The Consequences of Information Returns
Whenever you provide an identifying number to a requestor, you provide him with the necessary information to submit a valid information return. A return (including an information return) is not valid if it does not possess an identifying number.
Information returns are reports (sent to the IRS) of payments that are subject to the taxing authority of the federal and state government. These reports are typically submitted on Treasury Department Forms 1099 and W-2 (although there are other less commonly used forms).
Form 1099 typically reflects payments made to an "independent contractor" and the Form W-2 is used to report "wages". However, no matter which information return form is filed, or what type of payment it is reporting, the mere submission to the IRS of a valid information return constitutes presumptive evidence that the amounts shown on the form are subject to federal and state taxing authority.
We just discussed the fact that if payments made to you are not taxable, there is no legal reason for you to provide an identifying number, and you should not do so; to do so is tantamount to declaring that the payment is subject to taxation. In the same vane, if payments made to you are not taxable, then no report of the payment [i.e. an information return] is required to be made to the IRS. This can readily be seen in the IRC, as follows:
Section 3406 of the IRC is the section that authorizes backup withholding. Backup withholding may only be instituted concerning "reportable payments". Please take careful note that this section does not say that backup withholding may be instituted concerning any payment, or all payments, but only when the payment is specifically defined as a "reportable payment". This is a perfect example of the word games the Treasury department loves to play in the tax code.
Section 3406 goes on to list the other sections of the IRC that address "reportable payments". These sections are typically thought to be stand-alone provisions authorizing information reporting (as oppossed to backup withholding). These sections are: 6041, 6041(a), 6041A, 6041A(a), 6045, 6050A, and 6050N
However, as you can see, these sections are not "stand-alone" in their authority to file information returns. They are tied into the definitions provided in §3406.
It is interesting to note that none of the sections listed above use the language "reportable payments" - only "payments". If one did not know that "reportable payments" are defined in §3406 as the payments made under the sections shown above, one would never know that the word "payments" (used in the sections listed above) actually means "reportable payments"! [Don't you just love how the Secretary of the Treasury attempts to obscure simple facts that would help the average Citizen make sense of the tax code?]
Before any reporting may lawfully be performed, it must first be determined whether the payment is actually reportable. A payment can only be subject to the reporting requirements of the IRC if the payment is first determined to be within the taxing authority of the government. And who do you suppose determines that? If you are a Citizen, and the payment relates to something other than interest, dividends, or patronage dividends from corporate activity, then it is you, and only you, who has the legal authority to determine if the transaction is taxable to you! There is no law anywhere in existence that designates anyone other than you to determine your tax status. If you decide the payment is not taxable to you, then you are under no legal duty to provide anyone with an identifying number, nor are they required to file an information return.
If you do not provide an identifying number, the requestor cannot provide the IRS with a valid information return. If they cannot provide the IRS with a valid information return (and you don't file any other federal or state returns), then the IRS has no presumptive evidence that you have received any money (or other property) that is subject to federal or state taxing authority and they have no legal authority to take any action in reference to you. And guess what? The IRS agrees with that. In the case of US v. Lloyd, IRS Criminal Investigator Gary Makovski testified under oath:
"If no information [return] or [tax] return is filed, [the] Internal Revenue Service cannot assess you."
As you can see, information returns are powerful documents that are misused and misapplied consistently to create the false legal justification for concluding that a Citizen owes a tax he likely never really owed.
Information returns are made possible by you giving out your identifying number whenever you are asked, without being aware of the consequences of your action. The misuse and misapplication of information returns is also buttressed by petty functionaries and petty tyrants blackmailing law-abiding Americans into surrendering their numbers.
Why Do Companies Demand a Number?
The truly sad part of the entire "information return" issue is that most companies have no intention of putting you in a compromised position when they file an information return!
•Do you think your employer really cares whether the money they pay you is taxable to you?
•Do you think a business really cares whether you have a SSN or not?
•Do you think the guy writing a check to you really cares whether your business has a TIN?
