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| Taxation in the United States |
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Amendment XVI in the National Archives of the United States of America. It provides that:"The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several States, and without regard to any census or enumeration."
Some tax protesters contend that the Sixteenth Amendment to the United States Constitution was never properly ratified (see, e.g., Devvy Kidd).From "Tax Cuts, Fair Tax Schemes Keep People Herded in the Wrong Direction", by Devvy Kidd: "The Sixteenth and Seventeenth Amendments to the U.S. Constitution were clearly never ratified by the required number of states; fraud was committed when they were announced ratified." May 14, 2007.Christopher S. Jackson (1997), "The Inane Gospel of Tax Protest: Resist Rendering Unto Caesar - Whatever His Demands", Gonzaga Law Review 32 291-329. Two lines of court cases address these contentions. The first group of cases deals with the claims of William J. Benson, co-author of the book The Law That Never Was (1985). The second line of cases involves the contention that Ohio was not a state in 1913 at the time of the ratification.
The William J. Benson contention is essentially that the legislatures of various states passed ratifying resolutions in which the quoted text of the Amendment differed from the text proposed by Congress in terms of capitalization, spelling of words, or punctuation marks (e.g. semi-colons instead of commas), and that these differences made the ratification invalid. Benson makes other assertions including claims that one or more states rejected the Amendment and that the state or states were falsely reported as having ratified the Amendment. As explained below, the Benson arguments have been rejected in every court case where they have been raised, and were explicitly ruled to be fraudulent in 2007.
The earliest reported court case where the Benson arguments were raised appears to be United States v. House,617 F. Supp. 237, 87-2 U.S. Tax Cas. (CCH) paragr. 9562 (W.D. Mich. 1985). about seventy-two years after the ratification. Benson testified in the House case to no avail. The Benson contention was comprehensively addressed by the Seventh Circuit Court of Appeals in United States v. Thomas:788 F.2d 1250 (7th Cir. 1986), cert. den. 107 S.Ct. 187 (1986).
Thomas is a tax protester, and one of his arguments is that he did not need to file tax returns because the sixteenth amendment is not part of the constitution. It was not properly ratified, Thomas insists, repeating the argument of W. Benson & M. Beckman, The Law That Never Was (1985). Benson and Beckman review the documents concerning the states\' ratification of the sixteenth amendment and conclude that only four states ratified the sixteenth amendment; they insist that the official promulgation of that amendment by Secretary of State Knox in 1913 is therefore void.
Benson and Beckman did not discover anything; they rediscovered something that Secretary Knox considered in 1913. Thirty-eight states ratified the sixteenth amendment, and thirty-seven sent formal instruments of ratification to the Secretary of State. (Minnesota notified the Secretary orally, and additional states ratified later; we consider only those Secretary Knox considered.Four additional states ratified the Amendment after Secretary Knox\'s proclamation, bringing the final total of ratifications to 42. See United States Government Printing Office, Analysis and Interpretation of the Constitution; Annotations of Cases Decided by the Supreme Court of the United States; Senate Document No. 103-6; 1992 Edition.Amendments to the Constitution of the Unites States of Amercia) Only four instruments repeat the language of the sixteenth amendment exactly as Congress approved it. The others contain errors of diction, capitalization, punctuation, and spelling. The text Congress transmitted to the states was: "The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several States, and without regard to any census or enumeration." Many of the instruments neglected to capitalize "States," and some capitalized other words instead. The instrument from Illinois had "remuneration" in place of "enumeration"; the instrument from Missouri substituted "levy" for "lay"; the instrument from Washington had "income" not "incomes"; others made similar blunders.
Thomas insists that because the states did not approve exactly the same text, the amendment did not go into effect. Secretary Knox considered this argument. The Solicitor of the Department of State drew up a list of the errors in the instruments and — taking into account both the triviality of the deviations and the treatment of earlier amendments that had experienced more substantial problems — advised the Secretary that he was authorized to declare the amendment adopted. The Secretary did so.
Although Thomas urges us to take the view of several state courts that only agreement on the literal text may make a legal document effective, the Supreme Court follows the "enrolled bill rule." If a legislative document is authenticated in regular form by the appropriate officials, the court treats that document as properly adopted. Field v. Clark, 143 U.S. 649, 36 L.Ed. 294, 12 S.Ct. 495 (1892). The principle is equally applicable to constitutional amendments. See Leser v. Garnett, 258 U.S. 130, 66 L.Ed. 505, 42 S.Ct. 217 (1922), which treats as conclusive the declaration of the Secretary of State that the nineteenth amendment had been adopted. In United States v. Foster, 789 F.2d. 457, 462-463, n.6 (7th Cir. 1986), we relied on Leser, as well as the inconsequential nature of the objections in the face of the 73-year acceptance of the effectiveness of the sixteenth amendment, to reject a claim similar to Thomas\'s. See also Coleman v. Miller, 307 U.S. 433, 83 L. Ed. 1385, 59 S. Ct. 972 (1939) (questions about ratification of amendments may be nonjusticiable). Secretary Knox declared that enough states had ratified the sixteenth amendment. The Secretary\'s decision is not transparently defective. We need not decide when, if ever, such a decision may be reviewed in order to know that Secretary Knox\'s decision is now beyond review.
—United States v. Thomas
Benson was unsuccessful with his Sixteenth Amendment argument when he had his own legal problems. He was prosecuted for tax evasion and willful failure to file tax returns. The court rejected his Sixteenth Amendment "non-ratification" argument in United States v. Benson.941 F.2d 598, 91-2 U.S. Tax Cas. (CCH) paragr. 50,437 (7th Cir. 1991). William J. Benson was convicted of tax evasion and willful failure to file tax returns in connection with over $100,000 of unreported income, and his conviction was upheld on appeal. He was sentenced to four years in prison and five years of probation.67 F.3d 641, 95-2 U.S. Tax Cas. (CCH) paragr. 50,540 (7th Cir. 1995).
On December 17, 2007, the United States District Court for the Northern District of Illinois ruled that Benson\'s non-ratification argument constituted a "fraud perpetrated by Benson" that had "caused needless confusion and a waste of the customers\' and the IRS\' time and resources."Memorandum Opinion, p. 14, Dec. 17, 2007, docket entry 106, United States v. Benson, case no. 1:04-cv-07403, United States District Court for the Northern District of Illinois, Eastern Division. The court stated: "Benson has failed to point to evidence that would create a genuinely disputed fact regarding whether the Sixteenth Amendment was properly ratified or whether United States Citizens are legally obligated to pay federal taxes."Memorandum Opinion, p. 9, Dec. 17, 2007, docket entry 106, United States v. Benson, case no. 1:04-cv-07403, United States District Court for the Northern District of Illinois, Eastern Division. The court ruled that "Benson\'s position has no merit and he has used his fraudulent tax advice to deceive other citizens and profit from it" in violation of .Memorandum Opinion, p. 22, Dec. 17, 2007, docket entry 106, United States v. Benson, case no. 1:04-cv-07403, United States District Court for the Northern District of Illinois, Eastern Division. The court granted an injunction under prohibiting Benson from promoting the theories in Benson\'s "Reliance Defense Package" (containing the non-ratification argument), which the court referred to as "false and fraudulent advice concerning the payment of federal taxes."Memorandum Opinion, p. 9 & p. 20, Dec. 17, 2007, docket entry 106, United States v. Benson, case no. 1:04-cv-07403, United States District Court for the Northern District of Illinois, Eastern Division.Permanent Injunction, Jan. 10, 2008, docket entry 116, United States v. Benson, case no. 1:04-cv-07403, United States District Court for the Northern District of Illinois, Eastern Division.
