Chapter 3 of the TRUTH!
An important distinction to remember is the difference between direct and indirect taxes. What's the difference again?
DIRECT TAX. An easy way to remember the difference between direct taxes and indirect taxes is to remember that direct taxes are DIRECTLY on inalienable rights (people or property, real and personal). A direct tax can be thought of as simply a property tax. It is on something you own. (your body, your possessions, your rights)
INDIRECT TAX. Indirect taxes are able to be passed on to someone else INDIRECTLY (excise tax, ie; alcohol tax or corporation tax). An indirect tax can be thought of a simply an activity or privilege tax. It is on something you do. Exercising a privilege.
Take the alcohol tax for example. The tax is not on the alcohol itself (property), but on the manufacture or sale (activities) of the alcohol. (a government granted privilege requiring a license) Or a corporation tax. The tax is not on the corporation itself (property), or its income (also property), but on the privilege of doing business as a corporation, which privilege (not a right) is also granted by the government. The Supreme Court makes that clear: (Note: 'U.S.' in these court cites indicates a United States Supreme Court decision)
Doyle v. Mitchell Bros. Co. 247 U.S. 179 (1918) This case concerns the Corporation Excise Tax Act of August 5, 1909. The court stated: An examination of these and other provisions of the act makes it plain that the legislative purpose was not to tax property as such, or the mere conversion of property (into cash), but to tax the conduct of the business of corporations organized for profit by a measure of the gainful returns from their business operations and property from the time the act took effect. As was pointed out in Flint v. Stone Tracy the tax was imposed 'not upon the franchises of the corporation irrespective of their use in business, nor upon the property of the corporation, but upon the doing of corporate or insurance business and with respect to the carrying on thereof'; an exposition that has been consistently adhered to.
Both the alcohol tax and the corporation tax are on the activity, but are passed on to the consumer, the one buying the alcohol or the one buying the products or services of a corporation. The tax is just indirectly collected from the person buying the end product or service. The government also catches the end products with a sales tax. Even a sales tax is not on the product itself, but is on the licensed business privilege of selling the product.
The Supreme Court clears up any confusion for us.
Pollock v. Farmers' Loan & Trust Co. (rehearing) 158 U.S. 601 (1895) "As heretofore stated, the Constitution divided Federal taxation into two great classes, the class of direct taxes, and the class of duties, imposts, and excises; and prescribed two rules which qualified the grant of power as to each class. The power to lay direct taxes apportioned among the states in proportion to their representation in the popular branch of Congress, a representation based on population as ascertained by the census, was plenary and absolute; but to lay direct taxes without apportionment was forbidden." (pg. 617, 618)
The original Pollock case arose because of the Revenue Act of 1894. The decision was so confusing that this rehearing was held.This case has never been overturned!
Now that we understand that there are two main categories of taxation, what types of things are taxed with each kind of taxation? You would think that it would be easy to separate what you 'own' from what you 'do', or an inalienable right from a privilege, but apparently that is not the case with the government. Or maybe they just don't want you to KNOW?
Luckily, Supreme Court decisions have legally defined it for us. (Note: The Pollock case was before the income tax mentioned in the 16th Amendment.)
In 1894 Congress passed the Revenue Act of 1894. In this act Congress attempted to tax people and property (both taxable only with a direct tax) with an indirect tax, and call it a 'duty', levied without apportionment. The Supreme court found this unconstitutional and ruled:
Pollock v. Farmer's Loan & Trust Co. 158 U.S. 601 (rehearing) (1895) "It is said that a tax on the whole income of property is not a direct tax in the meaning of the Constitution, but a duty, and, as a duty, leviable without apportionment, whether direct or indirect. We do not think so. Direct taxation was not restricted in one breath, and the restriction blown to the winds in another. (pg 622)
The power to tax real and personal property (labor) and the income from both, there being an apportionment, is conceded: that such a tax is a direct tax in the meaning of the Constitution has not been, and, in our judgment, cannot be successfully denied: . . . (pg 634)
We have considered the act only in respect of the tax on income received from real estate, and from invested personal property, and have not commented on so much of it as bears on gains or profits from business, privileges, or employments, in view of the instances in which taxation on business, privileges, or employments has assumed the guise of an excise tax and been sustained as such. (pg. 635)
Our conclusion may, therefore be summed up as follows:
First. We adhere to the opinion already announced, that, taxes on real estate being indisputably direct taxes, taxes on the rents or income of real estate are equally direct taxes.