Let us assure you that the answer to these questions is "no". They unlawfully demand a number from you because they are ignorant, or cowards, or both. Most people (including so-called "experts") don't know one tenth of what you now know having read this far.
CPAs are led to believe that everyone who earns a living is a taxpayer, so that's the position they take when a company asks them what must be done to comply with the law. Of course the company is foolish to ask a CPA what must be done to "comply with the law" because CPAs are not qualified to give legal answers; CPAs can only tell the company what actions comply with the regulations - but then again, the CPA is not qualified to tell anyone if the payments made to you are within the taxing authority of the government.
Tax attorneys are little better. They will dodge a direct question about whether or not you're a taxpayer because they know that such a determination is not theirs (or the company's) to make, but they will quietly suggest to the company that it get rid of you or stop doing business with you if you raise the issue that you are not a taxpayer.
Most companies file information returns for two reasons. First, to provide documentary support for the deductions they are taking on their tax returns. Secondly, for the purpose of maintaining uniform accounting procedures. We recognize that these firms have been socialized to believe that information returns are as necessary as breathing. Unfortunately, ignorance is no excuse for blackmailing their workers and vendors out of their unalienable rights and the practice must stop. It should be noted that an information return is not required in order to substantiate a deduction on the company's tax returns.
Only one person is legally allowed to determine your tax status, and that's you. But if you exercise your legitimate legal right, then finding work gets very challenging. So who's to blame?
First and foremost, the government; it has the attorneys, the judges, the jails, and ultimately, the guns - and it routinely uses them all to harass and attack anyone who threatens the public perception of taxation. Secondly, the government sets the criteria for what is taught to CPA's. Thirdly, the government consistently puts out pamphlets, brochures, bulletins, publications, etc., that are intentionally designed to mislead CPA's and the public about the true meaning of the law. IRS attorneys work very hard to find language to use in those documents that does not misquote the law, but misrepresents the actual meaning and application of the law.
I suppose we could also blame CPA's and tax attorneys generally, but they are part of a very self-interested group that is particularly vulnerable to the truth. In other words, if the truth took hold across this great land tonight, CPA's and tax attorneys would be out on the street tomorrow looking for honest work. Needless to say, it is a rare member of their profession who has the integrity to even look at the facts, no less admit the truth publicly.
The next group is the "dominant media". We defined the dominant media as those information outlets that are well established and collectively provide news and other information to a vast majority of the public. Examples of entities that would fall within our definition of "dominant media" are CNN, NBC, ABC, CBS, The Los Angeles Times, The New York Times, etc. These information outlets have erected a "wall of separation" between the public and the truth about federal income tax. They cooperate in a conspiracy of silence on this issue. Further, they portray anyone who knows these truths as some sort of anti-government crackpot, thus insuring that the truth of the issue is obscured behind the false and malicious smear-job done on the reputation of the messenger. Because of the intentional "lock-out" of tax researchers and their data from dominant media outlets, what should have taken only a few years to rectify, has taken decades and is still not complete.
And now we get to who is ultimately responsible. Go outside and look at your neighbor. It is him (or her), and millions like him, that are truly responsible for this egregious situation. These are your fellow Citizens; yet each and every day they act as if they are the enforcement arm of the government. Each and every day many of these seemingly "ordinary people" engage in blackmailing their fellow Citizens out of their rights. This situation must stop. Our "neighbors" must be made to see that such abusive and illegal actions are not acceptable to their fellow Americans.
Having said this, we must remember that most of the people who are engaged in such unconscionable conduct are either ignorant of the true nature of their actions, or they are afraid for their own jobs. We must find a constructive way to inform our neighbors of the issues (such as tell them about this website) and to help them overcome their fears so that they can stand beside us in the fight for liberty. We must find a way to demonstrate to them the truth that every time they diminish the rights of others, they diminish their own freedom as well.