Similar Sixteenth Amendment arguments have been uniformly rejected by other United States Circuit courts in other cases including Ficalora v. Commissioner;751 F.2d 85, 85-1 U.S. Tax Cas. (CCH) paragr. 9103 (2d Cir. 1984). Sisk v. Commissioner;791 F.2d 58, 86-1 U.S. Tax Cas. (CCH) paragr. 9433 (6th Cir. 1986). United States v. Sitka;845 F.2d 43, 88-1 U.S. Tax Cas. (CCH) paragr. 9308 (2d Cir.), cert. denied, 488 U.S. 827 (1988). and United States v. Stahl.792 F.2d 1438, 86-2 U.S. Tax Cas. (CCH) paragr. 9518 (9th Cir. 1986), cert. denied, 107 S. Ct. 888 (1987). The non-ratification argument has been specifically deemed legally frivolous in Brown v. Commissioner;53 T.C.M. (CCH) 94, T.C. Memo 1987-78, CCH Dec. 43,696(M) (1987). Lysiak v. Commissioner;816 F.2d 311, 87-1 U.S. Tax Cas. (CCH) paragr. 9296 (7th Cir. 1987). and Miller v. United States.868 F.2d 236, 89-1 U.S. Tax Cas. (CCH) paragr. 9184 (7th Cir. 1989)
Another argument made by some tax protesters is that because the United States Congress did not pass an official proclamation (Pub. L. 204) recognizing the date of Ohio\'s 1803 admission to statehood until 1953 (see Ohio Constitution), Ohio was not a state until 1953 and therefore the Sixteenth Amendment was not properly ratified. The earliest reported court case where this argument was raised appears to be Ivey v. United States,76-2 U.S. Tax Cas. (CCH) paragr. 9682, 38 Amer. Fed. Tax Rep. 2d 76-5909 (E.D. Wisc. 1976). some sixty-three years after the ratification and 173 years after Ohio\'s admission as a state. This argument was rejected in the Ivey case, and has been uniformly rejected by the courts. See also McMullen v. United States,77-1 U.S. Tax Cas. (CCH) paragr. 9142, 39 Amer. Fed. Tax Rep. 2d 77-628 (W.D. Tenn. 1976). McCoy v. Alexander,77-2 U.S. Tax Cas. (CCH) paragr. 9504, 40 Amer. Fed. Tax Rep. 2d 77-5299 (S.D. Tex. 1977). Lorre v. Alexander,77-2 U.S. Tax Cas. (CCH) paragr. 9672 (W.D. Tex. 1977). McKenney v. Blumenthal,79-1 U.S. Tax Cas. (CCH) paragr. 9346, 43 Amer. Fed. Tax Rep. 2d 960 (N.D. Ga. 1979). In this case, the court stated: "The court takes note that Ohio was admitted to the union on March 1, 1803, has participated in all presidential elections and ratification procedures since that time, and has been generally afforded all rights and privileges to which a state is entitled. At such a late date this court will not entertain an action seeking to void the actions of and benefits accruing to the state of Ohio when it has been receiving those benefits and exercising those rights unfettered for over 175 years." and Knoblauch v. Commissioner.749 F.2d 200, 85-1 U.S. Tax. Cas. (CCH) paragr. 9109 (5th Cir. 1984), cert. denied, 474 U.S. 830 (1985).
In Baker v. Commissioner, the court stated:
The argument that the Sixteenth Amendment was not ratified and variations of this argument have been officially identified as legally frivolous federal tax return positions for purposes of the $5,000 frivolous tax return penalty imposed under Internal Revenue Code section 6702(a)., as amended by section 407 of the Tax Relief and Health Care Act of 2006, Pub. L. No. 109-432, 120 Stat. 2922 (Dec. 20, 2006). See Notice 2008-14, I.R.B. 2008-4 (Jan. 14, 2008), Internal Revenue Service, U.S. Department of the Treasury (superseding Notice 2007-30). [Note: As of late September 2007, the linked page at the Cornell University Law School web site for section 6702 does not yet reflect the increase in the penalty amount from $500 to $5,000.]
Some protesters have argued that because the Sixteenth Amendment does not contain the words "repeal" or "repealed", the Amendment is ineffective to change the law.Public Judicial Notice #3, Hour of the Time, December 16, 1999 According to legal commentator Daniel B. Evans:
Daniel B. Evans
In Buchbinder v. Commissioner, the taxpayers cited the case of Eisner v. Macomber and argued that "the Sixteenth Amendment must be interpreted so as not to \'repeal or modify\' the original Articles of the Constitution."67 T.C.M. (CCH) 1934, T.C. Memo. 1994-7, CCH Dec. 49,608(M) (1994). The United States Tax Court rejected that and all other arguments by Bruce and Elaine Buchbinder (the taxpayer-petitioners), stating: "We will not dress petitioners\' frivolous tax-protester ramblings with a cloak of respectability [ . . . . ] We find that petitioners in this case have pursued a frivolous cause of action. We find that they are liable for a penalty in the amount of $250.00 under the provisions of [Internal Revenue Code] section 6673."Id. The actual statement by the United States Supreme Court in Eisner v. Macomber is that the Sixteenth Amendment "shall not be extended by loose construction, so as to repeal or modify, except as applied to income, those provisions of the Constitution that require an apportionment according to population for direct taxes upon property, real and personal [ . . .] In order, therefore, that the clauses cited from Article I of the Constitution may have proper force and effect, save only as modified by the Amendment [ . . . ] it becomes essential to distinguish between what is and what is not \'income\' [ . . . ]".Eisner v. Macomber, 252 U.S. 189, 40 S. Ct. 189, 1 U.S. Tax Cas. (CCH) paragr. 32 (1920) (italics added).