Second. We are of the opinion that taxes on personal property or on the income of personal property (labor), are likewise direct taxes.
Third. The tax imposed by sections twenty-seven to thirty-seven, inclusive, of the act of 1894, so far as it falls on the income of real estate and of personal property, being a direct tax within the meaning of the Constitution, and, therefore, unconstitutional and void because not apportioned according to representation, all those sections, constituting one entire scheme of taxation, are necessarily invalid." (pg 637)
This case clearly proves that a tax on property (things you own), real or personal, must be a direct tax with apportionment among the states. And that taxes on businesses, privileges, or employments (things you do) have been sustained as indirect excise taxes. Remember, these decisions apply only to the 50 states.
So, then what category does the income tax fall into? Again let's let the Supreme Court decide that for us.
Brushaber v. Union Pacific Railroad Co. 240 U.S. 1, 16-17 (1916) "The conclusion reached in the Pollock case ...recognized the fact that taxation on income was, in its nature, an excise, entitled to be enforced as such."
The income tax is an EXCISE tax ! It is on something you DO! An activity or privilege tax! The tax was not on income, but on an activity.
The income tax does not neatly fall into any of the four constitutional taxes: direct property tax, imposts, duties, or excises. But to be constitutional the income tax must fall within one of the four classes, so the closest was an excise.
Black's Law Dictionary. 6th Edition.
Excise tax. A tax imposed on the performance of an act, the engaging in an occupation, or the enjoyment of a privilege.
The Brushaber case was in 1916. The 16th amendment was passed in 1913. The corporation tax was imposed in 1909. Many people think the 16th Amendment changed the income tax to a direct tax, to be collected without apportionment. The 16th Amendment changed NOTHING! This is the second greatest fraud perpetrated on the American people. This will be examined in a later chapter. But don't jump ahead yet!
So, what do we know so far?
The inalienable right of property, (things you own - real and personal) is only taxable, in the 50 states, with a direct tax, with apportionment. And property is acquired, possessed, and disposed of through inalienable right, secured by your state constitution.
If that is the case, is 'labor', or the 'income from labor' (wages), considered property? Or is the receiving of income a taxable activity? Can you decide yet?
The inalienable right of property can only be taxed with a direct tax in the 50 states, according to the above Supreme Court decisions.
The important point to remember here, is that an inalienable right cannot be taxed as a privilege.
So you see, once before (1894) Congress tried to tax the inalienable right of real and personal property with an indirect tax, and the Supreme Court ruled it unconstitutional because it was not applied as a direct tax and apportioned. The law has not changed. To attempt to collect a federal tax on real property, or personal property, or the income from either, as a direct tax, without apportionment, is still unconstitutional.
The income tax itself is NOT unconstitutional, because it is an indirect excise tax on privileges. It all depends on the subject being taxed, (something you own or something you do) and how the IRS attempts to collect it. It also depends on whether the tax is collected in the 50 states or not. The income tax is perfectly legal in the 50 states when it is 'imposed' on a taxable (privileged) activity, measured by the income produced, and is not directly on the income itself, and is collected as an indirect excise tax.
Is converting labor to cash a privileged excise taxable activity, or is it an inalienable right? Are labor and cash both something you own? Or something you do?
The answer coming up!
We have already learned that converting real estate to cash is not an excise activity which is taxable. It is an inalienable right to acquire, possess or dispose of property, under both state and national constitutions.