And remember, these problems will not be solved by browbeating a few people into seeing things our way. These problems will be permanently resolved only when enough Americans are made aware of the issues, and see them clearly, that identifying numbers are no longer "demanded" and every Citizen is respected in their legal right to determine their own tax status.
To Whom Does US Individual Income Tax Apply?
Needless to say, this is a pretty good question. However the question is not half as important as the answer. So how do we get the answer? One of the best ways might be to turn to the legal professionals who publish the tax code (and the rest of the United States Code).
The United States Code Annotated is a multi-volume publication that includes the complete text of the United States Code, together with case notes of state and federal decisions that demonstrate the application of specific sections of United States law and provides cross references to related sections, historical notes and library references. It is the inclusion of this "additional information" that distinguishes the "Annotated" version from the regular United States Code. The United States Code Annotated is the publication most widely used by attorneys, legal scholars and others researching United States law and it has been in use at least as long as the income tax laws have been on the books.
In the index to the Annotated Code, under the heading "Citizens", you will find the subheading "Citizenship". Under "Citizenship", if you scan carefully for all the cites that contain a "26" in bold type (That would be Title 26 United States Code; also known as the Internal Revenue Code), you will only find two cites, both referencing "gift tax". If there is a reference to the "gift tax" under "Citizenship", then why is there no reference to the "income tax" under that same heading? Keep reading!
Now then, if we go to the index heading "Income Tax", and then find the subheading of "Citizens", we note that there are only two cites: (a) citizens about to depart the United States and (b) citizens living abroad. Why do the only references to "income tax" for "Citizens" have to do with citizens about to leave the country and citizens living abroad?
Next, under the heading "Income Tax", we move to the subheading "Aliens", and find a cross-reference to the major heading of "Aliens". When we locate the heading "Aliens", and then the subheading "Income tax", we find nine pages of Title 26 laws that apply to aliens. Among the Internal Revenue laws [Title 26] affecting aliens are such familiar sections as "deductions", "exemptions", "gross income", "joint returns", "withholding of tax", and much more.
In our research, we have found that indexes, parallel tables, and tables of content can often times be more revealing than the actual text of the law. Why? Because of the "unwritten rule" we stated earlier about reading and understanding law - context, context, context! Indexes, such as that found in the United States Code Annotated, have to take into account broad issues of context in order to determine proper applicability and remain accurate for the legal professional. For 80 years the United States Code Annotated has been telling us the contextual truth. Most Americans just haven't been listening.
Since the tax code is a compilation of excise [privilege] taxes, one might properly observe that while a Citizen is exercising a right when working in this country, it is a privilege for a non-citizen to do so.
We should also point out that this reality dovetails perfectly with a Citizen's right to declare his own status for domestic income tax purposes. By permitting a Citizen to declare his own status, the tax code allows the nontaxpayer/Citizen to avoid a tax that does not apply to him. [It should be noted that without such an "escape hatch" for Citizens, the IRC would be unconstitutional.] Conversely, if an alien refuses to provide a number, the "payor" can simply include an affidavit with their information return, and if the IRS later determines that the person is liable for the tax, then the IRS can institute the proper proceedings against that person for the collection of the tax.
It is our hope that this information will assist you and others in the proper administration of your own tax issues. The issues we have addressed are the following:
- The term "income tax" can be used by the US government and its courts to describe revenue laws generally, or it can be used to describe a specific type of tax.
- 16th Amendment "income" and the ordinary "compensation for labor" of the average American are not the same thing.
- Each subtitle (A through E) of the IRC imposes a completely different type of tax and subtitle C taxes are not the same tax as subtitle A taxes.
- No tax law can apply to you if in doing so it would violate one or more of your "unalienable rights" (unless it is a direct tax).
- One of your unalienable rights is to exchange your labor for other forms of property (including money) without having to give a percentage to the government. The only way the government can tax such compensation is with a direct tax, and Congress has not imposed a direct tax upon compensation for labor.
- You need not provide an identifying number if you've determined the transaction is not taxable.
- No reporting is required if you've determined that the transaction is not taxable to you.