In Parker v. Commissioner, tax protester Alton M. Parker, Sr.,In its decision, the Court of Appeals specifically referred to Parker\'s tax returns as being "protest" returns. Parker v. Commissioner, 724 F.2d 469, 84-1 U.S. Tax Cas. (CCH) paragr. 9209 (5th Cir. 1984). challenged the levying of tax upon individual income, based on language in the U.S. Supreme Court decision in Stanton v. Baltic Mining Co.,240 U.S. 103 (1916). to the effect that the Sixteenth Amendment "conferred no new power of taxation, but simply prohibited the previous complete and plenary power of income taxation possessed by Congress from the beginning from being taken out of the category of indirect taxation to which it inherently belonged [. . . .]"Parker v. Commissioner, 724 F.2d 469, 84-1 U.S. Tax Cas. (CCH) paragr. 9209 (5th Cir. 1984). The United States Court of Appeals for the Fifth Circuit rejected Parker\'s argument, and stated that Parker\'s proposition is "only partially correct, and in its critical aspect, is incorrect.Id. The Court of Appeals re-affirmed that the Congress has the power to impose the income tax, and stated that the Sixteenth Amendment "merely eliminates the requirement that the direct income tax be apportioned among the states."Id. The court ruled that Parker had raised a "frivolous" appeal.Id.
Tax protesters argue that in light of this language, the income tax is unconstitutional in that it is a direct tax and that the tax should be apportioned (divided equally amongst the population of the various states).The purpose of inserting the phrase "divided equally amongst the population of the various states" is unclear. By definition, an apportionment of a tax among the states according to the population of each state in a nation where no two states have exactly the same population mathematically results in the total dollar amount of tax being unequal on a state-by-state basis. The purpose of this language may, however, be to signify that although the tax would necessarily vary on a state-by-state basis, the dollar amount of tax would theoretically be equal for each person.
The above quoted language in Stanton v. Baltic Mining Co. is not a holding of law in the case. (Compare Ratio decidendi, Precedent, Stare decisis and Obiter dictum for a fuller explanation.)
The quoted language regarding the "complete and plenary power of income taxation possessed by Congress from the beginning" is a reference to the power granted to Congress by the original text of Article I of the U.S. Constitution. The reference to "being taken out of the category of indirect taxation to which it [the income tax] belonged" is a reference to the effect of the 1895 Court decision in Pollock v. Farmers\' Loan & Trust Co.,, aff\'d on reh\'g, where taxes on income from property (such as interest income and dividend income) — which, like taxes on income from labor, had always been considered indirect taxes (and therefore not subject to the apportionment rule) — were, beginning in 1895, treated as direct taxes. The Sixteenth Amendment overruled the effect of Pollock,Boris I. Bittker, Constitutional Limits on the Taxing Power of the Federal Government, The Tax Lawyer, Fall 1987, Vol. 41, No. 1, p. 3 (American Bar Ass\'n) (Pollock case "was in effect reversed by the sixteenth amendment"). making the source of the income irrelevant with respect to the apportionment rule, and thereby placing taxes on income from property back into the category of indirect taxes such as income from labor (the Sixteenth Amendment expressly stating that Congress has power to impose income taxes regardless of the source of the income, without apportionment among the states, and without regard to any census or enumeration).
The Court noted that the case "was commenced by the appellant [John R. Stanton] as a stockholder of the Baltic Mining Company, the appellee, to enjoin [i.e., prevent] the voluntary payment by the corporation and its officers of the tax assessed against it under the income tax section of the tariff act of October 3, 1913." On a direct appeal from the trial court, the U.S. Supreme Court affirmed the lower court\'s decision, which had dismissed Stanton\'s motion (i.e., had rejected Stanton\'s request) for a court order to prevent Baltic Mining Company from paying the income tax.
Stanton argued that the tax law was unconstitutional and void under the Fifth Amendment to the United States Constitution in that the law denied "to mining companies and their stockholders equal protection of the laws and deprive[d] them of their property without due process of law." The Court rejected that argument. Stanton also argued that the Sixteenth Amendment "authorizes only an exceptional direct income tax without apportionment, to which the tax in question does not conform" and that therefore the income tax was "not within the authority of that Amendment." The Court also rejected this argument. Thus, the U.S. Supreme Court, in upholding the constitutionality of the income tax under the 1913 Act, contradicts those tax protesters arguments that the income tax is unconstitutional under either the Fifth Amendment or the Sixteenth Amendment.
Tax lawyer Alan O. Dixler has written:
In Abrams v. Commissioner, the United States Tax Court stated: "Since the ratification of the Sixteenth Amendment, it is immaterial with respect to income taxes, whether the tax is a direct or indirect tax. The whole purpose of the Sixteenth Amendment was to relieve all income taxes when imposed from [the requirement of] apportionment and from [the requirement of] a consideration of the source whence the income was derived."82 T.C. 403, CCH Dec. 41,031 (1984).
Some protesters argue that imposition of income taxes violates the First Amendment freedom of speech because it requires the subject of the tax to write information on a tax return; or violates freedom of religion if the subject of the tax claims some religious objection to the payment of taxes, particularly if the subject styles himself or herself as a Reverend, Minister, or other religious office-holder. While the Internal Revenue Code makes an exemption for churches and other religious institutions, it makes only special tax codes and deductions, not exceptions, for religious professionals. The United States Supreme Court held in 1878 Reynolds v. United States,98 U.S. 145 (1878). that a religious belief, however strongly held, does not exempt the believer from adhering to general laws.
Justice Oliver Wendell Holmes in United States v. Sullivan is often referred to by courts in response to Fifth Amendment self-incrimination arguments. c.1930 photograph
Other protesters argue that the Fifth Amendment right against self-incrimination allows an individual to refuse to file an income tax return calling for information that could lead to a conviction for criminal acts from which the income was derived, or for the crime of not paying the tax itself. In response, the courts generally refer to the case of United States v. Sullivan, where Justice Oliver Wendell Holmes wrote:
If the form of return provided called for answers that the defendant was privileged from making he could have raised the objection in the return, but could not on that account refuse to make any return at all.... It would be an extreme if not an extravagant application of the Fifth Amendment to say that it authorized a man to refuse to state the amount of his income because it had been made in crime. But if the defendant desired to test that or any other point he should have tested it in the return so that it could be passed upon. He could not draw a conjurer\'s circle around the whole matter by his own declaration that to write any word upon the government blank would bring him into danger of the law.United States v. Sullivan, 274 U.S. 259, 263-64 (1927).
—Oliver Wendell Holmes, United States v. Sullivan
By failing to assert the privilege on the tax return, the taxpayer may give the Internal Revenue Service personal information that could possibly incriminate the taxpayer, and the protection of the Fifth Amendment would not be available.
Some protesters have argued that the income tax is a prohibited "takings" under the Fifth Amendment\'s Takings Clause,The Truth About Frivolous Tax Arguments. Internal Revenue Service (2006-11-30). Retrieved on 2008-03-04. and can not be imposed unless the taxpayer receives just compensation. The United States Supreme Court rejected this argument in Brushaber v. Union Pacific Railroad. The takings argument and variations of this argument have been officially identified as legally frivolous federal tax return positions for purposes of the $5,000 frivolous tax return penalty imposed under Internal Revenue Code section 6702(a). See , as amended by section 407 of the Tax Relief and Health Care Act of 2006, Pub. L. No. 109-432, 120 Stat. 2922 (Dec. 20, 2006). See Notice 2008-14, I.R.B. 2008-4 (Jan. 14, 2008), Internal Revenue Service, U.S. Department of the Treasury (superseding Notice 2007-30). [Note: As of late September 2007, the linked page at the Cornell University Law School web site for section 6702 does not yet reflect the increase in the penalty amount from $500 to $5,000.]
