The Fleecing of America

The Hidden Truth About the Income Tax

By Jack Cohen

This paper exposes a fraud of the most terrifying proportions. It shows how far our government has departed from the principles laid down in our foundational documents. It shows how the Civil War and subsequent events have replaced our Republic with a Democracy. It is the result of years of careful research into American law.

Our focus is on the tax laws. Congress has never imposed an "individual income tax" that it can collect from Citizens of the Union. There is no such thing in the law. Congress has taxed "compensation for services" paid to Federal employees, wages paid to nonresident aliens, and "income" of citizens working abroad in tax treaty nations, but not the pay most of us receive for our labors. Thomas Jefferson warned us more than 200 years ago that "the price of liberty is eternal vigil," and we have not been sufficiently vigilant. With liberty comes responsibility, and it is we who are responsible for correcting the mistakes of the past. We cannot expect politicians to do it without tremendous pressure from us.

The Constitution separates Federal authority from State. It prevents the Federal government from interfering with individual property rights, which are protected by State law. The proof of this separation is clearly illustrated in the Rule of Apportionment, which requires all direct taxes imposed by the Federal government to be collected by the States. We should question how it came to be that there a Federal Communications Commission, when the Constitution prohibits interference with the free press, and thus all forms of responsible communication. If the Constitution guarantees the right to bear arms, why is there a Federal Bureau of Alcohol, Tobacco, and Firearms, and a host of Federal gun legislation?

The Constitution creates a government that is given approximately 18 directives, beyond which it does not operate. Each of its powers, clearly and specifically enumerated in the Constitution, is for the purpose of preserving the Union. Its power to tax is given to pay the debts, provide for the common defense, and general welfare of the Union. There is no Constitutional directive to provide for a national retirement plan, the largest standing army in the known history of civilization, world banks, or for putting people on the Moon.

The powers of Congress were surrendered by the States to provide a safe and stable environment for them, not to replace them. All American governments are instituted to protect, secure, and maintain individual rights, including our right to make a living at any lawful enterprise. The American people are the masters, and our governments are our servants, according to law, but not according to fact.

The system the Founders set up was one in which the powers and responsibilities of the dual governments never crossed paths. Federal duties, such as coining money, providing for a Navy to protect our shores, punishing piracy and other crimes committed on the high seas, or counterfeiting coin, or treason, were removed from the States. As we read through the 18 or so powers granted to the Federal government, we must read them as powers surrendered by the States for the benefit of the Union for the safety and security of the Union of States.

The powers were not granted to provide for a Super-government to which the States would become subservient. We are not an empire, we are a union of independent nations. The most misunderstood sentence in the English language is the Supremacy clause of the U.S. Constitution. The Constitution and laws and treaties made in pursuance of the objectives of the Constitution are the Supreme Law of the Land. Laws not made for the protection of the Union are not laws applicable to the Union. If our Founders were alive today, they would be appalled that so many shed so much blood to accomplish so little.

The American people need to take a fresh view of our foundations of law and justice, and we need to remember that our governments are instituted to do no more than provide for our protection and safety, so we may engage in our pursuits with the least amount of interference. We are the "kings and queens in America." We institute State governments to protect our rights. The Founders considered that we all have a right to earn a living, so long as we do not trespass on the rights of others. Today, our government expects us to apply for permission to earn a living, and pay a tax for the privilege. Try convincing your employer that you don’t need a Social Security account in order to hold a job. In general, most American employers will not pay a worker unless he has been given the worker’s permission, on a W-4, to withhold money from his check and pay part of his earnings to the government. Think of the inconsistency. The W-4 gives the employer permission to withhold. How could there possibly be a law that requires anybody to enter into such an arrangement? A W-4 is not a contract, it is a permission slip. Only the worker signs it. It is called a "Withholding Allowance Certificate," and is only necessary if the employee desires to allow his employer to withhold Social Security or "income tax" from his check. How could any law require anyone to give his permission for such foolishness?

American law is for our protection. The people form their State governments, and the States form the Union government. The governments of the Union and the States are almost entirely mutually exclusive. Where one operates, the other does not. They are formed for different purposes. The Federal government protects the Union, while the States protect their Citizens. At one time in our history, our Federal and State judges were capable of drawing a distinct line between Federal and State authority. Today, the line is blurred and practically nonexistent.

After his first administration, Jefferson proudly announced the abolition of internal taxes, which he described as causing internal vexation:

The early government tried to stay out of people’s lives while managing the affairs of the Union of States. It only raised revenue for its necessary functions- those outlined in the Constitution. It didn’t try to control everything in sight, and tax us out of our homes. Instead, it tried to distribute its huge landholdings to abolish poverty, which, for a time, was the actual result. We had no internal taxes until the Civil War. Congress taxed imports, not people. After the Civil war, the internal taxes imposed to finance the war were not dropped; they were not reduced; in fact they grew.

Imagine an America without a single Federal internal tax, whether on income, or gasoline, or rifles, or trucking. Imagine a government that secures and protects our right to earn a living and move about freely, so long as we do not trespass against the rights of another. Imagine a government that looks to its constitution instead of the polls for its inspiration, and provides nothing not required by its foundational document.

The founders declared that we had certain fundamental rights, proclaimed to be unalienable (those which can’t be given away or taken, except by force). These rights, they held, are such as we had before we formed governments. Among these rights are the right to make a living by any lawful pursuit. These rights today are today the subject of extensive control and taxation.