Eisner v. Macomber 252 U.S. 189 pg 205 (1920), "Be that as it may, it is concluded in all these cases, from that of Hylton to that of Springer, that taxes on land are direct taxes, and in none of them is it determined that taxes on rents, or income derived from land are not taxes on land." also see Hylton vs. U.S. 3 U.S. 171 (1796), Springer vs. U.S. 102 U.S. 586 (1880), Pollock vs. Farmers Loan and Trust 158 U.S. 429, pg 578,579 (1895).
The Supreme Court says all these cases agree. Property, (what you own) and the income from that property, can only be taxed with a direct tax with apportionment. Let's let the Supreme Court clarify it one more time.
Knowlton v. Moore 178 U.S. 41 (1900) "Direct taxes bear immediately upon persons, upon possessions and enjoyment of rights. Indirect taxes are levied upon the happening of an event or an exchange."
OK, so now we know that the income tax is an excise tax; and that an excise tax is an indirect tax; and that an indirect tax is levied upon the happening of an event (privileged activity). But, what exactly are excises?
The good ol' Supreme Court tells us.
Flint vs Stone Tracy Co. 220 U.S. 107 (1911) "Excises are taxes laid upon the manufacture, sale or consumption of commodities within the country, upon licenses to pursue certain (licensed) occupations and upon corporate privileges; the requirement to pay such taxes involves the exercise of privilege." "...Conceding the power of Congress to tax the business activities of private corporations ... the tax must be measured by some standard... It is therefore well settled by the decisions of this court that when the sovereign authority has exercised the right to tax a legitimate subject of taxation as an exercise of a franchise or privilege, it is no objection that the measure of taxation is found in the income..."
Tyler vs U.S. 281 U.S. 497, at pg 502 (1930) "A tax laid upon the happening of an event, as distinguished from its tangible fruits, is an indirect tax."
The happening of an event (something you do) versus its tangible fruits (something you own).
The indirect or excise income tax is NOT ON the income itself, but on a privileged (licensed) activity, (manufacture, sale or consumption), or on the exercise of a privilege (corporate franchise or licensed occupation) that produces the income. The income from that activity is used to measure the amount of the tax to charge for this activity or privilege. But there still must be a tax imposed on that activity or privilege, BEFORE it can be collected!
But what about a tax on income received from your labor, when your occupation does not require a license? Is labor a privileged taxable activity? Or is labor an inalienable property right that can only be taxed with a direct tax? Again, to the Supreme Court.
Butchers' Union Co. v. Crescent City Co. 111 U.S. 746 (1883) "As in our intercourse with our fellow-men certain principles of morality are assumed to exist, without which society would be impossible, so certain inherent rights lie at the foundation of all action, and upon a recognition of them alone can free institutions be maintained. These inherent rights have never been more happily expressed than in the Declaration of Independence, that new evangel of liberty to the people: "We hold these truths to be self-evident" - that is so plain that their truth is recognized upon their mere statement - "that all men are endowed" - not by edicts of Emperors, or decrees of Parliament, or Acts of Congress, but "by their Creator with certain inalienable rights" -- that is, rights which cannot be bartered away, or given away, or taken away except in punishment of crime -- "and that among these are life, liberty and the pursuit of happiness, and to secure these" -- not grant them but secure them-- "governments are instituted among men, deriving their just powers from the consent of the governed."
"Among these inalienable rights, as proclaimed in that great document, is the right of men to pursue their happiness, by which is meant the right to pursue any lawful business or vocation, in any manner not inconsistent with the equal rights of others, which may increase their prosperity or develop their faculties, so as to give them their highest enjoyment. The common business and callings of life, the ordinary trades and pursuits, which are innocuous in themselves, and have been followed in all communities from time immemorial, must, therefore, be free in this country to all alike upon the same conditions. The right to pursue them, without let or hindrance, except that which is applied to all persons of the same age, sex, and condition, is a distinguishing privilege of citizens of the United States, and an essential element of that freedom which they claim as their birthright.