Protesters argue that the income tax violates the Fifth Amendment right that no person shall be "deprived of life, liberty, or property, without due process of law". However, people can be deprived of life, liberty, or property with due process of law — this is what the courts do. Legal commentator Daniel B. Evans describes:
Daniel B. Evans
Fifth Amendment "due process" arguments by tax protesters were rejected by the United States Court of Appeals for the Third Circuit in Kahn v. United States,753 F.2d 1208, 85-1 U.S. Tax Cas. (CCH) paragr. 9152 (3d Cir. 1985). by the United States Court of Appeals for the Fifth Circuit in Anderson v. United States,754 F.2d 1270, 85-1 U.S. Tax Cas. (CCH) paragr. 9261 (5th Cir. 1985) (per curiam). by the United States Court of Appeals for the Seventh Circuit in Cameron v. Internal Revenue Serv.,773 F.2d 126, 85-2 U.S. Tax Cas. (CCH) paragr. 9661 (7th Cir. 1985). by the United States Court of Appeals for the Eighth Circuit in Baskin v. United States,738 F.2d 975, 84-2 U.S. Tax Cas. (CCH) paragr. 9673 (8th Cir. 1984), by the United States Court of Appeals for the Ninth Circuit in Jolly v. United States,764 F.2d 642, 85-2 U.S. Tax Cas. (CCH) paragr. 9498 (9th Cir. 1985). and by the United States Court of Appeals for the Tenth Circuit in Martinez v. Internal Revenue Serv.744 F.2d 71, 84-2 U.S. Tax Cas. (CCH) paragr. 9811 (10th Cir. 1984).
An early protester, Arthur J. Porth, argued that the Sixteenth Amendment to the U.S. Constitution should itself be declared unconstitutional. His theory was that the income taxes under the Internal Revenue Code of 1939 imposed "involuntary servitude" in violation of the Thirteenth Amendment. That argument was ruled to be without merit in Porth v. Brodrick, United States Collector of Internal Revenue for the State of Kansas.214 F.2d 925, 54-2 U.S. Tax Cas. (CCH) paragr. 9552 (10th Cir. 1954). The involuntary servitude argument, and variations of this argument, have been officially identified as legally frivolous federal tax return positions for purposes of the $5,000 frivolous tax return penalty imposed under Internal Revenue Code section 6702(a)., as amended by section 407 of the Tax Relief and Health Care Act of 2006, Pub. L. No. 109-432, 120 Stat. 2922 (Dec. 20, 2006). See Notice 2008-14, I.R.B. 2008-4 (Jan. 14, 2008), Internal Revenue Service, U.S. Department of the Treasury (superseding Notice 2007-30). [Note: As of late September 2007, the linked page at the Cornell University Law School web site for section 6702 does not yet reflect the increase in the penalty amount from $500 to $5,000.]
Some tax protesters and other like-minded conspiracy theorists argue that all Americans are citizens of individual states as opposed to citizens of the United States, and that the United States therefore has no power to tax citizens or impose other federal laws outside of Washington D.C. and other federal enclavesYou\'re not a "citizen" under the Internal Revenue Code, Family Guardian/Sovereignty Education and Defense Ministry, retrieved on 21 Sept. 2007 The first sentence of Section 1 of the Fourteenth Amendment states:
All persons born or naturalized in the United States, and subject to the jurisdiction thereof, are citizens of the United States and of the State wherein they reside.
Notably, some tax protesters contend that the Fourteenth Amendment itself was never properly ratified, under the theory that the governments of southern states that supported the post-Civil War amendments were not representative of the people.See generally USA The Republic, and see 1957 Georgia Memorial to Congress.
Courts have uniformly held that this argument that the Fourteenth Amendment divested state citizens of U.S. citizenship is plainly incorrect. In Kantor v. Wellesley Galleries, Ltd.,Kantor v. Wellesley Galleries, Ltd., 704 F.2d 1088, 1090 (9th Cir. 1983). the court explained that "[w]hile the Fourteenth Amendment does not create a national citizenship, it has the effect of making that citizenship \'paramount and dominant\' instead of \'derivative and dependent\' upon state citizenship".Kantor v. Wellesley Galleries, Ltd., 704 F.2d 1088, 1090 (9th Cir. 1983). See also United States v. Ward,United States v. Ward, 833 F.2d 1538, 1539 (11th Cir. 1987).Fox v. Commissioner,T.C. Memo. 1993-37, 65 T.C.M. (CCH) 1831, CCH Dec. 48,842(M) (1993), aff\'d, 95-2 U.S. Tax Cas. (CCH) paragr. 50,637 (9th Cir. 1995). and United States v. Baker.2005-2 U.S. Tax Cas. (CCH) paragr. 50,509 (11th Cir. 2005) (per curiam).
An argument raised in the case of Trohimovich v. Commissioner is that the Seventeenth Amendment to the United States Constitution was not propertly ratified, and that all laws passed by Congress since the year 1919 (which was not the year of ratification) are invalid. The Trohimovich case involved a criminal contempt charge against the taxpayer in connection with a failure to obey a subpoena to produce books and records needed for the trial of the case. The United States Tax Court stated:
The [taxpayer\'s] petition in this case, while rambling and lengthy, appears to rely primarily on arguments that neither the Internal Revenue Service nor this Court has authority to determine petitioner\'s tax liability because the Seventeenth Amendment to the Constitution, which changed the method of electing senators to the U.S. Congress, was improperly proposed and/or adopted, and therefore all laws enacted by Congress (and the Senate) subsequent to at least 1919 are invalid. This included the Internal Revenue Code and the legislation which established this Court.
The court rejected the taxpayer\'s arguments, and ordered that "he be imprisoned for 30 days as punishment" for criminal contempt in failing to obey court orders or subpoenas.Trohimovich v. Commissioner, 77 T.C. 252, CCH Dec. 38,121 (1981).
Another tax protester argument is that a \'missing\' Thirteenth Amendment to the Constitution known as the Titles of Nobility Amendment or "TONA" precedes the current Thirteenth Amendment; the missing amendment purportedly would have divested the citizenship of any person receiving a title of nobility. Therefore, actions taken by lawyers and judges, who use the title \'Esquire\' (which some protesters claim is a title of nobility), are monarchical, and therefore unconstitutional. This contention, rarely raised before courts, was most recently addressed in Campion v. Towns, No.CV-04-1516PHX-ROS, *2 n.1 (D. Ariz. 2005) as a defense to a charge of tax evasion. The court replied:
Additionally, the Court will correct any misunderstanding Plaintiff has concerning the text of the Thirteenth Amendment to the United States Constitution. In his Complaint, Plaintiff includes a certified copy of the Thirteenth Amendment from the Colorado State Archives which was published in 1861. As included in that compilation, the Thirteenth Amendment would strip an individual of United States citizenship if they accept any title of nobility or honor. However, this is not the Thirteenth Amendment. The correct Thirteenth Amendment prohibits slavery. Although some people claim that state publication of the erroneous Thirteenth Amendment makes it valid, Article V of the Constitution does not so provide.
