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Chapter 1 of the TRUTH!



In order to understand the income tax, you must understand how it came about and how it was originally meant to be collected.

So let's just start at the founding of America and just work forward from there. The real start of America was with the Declaration of Independence on July 4, 1776. The real start of the United States was on September 17, 1787, with the ratification of the Constitution.  YES!  There is a difference! It will be explained as we go. That is why it is important to read this book in order.


First we have to find out where the taxing powers came from.

Our forefathers designed this country to be a free country, with no king and no subjects. They had just left the oppressive government of England, and did not want to create the same thing all over again. This new country and its new government was to be a concept that was unfamiliar to the common people. It was based on the concept that every man was his own master and a king in his own house. Every individual was to be a SOVEREIGN with 'inalienable' rights. What is a sovereign?

Black's Law Dictionary.
A person, body, or state in which independent and supreme authority is vested;
Sovereignty. The supreme, absolute, and uncontrollable power by which any independent state is governed; supreme political authority; the supreme will; paramount control of the constitution and frame of government and its administration; the self sufficient source of political power from which all specific political powers are derived;

Sovereign means "having supreme rank, power and authority. The greatest in degree." (from Webster's dictionary) A king is sovereign. There is no one above him except his creator. The American people are the same. There is no government above you except your creator (whatever your concept of God is). NO human government! This country was based upon the concept of individual sovereignty. This country is owned by each and every individual, jointly, with everybody else. Like the song says, "This land is your land, this land is my land." We own it together. But running a jointly owned country is complex, just like running a jointly owned corporation. So the sovereign people joined together and contracted to hire managers to run the country for them. These managers were called governments, local, state and federal. The government is just an employee of the sovereign people! In order to keep the employees in line, the people drew up employment contracts with these government employees. These employment contracts, spelling out the duties and limitations of the managers, are called state constitutions. Each sovereign state has its own constitution. And, like the sovereign individual people, each sovereign individual state also bound together with the other states and hired a manager to take care of the joint interests of the states. This manager was the federal government, and the employment contract between the states and the federal government is called the U.S. Constitution.

First comes the Creator! (Whatever your concept of God is!)

Next comes the individual sovereign people, whom the creator created. These individual sovereign people each had inalienable rights.

Who rules whom here? Are the people over the Creator?

Next the sovereign people created the sovereign states, and their governments.

Next the states created the federal government.

Therefore, do the people tell the government what to do, or does the government tell the people what to do? Are the state governments superior to the federal government? This whole picture has been turned upside down. Now the federal government is all powerful. It rules over the states and over the people. Both the federal government and the state governments rule over the people. And God has been booted out of the picture completely, through separation of church and state. The church is now just a corporation, dictated to by the government. In fact, you cannot even be recognized as a church without getting permission from the government and becoming a corporation. Now your allegiance is first to the government, and then to God! Again, the order is reversed!

A government can also be sovereign, but in the United States of America, the government's sovereignty is delegated to it, by the people. Since all the American people own this country together, (one large ruling family) who is actually going to run it and make the day to day decisions? How were the people going to secure their inalienable rights? This is why governments were created in this country. To protect our inalienable rights and handle the affairs of the state.

The Declaration of Independence tells us the true purpose of the government:
"That to secure these rights, governments are instituted among men, deriving their just power from the consent of the governed..."

Most state constitutions plainly state this fact. Since I live in Colorado, I will quote the Colorado Constitution, Article II Section 2: "The people of this state have the sole and exclusive right of governing themselves, as a free, sovereign and independent state:" If this is true, and we are free sovereigns, then why do we pay income taxes to the federal government? Why not to Mexico also? The answer will surprise you!

The people of Colorado, the ruling family, have the right to govern themselves as sovereign individuals, free and independent, as a republic, not a democracy. The U.S. Constitution Art. IV Section 4, ". . . guarantees to every state in this union a republican form of government . . ." Is your state run as a republic, or as a democracy? What's the difference between a republic and a democracy?