It has been well said that, "The property which every man has is his own labor, as it is the original foundation of all other property, so it is the most sacred and inviolable. The patrimony of the poor man lies in the strength and dexterity of his own hands, and to hinder his employing this strength and dexterity in what manner he thinks proper, without injury to his neighbor, is a plain violation of the most sacred property.
Sounds very Libertarian doesn't it? Notice where it says the right to pursue any lawful business or vocation. 'Lawful' is different than legal, and means that you can engage in that occupation without a license. If it DID require a license, and you didn't get one, that would be illegal. Lawful means engaged in by inalienable right. Legal means engaged in by civil right, a privilege under the statutes.
Coppage v. Kansas 236 U.S. 1, at 14 (1915) Included in the right of personal liberty and the right of private property - partaking of the nature of each - is the right to make contracts for the acquisition of property. Chief among such contracts is that of personal employment, by which labor and other services are EXCHANGED for money or other forms of PROPERTY.
The Supreme Court has ruled that your labor is your most sacred property, and it is the basis of all other inalienable property rights. The Colorado Constitution states that acquiring and possessing property is an inalienable right. Can inalienable rights be taxed as privileges granted by the government? Not legally. Maybe Congress, when they passed the income tax laws, meant labor to be taxed? But, remember, Congress can not legislate away parts of the Constitution. They can only pass laws that are in accordance with the Constitution, because the Constitution is where Congress gets its authority. If Congress could vote out the Constitution, you would have no rights. Let's see what Congress has to say.
CONGRESSIONAL RECORD STATES THAT THE INCOME TAX IS NOT ON INCOME, but is an excise tax, applied only to certain taxable activities and privileges!
From Congressional Record - House March 27, 1943. pg 2580
"So the amendment (16th) made it possible to bring investment income within the scope of the general income-tax law, but did not change the character of the tax. It is still fundamentally an excise or duty with respect to the privilege of carrying on any activity or owning any property which produces income. The income tax is, therefore, not a tax on income as such. It is an excise tax with respect to certain activities and privileges which is measured by reference to the income they produce. The income is not the subject of the tax: it is the basis for determining the amount of tax."
Is Congress right? They make the laws, don't they? They said "Income is not the subject of the tax. It is the basis for determining the amount of tax" on a taxable activity or privilege. They checked it out themselves again and also came up with the following 1979 report, which was updated in 1984.
From a report by The Congressional Research Service. Report No. 84-168A, 784 / 725 titled "Some Constitutional Questions Regarding the Federal Income Tax Laws", dated May 25, 1979, and updated Sept. 26, 1984
"The Supreme Court, in a decision written by Chief Justice White, first noted that the Sixteenth Amendment did not authorize any new type of tax, nor did it repeal or revoke the tax clauses of Article I of the Constitution, quoted above. Direct taxes were, notwithstanding the advent of the Sixteenth Amendment, still subject to the rule of apportionment and indirect taxes were still the subject of the rule of uniformity. Rather, the Court found that the Sixteenth Amendment sought to restrain the Court from viewing an income tax as a direct tax because of its close effect on the underlying property." (pg 5)
Congress writes the laws, and Congressional Record states that the income tax is on taxable privileges. A tax on your labor, or the income from your labor - (personal property) is the same as a tax directly on you, just the same as a tax on rents is legally the same as a tax on the property that produced the rents.
So if the income tax is an excise tax on privileged activities, then why is the income tax mandatory? Surprise! IT ISN'T! According to the Supreme Court.
Flora v. U.S. 362 U.S. 145, at 176 (1960) Our system of taxation is based upon voluntary compliance and self assessment, and not upon distraint (force).
The Supreme Court says our system of taxation is voluntary and not based upon force (distraint). Why is that? Because to engage in a privileged (licensed) excise taxable activity is voluntary. The tax only becomes mandatory when you voluntarily engage in the privileged activity. But, do the laws back this up? Let's look at the Code of Federal Regulations (CFR) for income tax, also known as Title 26, or Treasury Regulations.
26 CFR 601.103 "Summary of general tax procedure.
(a) Collection authority. The tax system is basically one of self assessment."