—Campion v. Towns
Internal Revenue Service building on Constitution Avenue in Washington, D.C.. The agency collects taxes and enforces the internal revenue laws.
Some tax protesters argue that they should be immune from federal income taxation because they are sovereign individuals or "natural individuals," or on the ground that they have not requested a privilege or benefit from the government. These kinds of arguments have been ruled without merit. For example, in the case of Lovell v. United States the United States Court of Appeals for the Seventh Circuit stated:
Plaintiffs argue first that they are exempt from federal taxation because they are "natural individuals" who have not "requested, obtained or exercised any, privilege from an agency of government." This is not a basis for an exemption from federal income tax. [citation omitted] All individuals, natural or unnatural, must pay federal income tax on their wages, regardless of whether they received any "privileges" from the government. Plaintiffs also contend that the Constitution prohibits imposition of a direct tax without apportionment. They are wrong; it does not. U. S. Const. amend. XVI [. . . .]755 F.2d 517, 85-1 U.S. Tax Cas. (CCH) paragr. 9208 (7th Cir. 1984).
—Lovell v. United States
The Court of Appeals in Lovell affirmed a U.S. District Court order upholding a frivolous return penalty under . Similarly, in United States v. Sloan, the taxpayer\'s contention — that he is "not a citizen of the United States, but rather, that he is a freeborn, natural individual, a citizen of the State of Indiana, and a \'master\'—not \'servant\'—of his government" — was ruled to be not a legal ground for the argument that the taxpayer was not subject to the federal tax laws; the tax evasion conviction was upheld by the United States Court of Appeals for the Seventh Circuit.939 F.2d 499, 91-2 U.S. Tax Cas. (CCH) paragr. 50,388 (7th Cir. 1991), cert. denied, 502 U.S. 1060, 112 S. Ct. 940 (1992). Similarly, the United States Court of Appeals for the Third Circuit stated, in Powers v. Commissioner: "Powers [the taxpayer] contends that either he is immune from the tax laws, or he is a \'slave\' to the federal government. This false choice is a creature of Powers\' tax protester ideology, not the laws of this Republic."Powers v. Commissioner, 2008-1 U.S. Tax Cas. (CCH) paragr. 50,116 (3d Cir. 2007) (per curiam), footnote 1.
The argument that a person\'s income is not taxed when the person rejects or renounces United States citizenship because the person claims to be a citizen exclusively of a state, and variations of this argument, have been officially identified as legally frivolous federal tax return positions for purposes of the $5,000 frivolous tax return penalty imposed under Internal Revenue Code section 6702(a)., as amended by section 407 of the Tax Relief and Health Care Act of 2006, Pub. L. No. 109-432, 120 Stat. 2922 (Dec. 20, 2006). See Notice 2008-14, I.R.B. 2008-4 (Jan. 14, 2008), Internal Revenue Service, U.S. Department of the Treasury (superseding Notice 2007-30). [Note: As of late September 2007, the linked page at the Cornell University Law School web site for section 6702 does not yet reflect the increase in the penalty amount from $500 to $5,000.]
Some tax protesters argue that under article I, section 8, clause 17 of the U.S. Constitution, federal income taxes can be imposed only inside an area called the "federal zone" — limited to the District of Columbia and various federal enclaves such as military bases.See, for example, the arguments in the online document "The Federal Zone: Cracking the Code of Internal Revenue", specifically the site\'s page on United States v. Bevans.Memorandum of Law in Support of Challenge to Criminal Jurisdiction of This Court by Sheila Terese Wallen, Defendant, United States v. Wallen, U.S. District Court for the District of Arizona, case no. 95-484-WDB The document includes arguments ruled frivolous, such as "federal zone" argument, and the claim the Fourteenth Amendment created a separate class of citizens because it did not capitalize the word "citizen", while the main body of the Constitution did. Clause 17 provides that Congress shall have the power:
[. . .] To exercise exclusive legislation in all cases whatsoever, over such District (not exceeding ten miles square) as may, by cession of particular states, and the acceptance of Congress, become the seat of the government of the United States, and to exercise like authority over all places purchased by the consent of the legislature of the state in which the same shall be, for the erection of forts, magazines, arsenals, dockyards, and other needful buildings [. . . .]
—U.S. Constitution
This argument is based in part on the U.S. Supreme Court decision in the case of United States v. Bevans.16 U.S. 336 (1818). In Bevans, the parties argued over whether a federal court in Massachusetts had jurisdiction over the case of a U.S. Marine charged with a murder that occurred on a ship in Boston Harbor. No issues regarding federal income taxation or the Internal Revenue Code were presented to or decided by the Court in the Bevans case. The Internal Revenue Code and the Internal Revenue Service did not yet exist in 1818, when the Bevans murder case was decided.
The Clause 17 argument was specifically rejected in the case of United States v. Sato:
Defendants argue that Clause 17 limits the legislative power of Congress such that the only geographical areas over which Congress may legislate, or may exercise its power of taxation, are those areas described in Clause 17. This position is contrary to both the natural reading of the Constitution and the case law. Clause 17 limits not the power of Congress, but the power of the states. "[T]he word \'exclusive\' was employed to eliminate any possibility that the legislative power of Congress over the District [of Columbia] was to be concurrent with that of the ceding states." . . . Similarly, it is clear that the power of the Congress to collect taxes, created by Article I, Section 8, Clause 1 of the Constitution, is an independent power which is not limited by the other specific powers enumerated in Section 8. United States v. Butler, 297 U.S. 1, 65-66, 56 S. Ct. 312, 319 (1936). It is thus readily apparent that Congress\' power to tax extends beyond the exclusive legislative districts contemplated by Clause 17. Defendants\' motion to dismiss based on Clause 17 is denied.United States v. Sato, 704 F. Supp. 816, 89-1 U.S. Tax Cas. (CCH) paragr. 9257 (N.D. Ill. 1989) (citations omitted; brackets in original).
—United States v. Sato
The Clause 17 argument was also unsuccessful in Celauro v. United States, Internal Revenue Service.411 F. Supp. 2d 257, 2006-1 U.S. Tax Cas. (CCH) paragr. 50,168 (E.D.N.Y. 2006).
Some tax protesters contend that the U.S. Supreme Court decision in Caha v. United States152 U.S. 211 (1894). restricts the jurisdiction of the federal government to impose income taxes inside the "states", based on the following language from the Court’s opinion:
This statute is one of universal application within the territorial limits of the United States, and is not limited to those portions which are within the exclusive jurisdiction of the national government, such as the District of Columbia. Generally speaking, within any state of this Union the preservation of the peace and the protection of person and property are the functions of the state government, and are no part of the primary duty, at least, of the nation. The laws of congress in respect to those matters do not extend into the territorial limits of the states, but have force only in the District of Columbia, and other places that are within the exclusive jurisdiction of the national gover[n]ment.