Before the Civil War, the Government Land Office distributed land to eliminate poverty. Today, the Bureau of Land Management "manages" the land that was acquired expressly to be sold or given to the people. The Bureau of Internal Revenue has all but Replaced Customs as a collector of revenue. The Union government has lost sight of its purpose.

Instead of dedicating themselves to staying out of our way, our government has become our biggest headache. We have truly lost our liberty. We have become "human resources" for the government- its property. It is no longer the limited government of the Union; it has become the government of everybody in all our affairs. It no longer makes law in accord with its constitution, it makes law according to whatever bill of goods the politicians can make the people believe we want or need, and then take our money to provide it. Today’s Social Security obligations are 4 times the whole budget during WWII.

Political parties are both good and evil. Ours have leaned more toward the evils than the good they might do. At the same time they have bloated the budget beyond comprehension, they have driven more than 50% of the voters from the polls. The American people, it seems have become disillusioned with our political instruments.

Politicians use a device developed by Alexander the Great to conquer the great Democracies of ancient Greece without bloodshed. He would simply convince the masses that their problem was XYZ, and that he could and would solve it for them. They ended up "voting" for Alexander. It is the oldest political trick in the book. Listen to the politicians of today. They tell us what "this country needs" and then tax us silly to provide it. The only visible objectives of our two major political parties is gaining power and control, not to provide the "wise and frugal government" spoken of by Jefferson and others. In their objectives, they have been highly successful.

In his farewell address, President Washington cautioned us against four things dangerous to liberty. Political parties were at the top of the list, followed by defense agreements with foreign nations that made their enemies ours, which he called "entangling alliances," to be avoided. Third was paper money, and fourth, standing armies, which always invent necessities for their existence. Political parties have brought us paper money, standing armies, and dangerous foreign alliances, horrible debt, and great interference with people’s and States’ rights, all in violation of our Constitution.

Before the Civil War there were no internal taxes. Since the Civil War, our internal taxes have all but replaced taxes on imports, as is reflected in our recent trade "agreements." A constantly soaring Federal Budget began with the Civil War, and will continue until the American people stop paying taxes we don’t owe, and put a lid on our politicians. A brief chronology of the laws passed, and the effects thereof, follows:

1889. First Income Tax dropped, internal excise taxes, called "consumption taxes," remain for "reconstruction."

1894. Second Income Tax introduced. No exigency existed creating need for more spending or involvement in American life.
1895. Supreme Court declares tax on income to be a property tax; income tax could only be collected by Rule of Apportionment.

1913. 16^th Amendment ratified, and Tax Act imposes income tax on corporations, as before, and on those who receive corporation income or profit, such as the shareholders. This is the only "individual income tax" Congress has ever imposed. Act imposes tax on compensation received by nonresident aliens as net income, and on citizens working abroad as "gross income." Tax presented as a "soak the rich" tax.

1939. Public Salary Tax Act imposes a tax on compensation paid to Presidents, Federal Judges, Legislators, and other elected or appointed Officials.

1942. War brings Victory Tax Act. American workers begin having "income tax" deducted from their pay. Tax expires in 1945, workers keep paying.

1954. Congress recodifies the internal tax laws as Title 26 Internal Revenue. Still no tax on our wages, but by this time, nobody seems to know it. No Constitutional directive exists for Congress to make "Codes."

The 1861-62 Internal Revenue Laws were the beginning of the downfall of the Union. They were passed to fund the conflict, and never went away. They were temporary measures. No legal historian has ever addressed the question of whether the Union Congress could even make law while 1/3 of its member States were missing. Could either house make a quorum? The "congress," during the Civil War, was the congress of the North, not that of the Union. Beyond the fact that the Civil war brought us internal taxes for the first time since the Revolution, it is important that we remember the internal taxes on consumption have never been reduced or eliminated, although the reason for imposing them has long since disappeared.

The adoption of the Constitution required Congress to switch from paper money to gold and silver coin. The Founders funded the Treasury with import taxes to finance the government and spend our coin into circulation. It paid all its bills in gold or silver coin. The Civil War brought a return of paper money, and a shift in its taxing policy from imports to Citizens. Congress has forgotten the reasons it was given the power to tax in the first place. Our Constitution gives it three jobs for which it needs the power to tax: "to pay the debts, and provide for the common defense and the general welfare of the United States." The first purpose given, to pay the debts, seems foreign to our present government. We have been saddled with their ever-growing debts since the Roosevelt Administration. The term "general welfare of the United States" refers to the Union, not the people living in any of the States. "The power to tax is the power to destroy." Congress is destroying the entire middle class the property rights of all of us.

What was the Civil War really all about? The agrarian economy of the South had relied on slavery for centuries. Although illegal in England, the British had introduced it to the Colonies. The problem was not that the South was not getting rid of slavery. It was that the North insisted it wasn’t happening fast enough, and wanted it to happen overnight. The South couldn’t handle the social and economic problems that would, and ultimately did, result. The measure of the success of the war is the plight of those "freed." The freed slaves became homeless and jobless, without schools, property, or any real degree of equality.

While it was the job of the Union government to preserve the peace, especially between the States, the politicians fomented a war that could and should have been avoided. Slavery might have died a natural death instead of a violent and useless one. The freed slaves had to pass literacy tests for employment and other purposes, without schools to teach them to read; they had to pay poll taxes they couldn’t afford in order to vote, and to fight with their lives to end segregation, nearly 100 years to the day from the first battle of the Civil War. Their descendants are still working to achieve equality in the "job market." The Civil War did nothing positive for them, or for the resulting plight of the South as a whole. Government-engineered culture shock is nobody’s idea of good government. The abolition of slavery was and is a good idea. The War to abolish it brought about the destruction of the Republic, and was not a good idea.