26 CFR 601.602 "Tax forms and instructions.
(a) Tax return forms and instructions. The tax system is based on voluntary compliance, and the taxpayers complete and return the forms with payment of any tax owed."
If you file a return, you self-assess yourself, and claim, under penalty of perjury, that you are engaged in a privileged taxed activity. If you pay the amount due on the return, you complied voluntarily. Do these 2 regulations imply that everyone is required to file a return? NO. Only IF you are liable for an excise tax. Then you are required to file a return. Will the IRS protest, if you are misinformed, and are not engaged in a licensed activity or occupation, but filed a return anyway claiming that you are? Will they voluntarily return your money after they tricked you into paying it and swearing that you owed it? No! In fact, since you swore, under penalty of perjury, that you had excise taxed income, you then give them the full power of the law to come after you if you don't file or pay!
And why do you self-assess yourself? Because the IRS cannot legally assess a tax or a penalty on you without an assessment if you do not file a return.
Internal Revenue Code (IRC) Sect. 6203. Method of assessment. The assessment shall be made by recording the liability of the taxpayer in the office of the Secretary in accordance with rules or regulations prescribed by the Secretary.
Surprise! If you will look up the regulations for income tax, 26 CFR Part 1 - Income Tax, you will find that there are no regulations for the assessment of income tax. If there are no regulations, can the IRS make an assessment for you if you choose not to make a self-assessment? NO! You volunteer!
YOU must decide for yourself, BEFORE you file a return, whether you are receiving income from the exercise of an inalienable right, or if you are receiving income from the exercise of a taxed privilege. The IRS will not decide for you. They will just tell you that if you have taxable income, you are required to file a return. And they are right.
But what if the IRS files a return for you? Can they do that and then do an examination of that fictitious return, and find a large deficiency? They do it every day!
IRC 6201 Assessment authority. (1) The Secretary shall assess all taxes determined by the taxpayer or by the secretary as to which returns or lists are made under this title.
A tax can only be assessed if a return was filed! IRC 6061 and 6020(b)(2) both require tax returns to be signed, either by the taxpayer or by the Secretary. The next time the IRS tries to assess a tax on a fictitious return you did not file, demand to see the signed return! There is none! So if you did not file a return and self-assess yourself, then no tax can be assessed against you. There are no regulations for income tax assessment, so without a signed return by you, no assessment can be legally made by the IRS. If they DO prepare a return for you and you agree with it, because of intimidation, then it becomes legal!
BUT, DID you have taxable income?
Since the federal government cannot tax your inalienable rights as privileges, can your state government tax a constitutional right?
Murdock v. Pennsylvania 319 U.S. 105, at page 113 (1943) "A state may not, through a license tax, impose a charge for the enjoyment of a right granted by the Federal Constitution."
The 'federal' government can tax inalienable rights, (persons and property) when the tax is a direct tax. 'States' cannot license or tax federal constitutional rights. That is reserved for the federal government. But your inalienable rights are secured by the state Constitutions in the first place, since the 9th and 10th Amendments to the U.S. Constitution reserves those rights and powers not delegated. States cannot tax inalienable rights as privileges either. Your property CAN be directly taxed by the state! But the states are lazy. The states just let the federal government determine if your income is taxable or not, and then just take a percentage of that figure. So if you have no federal taxable income, then you also have no state taxable income.
To thoroughly get the term 'excise' straight, let's let some lower federal courts clarify the term excise for us also:
American Airways v. Wallace 57 F.2d 877, 880 "The terms "excise tax" and "privilege tax" are synonymous. The two are often used interchangeably."
Manufacturers' Trust Co. v. U.S. 32 F. Supp 289 "A tax levied upon property, because of its ownership, is a direct tax, whereas one levied upon property because of its use is an excise, duty or impost."
From the legal encyclopedia American Jurisprudence Chapter 71 State and Local Taxation, Section 28, we read, "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 occupation which is the subject of the excise, and the element of absolute and unavoidable demand is lacking."
