Skip to comments.Repeal That Infernal Tax Code
Posted on 04/17/2012 5:28:08 AM PDT by Kaslin
"April is the cruelest month. . . ."--T. S. Eliot, The Waste Land
Ronald Reagan said it back in 1983: "Our federal tax system is, in short, utterly impossible, utterly unjust and completely counterproductive . . . (it) reeks with injustice and is fundamentally un-American . . . it has earned a rebellion, and it's time we rebelled."
But what politician today would speak so eloquently, and all too accurately, about the country's irrational, insufferable, infernal Internal Revenue Code? (Except maybe for purely ceremonial purposes during an election year.)
Those in Congress who have made distinguished careers sneaking tricky little passages into the tax code to favor the special interests they represent, or just hope to solicit for a campaign donation, aren't interested in undoing this elaborate trap for the average taxpayer.
Why would politicians seriously challenge a system that so richly rewards them for their expertise in an arcane specialty?
Lest we forget, and so many do, that this republic was born of a tax revolt -- indeed, a mounting succession of them that climaxed in the Spririt of '76. Gosh, maybe that's why they call it the Tea Party.
But we the people long ago lost touch with our Revolutionary, and still revolutionary, roots. We've become inured to the injustice, inefficiency and general incomprehensibility of an encyclopedic tax code that by now passeth all understanding.
A whole priesthood of CPAs has multiplied to translate this gnostic creed, with all its daunting commandments and special dispensations.
Most of us don't object to paying our taxes. Living in the United States of America is not only a blessing but a great bargain. What we object to, or should, is how hard, how complicated, how expensive and sometimes just how plain hopeless it is to try to figure out how much we owe.
Awash in a sea of paper, or rather an ocean of electronic impulses in this internetted age, the American taxpayer needs . . .
But every sweeping new tax law Congress enacts -- always called a "reform" -- makes reform only more complicated and, if possible, more confusing. And makes the tax code longer. By now, it has grown as indecipherable as Hammurabi's. It might as well be on clay tablets.
Despite the perennial foofaraw in Washington about whether and how much to cut taxes, what really drives people nuts is the paperwork, the record keeping, the uncertainty.
Even if folks have an accountant, and by now an estimated 80 percent of us use a tax preparer, or at least some software, to figure out how much we owe, it's still a wearing process.
For the average American family, filling out a tax form has become like attacking a puzzle to which, often enough, there is no right answer. But we're all supposed to swear, on penalty of perjury, that we've done our best to find it.
What to do? Don't mend it, end it. Abolish the tax code and start all over. Think about it: Would anybody starting from scratch come up with a system so byzantine, so counterproductive, so insane as the one we're stuck with? Well, maybe Rube Goldberg.
So why not opt for a clean break with the past?
Yes, kill the monster. Drive it through. Abolish the Internal Revenue Code and begin anew.
Put this thing out of its misery and the taxpayer's. By a date certain. Say, December 31, 2013. The government would have until then to come up with a simpler, fairer substitute.
At this point, it would be easier to junk the U.S. tax code and start all over than to fix it, and certainly to understand it.
To rephrase a thought from Dr. Johnson, nothing so wonderfully concentrates the mind as the prospect of having to file your taxes by midnight tonight. Or get an extension and so succeed only in prolonging the pain.
First kill the Internal Revenue Code, and the way to create a simpler, fairer system might become clearer to all those politicians, bureaucrats and other unimaginative types who now say it just can't be done. But it can be.
There is no time like the present to abolish the Internal Revenue Code. Which is pretty much what I wrote on Tax Day in 2004 and 2006 and 2008 ... and just about every year since. And now have said so again on this Tax Day.
Never. never, never, never give up. Don't believe those who can always be counted on to do nothing about even the longest-running outrages. Just abolish the old tax code and the politicians in Washington would have to devise a new, better, simpler one. From scratch. They'll want to get paid, won't they?
Here’s the solution:
Actually, I believe the solution is in front of the Supreme Court at this very moment. Should the USSC follow the Constitution and declare that Government CANNOT FORCE any citizen to purchase a “product or service”, they will be in effect declaring ALL LAWS that cannot be read and Understood by the average person of average means without the assistance of a “Government approved and licensed attorney or accountant” shall be immediately NULL and VOID. The government should not be allowed to force everyone to HIRE an ATTORNEY or an ACCOUNTANT just to understand and follow a LAW they ARE REQUIRED TO OBEY. Which is incidentally why we passed the Original 13th Amendment.