In a republic, (Rule by Law) every individual has inalienable rights from their creator. These inalienable rights of each individual are protected by all the other individuals, even if 5 million others disagree with how you exercise your inalienable rights. They cannot be violated. You can exercise these rights in any way you please, as long as you do not violate the rights of others. They cannot be voted away by a majority vote. Remember in school when you pledged allegiance to the flag, and the 'republic' for which it stands? Are you a Republican?

In a democracy, (Rule by Man) each individual votes to see what rights you have and what rights you don't. The majority vote rules. So if six people, 5 men and 1 woman, vote on a proposed new law that says the woman will provide sexual favors to the five men, and the 5 men vote for the law, and the woman votes against the law, then she loses and it becomes law. That's a democracy. It has been called 'Mob Rule'. The majority can decide anything they want, and it becomes law, even if it violates your rights. Are you a Democrat?

Would you rather live in a republic or a democracy? Remember, in a republic, you have inalienable rights, granted to you by God. In a democracy, you don't, You have 'civil' rights, which are granted to you by the civil government, and can be taken away at will.

Colorado Constitution Article II Section 1: "All political power is vested in and derived from the people; all government, of right, originates from the people, is founded upon their will only, and is instituted solely for the good of the whole."

YOU and I are 'the government', with all political power vested in us! As the ruling family, we did not want to be bothered with the day to day affairs of the state, so we delegated part of our sovereignty to government servants, to protect our rights. We put limits on that delegated power though, to prevent abuse. Those limits are called the constitutions. The constitutions, federal and state, are really nothing more than employment contracts between the sovereign people and their public servants. These constitutions outline the powers that the servants can exercise and more importantly, the powers they do not have. If the power was not delegated, in writing, then the government servants do not have that power! The government has done a very good job of reversing these positions!

A Colorado court case helps clarify this.
"The individual, and not the state, is the source and basis of our social compact and that sovereignty now resides in and has always resided in the individual
." Colorado Anti-Discrimination Comm. v. Case 151 Colo 235, 380 p 2d 34 (1962)

This concept was hard for the people coming from oppressive governments to understand, back at the founding of our country, and it is hard for people to understand today. But stop and think about this a second. Can you be a sovereign individual without having inalienable rights? And can you have inalienable rights without being a sovereign individual? No! Sovereignty and inalienable rights are two sides of the same coin. You cannot have one without the other. In this country, sovereign means the same as American. But since governments want subjects to rule over, and not sovereign people ruling over it, this concept is not taught in public schools.

But, let's follow this concept from its roots and see what kind of government we grew. It really is very simple once you understand it.

The Declaration of Independence states "We hold these truths to be self-evident, that all men are created equal, and that they are endowed by their creator with certain unalienable rights, that among these are Life, Liberty and the pursuit of Happiness. That to secure these rights, governments are instituted among men, deriving their just power from the consent of the governed..."

Sounds great, but what does it mean? The government now claims to be the sovereign over the people. Is the government sovereign, or is it the people?

What this means, is that all Americans are created with equal rights. And those rights are unalienable. What does un-a-lien-able (or inalienable) mean? It means "incapable of being surrendered or transferred, or taken away." They cannot be liened or taxed without permission Did you give your permission?.

Inalienable rights. Rights which are not capable of being surrendered or transferred without the consent of the one possessing such rights.

Just WHAT does the inalienable right to life, liberty and the pursuit of happiness include? They would include the following:

Freedom of religion. Freedom of speech and of the press. The right to keep and bear arms. The right to travel freely within the states without restriction. The right to be secure in our persons, houses, papers and effects, against unreasonable searches and seizures. The right to not be a witness against yourself. The right to a trial by jury. The right to marry. The right to own property, real and personal. The right to engage in a profession to earn a livelihood. Plus many others. These rights were reserved in the first 10 amendments to the U.S. Constitution, which is aptly named The Bill of Rights.

Your inalienable rights cannot be surrendered or transferred without your consent, but they CAN be waived, or contracted away! It is a legal principle that if you don't claim your rights, you automatically waive them. Can you guess who came up with that principle? When you waive (by not claiming) your inalienable rights, you also waive your individual sovereignty. In the U.S. of A., if you are not a sovereign individual, then you are just a subject/slave of the government. And that is exactly how the government, especially the IRS, treats you, as a subject/slave. You also waive your rights when you contract them away.