—Caha v. United States
Some tax protesters contend that the Court\'s reference to "those matters" restricted the federal government\'s jurisdiction over matters of taxation. Caha is not a tax case. The reference to "this statute" was a reference to a perjury statute. The Caha case involved a perjury conviction where the defendant unsuccessfully argued that the federal court had no jurisdiction over a prosecution for the crime of perjury committed in a proceeding in a land office at Kingfisher, Oklahoma regarding ownership of real estate.
The reference in Caha to the "laws of congress in respect to those matters" was a reference to the matters of preservation of the peace and the protection of person and property. The Court in Caha rejected the argument that the federal courts had no jurisdiction to hear a case under the perjury statute, and the defendant\'s conviction was affirmed. No issues involving the power to impose and enforce federal taxes in the fifty states were presented to or decided by the court in Caha.
The courts have uniformly rejected the "federal zone" argument that congressional authority to impose an income tax is limited to the District of Columbia, forts, magazines, arsenals, or dockyards, etc. See, for example, United States v. Mundt;29 F.3d 233, 94-2 U.S. Tax Cas. (CCH) paragr. 50,366 (6th Cir. 1994). Nelsen v. Commissioner;65 T.C.M. (CCH) 2530, T.C. Memo 1993-189 (1993). Abbs v. Imhoff.99-2 U.S. Tax Cas. (CCH) paragr. 50,652 (W.D. Mich. 1999).
Some tax protesters have cited the U.S. Supreme Court case of Stratton\'s Independence, Limited v. Howbert231 U.S. 399 (1913). for the argument that an income tax on an individual\'s income is unconstitutional. This was an argument raised unsuccessfully by John B. Hill, Jr., in Hill v. United States.599 F. Supp. 118, 85-1 U.S. Tax Cas. (CCH) paragr. 9148 (M.D. Tenn. 1984). and without success by John B. Cameron, Jr., in Cameron v. Internal Revenue Serv..84-2 U.S. Tax Cas. (CCH) paragr. 9845 (N.D. Ind. 1984), aff\'d, 773 F.2d 126, 85-2 U.S. Tax Cas. (CCH) paragr. 9661 (7th Cir. 1985). In Stratton, a mining corporation argued that the 1909 corporation tax act did not apply to that corporation. The U.S. Supreme Court ruled that the 1909 corporation tax act did apply to mining corporations, and that the proceeds of ores mined by the corporation from its own premises were income within the meaning of the 1909 tax act. The Court also ruled that the corporation was not entitled to deduct "the value of such ore in place and before it is mined" as depreciation within the meaning of the 1909 Act. The Stratton case involved income taxation of a corporation, not of individuals. The Court in the Stratton case did not rule any corporate or individual income tax as unconstitutional.
Some tax protesters have cited Doyle v. Mitchell Bros. Co.247 U.S. 179 (1918). for the proposition that income of individuals cannot be taxed. This was the argument raised unsuccessfully by Joseph T. Tornichio in the case of Tornichio v. United States98-1 U.S. Tax Cas. (CCH) paragr. 50,299 (N.D. Ohio 1998), aff\'d, 99-1 U.S. Tax Cas. (CCH) paragr. 50,394 (6th Cir. 1999). and by Joram Perl in Perl v. United States (also unsuccessfully).99-2 U.S. Tax Cas. (CCH) paragr. 50,935 (D. Mass. 1999). The following language is sometimes cited by protesters:
Yet it is plain, we think, that by the true intent and meaning of the act the entire proceeds of a mere conversion of capital assets were not to be treated as income. Whatever difficulty there may be about a precise and scientific definition of \'income,\' it imports, as used here, something entirely distinct from principal or capital either as a subject of taxation or as a measure of the tax; conveying rather the idea of gain or increase arising from corporate activities.
—Doyle v. Mitchell Bros. Co.
The above verbiage is immediately followed in the text of the case by this sentence:
As was said in Stratton\'s Independence v. Howbert, 231 U.S. 399, 415 , 34 S. Sup. Ct. 136: \'Income may be defined as the gain derived from capital, from labor, or from both combined.\'
—Doyle v. Mitchell Bros. Co.
In Doyle, the taxpayer was a corporation engaged in the manufacture of lumber. In 1903, the taxpayer purchased certain timber land at a cost of about $20 per acre. As of December 31, 1908, the value of the land had increased to about $40 per acre. The Corporation Excise Tax Act of 1909 was enacted on August 5, 1909, and was effective retroactively to January 1, 1909. For the years 1909 through 1912, the taxpayer filed tax returns under the 1909 Act, showing gross receipts from the sale of manufactured lumber and, in arriving at the amount of net income subject to tax under the 1909 Act, deducted an amount based on the $40 per acre value, rather than the actual cost of about $20 per acre. The Commissioner of Internal Revenue argued that the taxpayer should be able to deduct only an amount based on the taxpayer’s historical cost basis of $20, rather than the $40 fair market value at the time the 1909 Act became effective. (Essentially, if the taxpayer were allowed to use the $40 per acre value as its basis rather than the actual $20 historical cost basis, a portion of the taxpayer’s gain — the increase in value from 1903 to December 31, 1908 — would go untaxed.)
The U.S. Supreme Court ruled that under the 1909 Act — which had become effective January 1, 1909 — the taxpayer should be taxed only on the increase in value after 1908. Increases in value prior to the effective date of the statute were not to be taxed under the terms of that statute. Thus, the taxpayer was entitled to deduct, from its gross receipts from the sale of finished lumber, a basis amount computed with reference to the $40 per acre value as of December 31, 1908. Doyle is a case involving statutory (not constitutional) interpretation. In this case, the Court was interpreting the 1909 statute. Although some tax protesters cite this case for an argument about the constitutional definition of income as excluding income of individuals, no issues involving the constitutional definition of income, or of income under any other tax statutes, were presented to or decided by the Court.
The case is also notable for the fact that it involved a retroactively imposed tax. The taxpayer did not argue — and the Court did not rule — that as a general proposition taxes could not be imposed retroactively. Indeed, the tax in this case was imposed retroactively; the statute was enacted in August of 1909 but was made effective retroactively to January 1, 1909.
One argument repeatedly made by tax protesters is that the income of individuals is not taxable because income should mean only "corporate profits" or "corporate gain". This is the Merchants\' Loan argument, named after the case of Merchants’ Loan & Trust Company, as Trustee of the Estate of Arthur Ryerson, Deceased, Plaintiff in Error v. Julius F. Smietanka, formerly United States Collector of Internal Revenue for the First District of the State of Illinois.255 U.S. 509 (1921). The argument is essentially that "income" for federal income tax purposes means only the income of a corporation — not the income of a non-corporate taxpayer — because the United States Supreme Court in that case, in discussing the meaning of income, mentioned a statute enacted in 1909 that taxed the income of corporations.