You can avoid an excise tax by avoiding or not participating in the activity or privilege that is the subject of the tax. Since the income tax has been ruled to be an excise tax, then the same principle would apply. If you do not engage in the privileged (licensed) taxable activity or occupation, then you will not be subject to the tax. It is voluntary!
Again, from American Jurisprudence (Am. Jur.) Chapter 71 Section 94, we read "The (inalienable) right to acquire, possess, or own property cannot, according to one doctrine, be made the subject of an excise tax. The theory appears to be that a tax upon the right to acquire, possess, hold or own property is tantamount to a tax upon the property itself, and hence, must be regarded as a property tax and not an excise tax."
71 Am. Jur. 194 says "A tax on an essential attribute of a thing is a tax on the thing itself, and no tax can be imposed on the right of ownership, which is not also a tax on property. An individual, unlike a corporation, cannot be taxed for the mere privilege of existing, nor for the enjoyment of the right to own property."
Another important distinction between rights and privileges, must be made here.
Rights are from the creator, and are inalienable. They cannot be legally taken away. BUT, you can waive them by not using them, or by contract. . If you don't exercise your rights, you have none. If you agree not to claim them, under a contract, then again you don't have them.
Privileges are from the government in the form of licenses and government contracts. They can be granted and taken away at the whim of the government. The governments, state and federal, would like you to believe that you have no rights, that you only have privileges granted by them. They call these privileges 'rights' also, known as civil rights. A 'civil right' is a right granted by the civil government. It can also be granted and taken away at will. A civil right is really just a privilege from the government.
So a distinction must also be made between an inalienable right and a civil right, especially when dealing with the government. Civil rights are really privileges.
You must know what your inalienable rights are, and you must exercise them! If you don't, the government will call them privileges and tax them!
So, when it comes to the income tax, are the legal authorities of America all wrong? Or can we believe what they plainly say?
The income tax is NOT on income. It is on a taxed privileged (licensed) activity that produces income. The tax is on the 'source' that produced the income. The amount of income produced (property) by the privileged activity (source) is used to measure how much tax to impose on the privileged activity itself.
Direct taxes only fall on inalienable rights such as persons (capitation tax), and possessions (property). (On things you own) At present, there are no federal taxes that are apportioned among the states, as is required of direct taxes. All federal taxes are currently indirect taxes.
Indirect taxes only fall on privileged, taxed activities or events, and the exercise of a government granted franchise or privilege (corporations and licensed occupations) and on agreeing to government contracts. (On things you do)
The direct/indirect tax restrictions only apply to the 50 united States.Not to Washington D.C. and other U.S. government possessions.
The income tax is an indirect excise tax upon privileges. If you don't want to pay the tax, don't engage in the privilege or get the license!
It is important to remember, that, the subject of the income tax, is neither the income itself, nor the source of the income, such as labor, wages or property.
It is the privileged activity or occupation you are engaging in, upon which a tax is imposed, which is the lawful subject of an indirect excise income tax. The amount of the income received, in connection with the taxed privilege, is used to figure the amount of the tax on the activity itself.
'Labor' is the exercise of an inalienable personal property right. Income received from your personal property, labor, can only be taxed with a direct tax, with apportionment among the states. Unless you have waived that right in exchange for a privilege. Why do you think the government pushes so hard for every occupation to incorporate, by giving alleged tax breaks? Because then your income becomes taxable. You must demand your inalienable rights! Unless you like paying income taxes.
Whether the income tax is officially called an excise tax, or not, is irrelevant. The important distinction is whether it is a tax on an inalienable right or on a privilege. Is it a tax on property, real or personal (direct tax); or a tax on a privileged activity (indirect tax)?
Use this information ONLY AFTER you have reclaimed your inalienable rights. At present you do not have any! If you attempt to use any of the information in this chapter BEFORE you do that,, the IRS and the courts will call it a frivolous argument and without merit. They WILL rule against you! Use this information at your own risk! More information on this in later chapters on Citizenship.
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