A return to apportionment by state will, of necessity, create an incentive in Congress to not pass tax measures!
Repeal of the 16th will eliminate the income tax.
Excise tax is still on the table.
If I had to choose income or excise, I choose excise.
Chapter 4 of the TRUTH!
The TRUTH About Income!
In the last chapter we learned the truth about income tax. In this chapter we will learn the truth about the real definition of income itself! Nowhere in the Internal Revenue Code (IRC) is income defined.
So the big question becomes, what IS income? And did you have any that was taxable?
The word “income” is not defined in the Internal Revenue Code, as the court stated in U.S. v. Ballard 535 F.2d 400 at 404, but the Supreme Court has defined it for us in numerous cases.
Stratton’s Independence v. Howbert 231 U.S. 399 (1913) “As has been repeatedly remarked, the corporation tax act of 1909 was not intended to be and is not, in any proper sense, an income tax law. This court has decided in the Pollock Case that the income tax of 1894 amounted in effect to a direct tax upon property, and was invalid because not apportioned according to population, as prescribed by the Constitution. The act of 1909 avoided this difficulty by imposing not an income tax, but an excise tax upon the conduct of business in a corporate capacity, measuring, however, the amount of tax by the income of the corporation, . . .”
“As to what should be deemed “income” within the meaning of Sec. 38, it of course need not be such an income as would have been taxable as such, for at that time (the 16th amendment not having been as yet ratified) income was not taxable as such by Congress without apportionment according to population, and this tax was not apportioned. Evidently Congress adopted the income as the measure of the tax to be imposed with the respect to the doing of business in corporate form because it desired that the excise should be imposed, approximately at least, with regard to the amount of benefit presumably derived by such corporations from the current operations of the government.”
The Supreme Court defines “income tax”, as an excise tax “imposed with respect to the doing of business in corporate form”. If you are not engaged in any corporate activities then you are not liable for an “excise income tax.” This Supreme Court decision also states that Congress cannot tax an individual’s income directly. All direct taxes must be imposed on the states with apportionment. U.S. Constitution Art. 1 Sect 2. Cl. 3 and Sect 9 Cl. 4.
The above case applies to corporations, so if you are not a corporation, then the Corporation Excise tax does not apply to you. The important thing here is the clarification that the income tax is an excise tax, imposed upon the doing of business in corporate form. An the tax is determined by how much income is received. But WHAT is income? The Supreme Court again tells us:
Eisner vs. Macomber 252 U.S. 189 pg 205 (1920) The Sixteenth Amendment must be construed in connection with the taxing clauses of the original Constitution and the effect attributed to them before the Amendment was adopted.
In Pollock v. Farmers’ Loan and Trust it was held that taxes upon rents and profits of real estate and upon returns from investments of personal property were in effect direct taxes upon the property from which the income arose, imposed by reason of ownership; and that Congress could not impose such taxes without apportioning them among the states according to population, as required by Art 1 Sect. 2 Cl. 3 and Sect. 9 Cl. 4 of the original Constitution.
Afterwards, and evidently in recognition of the limitations upon the taxing power of Congress thus determined, the Sixteenth Amendment was adopted: . . . As repeatedly held, this did not extend the taxing power to new subjects, but merely removed the necessity which might otherwise exist for an apportionment among the states of taxes laid on income. . . . it becomes essential to distinguish between what is and what is not “income’, as the term is there used;
After examining dictionaries in common use we find little to add to the succinct definition adopted in two cases arising under the Corporation (Excise) Tax Act of 1909
(Stratton’s Independence v. Howbert 231 US 399, 415; Doyle v. Mitchell Bros. Co. 247 US 179, 185)
“Income may be defined as the gain derived from capital, from labor, or from both combined”, provided it be understood to include profit gained through a sale or conversion of capital assets, to which it was applied in the Doyle case pp. 183, 185.
“Derived — from — capital”; — “the gain — derived — from — capital,” etc. Here we have the essential matter: not a gain accruing to capital, not a growth or increment of value in the investment; but a gain, a profit, something of exchangeable value proceeding from the property, severed from the capital however invested or employed, and coming in, being “derived,” that is, received or drawn by the recipient (the Taxpayer) for his separate use, benefit and disposal; — that is income derived from property. Nothing else answers the description.