The South still calls the war the "War of Northern Aggression," which it was. One of the political motives was that the North, and South both were adversely effected by the Rule of Apportionment. The South had more representatives per capita, since the Constitution counted slaves as 3/5 of a person for the apportionment of seats in the House. The North was jealous of that, while the South was hit hardest by direct taxes. Congress can only tax property in a State according to the Rule of Apportionment. Slaves were property, and direct taxes hit slave owners hardest and were resented by the South. The North and South were actually at odds with one another because of the Rule of Apportionment, not the plight of the slaves. The North kept pushing the South to free their slaves immediately, while the South sought ways to bend the rule of apportionment for purposes of direct taxes.

When it became apparent that the politicians of the North and South could not settle their differences amicably, the South seceded, and the "Union" declared war on the "Secessionist States."

The "congress" imposed an income tax, written to terminate with the hostilities, and it died a natural death in 1889, when the last troops of the Union Army were withdrawn from the South. In 1894, Congress tried another income tax.

In 1895, the Supreme Court heard the Pollock case, in which they held that the 1894 act was unconstitutional. The tax was laid directly on income, and since income is property, such a tax could only be collected by the Rule of Apportionment. In so ruling, the court held the identically worded 1862 Act to have also been unconstitutional. The 1913 Act is nearly a carbon copy of the two previous income tax laws that were held to be unconstitutional.

The Pollock case makes clear how the Rule of Apportionment works. The direct tax is one of those the Founders considered might be necessary for exigencies, but not for ongoing revenue purposes. It’s a one-time tax- a one-shot deal. According to that Rule, Congress figures out how much it wants and bills the States according to their populations. Since the States have charge of protecting their Citizen’s property rights, the Federal government can only tax Citizens’ property through our State governments. It bills the States, who turn to their taxpayers to collect the tax, according to State law. The collection is then turned over to the Federal government, and that ends the matter. The Federal government does not tax anybody’s property that is located within a State, except by that rule. The concept is quite clear to anybody who studies it (except if he is a politician).

The language of the Pollock court made it clear that Congress could not impose a direct tax on income and collect it from anyone within the States. The States collect such taxes from their taxpayers. This is one of the essential elements in the separation of Federal power from State power. The soul of jurisdiction is the soil over where the law applies. The respect our Constitution and laws pay to the States’ power to protect Citizens’ property rights is embodied in that Rule.

Joseph Story, a Supreme Court Justice who had been a companion of Jefferson, wrote his commentaries on the Constitution in 1833. Of the restriction of Federal powers to those delegated by the States in the Constitution, he said:

The politicians were unhappy with the Pollock decision. In 1909, they introduced an income tax that purported to be "indirect." The Corporation Excise Tax Act of 1909 imposed a tax on corporations for the privilege of doing business, measured by their income. The tax was on pre-distribution net income. This had the net effect of either reducing corporate capital, which reduced their growth and production, reducing the wages of their workers, or reducing profits paid to shareholders, or all three. It is hard to imagine what sort of benefit this system provided the Union, since the amount of tax collected by the government was not a large amount, and was punitive in nature.

1909 was also the year they introduced the 16^th Amendment, which now appears to have been their insurance in case the Corporation tax were struck down. It authorizes a tax on incomes derived from their sources without respect to the Rule of Apportionment. While the courts have held that the Amendment is "constitutional," they have been divided on whether it authorizes a direct tax without apportionment or limits the tax to the class of indirect taxes. Ordinarily, when such a situation exists, the law is held void for vagueness. Nonetheless, the tax was never intended to reach the fruits of our labors. Jefferson felt the best way to protect our rights was not to re-elect anybody, which would be an excellent policy today:

In Hale v. Henkel, 201 U.S. 43 (1906), the Court made a clear distinction between individual Citizens’ rights, and those of corporations:

Congress taxed the corporations for the privilege of doing business. The measure of the tax was income, and so the politicians called it an indirect tax. That is Newspeak for effectively taxing the income, but it is the effect that is the measure of the law. There is no difference, in this instance, between a tax on the corporation measured by its income and a tax directly on its income.

Could such a tax reach every corporation in America? We must answer in the negative. Congress cannot tax people or corporations in States, unless their activity brings them into the jurisdiction of the United States. This tax was intended to reach all corporations that owed their existence to an Act of Congress. Federal corporations are created by an Act of Congress, known as Private Law.

Federal taxation or regulation of a Federal corporation makes sense. But the Federal government is not designed to regulate what goes on within a State, and has no power to regulate State corporations. Federal law applies only in Federal areas, such as the District of Columbia. It should be remembered that there are numerous Federal corporations, all of which are subject to the income tax. It stands to reason that a corporation created by Federal law is subject to Federal regulation. A corporation created by State law is similarly subject to State regulation.