Now where did these inalienable natural rights come from? The government? NO! Notice it says "governments are instituted to secure these rights", not to grant these rights. The individual sovereign Americans delegated powers to the government, so that the government could secure these rights for them. The government is just your bodyguard, protecting your rights. The government is your public servant. Not the other way around. Your unalienable rights came from your creator. The creator is always above the created. Remember this important distinction. The government grants 'civil rights', and withdraws them as is pleases. More on this later.

Colorado Constitution Article II Section 3. "All persons have certain natural, essential and inalienable rights, among which may be reckoned the right of enjoying and defending their lives and liberties; of acquiring, possessing and protecting property; and of seeking and obtaining their safety and happiness."

Natural inalienable rights are from your creator. Inalienable rights are really just property rights. No one can take your property from you without your consent. If they take it by force, then your rights are violated!

Colorado Constitution Article II Section 15. "Private property shall not be taken or damaged, for public or private use, without just compensation."

One point to keep in mind here, is that your most fundamental inalienable property right is that of labor. (More on this later) So your labor (which is private property), or the income 'acquired' with your labor, cannot be taken without just compensation! When you are taxed on the income (property) exchanged (acquired) for your labor, is that taking your private property without compensation? Is that a violation of your inalienable right to property? You decide. If you decide yes, do you mind waiving your inalienable right to acquire property, and to pay a tax on that right, as a privilege? As you will learn in later chapters, the income tax is a tax on income from privileges.

The big question to ask, is, can an inalienable right be taxed as a privilege? The answer is yes, but ONLY if you first agree, and waive your inalienable rights of property. Have you waived your inalienable rights? Yes you have! I'll show you how later.

Where does the government get its power? From the consent of the governed. You! Every thing the government does, is approved by you, with your vote or non-vote. Think about it. Is the government protecting your inalienable rights in a republic, or is it granting you civil rights in a democracy? Are you happy with the way your servants are running your country?

If not, only you can change it. YOU are the government!! The government is really only your personal company (the US of A, jointly owned with other Americans) and government employees are only your personal company managers, that you hired to manage the country for you, and to protect your rights. Remember, the Constitution is really just an employment contract with them.

But, the balance of power in this country has shifted, and the servant (the federal government) has become the master. At least that is what the government wants you to think. The power of the government is limited by the Constitution. The Constitution outlined the powers that were delegated to the government. The government only has the powers that were delegated to it by the people, and it's power is not unlimited. Yet. The government is presently trying to change and rewrite the constitution, so it can have unlimited power.


In America, every man's home is his castle, every man is a king and every woman is a queen. Every individual has individual sovereignty. It is like each home is a sovereign country estate of its own. All these little countries, or estates, banded together and created states, with state constitutions to protect their rights. And then these states created a country, America, with a national constitution to protect the states' and the individuals' rights. The governing rights delegated to these governments were not all inclusive. Only certain ones were given and they were spelled out in the constitutions. What about the rights that weren't delegated?

U.S. of A. Constitution
9th Amendment:
The enumeration in the Constitution, of certain rights, shall not be construed to deny or disparage others retained by the people.

10th Amendment: The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.

All the powers delegated to the federal government are stated in the Constitution, in Article I, Section 8, and are very limited. Some of those limitations are stated in Sections 9 & 10. Notice that the powers not delegated, are retained by the States in their constitutions. And the powers not delegated to the States, are reserved to the individual sovereign Americans, the people.

Another important point to remember. The federal Constitution delegated two categories of power to the government. The first power was only for legislating for the 50 states, as delegated, and the second power was delegated to run the affairs of the federal government itself. This second power was an exclusive, unlimited power, under a democracy, because it did not apply to the 50 state republics, it applied only to property that the federal government owned, within it's geographical jurisdiction.

The federal government has spent the last 150 years trying to expand its jurisdiction to include the 50 states also. They have been successful.

The constitution divided the taxing powers -- for the 50 states only -- into two categories that all taxes must fall within to be legal. They are 'direct' and 'indirect' taxes. This restriction did NOT apply to federal government jurisdiction over its own property.