That Congress has power to tax stockholders upon their property interests in the stock of corporations is beyond question; and that such interests might be valued in view of the condition of the company, including its accumulated and undivided profits, is equally clear. But this would be taxation of property because of ownership, and hence would require apportionment under the provisions of the Constitution, is settled beyond peradventure by previous decisions of this court.
Clearly, the definition of corporate income means a gain or profit received from an excise taxed activity. But does this same definition apply to individual income tax?
To the Supreme Court again:
Merchants’ Loan & Trust Co. v. Smietanka 255 U.S. 509 (1921) “It is obvious that these decisions in principle rule the case at bar if the word “income” has the same meaning in the Income Tax Act of 1913 that it had in the Corporation Excise Tax Act of 1909, and that it has the same scope of meaning was in effect decided in Southern Pacific Co. v. Lowe 247 U.S. 330, 335, where it was assumed for the purposes of decision that there was no difference in its meaning as used in the act of 1909 and in the Income Tax Act of 1913. There can be no doubt that the word must be given the same meaning and content in the Income Tax Acts of 1916 and 1917 that it had in the act of 1913. When to this we add that in Eisner v. Macomber, supra, a case arising under the same Income Tax Act of 1916 which is here involved, the definition of “income” which was applied was adopted from Strattons’ Independence v. Howbert, arising under the Corporation Excise Tax Act of 1909, with the addition that it should include “profit gained through sale or conversion of capital assets,” there would seem to be no room to doubt that the word must be given the same meaning in all the Income Tax Acts of Congress that was given to it in the Corporation Excise Tax Act, and that what that meaning is has now become definitely settled by decisions of this Court.”
The word “income” has the same meaning in ALL the income tax acts of Congress. That meaning has been declared to be corporate profits and gains and has been definitely settled by the Supreme Court. So, did you have income that is taxable? Did you have a gain or profit from a corporate activity? Remember that the income tax is an excise tax on the doing of business in a corporate capacity. That is the ONLY way that you can receive taxable income, as legally defined by the Supreme Court.
If you relied on these never overturned Supreme Court rulings in your beliefs, does your reliance on these plain rulings constitute a frivolous position? The IRS says it does!
So, if you had NO corporate income tax liability for this year, you had zero “income” as legally defined by the U.S. Supreme Court. A corporation is NOT taxed on ALL its income, from whatever source. It is only taxed on it’s profit. If that is the case then why are YOU taxed on ALL your income from whatever source? You are also allowed to deduct SOME expenses. Does that mean that if you work for a corporation and you exchange 40 hours of your labor for $600, that you had $600 of profit, minus deductions? If a corporation exchanges $600 for 40 hours of your labor, did they also have a profit? NO! They can claim ALL your labor as a deductible operating expense. So why is it that why you exchange one property (your labor) for another property ($600) that in that exchange, you had a profit and the corporation had a deduction? Why is it a profit for you but not for the corporation? The answer is that it is not a profit for EITHER of you! And therefore it is not taxable income, as defined by the Supreme Court.
The Supreme Court has ruled:
Eisner vs. Macomber 252 U.S. 189 pg 205 (1920): “ The Sixteenth Amendment must be construed in connection with the taxing clauses of the original Constitution and the effect attributed to them before the Amendment was adopted. . . .taxes upon rents and profits of real estate and upon returns from investments of personal property (labor) were in effect direct taxes upon the property from which the income arose, . . . that Congress could not impose such taxes without apportioning them among the states”
The Supreme Court has plainly stated that an individual’s income cannot be taxed directly: But an individual’s income CAN be taxed with an excise tax, IF it was received in a corporate activity. More on this later.
Stratton’s Independence v. Howbert 231 U.S. 399 (1913) “As has been repeatedly remarked, the corporation tax act of 1909 was not intended to be and is not, in any proper sense, an income tax law.
Corporate “income” (profits and gains) CAN be taxed with an excise tax, but the income itself is not taxed because it is property. Therefore income tax is not on income, it is on profits. It is not an income tax law, it is a profits tax law. Are you engaged in, or did you receive income in connection with, any corporate activities? Receipts received from labor or private investments are not corporate “income” and therefore do not fall within the legal definition of “income” as defined by the Supreme Court.