- vIf the person making a payment to you wants to report the payment even after you've made the determination that it not a taxable transaction, that person may do so without a number and must affix the appropriate affidavit to the information return. [Contact Us for the affidavit.]
- Under the regulations created by the Secretary of the Treasury for tax matters, a person making a payment to you has no other remedy than the steps specified in item 8 if you refuse to provide a number. Actions such as firing you, or withholding payments owed, are not lawful options because no law specifies such conduct as a remedy.
- It is our responsibility to inform our friends and neighbors of these truths. Sending them the URL for this page is one great way to do that! Most are ignorant or afraid or both. We should endeavor to cure their ignorance and give them sufficient information and support so that they need no longer fear the IRS.
- Despite the illegal and immoral conduct of the government [most notably the Treasury Department, the IRS, and the US Department of Justice, Tax Division] the truth is that US Individual Income Tax applies primarily to aliens and only to working American Citizens in very narrow circumstances that are not generally applicable to the public at large.
Constitutional Issues of Taxation
Most Americans understand that all government functions must be authorized by their state constitution or the Constitution of the United States. While this understanding may not be as firm as it was in our grandparents' day, it is still fairly well acknowledged. However, some feel that when it comes to matters of taxation, the government throws the Constitution out the window and all must follow the dictates of the government or pay the piper. While this is not legally true, there is ample reason for people to feel this way. The purpose of this article is to clarify what the Constitutional boundaries of taxation are and what we can do to stay clear of the boundary markers.
First and foremost we want to assure you that even government's taxing authority must be exercised in compliance with your state constitution, or if a federal tax, with the US Constitution.
Some of you who have investigated the Constitutional limits of taxation know that the subject can be difficult and frustrating. The Constitutional issues of taxation must be understood not only through a proper view of law, but also through a proper view of history. Taxation is as much a part of our nation's history as is King George III or George Washington.
We will attempt to break down the Constitutional realities of federal taxation for you without inundating you with court cases and other citations. We will try to present a plain-English explanation that weaves together all the essential legal realities that are elsewhere [in other web sites and books] explored in such excruciating minutia (sometime correctly, sometimes not). We hope to give you a strong and logical framework into which you can place all that you have read or seen, as well as all that you may find in the future.
Prior to the creation of the federal Constitution, the United States had been operating under the Articles of Confederation. The Articles of Confederation had a few glaring deficiencies, but the most problematic was the inability of the US to compel payments from the states to cover the operating costs of the federal government. In other words, Congress (which is nothing more than the states of the Union voting on what the national government will do) was authorizing the Executive Branch to take various actions, but then some of the states were not paying the bills responsibly for the actions Congress had authorized.
When the US Constitution was created, the Founding Fathers sought to correct this problem by giving the federal government clearly defined taxing powers. Direct taxes were to operate solely upon the state governments, while indirect taxes were to operate upon whomsoever would avail himself of a privileged activity (i.e. indirect taxation). However, because the states (as colonies) had been subject to taxes that were used for political punishment, as well as at times enduring taxes rates that were considered intolerably high, the Founding Fathers clearly specified the forms of the taxation that could be laid, along with the rules that the government must follow in order to Constitutionally lay such taxes.
What Does The US Constitution Permit?
The Federal Constitution only permits the government to lay two forms of taxation. One is a "direct tax" and the other an "indirect tax". Together these two forms of taxation comprise the whole; much like the northern and southern hemisphere - there's no third choice.
The term "indirect tax" never appears in the Constitution. The Constitution permits the US Government to "lay and collect taxes, duties, imposts and excises..." [See Article 1, Section 8, Clause 1.]
Although there has been some debate about the meaning of the word "taxes", as it appears in the above quote, it is generally held that its use refers to the direct taxes authorized in Article I, Section 2, Clause 3, while "duties, imposts and excises" are the three species of taxes which comprise the class of indirect taxes.
So how can we tell the difference between these two forms of taxation that the US Supreme Court has called "the two great tax classes"?