Most States provide for the formation of a corporation by filling out some papers and paying a fee. This does not represent a Federal privilege. Which law, Federal or State, is determined by geography. Where State law applies, Federal law does not. It is an either/or situation, never both. Almost anyone of legal age and competence can form a corporation at the State level. It is to Private Law that Federal corporations such as the railroads, FSLIC, FDIC, RTC, etc., owe their existence, and it is their profits that are the subject of the income taxes. Congress cannot tax a corporation created by State law unless, the "State" is subject to Federal jurisdiction, the corporation is operating where Federal law operates {such as "Federal" States rather than Union States, or is engaged in a Federally regulated activity. The District of Columbia is a Federal, not Union, "State."}. Congress most certainly cannot tax property, including wages or salaries, within a State except by the Rule of Apportionment.

Nevertheless, after 1909, all American corporations began paying an income tax, and the government didn’t turn down the money flowing in from State corporations. There is a fairly obvious trend of government deception being played out. Once the cash started flowing in, of course, the politicians began to invent new reasons to need to spend it.

1913. The Demise of the Republic and the Birth of "Representative Democracy"

1913, with the 17^th Amendment, effectively ended our Republican form of government. Before the 17^th Amendment, the Senate was made up of members elected by State legislatures. Thus the States were represented. The States, after all, form the Union. The Senators could be removed on a moment’s notice by a State legislator. Direct election removes that possibility. The Senate held the purse to control direct taxes. The 17^th Amendment abolished State representation in Congress, by having the Senate elected by popular vote. So now we have two elected houses, which combine annually to increase spending beyond anything we could call responsible.

In 1913, Congress introduced an "elastic currency" with the Federal Reserve Act. Modern historians, other than economists, can find no real necessity for such a thing. Before 1963, the year of President Kennedy’s murder, people were fond of saying "sound as a dollar." Since that time, the expression has left our vocabulary. Immediately upon assuming office, President Johnson recalled all United States notes, redeemable in lawful money, and the "redeemable in lawful money" clause disappeared from Federal Reserve Notes. Unchecked inflation and profligate government spending has been a direct result. Inflation is not caused by our spending habits, it is caused by theirs. They spend more than they have, which weakens our dollar directly. There is a price for such activity, and the price is reflected in the declining value of our dollar.

The National debt is not the debt of the American people, it is the debt of our government, and it is technically owed to the people. Their debt should not be made our problem. Their job is to maintain the value of money so that when WE borrow from one another, the dollars we pay back are as valuable as those borrowed. This is one of the obligations of contracts the Constitution refers to. Congress regulates the value of the dollar by adjusting the precious metal content to reflect the comparative market values of each relative to the other, so a dollar is always a dollar- a uniform measure of value. A twenty-dollar gold coin is always worth twenty silver dollars. The bi-metal standard created the most stable money in history. Fluctuating value of money is destructive to the rights of the people, and the obligation of contracts.

Interest paid by consumers is dangerous to our economic health. For governments, it is insanity. We may recall from history that Rome collapsed shortly after its once-treasured gold coin had been reduced to lead. They had given the people bread and circuses, had huge welfare obligations, and ran out of real money. Governments need money to operate on. The more they require debt to operate, the less value our dollars will have. "The economy" politicians refer to consists of nothing more than the condition of trade and commerce between Citizens. As our dollar declines in value, through inflation, the stability of our trade with each other is impaired.

The power to coin reads: "The Congress shall have power to coin money and regulate the value thereof, and of foreign coin, and to fix the standard of weights and measures." The dollar is a unit of measure of value; it is not an arbitrary. What if the volume of a pint or the size of an acre or the length of a mile were allowed to fluctuate like our money? We would have chaos. The power to coin is given as an obligation to the States and the people. The States gave up the power to coin money, because the "dollar" minted by one State didn’t have the same value as that minted by another. Can it be supposed that the power to coin includes the power to devalue? And if they do, who benefits? Obviously, not the people or the States.

In the late 1800’s there was a series of cases that became known as the "Legal Tender Cases." At issue was whether United States Notes satisfied the requirement that payment of debt be made in lawful money (gold or silver coin). The substance of the courts’ decisions was that if we could take our United States Notes to the bank and redeem them in lawful money, there was no significant difference between the note and the coin. After the "redeemable in lawful money" clause disappeared, prices rose along with Federal spending and debt. Few of us remember that the Arabs doubled the price of oil from $7 to $14 after they realized that the American dollar only bought half the goods it had purchased a few years earlier.

The Income Tax Act of 1913 incorporated the corporation tax, raised the tax from 1% on the excess over $5,000 to 3 ¢, and imposed an "individual income tax" on people receiving after-tax corporation income. Thus the income was taxed twice. This was billed as a "soak the rich" tax. There was no confusion in those days as to who was living off dividends instead of labor. At an average rate of return of 5%, one would have to have $100,000 invested to receive that much income annually. In 1913, the average worker was making perhaps $500 per year. No American working for a living paid the tax. People making $5000 per year from investments were considered rich by the working class. The equivalent in today’s dollars would be a tax on income in excess of $500,000 from dividends, not labor. The tax was not meant to reach working people. However, as in the earlier tax, people in all the Union States began paying the tax on income distributed from State corporations as well as Federal. By now we should be aware that Congress does not read the laws it passes, particularly where such limits are imposed. The trend has reached magnificent proportions today. Congress reads and votes on 30-page summaries of 7,000 page bills, rather than reading the whole thing, which would take too long. It should have occurred to them by now that if the bill is too long to read, it is too long to vote on. The 1997 and 1998 "Taxpayer Bill of Rights" are each longer than the 1954 Internal Revenue Code they "amend."