“Income” is legally defined as a corporate gain of profit in the Internal Revenue Code. Nowhere is there any different definition.
The definition of income used in the Corporate Excise Tax Act of 1909 is the same definition used in ALL the income tax statutes.
“Gross income” would then be the total income of a corporation, from all sources.
“Taxable income” would therefore be corporate gross income, minus allowable deductions. Also known as profit. If a corporation had no profit, then it had no taxable income. If you are an officer of a corporation, then you had individual income that is taxable.
Anytime the Internal Revenue Code mentions the word “income” it is talking about corporate income.
The FairTax does not need the 16th Amendment to be constitutional. It is fully constitutional under Article I Section 8.
The FairTax Rebate is also uniform and allows for the FairTax rate to be applied uniformly above a certain amount of spending, hence constitutional.
I know the architects of the legislation and they designed the FairTax to exist without the 16th Amendment and they did not design it in a vacuum but with input from hundreds of constitutional scholars and experts.
REPLACE IT WITH A 10% FLAT TAX
no tax on government employees, who are already being paid FROM taxes
no tax on any government income (Social Security, unemployment, etc)
AND THE GOVERNMENT *MUST* ONLY SPEND WHAT IT TAKES IN EXCEPT FOR EMERGENCY DEFENSE EXPENDITURES!
And I am going to give a beating to the nest “fair” tax person who tries to explain why the ‘tax-inclusive’ rate is good)
REPLACE IT WITH A 10% FLAT TAX
no tax on government employees, who are already being paid FROM taxes - and their salaries are FROZEN for the next 10 years (then they cannot exceed private sector annual salary)
NO MORE ‘20-and-out’ - paying people full retirement from government jobs after 20 years is insane. they can ‘retire’ at 65 like the rest of us.
And your retirement pay CAN NOT exceed your base pay.
SOCIAL SECURITY is optional, if you have a retirement account.
no tax on any government income (Social Security, unemployment, etc)
AND THE GOVERNMENT *MUST* ONLY SPEND WHAT IT TAKES IN EXCEPT FOR EMERGENCY DEFENSE EXPENDITURES!
And I am going to give a beating to the next “fair” tax person who tries to explain why the ‘tax-inclusive’ rate makes sense)
[anything else I can solve while I am here?]
AMEN! AMEN! AMEN! AMEN! and AMEN!!!!
If you are talking about a flat rate income tax forget it!
ANY form of income tax is fatally flawed in that it preserves the ability of politicians to define exactly what is, or is not, “income”. That seemingly small thing is at the heart of all that is currently wrong in Washington and we MUST fix it!!
The FairTax (and other sales taxes) is seductively simple.
The problem I have with it is it injects the federal government into EVERY purchase made. In our age of instant data mining, the possibilities of manipulation are staggering. The FairTax theory is: you swipe a debit card to buy a Coke, you pay a 20% (or whatever) sales tax. The ugly likelihood (once Congress gets busy on the tax code): you swipe a debit card, you scan the Coke, the transaction _starts_ with a 20% sales tax, but then because you used “plastic” knows who you are, notices from your tax history you’re in a higher tax bracket, ups that to 30%, notices you’re buying an “plus unhealthful” product, ups tax to 35%, checks your Obamacare (it’s not repealed yet, guys!) records and sees you’re borderline diabetic, ups tax to 45%, cross-references with criminal databases, notices an unpaid parking ticket, alerts security, and just as you’re opening the can walking out the door a cop arrests you for missing the court date you received in the mail but your toddler fed to the dog before you got home.
Do you _really_ want to give the feds that much monitoring capability?
Before you say “can’t happen”, remember that the IRS is leveraging border security to prevent tax-owing citizens from leaving. Fences block transit both ways, and point-of-sale taxation can be mined for a lot more information and abuse than you can imagine.
When it comes to taxes there's never anything new, or fair about them.
Well you are wrong about that in regards to Rebates. As long as rebates are uniform they represent a tax reimbursement which is completely constitutional.
The goal for the FairTax with regards to the Rebate is simple:
THERE IS NO FEDERAL INDIRECT TAX APPLIED TO INDIVIDUALS BELOW A CERTAIN SPENDING THRESHOLD OF ESSENTIALS.