The first category is that of DIRECT TAXES. There are two authorities in the constitution delegating this power of direct taxation from the sovereign American people to Congress. The first is:
Article 1, Section 2, Clause 3: "Representatives and direct taxes shall be apportioned among the states which may be included within this Union, according to their respective numbers..."
The second is:
Article 1, Section 9, Clause 4: "No capitation, or other direct tax, shall be laid, unless in proportion to the census or enumeration herein before directed to be taken."

What does 'apportioned among the states' mean? It means "to distribute or allocate proportionally." (Webster) It means divided up equally among the states, based on their population. That is one of the reasons a census is taken every ten years. Also note that the federal government can impose a direct tax on the states, BUT NOT on the people. This power was not delegated to them!

Notice that the first clause says that direct taxes are to be apportioned among the states according to their numbers. It doesn't say among the individual people, but among the states. If the government wants to raise 10 million dollars, it divides that amount proportionally among the states, based on their population. The states then collect it as they want, usually as a property, or other tax that is acceptable to them. Also note, that "no direct tax" shall be laid unless in proportion to the census. And since it is apportioned 'among the states', this restriction does not apply when taxes are laid outside the states.

That is why the government needs to take a census, so it knows how much tax it can raise from the states through direct taxation. This method of taxation was only used four times after the founding of America. The direct tax is levied on each separate state, according to the census, and then each state must collect its share of the national tax from its Citizens. The state Citizens cannot be taxed by the federal government, with a direct tax, without apportionment among the states, except when the state does not comply with the direct tax imposed on them. Remember, a direct tax is levied on the individual states, NOT on the citizens of that state. Some people think the 16th amendment removed the apportionment feature of direct taxes. This is not true. Even if direct taxes did NOT have to be apportioned, the tax must STILL be applied to the states, not to the individual people!

An important distinction is to be made here. A direct tax is ALWAYS on property. On your property rights.

It is on something you OWN. Your inalienable rights are either personal or real property. Therefore, your rights cannot be federally taxed with a direct tax. This restriction does not apply to the states and states CAN impose a direct tax on your property, i.e. property tax. Also note that the inalienable right of property also includes the income from that property.

The second category is that of INDIRECT TAXES. There is one constitutional authority delegating this power of indirect taxation to Congress. It is:

Article 1 Section 8, Clause 1: "The Congress shall have power to lay and collect taxes, duties, imposts and excises to pay the debts and provide for the common defense and general welfare of the United States: But all duties, imposts and excises shall be uniform throughout the United States."

What does uniform mean? It means that all subjects in a taxable category or class, will be taxed at the same rate. If the tax on distilling alcohol is 5% of the net income, then all distilling of alcohol must be taxed at the same rate, 5%. Indirect taxes CAN be levied on activities engaged in by individuals.

A tax on duties, imposts and excises is NOT on the person (capitation tax) engaged in an activity, and it is NOT on the income (property) received from an activity, but is on the activity itself. And this taxable activity is a 'privilege' that is granted and regulated by the government How MUCH tax is imposed on that activity is determined by the income produced by that activity. The income is just a guideline for determining the amount of tax. The tax is NOT ON the income!

The important distinction here is that an indirect tax is on an activity, it is on something you DO! You can avoid the tax by not engaging in the activity! The income itself is not taxed. It is the ACTIVITY that produced the income that is taxed. And that activity is always a taxable privileged activity.

For example, a gasoline excise tax in not on the gasoline, it is on the sale of the gasoline. Gasoline is property, not an activity. Property can only be taxed with a direct tax. It is the 'sale' of the gasoline that is taxable, an activity.

These are the only two legal categories for all federal taxes in the 50 states, direct and indirect. All taxes must fall into one or the other, and each class must be collected as directed in the Constitution. All direct taxes must be apportioned among the states, and all indirect taxes must be uniform. Remember, this applies only to the 50 United States of America, and not to D.C. or the U.S. possessions. These constitutional mandates have never been repealed.

Now, of all the things that are taxable in the 50 states, they can be boiled down to 2 main categories:
(1) Inalienable rights, which include property (real and personal), and the income from that property.
(2) Privileges, which are always granted by the government, and are always activities.
The Constitution tells us how each type of tax is to be administered.