In 1916, Congress "codified" all the internal revenue laws. The intent of Congress to apply the law to areas subject to its geographical jurisdiction was clearly shown in Section 15 of that Code:

Noted that State "OR" United States are used interchangeably, and apply only to areas subject to Federal jurisdiction and law. The Codification of the law in 1916 provides a clear definition of income as being derived from any of a number of sources:

The 16^th Amendment authorizes the taxation of income "from whatever source derived," so the identification of a source is truly irrelevant. Income is not taxed until it has been derived from a source. One wonders how it is that income derived from a commercial enterprise and taxed could be considered to have been derived a second time when distributed to the shareholders. Such, I suppose, is one of the miracles of modern lawmaking. The phrase "derived from" has caused much confusion in recent years. Our modern IRS sees no difference between "income derived from wages" and "wages." This is like saying that a "meteor from outer space" is the same as "outer space," or that "water from a well" is the same as "a well." By the same logic, is a calf from a cow the cow?

The only way a corporation, whose profits were the subject of the tax, could derive profit from wages or salaries was to charge more for a service than they paid in wages. There are such things as service corporations that provide only the services of their employees, from which they derive profit. If H & R Block pays its employees $10 per hour and charges $20 for their services, the difference would be gross profit to Block, not the employees. It’s not difficult to figure out, when we realize whose income was being taxed, and that income is synonymous with profit, not "compensation." A corporation deriving profit derived from wages cannot possibly be required to pay a profit tax on the wages it pays, and the law does not reach the wage-earners.

In 1919, Congress introduced an act to tax "compensation paid to appointed or elected officials," for services rendered to the Nation, but the Federal Judges held the act up until 1939. The compensation of a Federal Judge cannot be diminished while in office, pursuant to the Constitution, but when Congress offered to grandfather the existing judges, they conceded in 1939.

Not once did they contemplate the legacy they left their successors, or whether Congress could tax anybody’s wages for any reason. We might say that 1939 was the year in which the Judicial Branch became the tool of the Executive, who collects the tax. Today, the Judiciary endorses nearly every action the Executive takes. It sentences people to jail for not paying taxes they know jolly well were not owed. It allows the IRS to seize and sell property in a manner they know law forbids. Worst of all, the Federal Judges have provided the IRS an apparent exemption from the Constitution, which declares that no one shall be deprived, by government or anybody else, of life, liberty, or property, without due process of law. The Judiciary is responsible for promulgating the grand deception rather than protecting us from it. The Judicial Branch was given independence from the other two Branches as a measure of our protection from them. That Branch has betrayed us all.

Nor did they address the question of which Branch had the power to collect such a tax without exerting undue influence on the other two Branches. Simply put, the Public Salary Tax Act makes it possible for the Executive Branch, which collects the tax, to blackmail anybody in any of the three Branches. The power of the Constitution lies in its division of powers into three separate Branches, each with its autonomy from the other two. The Judges don’t make law, the Senate doesn’t propose spending bills, the President doesn’t declare war, the Congress doesn’t make Treaties, and on and on it goes. The Separation of Powers doctrine is what makes the Constitution work, and the current blending of Branches is what prevents it from working properly. The Constituion is the supreme model for "hands-off" governments. But like any government ever devised throughout history, it is constantly subject to corruptive influences, and must be watched like the proverbial hawk. Jefferson warned that the price of liberty is eternal vigil, and history has proved him to be absolutely correct.

"From each according to his ability, to each according to his need" is a Communist slogan. Social Security is the greatest wealth transfer program ever devised. It takes from workers to pay those who do not work. But the law does not create such a hoax. The Social Security Act of 1935 created a plan to supplement the retirement plans of its "States," (you may recall that "State" or "United States" are used interchangeably, indicating areas subject to Federal jurisdiction). Although the words of the Act do not include all the working people in America, the politicians encouraged all Americans to participate, and did not turn down the "contributions" when they began flowing in from working people of the States. Apparently, anybody could "contribute" and everybody thought they had to. This was and is a huge misunderstanding. Today, the name of the Act is the "Federal Insurance Contributions Act" or FICA. Congress is now trying to figure out how to bail out Social Security, having spent every dime ever collected for it. It was, and is, a transfer tax. Take a few bucks from everybody, pay a little to a few, spend the rest, and rely on future generations to make up the difference. Actuarially, there would have to be a steady increase in working people to support it. Instead, we have a steady or declining number of workers, and a steady increase in the number of beneficiaries. In 1936, the life expectancy was 62. Today it is fast approaching 80.

Today, workers "contribute" more than 15% of their wages to support our elderly and infirm, and private plans for the same purpose have all but disappeared. Medicare has crowded out private "guaranteed renewable for life" medical and hospital insurance for the elderly. Before age 65, we can buy comprehensive insurance. After that age, we accept what the government pays for, and buy private insurance, not to pay for things the government doesn’t, but to supplement what it pays for. What sort of situation is this? Further, since the government got into the insurance business, medical costs have skyrocketed. Any correlation? One could hardly call these plans sound fiscal policy, but the Social Security Retirement "deal" surely was popular! The result was that by the time World War II arrived, virtually every worker in America was having part of his pay deducted and paid to the government without complaint. By 1942, six years after the Social Security Act, the American people had been conditioned to accept the "Victory Tax."

No one thought to consider whether it was lawful for the government to establish a retirement plan for the public. The 30’s were desperate times, and people welcomed ideas that sounded like they would produce a more secure future.

No one thought to consider that the government immediately spent the money, giving lie to the "trust fund" notion. It is difficult to imagine an entire generation of self-reliant, self-governing people, coming to believe that the government would manage our savings better than we.