To implement the above the government can choose business to choose to monitor spending of all consumers, a ridiculous and impractical proposition. Or the government can rebate/reimburse taxes already paid up to that threshold.
The income tax has always been constitutional as an indirect tax under the historical provisions of the Constitution as long as it was uniformly applied in the same manner as an excise tax. It is the graduated income tax which is not uniform for which the 16th was created. The 16th allows for confiscation of wealth and for targeting which wealth groups get taxed.
The original income tax was signed into law in 1862 by President Lincoln and was 1% on all incomes. It was constitutional and never challenged. It was Congress that in only two years time after Lincoln signed the original law that they started to create tax brackets that led to a graduated income tax. This graduated income tax was challenged in court and was declared unconstitutional by the SCOTUS later in the 1860s. The 1% tax was recuscitated in the 1870s and sunsetted in one year’s time but there were again members of Congress wanting to make it graduated despite the SCOTUS precedent. The income tax was again brought up in 1894 and shot down. This was the history leading up to the 16th.
So as long as the income tax was applied to incomes uniformly this form of taxation was considered constitutional. Ever today some IRS supporters use twisted logic to say the income tax is uniform by saying that within each bracket it is uniform. You can bet that they will try to use that argument should the 16th be repealed.
You are having paranoid fears understandably because you have lived under the behavioral practice patterns of the 16th Amendment all your life.
I spent a great deal of time in Suzzalo library in the microfiche department of periodicals where I read countless newspapers and editorials from late 1800s leading up to 1913 and beyond. The people I read about and the news articles and editorials I read were from people that never saw the result of a society living under the 16th Amendment for generations.
When we repeal the 16th we will go back to the original tax provisions in Section I of the Constitution. The key thing to understand is that taxes must be uniform, not uniform within certain categories, but uniform in spending and with the FairTax it must be uniform in RETAIL, END-USER, CONSUMER spending across the board.
If Congress tries to pass a law that says it can tax retail sales of apples different from retail sales of oranges, it will violate the uniformity clause and be unconstitutional on its face.
There is a lot of history on taxation before 1913. All of that history was well worked out with respect to indirect taxes, excises, duties and imports. All of that history and case law comes back to center stage when the 16th is gone.
When you study it you will see clearly that your concerns are overblown. Taking away the 16th gives power back to the people and starts the process of decentralizing the federal government which is badly needed.
ANY form of income tax is fatally flawed...The Fairtax specifically taxes the gross income from sales and services...
Looie as usual you are just plain LOONIE and haven’t the faintest idea as to what you are talking about!
It does no such thing! no form of “income” would be taxed under the fairtax. Only PERSONAL consumption is.
The FairTax Rebate is also uniform and allows for the FairTax rate to be applied uniformly above a certain amount of spending, hence constitutional.That's not at all true.
Go to their own rebate chart and you'll see that a family of four, husband and wife with 2 kids will receive MORE than a family of four with a single mom and 3 kids.
The Fairtax is a fraud beginning with the way the rate is being sold.
No, That's why I use cash for everything.
You are on to the real problem though. The tax system is not about operating funds for the government it is about control and intelligence gathering. Just to prove that you have paid enough tax you are compelled to provide to the government how much you make, where you made it, how much profit you made if you sell something. They have to know where you live, where you work, and how you get from one to the other. They know how many kids you have and where they go to school, Where you go to church and whether or not that church is an "approved" nonprofit. they even know which bank you keep your accounts in.
They knew about this when they passed the 16th amendment. (I think Bryant wanted the dictatorial power that would result) In the words of Virginia House Speaker Richard E. Byrd, who in 1910 predicted what the income tax would do.
"A hand from Washington will be stretched out and placed upon every man's business; the eye of the Federal inspector will be in every man's counting house . . . The law will of necessity have inquisitorial features, it will provide penalties, it will create complicated machinery. Under it men will be hailed into courts distant from their homes. Heavy fines imposed by distant and unfamiliar tribunals will constantly menace the tax payer. An army of Federal inspectors, spies and detectives will descend upon the state . . . Who of us who have had knowledge of the doings of the Federal officials in the Internal Revenue service can be blind to what will follow?"
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