The Court in Merchants\' Loan was specifically interpreting a 1916 statute imposing income taxes on individuals and estates (among other kinds of entities), and not the 1909 corporate tax statute. The taxpayer in Merchants\' Loan was not a corporation but was the "Estate of Arthur Ryerson, Deceased". The Court was not presented with (and did not decide) any issue involving the taxability of "corporate profits" or "corporate gains" or any other kind of income except the gain on the sale of the stock by the "Estate of Arthur Ryerson, Deceased". The terms "corporate profit" and "corporate gain" are not found in the text of the Court’s decision in Merchants’ Loan. In Merchants\' Loan, the Supreme Court ruled that under the Sixteenth Amendment to the United States Constitution and the 1916 tax statute applicable at the time, a gain on a sale of stock by the estate of a deceased person is included in the income of that estate, and is therefore taxable to that estate for federal income tax purposes.
The Merchants\' Loan argument has been litigated by tax protesters several times, and the courts have uniformly rejected the argument that income consists only of corporate profits. See, for example: Cameron v. Internal Revenue Serv.,593 F. Supp. 1540, 84-2 U.S. Tax Cas. (CCH) paragr. 9845 (N.D. Ind. 1984), aff’d, 773 F.2d 126, 85-2 U.S. Tax Cas. (CCH) paragr. 9661 (7th Cir. 1985). Stoewer v. Commissioner,84 T.C.M. (CCH) 13, T.C. Memo 2002-167, CCH Dec. 54,805(M) (2002). Reinhart v. United States,2003-2 U.S. Tax Cas. (CCH) paragr. 50,658 (W.D. Tex. 2003). Fink v. Commissioner;85 T.C.M. (CCH) 976, T.C. Memo 2003-61, CCH Dec. 55,068(M) (2003). Flathers v. Commissioner;85 T.C.M. (CCH) 969, T.C. Memo 2003-60, CCH Dec. 55,067(M) (2003). Schroeder v. Commissioner;84 T.C.M. (CCH) 220, T.C. Memo 2002-211, CCH Dec. 54,851(M) (2002), aff’d, 2003-1 U.S. Tax Cas. (CCH) paragr. 50,511 (9th Cir. 2003), cert. denied, 540 U.S. 1220 (2004). Sherwood v. Commissioner;T.C. Memo 2005-268, CCH Dec. 56,200(M) (2005). and Ho v. Commissioner.T.C. Memo 2006-41, CCH Dec. 56,447(M) (2006). Tax protesters — who have lost every case using Merchants\' Loan for the theory that only "corporate profits" could be taxable — are citing a case where the U.S. Supreme Court ruled that the income of a non-corporate taxpayer is taxable. Neither the United States Supreme Court nor any other federal court has ever ruled that under the Internal Revenue Code the term "income" means only the income of a corporation for federal income tax purposes.
Some tax protesters have cited the Supreme Court case of Flint v. Stone Tracy Co.220 U.S. 107 (1911). for the argument that only corporate profits or income can be taxed, using the following quote:
Excises are taxes laid upon the manufacture, sale or consumption of commodities within the country, upon licenses to pursue certain occupations and upon corporate privileges...the requirement to pay such taxes involves the exercise of privileges, and the element of absolute and unavoidable demand is lacking...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 produced in part from property which of itself considered is nontaxable.
—Flint v. Stone Tracy Co.
In Flint v. Stone Tracy Co., the U.S. Supreme Court ruled that the corporation tax act of 1909 did not violate the constitutional requirement that revenue measures originate in the U.S. House of Representatives. The Court did not rule that excise taxes consisted only of taxes on corporations and corporate privileges, to the exclusion of taxes on individuals (natural persons). The issue of the validity of an income tax imposed on individuals was neither presented to the Court nor decided by the Court.
The courts have rejected the argument that Flint v. Stone Tracy Co. can be used to avoid taxation of wages. For example, in Parker v. Commissioner, a case where a taxpayer unsuccessfully argued that wages were not taxable, the United States Court of Appeals for the Fifth Circuit stated (in part):
Appellant cites Flint v. Stone Tracy Co., 220 U. S. 107, 31 S. Ct. 342, 55 L. Ed. 389 (1911), in support of his contention that the income tax is an excise tax applicable only against special privileges, such as the privilege of conducting a business, and is not assessable against income in general. Appellant twice errs. Flint did not address personal income tax; it was concerned with corporate taxation. Furthermore, Flint is pre-sixteenth amendment and must be read in that light. At this late date, it seems incredible that we would again be required to hold that the Constitution, as amended, empowers the Congress to levy an income tax against any source of income, without the need to apportion the tax equally among the states, or to classify it as an excise tax applicable to specific categories of activities.724 F.2d 469, 84-1 U.S. Tax Cas. (CCH) paragr. 9209 (5th Cir. 1984).
—Parker v. Commissioner
The argument that only corporations are subject to federal income tax, and variations of this argument, have been officially identified as legally frivolous federal tax return positions for purposes of the $5,000 frivolous tax return penalty imposed under Internal Revenue Code section 6702(a)., as amended by section 407 of the Tax Relief and Health Care Act of 2006, Pub. L. No. 109-432, 120 Stat. 2922 (Dec. 20, 2006). See Notice 2008-14, I.R.B. 2008-4 (Jan. 14, 2008), Internal Revenue Service, U.S. Department of the Treasury (superseding Notice 2007-30). [Note: As of late September 2007, the linked page at the Cornell University Law School web site for section 6702 does not yet reflect the increase in the penalty amount from $500 to $5,000.]
At least two federal courts have indicated that Congress may constitutionally tax an item as "income," regardless of whether that item is "income" within the meaning of the Sixteenth Amendment. In Penn Mutual Indemnity Co. v. Commissioner, the United States Court of Appeals for the Third Circuit stated:
It did not take a constitutional amendment to entitle the United States to impose an income tax. Pollock v. Farmers\' Loan & Trust Co., 157 U. S. 429, 158 U. S. 601 (1895), only held that a tax on the income derived from real or personal property was so close to a tax on that property that it could not be imposed without apportionment. The Sixteenth Amendment removed that barrier. Indeed, the requirement for apportionment is pretty strictly limited to taxes on real and personal property and capitation taxes.
It is not necessary to uphold the validity of the tax imposed by the United States that the tax itself bear an accurate label [ . . . ]
It could well be argued that the tax involved here [an income tax] is an "excise tax" based upon the receipt of money by the taxpayer. It certainly is not a tax on property and it certainly is not a capitation tax; therefore, it need not be apportioned. [ . . . ] Congress has the power to impose taxes generally, and if the particular imposition does not run afoul of any constitutional restrictions then the tax is lawful, call it what you will.Penn Mutual Indemnity Co. v. Commissioner, 277 F.2d 16, 60-1 U.S. Tax Cas. (CCH) paragr. 9389 (3d Cir. 1960) (footnotes omitted).