We consider slavery to be forced labor. When we work part-time for anyone, including the government, by force, we are, to that degree, slaves. World War II came along, and once again, with the "trust fund" money being obligated to workfare programs, such as the Conservation Corps (CCC) and Works Projects (WPA), and the good old politicians needed still more money.

Roosevelt entered office with a 7 Billion dollar budget and a surplus. During his reign, he managed to raise it to 70 Billion, and the nation was in debt. Movie Stars were out soliciting interest-bearing bonds to raise money to support "our boys." Taxes were inadequate to our wartime needs. Songs like "Over There" and "When the Caissons go Rolling Along," were constantly on the Radio. The newspapers were full of the enemies’ atrocities. We had to fight the enemies of our "allies," and make the world safe for "democracy." It was a popular war, by all counts. Production all across America shifted quickly to wartime necessities. Before the War, for example, there were 27 American manufacturers of Automobiles. During the War, no automobiles were manufactured. By the end of the war, we were left with "the big three," car manufacturers, and a handful of others that have since disappeared. Some of us remember Hudson cars, Studebakers, Packards, Kaisers and Frasers, LaSalles, Terraplanes, and others. Each was distinctive in its way. Today, all our cars look like bubbles, and most of their parts are manufactured outside America.

Congress enacted a batch of "excise" taxes, like the tax on telephone phone services, airline tickets, and its "Victory Tax," none of which have gone away even though they were drafted to expire with the cessation of hostilities.

The so-called "Victory Tax" was not a new tax. In fact, it was a 5% surtax on existing income taxes. Those wages that were taxable as income pursuant to previous law were the only wages this surtax effected. But suddenly every American was having "income" taxes deducted from his paycheck. The IRS actually sent out "Voluntary Victory Tax" forms, and people began authorizing the deduction of income tax from their wages, on the promise that they could file at the end of the war for a refund. Poppycock! Those who tried are still waiting. It is this imagined "Victory Tax" that is being deducted from our pay today.

In 1945, the last year of World War II, Beardsley Ruml, Chairman of the Fed, delivered a speech to the American Bar Association, entitled "Taxes for Revenue Purposes are Obsolete." In sum, he said:

He explained what taxes are really for:

Thus taxes, as he perceived them, are to help stabilize the purchasing power of the dollar (not its value), for redistribution of wealth, to penalize certain industries, and to provide for "national benefits," such as highways (?) and Social Security. Our government has ceased to be a government of the Union and has become the instrument of social control. And we thought the Soviet government lied to its people!

1954 brought us the Internal Revenue Code of 1954, which has thoroughly confused the courts and the professionals. It was intended to phase out the ’39 Code and phase in a new code. In the process, much of the original language of the law was lost, and along with it the intent of the lawmakers. Intent is called the "spirit" of the law, without which laws often make no sense. Code Section 61 defines "gross income" as follows (notes in the squiggly { } parentheses and italics are mine):

According to common rules of grammar and syntax, the sentence states that the "items" listed are sources of income, but the list includes items of income, such as rents, interest and dividends. Whoever wrote this section was either no master of the language, or was a master of deception. Note also that the item at (1) does not include the words "wages" or "salaries." The phrase "compensation for services" is taken from the Public Salary Tax Act, declaring "compensation for services" paid to those elected or appointed to serve our country by serving the government in those positions. These forms of compensation were to be included within the definition of "gross income." and were not listed as separate taxable wages. Of special interest is that the definition does not say whose income is subject to an income tax. That information must be found elsewhere.

Code Section 1 says there is a tax on the "taxable income" of married people, etc., and is nothing more than a tax table. Sections 1 through 1399 includes all the income taxes, including those imposed on trusts, corporations, partnerships, and insurance companies, and those sections comprise Chapter 1 of the Code. Chapter 2 of the Code consists of Sections 1401, 1402, and 1403, which relate to Social Security for the self-employed. Chapter 4 has been repealed, and Chapter 6 has to do with Consolidated Returns by Associations of Corporations paying a tax imposed by Chapter 1. Consider the following in that light:

If Chapter 1 ends after the "date of enactment of this title," then in order to understand the law, we must know exactly what is meant by that phrase. One possibility might be a reference to the attempt by Congress to codify all of the 50 Titles of the United States Codes into what they are calling "positive law." Under this theory, the Codes take on the same force and effect as the Statutes. Titles not so enacted are referred to as prima facie evidence of the Statutes, and when challenged, the Statute prevails.

If the "date of enactment" of the title refers to the date Congress enacts Title 26 into positive law, then chapters 1, 2, and 6 are in force, because Congress has not yet enacted Title 26 into positive law. As you will see, Subtitle F, containing all the collection and enforcement provisions, goes into effect on the day after the date of enactment of this title, so Chapter 1 income taxes and Subtitle F enforcement proceedings are mutually exclusive.

Another possibility might be the date the President signed the Code into law, August 16^th, 1954. If that is so, then the chapters mentioned were repealed on that date. Congress has established a "Law Revision Committee" that is responsible for taking relevant provisions from the United States Statutes at Large, the Stats, and incorporating them into the Codes. The Stats are published chronologically, but the Codes are published by subject matter. Thus provisions in the same Section of a Code might be taken from two or more entirely different Statutes enacted over a period of years. The general idea behind enacting a Code into positive law is to make the Codes an adequate representation of the Laws found in the Statutes. In many ways Codification of the laws is a great source of confusion to us, the courts, and the lawyers.