Here's a solid definition of "direct tax" straight from the US Supreme Court:
"Direct taxes bear upon persons, upon possessions, and enjoyment of rights". Knowlton v. Moore, 178 US 41
[See Article I, Section 2, Clause 3, which grants the U.S. the power to lay a direct tax.]
In other words, direct taxes cannot be avoided because they are upon things that are fixed - such as your physical being, your real property, and certain fundamental rights.
By contrast, an indirect tax is a tax that you can avoid by choosing not become involved in the activity upon which the tax is laid. An example of this might be importing products from another country into the United States. In such a circumstance one is required to pay an import duty. However, one can avoid paying an import duty simply by not importing foreign products into this country. Another example might be distilling rum in the Virgin Islands and importing it into the states of the Union. If one wishes to avoid the taxes involved in such a process, one need only to refrain form the activity.
In short, an indirect tax is a tax that you can choose to avoid without giving up the normal affairs of life. However, if one cannot avoid a taxable activity without sacrificing the ordinary affairs of life, the tax is not indirect, but direct.
Since within the class of indirect taxes, the excise tax is the one most familiar to the American public; what exactly is an excise tax?
"The term 'excise tax' and 'privilege tax' are synonymous. The two are often used interchangeably." American Airways v. Wallace, 57 F.2d 877, 880
Here is a more detailed definition:
"The obligation to pay an excise is based upon the voluntary action of the person taxed in performing the act, enjoying the privilege or engaging in the privilege which is the subject of the excise, and the element of absolute unavoidable demand is lacking" People ex rel, Atty Gen v. Naglee, 1 Cal 232; Bank of Commerce & T. Co. v. Senter, 149 Tenn. 441SW 144
You will note that two elements are mandatory upon the government if a tax is to be classified as an excise, and thus avoid the requirement of apportionment. The first is that your actions must be "voluntary". In other words, as stated earlier, you must be free to steer clear of the "taxable activity" without sacrificing the ordinary affairs of life. Secondly, if you steer clear of the "taxable activity" the government cannot make a demand upon you for the tax that you cannot avoid by stating (or showing) that you were not involved in any excise taxable activity. We will revisit this issue later in the article.
How Does "Income Tax" Fit Into The Constitutional Scheme?
Although the tax that concerns most people is "income tax", the Constitutional question really rests on whether a tax (any tax) is a "direct tax" or an "indirect tax". As an example, Congress may pass a tax law that clearly structures a tax as a direct tax, and call that tax an "income tax". The following month they may pass another tax measure that is clearly structured as an indirect tax, and also call that an "income tax". If properly constructed, one bill would lay a direct tax, while the other bill would lay an indirect tax, and both would be referred to (by ignorant politicians) as "income tax" bills. You can see that the term "income tax" does not really answer a Constitutional question concerning taxation. For almost a century now people have been making the mistake of trying to define "income tax" as being exclusively within one tax class or the other, not understanding that it can be can be either depending on how Congress structures any particular tax.
As a nation, we have been fixated by the phrase "income tax", but it is important to know that term is one that can shift like the wind. We must focus on the issue of direct v. indirect. While the phrase "income tax" has a historic meaning in law that formerly fixed meaning has been eroded to the point of near uselessness by misapplication of the phrase by Congress, the courts, and the public over the last 90 years.
[Editor's Note: Historically speaking, until the adoption of the 16th Amendment blurred the lines, the US Supreme Court had always viewed an "income tax" as a tax solely in the form of a direct tax. The Court did not view "excise taxes" as "income taxes". In many of the Court's decisions between 1913 and 1921, the Court clearly stated that the various tax acts passed by Congress, which laid excise taxes under the guise of "income taxes", were not really "income tax acts".]
In addition to allowing the national government to lay direct and indirect taxes, the US Constitution also mandates two "rules" concerning how the government can lay such taxes.
•Direct taxes must be "apportioned among the several states which may be included within this Union". [See Article I, Section 2, Clause 3 and Article 1, Section 9, Clause 4.]