—Penn Mutual Indemnity Co. v. Commissioner
In Murphy v. Internal Revenue Serv., the United States Court of Appeals for the District of Columbia Circuit ruled that a personal injury award received by a taxpayer was "within the reach of the congressional power to tax under Article I, Section 8 of the Constitution" — even if the award was "not income within the meaning of the Sixteenth Amendment".Murphy v. Internal Revenue Serv., 2007-2 U.S. Tax Cas. (CCH) paragr. 50,531 (D.C. Cir. 2007). In the Murphy case, although Congress had provided a statutory exclusion under for recoveries in connection with a personal physical injury or physical sickness, the award in question had been received in connection with a non-physical injury, and therefore was not covered by the statutory exclusion.
One argument that has been raised is that because the federal income tax is progressive (i.e., because the marginal tax rates increase, or progress, as the level of taxable income increases), the discriminations and inequalities created by the tax should render the tax unconstitutional. This argument was rejected by the United States Supreme Court in two companion cases — with respect to the income tax on individuals in Thorne v. Anderson, and with respect to the income tax on corporations in Tyee Realty Co. v. Anderson.Thorne v. Anderson and Tyee Realty Co. v. Anderson are published in one report at 240 U.S. 115 (1916).
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Several tax protesters assert that the Congress has no constitutional power to tax labor or income from labor, citing a variety of court cases. These arguments include claims that the word "income" as used in the Sixteenth Amendment cannot be interpreted as applying to wages; that wages are not income because labor is exchanged for them; that taxing wages violates individuals\' right to property; and several others.
Robert L. Schulz and his We the People Foundation take the positions that the government "is clearly prohibited from doing what it is doing – taxing the salaries, wages and compensation of the working men and women of this country and forcing the business entities that utilize the labor of ordinary American citizens to withhold and turn over to the IRS a part of the earnings of those workers" and "that the federal government DOES NOT possess ANY legal authority -- statutory or Constitutional -- to tax the wages or salaries of American workers."From website for We the People Foundation, retrieved on March 3, 2008, from [2] (capitalization in original).
Similarly, tax protester Tom Cryer argues that "the law does not tax [a person\'s] wages", and that the federal government cannot tax "[m]oney that you earned [and] paid for with your labor and industry" because "the Constitution does not allow the federal government to tax those earnings" (referring to "wages, salaries and fees that [a person] earn[s] for [himself]"). See [3].
Arguments about the taxability of compensation for personal services, whether called wages, salary, or some other term, may be either constitutional arguments as in United States v. Connor (see below)898 F.2d 942, 90-1 U.S. Tax Cas. (CCH) paragr. 50,166 (3d Cir. 1990). or statutory arguments as in Cheek v. United States,498 U.S. 192 (1991)., depending on the details of the argument. For purposes of presentation, these arguments are summarized here rather than in the article Tax protester statutory arguments. The rest of this section explains these arguments in more detail.
Some protesters include false quotations in their arguments. Radio personality Dave Champion contends that the following verbiage is a quotation from the case of Evans v. Gore in his own arguments on the internet about federal income taxes:
The sixteenth [amendment] does not justify the taxation of persons or things (their property) previously immune . . .it does not extend taxing power to new or excepted citizens…it is intended only to remove all occasions from any apportionment of income taxes among the states. It does not authorize a tax on a salary. [ . . . ]Federal Income Tax, Original Intent Treatise (bolding is by Dave Champion).
The quoted material by Dave Champion is false; it does not appear in the Court\'s decision.Evans v. Gore, 253 U.S. 245 (1920), U.S. Supreme Court In Evans v. Gore, the U.S. Supreme Court actually did rule that a federal income tax on certain income of federal judges was unconstitutional. The Evans v. Gore ruling has been interpreted as barring application of the Federal income tax to a Federal judge who had been appointed prior to the enactment of the tax.See the U.S. Supreme Court\'s interpretation of Evans v. Gore in United States v. Hatter, 532 U.S. 557, 121 S. Ct. 1782 (2001). This was the Court\'s year 1920 interpretation of the "Compensation Clause", the rule that Federal judges "shall, at stated Times, receive for their Services a Compensation, which shall not be diminished during their Continuance in Office" under Article III, section 1 of the U.S. Constitution. The decision in Evans v. Gore was eviscerated in the 1939 U.S. Supreme Court decision of O\'Malley v. Woodrough,307 U.S. 277 (1939). and was expressly overruled by the U.S. Supreme Court itself in 2001, in the case of United States v. Hatter.532 U.S. 557, 121 S. Ct. 1782 (2001). See also United States v. Will, 449 U.S. 200 (1980). In Hatter, the Supreme Court stated: "We now overrule Evans insofar as it holds that the Compensation Clause forbids Congress to apply a generally applicable, nondiscriminatory tax to the salaries of federal judges, whether or not they were appointed before enactment of the tax."Hatter, 532 U.S. 557 (2001).
Neither the Supreme Court nor any other federal court has ever ruled that the Sixteenth Amendment (or any other part of the Constitution) does not authorize a Federal income tax on compensation for personal services.
For the argument that wages are not taxable, some tax protesters—including convicted tax offender Irwin Schiff—incorrectly attribute to the U.S. Supreme Court the following language in connection with the leading tax case of Lucas v. Earl:
The claim that salaries, wages, and compensation for personal services are to be taxed as an entirety and therefore must be returned [i.e., reported on an income tax return] by the individual who has performed the services which produce the gain is without support, either in the language of the Act or in the decisions of the courts construing it. Not only this, but it is directly opposed to provisions of the Act and to regulations of the U.S. Treasury Department, which either prescribed or permits that compensations for personal services not be taxed as an entirety and not be returned by the individual performing the services. It is to be noted that, by the language of the Act, it is not salaries, wages, or compensation for personal services that are to be included in gains, profits, and income derived from salaries, wages, or compensation for personal services.
—Lucas v. Earl
This language is not from the Court’s opinion in Lucas v. Earl.281 U.S. 111 (1930). Instead, it is an almost direct quote from page 17 of the taxpayer\'s brief filed in the case. Guy C. Earl was the taxpayer, and the brief was written by Earl’s attorneys: Warren Olney, Jr., J.M. Mannon, Jr., and Henry D. Costigan. In some printed versions of the case, this statement and other quotes and paraphrases from pages 8, 10, 14, 15, 17, and 18 of the taxpayer\'s brief are re-printed as a headnote or syllabus above the opinion of the Court.The Respondent\'s (taxpayer\'s) brief is available in PDF format at the web site for the College of Law of the University of Cincinnati. See the file "earl07.pdf". In the case reprints that include this headnote (and many of them do not even show it), these excerpts are not clearly identified as being from the taxpayer\'s brief. A person not trained in analysis of legal materials would not necessarily know that this verbiage, like any headnote or syllabus, is not part of the Court’s opinion, perhaps leading to the confusion about the source of the quote. As explained below, the Supreme Court rejected the arguments in the quote, and the tax