All of the collection and enforcement provisions of the Internal Revenue Code are found at Subtitle F, beginning at Code Section 6001. 7851 (a)(6) says that the collection and enforcement provisions go into effect "the day after the date of enactment of this title."

The provisions of Subtitle F and Chapters 1 and 2 are mutually exclusive. Either we have the enforcement provisions and no Chapter 1 Income tax, or we have Chapter 1 Income tax and no enforcement. The Law Revisers’ notes, which are considered prima facie evidence of the intent of the lawmakers, under 7851, indicate that Chapters 1 and 2 were indeed repealed on August 16, 1954:

Thus it appears that "this title" refers to "this Code." Is this law or mystery writing? We call this kind of writing "words of art" because they cause, rather than dispel, confusion, and require "construction." Chapters 1, 2, and 6 were repealed August 16, 1954, and the collection and enforcement procedures went into effect the next day. The provisions at 7851(a)(6) are said to apply with respect to any tax imposed by "this title." Since all the income taxes are said to be imposed by Chapter 1, what is left?

Ignoring the excise taxes shown at Subtitles D and E, there are Wage Taxes shown at Subtitle C. These taxes are all direct taxes. Social Security wage taxes found at Chapter 21, Railroad Retirement taxes found at Chapter 22, Federal Unemployment taxes found at Chapter 23, and Federal employees’ wage taxes found at Chapter 24. Chapter 21 taxes are imposed, not by Title 26, but by Title 42. Chapter 22 taxes are imposed at Title 45. Chapter 23 taxes are authorized, but not imposed, by Title 26. The wage taxes shown at Chapter 24 are for Federal employees in cooperation with States, pursuant to the Public Salary Tax Act, and the taxes are authorized, but not imposed, by Title 4. All subtitle C wage taxes are direct and voluntary, and depend upon agreements with the government by "States" and their employers and employees.

Since title 26 imposes none of the wage taxes, and Chapter 1 income taxes were repealed on the adoption of the Code, there are no enforcement procedures for collecting any of them contained in Subtitle F. It has been this way since the ’54 Code was adopted, if not before.

However, merely because these taxes are not imposed by law does not mean the IRS will not expend great effort to collect them by intimidation and brutality. During the past few years, I have had numerous interviews with the IRS with clients and members, wherein we have requested a copy of the law imposing a tax on our wages. IRS cannot, and persistently has refused to, identify the tax supposedly imposed on everybody’s wages. I’d ask "where in the Code does it say Bob’s wages are subject to a tax?" They would give us the runaround. "Look it up in the law library," or "it’s in Title 26" (containing 2109 provisions), or "everybody knows wages are income," but never a direct answer. They become irate if we persist in asking. We have had numerous conferences and have written numerous letters, but nobody in the IRS can tell us where to find this magic law. Letters to Congress usually get us routed back to the IRS instead of pointing to the law.

They cannot find the magic law because none exists. I know it doesn’t exist, because I have read every internal revenue law ever passed by Congress regarding income taxes since the Revolution, and there is no law that fits the description of the law the IRS claims exists.

IRS is probably the most devious organization ever created, but it was not created by an Act of Congress, like the Customs Office. In his Reorganization Plan # 26 of 1950 President Truman abolished the former Bureau of Internal Revenue created by President Lincoln during the Civil War, and created the Internal Revenue Service as an Executive Agency in the Department of the Treasury. The laws effecting the Treasury Department are Codified at Title 31. Title 31 shows no IRS or BATF. This is an extremely important detail, because Title 31 is one of the Titles that has been enacted into positive law.

According to the provisions of Title 1, General Provisions, which also has been enacted into positive law, the Codes are prima facie evidence of the general and permanent laws in force throughout the United States. The Statutes contain all the laws of the United States, including treaties, but the Codes contain only the laws in force throughout the Union, except for Title 26.

Prima facie means "at first glance." Where a Code has not been enacted into positive law, the Statutes prevail when such Codes are challenged. The phrase "general and permanent" means that the law is given force throughout the Union. Thus, since Title 31 shows a Customs Office but does not show an IRS, we know that Customs has effect throughout the Union, but the IRS does not. Earlier, we showed how the Internal Revenue Code, Title 26, was meant to apply only in areas subject to Federal, not State, jurisdiction, and a careful analysis of the Statutes and Codes clearly illustrates this fact.

Although the courts have become perverted concerning the income tax, there are numerous cases that clearly show that our wages are not, and cannot be made the subject of an income tax:

It has become apparent that our politicians are ruining our country. We have millions of homeless and unemployed, but they tell us the "economy" is healthy. We have manufacturing fleeing the country like we had the plague, and our markets are flooded with cheap goods from abroad. The United States is maintaining nearly 4,000 military bases in foreign nations during peacetime. The Constitution requires Congress to retire the Army within two years of a declaration of war. To keep it going requires a vote every two years. There is no rational excuse for maintaining a standing army during peacetime.

Have we forgotten our origins? The birth of our nation was a tax revolt supported by the Colonial Militias. The Union didn’t have a scrap of an army or the means to pay it. We learned in our very first war that nobody beats guerillas. We learned that skill from the Indians. Imagine a line of brightly-uniformed soldiers, marching to a cadence, through a forest where we are lurking, wearing camouflage, and are carrying our own weapons, with which we have had much practice. Nobody beats guerillas, and that is how we won the war of the Revolution. Not because we had a better-trained army, but because we were fighting for our right to be left alone.