•"All duties, imposts and excises [indirect taxes], shall be uniform throughout the United States". [See Article I, Section 8, Clause 1.]
Although there has been some debate on what apportionment actually means in a political sense, it is safe to say that it requires the population data from the most recent census be used to distribute the tax burden evenly throughout the states of the Union.
Uniform means that each person taxed in a given circumstance will be taxed at the same rate as any other person would be taxed in the very same circumstance. As an example, if a person produces 80 proof dark rum in the Virgin Islands and brings it into the United States at the port of New Orleans, he will be taxed exactly the same as any other man who would do exactly the same thing. However, if a man produces 100 proof dark rum in the Virgin Islands and brings it into port at New Orleans, it is Constitutional for him to be taxed at a different rate because his circumstance (bringing in 100 proof rum) is different from that of the first man (who was bringing in 80 proof rum).
The Dastardly 16th Amendment!
Because this site is about facts, and not about rhetoric or hyperbole, we will not delve into the ugly waters of what the 16th Amendment might have been intended (secretly or otherwise) to accomplish, or how the politics of the 16th Amendment were devious, or whether or not the 16th was properly ratified. We will stick to "what is" in this day and age.
We describe the 16th Amendment as "dastardly" not because of the politics attendant to its drafting or its alleged ratification, but because of the great misunderstandings that have followed its alleged ratification and the massive governmental theft of property from the American people that has occurred due to that misunderstanding. It is a completely factual statement to say that the 16th Amendment has resulted in the largest fraud ever perpetrated by a government against its Citizens.
We say "fraud" because one of the elements of the crime of fraud is to remain silent when there is a clear duty to speak, and certainly our government has a clear duty to come out and tell the public that most Americans do not owe a penny of Subtitle 'A' or 'C' taxes, either under the original provisions of the Constitution, or under the alleged authority of the 16th Amendment (as you will see later).
Although the government has always had a duty to speak out, recently representatives of the United States Department of Justice and the Internal Revenue Service had agreed to attend a hearing arranged by We The People Foundation for Constitutional Education and Congressman Bartlett. [The hearing was originally scheduled for Sept. of 2001, but was rescheduled for Feb. of 2002.] The purpose of the hearing was for the American people to get straight answers to some disturbing questions about US tax law and the administration of tax policy. Two weeks after receiving the first 199 questions, the DOJ and the IRS broke their word and pulled out of the hearing.
The questions that were submitted to DOJ and IRS can be viewed at, http://www.givemeliberty.org/bartlettresponse/draftquestions01-22-02.html
Furthermore, the federal government (with the state governments acting in complicity) continually seizes property not lawfully subject to seizure, routinely forces nontaxpayers into regulatory administrative tribunals, and repeatedly puts people in jail for not paying a tax they never legally owed. And all of this government deceit and manipulation became possible only because the 16th Amendment exists.
What Did The 16th Amendment Do?
The 16th Amendment was an attempt to overturn, by Constitutional Amendment, the supposed tax limitations placed on the national government by the decision of the US Supreme Court in the case of Pollock v. Farmer's Loan and Trust Co., 157 US 429 (1895). [While we see the 16th Amendment as being wholly unnecessary as a response to the Pollock decision, that discussion would require an entire separate article.]
Here is what the 16th Amendment says:
The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several States, and without regard to any census or enumeration.
That's it! That's the entire text of the Amendment that has caused so much confusion and trouble.
Historically, Americans of yesteryear were aware that a direct tax was upon their person, or their real property (including slaves), or their exercise of other fundamental rights. They were also aware that a tax on the fruits of one's property (such as receiving payment from renting a piece of real property) was also a direct tax unless those earnings where in the course of a privileged activity, and then they were subject to an excise tax.
In Pollock, the US Supreme Court stated that a tax upon earnings derived from one's existing property (real or personal) must be considered a direct tax subject to the rule of apportionment. This gave rise to concern in banking and government circles because they felt (and we agree) that corporations are something that is legislated into existence by the government and therefore the fruits therefrom is properly subject to an excise tax.