Inalienable rights, exercised by the people, can only be taxed directly with a capitation (head) tax, or a direct tax apportioned among the states. A capitation tax is on your body, which is your personal property, and is imposed on the state where the people live, not on the people directly.

Privileges, are taxed through duties, imposts and excises, and they must be taxed uniformly. These activities are taxed indirectly. The tax is not on the people or the property, because these can only be taxed directly, through apportionment. Therefore, the tax is called indirect, because it is on a privileged activity (such as the manufacture of alcohol), but the tax is indirectly passed on to the people buying the alcohol. Any tax on a company activity is really passed on to the customers. That makes it an indirect tax. The government is saying that an excise tax is not on you personally, but it really IS, indirectly. If you don't like the tax, don't buy the product.

Another important distinction must be made here. As you will learn, the income tax has been declared by the Supreme Court to be in the category of an excise tax. An excise tax is not on property, but is on privileges. Privileges granted by the government. Before you can be liable for an income tax, you must be exercising a government privilege that is producing income. The question to ask here is: When I receive income, am I receiving it in connection with the exercise of an inalienable right, or in connection with the exercise of a government privilege? What is the SOURCE of that income, and is there a tax imposed on that source activity? The Internal Revenue Code (IRC), in section 61, lists items of income from taxable 'sources', whatever that source may be. It does not list the sources though!

If the items of income are received 'in connection with' the exercise of an inalienable right (the source), then that income can only be taxed with a direct tax with apportionment among the states,

If the items of income are received 'in connection with' the exercise of a excise taxed activity, a privilege (the source), then that income can be taxed with an indirect excise tax on the privileged activity that produces the income.

Is your income received from the exercise of an inalienable right? Or from the exercise of a privilege? What is the source? To stack the deck in their favor, the federal government ALWAYS presumes that your income was received from an excise taxed activity, unless and until you claim otherwise.

What if you use the inalienable right of property in a privileged taxable activity, then how would the income be taxed? The 16th Amendment was passed for that very situation. It basically says that if you are engaged in a privileged activity, then any income received from anything 'connected' to that privileged activity is taxable with an income tax. (From whatever taxable source) ie: A tax on the income from your personal inalienable right to farm (real property) would have to be a direct tax. But if you used that same farm in a corporate activity, (a privilege) then the income would be taxable as an indirect excise tax on the privilege. Do you see why the government recommends incorporation for any business. It converts your inalienable right to a taxable privilege!

The way the laws are set up in this country, the government automatically presumes that your income is received from a privileged taxable excise activity, and therefore is taxable with an excise income tax. It is up to you to prove otherwise.

You must exercise your inalienable rights and claim those rights, or the government will claim your rights are privileges, and tax them accordingly. If the government calls your inalienable rights privileges and then taxes them as privileges, and you don't object, WHO IS TO BLAME?


The U.S. Constitution is clear.

The American people, are all individual sovereigns, who collectively created the state and federal governments. They delegated certain powers, via constitutions, to these governments, to protect their rights and run their political affairs for them. They reserved all powers not delegated, to themselves.

Sovereigns have inalienable rights.

Subjects of the government have privileges and immunities, also called civil rights.

The powers delegated to the federal government, to legislate for the 50 republic states, are enumerated in the Constitution. The powers delegated to the federal government, to legislate for its own property and jurisdiction, are unlimited and a democracy.

Taxes on the income from the exercise of inalienable rights (property) are always direct taxes, (directly on you) and must be apportioned, among the states, to be constitutional.

Taxes on privileged activities (excises, duties and imposts) are always indirect taxes and must be uniform. They are not directly on you, but you indirectly pay them anyway.

Direct taxes are on something you OWN. Rights and property, including the income from that property.

Indirect taxes are on something you DO. Privileged activities.


Do NOT use these arguments when confronting the IRS or any branch of state or federal government, IF your are a citizen/subject of the federal government, also known as a U.S. citizen. The governments in the United States do not recognize inalienable rights and the court systems do not uphold the constitutions, except when it benefits them.

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