We didn’t learn our lesson after the Civil War. That war gave us our first internal taxes since the Revolution, and they have not gone away. We didn’t learn it after World War I or World War II, or Korea or Vietnam. Every time Congress discovers an emergency which requires more of our money, it finds all kinds of necessity for the money after the emergency dissipates, and the upward spiral continues to escalate. George Washington’s budget was $3 millions in real money, and today’s budget is fast approaching $2 Trillions.

Today’s politicians have masked their debt by "balancing the budget," which only reduced the deficit, not the debt, and did nothing to reduce it. It is estimated that their debt is perhaps $5 Trillions, but nobody knows for sure, because there are so many off-budget items unaccounted for, and no accurate general accounting of their accumulated debt. Some estimates go as high as $15 Trillion. The General Accounting Office cannot provide an exact figure.

President Truman took office with a 70 Billion dollar budget, President Carter was handed a $300 Billion dollar budget, President Reagan left office with a $600 Billion dollar budget, and President Bush left office with a budget twice that of President Reagan. By the time President Clinton leaves office, the budget is likely to top $2 Trillion, nearly twice what it was when he took office. How much more doubling can the American people stand? How much more should we be expected to tolerate?

The real check on government spending is the will of the people. The only way for us to get our politicians to behave responsibly is for us to take away their biggest, and most offensive, source of revenue, the "individual income tax," the tax that never was. We need to challenge their profligate spending habits, and begin again, as we did 200 years ago, to question every move made by our political representatives.

When they say Social Security is sound, they are depending on our children and grandchildren paying more and more of their wages into an account that is immediately distributed to SS beneficiaries, and the rest is spent foolishly. There is no "trust fund," there is only an entry on the general ledger called a trust fund. The money goes directly into the general fund to be immediately spent. While the politicians feed us the "soundness of Social Security" doctrine, they are scurrying about looking for ways to "save" it. The program, instituted to supplement State employees’ retirement plans has become a menace to the financial health of the Union, and must be abolished, not "privatized."

1. IRS is forcing the collection of Social Security taxes by telling employers that they must obtain a W-4 from their employees. This is only true if the employee wants to authorize withholding, but employers believe what IRS agents tell them over the phone, and do not request a copy of the law that says so! It is time for all employers to demand to see a copy of any law that requires them to perform any services or pay any money to the government.
2. IRS insists that wages must be reported as employees’ income, and taxed, despite the fact that they cannot produce a law that says so.
3. IRS "Notice of Federal Tax Lien" claims that the lien is pursuant to an assessment, but in no instance have IRS personnel been able to produce such an assessment.
4. Said "notice" has a space for an abstract of judgment that is never filled out, because IRS cannot obtain a judgment. Federal and State law both require such judgment to perfect the government’s claim of a lien. This is because the lien must be attached to property by a court of law, without which it attaches to nothing.
5. Said notice of tax lien, when filed in County records, often ruins a person’s credit, and many times leads to an IRS "notice of levy."
6. IRS "notice of levy" is authorized to be served only upon a government employer relative to government employees’ wages, but IRS sends these things to banks, insurance companies, and other fiduciaries not paying wages, and to private employers despite the law’s limitations on their use. The "notice" on its face says the IRS has a levy which requires the employer to pay our wages to them instead of us, but in no case on record have they ever been able to produce a levy. That is because a levy, according to Federal and State law, requires a court order, and they never obtain such an order.
7. IRS has no legal authority to seize and sell anyone’s home. Their sales are made without warrant. Their sales do not convey title to property, since no court has ordered a change of ownership. Anybody who buys a home at an IRS "sale" buys nothing but a cloud upon its title, and if the victim of the sale knows how to deal with the situation in court, the "buyer" loses his money and the homeowner keeps his home. The IRS won’t refund a dime to the losing buyer. What a colossal scam!
8. IRS uses deception and brutality to beat the American people out of literally trillions of dollars we don’t owe, for a tax that does not exist, and the courts, generally, support them.
9. Congress has no intention of curbing the IRS. Its current efforts are merely to put a smiley face on the IRS to keep the collections going. They just want us to feel better about paying this nonexistent tax.

I encourage every American to cease paying taxes we don’t owe. To obtain assistance in putting a stop to illegal taxes, we must begin with individual efforts, demanding to see the law they claim exists. The Association offers such assistance. We have developed a series of letters designed to force them to show us the law or leave us alone. We have developed letters for County Auditors that file fraudulent lien documents, demanding that they remove them, and pay for any damages incurred by improper filing of them. Within a short time of this writing, we intend to file our first lawsuit against a County Auditor for having done so, all according to State law.

Within a few months, we will commence lawsuits against banks, insurance companies, and private employers for honoring a fraudulent notice of levy. Cases of this type have already been won. It is expected that these lawsuits will draw the attention of the press. In the meantime, we all need to write to Congress and demand that they admit there is no such tax, and that they start making preparations for adjusting their bloated budget accordingly.

I have great faith in the American people. 200 years ago, we were inspired to revolt against taxes as a whole people. Those taxes were minute compared to our burden today. I believe we have not lost the courage to do it again. As the pen is mightier than the sword, I believe there is more power in the 32 ¢ (soon to be 33 ¢) stamp than in all the rifles the people could muster- especially against the most powerful and best-trained military machine in history.

The above article by Jack Cohen is from THE TAX AX. For more Tax Ax Articles, click here.