In other words, the Pollock decision made no distinction between a man earning rent from his private property, and a man earning a return on his investment in a corporation. The former must properly be considered a direct tax, while the latter should rightly be considered an excise. The rent from a man's private property is his "private affairs", and thus outside government's authority to lay any tax except a direct tax subject to apportionment.
However, profit or gain (to a shareholder) from a corporate enterprise should properly be income subject to taxation as an excise taxable activity - after all, there would be no opportunity for said profit if the state hadn't granted the corporation into existence.
We may never know whether the framers of the 16th Amendment had a legitimate concern about Pollock being used to challenge the 1909 Corporate Tax Act, or whether it simply provided a convenient excuse to try and alter the Constitution's tax regulation (i.e. apportionment for direct taxes). Fortunately, it matters not what their intentions may have been; it only matters what was actually accomplished.
The US Supreme Court has ruled on the meaning of the 16th Amendment many times. However, because each case has had different particulars, it is sometimes difficult to understand the decisions in a cohesive fashion or to give all the cases one settled meaning. Fortunately, we don't need to spend a lot of time reconciling all the various particulars of each case because the Court has been very clear as to the definition of "income" as used in the 16th Amendment. Since the Amendment only grants Congress the power to "to lay and collect taxes on incomes", that definition is rather critical.
Let's look at what the various courts have said about "income" and the 16th Amendment:
"The Treasury Department cannot, by interpretive regulations, make income out of that which is not income within the meaning of the revenue acts of Congress, nor can Congress, without apportionment, tax as income that which is not income within the meaning of the 16th Amendment." Helvering v. Edison Bros. Stores, 133 F.2D 575
The last part of that quote is crucial to a proper understanding of the impact 16th Amendment, and indeed the entire tax structure of the federal government. It is essential that you understand that only "16th Amendment income" can be taxed without apportionment.
"The individual, unlike the corporation, cannot be taxed for the mere privilege of existing. The corporation is an artificial entity which owes its existence and charter powers to the state; but the individuals' Right to live and own property are natural rights for the enjoyment of which an excise cannot be imposed." Corn v. Fort, 95 S.W.2d 620 (1936)
From these two decisions alone, we can pinpoint some very crucial information.
•All property (which includes income) other than "16th Amendment income" can only be taxed if the tax is constitutionally apportioned.
•"16th Amendment income" can be taxed without apportionment.
•Obviously the courts are making it clear that there is a real and significant distinction between "income" in the ordinary sense, and "16th Amendment income".
•A Citizen's property (which includes ordinary income) cannot be taxed as an excise.
Do you feel like we're narrowing in on the meat of the issue? Good, because we are!
Now that we know the points indicated above, what we really need to know is what is "16th Amendment income". Once we know that, we should be getting a pretty good handle on what is Constitutionally taxable and under what rules! Interestingly, in order to find the meaning of the word "income", as used within 16th Amendment, we must first explore the meaning of the word "income" as it is used within the 1909 Corporate Tax Act.
"As has been repeatedly remarked, the corporation tax act of 1909 was not intended to be and is not, in any proper sense, an income tax law. This court had decided in the Pollock case that the income tax law of 1894 amounted in effect to a direct tax upon property, and was invalid because not apportioned according to populations, as prescribed by the Constitution. The act of 1909 avoided this difficulty by imposing not an income tax [direct], but an excise tax [indirect] upon the conduct of business in a corporate capacity, measuring however, the amount of tax by the income of the corporation". Stratton's Independence, LTD. v. Howbert, 231 US 399, 414 (1913)
As an indirect (excise) tax, the Corporate Tax Act of 1909 was not a tax upon property, but was a tax upon the privilege [enjoyed by the shareholders] of doing business in the corporate form, and the tax to be paid for exercising that privilege was determined by how much profit each shareholder took from the corporation.