Now, reflect as well on the fact that whatever you may believe about the meaning, purpose and effect of the 16th Amendment, it does NOT re-define "income".  All it says is, "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." No definition, no changes as to what qualifies as "income", or, if you prefer, no changes as to what is subject to the tax.

Those who want you to believe what isn't true (for the benefit of their ambitions) encourage you to IMAGINE a definitional change in this language. They want you to imagine that by declaring that the tax on gains from privileged activities-- "incomes", as the term is meant in related tax law-- can be applied without apportionment the amendment is saying that something which couldn't be taxed before now can be (or can be without apportionment). But that's NOT what the amendment says, nor what it does.

The 16th Amendment is simply designed to correct an error made by the Supreme Court in Pollock v. Farmer's Loan & Trust, 157 U.S. 429 (1895). In that ruling the court erroneously resorted to the personal-property sources from which "income" realized in the form of dividends and rent is derived-- stock or real estate-- to treat as a property tax on those sources what is actually just an excise on the privileged activity producing the gains. The 16th Amendment is designed and intended solely to overrule the court's mistake and allow the pre-amendment tax to resume operation as the excise on privilege-related gains that it always has been.

Even the Pollock Court readily conceded that the "income" tax is and always has been an excise and was and is properly applied as such to "income" realized in any and every way other than as dividends and rent. The court references and re-iterates one of its several previous rulings to this effect:

"...in Springer v. U. S., 102 U.S. 586 , it was held that a tax upon gains, profits, and income was an excise or duty, and not a direct tax, within the meaning of the constitution, and that its imposition was not, therefore, unconstitutional."

Pollock v. Farmer's Loan & Trust, 158 U.S. 601, 1895.

The court is saying that because the gains, profits and income upon which the tax falls are only those proceeding from the exercise of privilege, the tax is recognized as an "excise" tax, needing no apportionment to pass Constitutional muster. In its ruling in Brushaber v. Union Pacific RR. Co., 240 U.S. 1 (1916), when the meaning and effect of the 16th Amendment is being analyzed and declared, the court summarizes the 170+ page Pollock ruling in this regard:

"...the conclusion reached in the Pollock Case did not in any degree involve holding that income taxes generically and necessarily came within the class of direct taxes on property, but, on the contrary, recognized the fact that taxation on income was in its nature an excise entitled to be enforced as such..."

Going on, the Brushaber court explains the Pollock court's reasoning in excepting dividend- and rent-realized gains:

 "...unless and until it was concluded that to enforce [the income tax] would amount to accomplishing the result which the requirement as to apportionment of direct taxation was adopted to prevent in which case the duty would arise to disregard form and consider substance alone and hence subject the tax to the regulation as to apportionment which otherwise as an excise would not apply to it. Nothing could serve to make this clearer than to recall that in the Pollock Case, in so far as the law taxed incomes from other classes of property than real estate and invested personal property, that is, income from 'professions, trades, employments, or vocations', its validity was recognized; indeed, it was expressly declared that no dispute was made upon that subject, and attention was called to the fact that taxes on such income had been sustained as excise taxes in the past."

You can see now that the Pollock court DIDN'T declare that the income tax WASN'T an excise in regard to the two excepted categories of dividends and rent. Rather, the court declared that in those two cases what was in form an "income" tax nonetheless in substance didn't fall on the "income" at all. Instead (the court reasoned) the tax being proposed in those cases actually fell on the "sources" by which the "income" was derived, meaning that in those cases the tax proposed was really a property tax, and therefore "direct" and requiring apportionment.

The Brushaber court goes on to declare that the 16th Amendment doesn't authorize a non-apportioned property tax (which would be a new kind of tax: a capitation or other direct tax which is free of the apportionment requirement). Rather, it simply overrules the Pollock Court's conclusion that because these two kinds of privilege-based (and therefore otherwise excise-taxable) gains are realized in connection with personal property any tax on them must be apportioned. Responding to litigant Frank Brushaber's argument to the contrary, the court says:

"We are of opinion, however, that the confusion is not inherent, but rather arises from the conclusion that the 16th Amendment provides for a hitherto unknown power of taxation; that is, a power to levy an income tax which, although direct, should not be subject to the regulation of apportionment applicable to all other direct taxes. And the far-reaching effect of this erroneous assumption will be made clear by generalizing the many contentions advanced in argument to support it...”

The court goes on to discuss those many contentions argued to support the "new hybrid tax" error, and then returns to again directly address that central issue:

“But it clearly results that the proposition and the contentions under it, if acceded to, would cause one provision of the Constitution to destroy another; that is, they would result in bringing the provisions of the Amendment [purportedly] exempting a direct tax from apportionment into irreconcilable conflict with the general requirement that all direct taxes be apportioned."

"Didn't happen", the court goes on to say in so many words (actually, in TOO many words-- Chief Justice White, who wrote the unanimous opinion, had a knack for writing 200-word sentences). A series of subsequent rulings and summaries by experts reviewing the Brushaber ruling summarize and re-iterate the ruling more succinctly:

"The provisions of the Sixteenth Amendment conferred no new power of taxation..." 

Stanton v. Baltic Mining Co., 240 U.S. 103 (1916);

 

"The Sixteenth Amendment, although referred to in argument, has no real bearing and may be put out of view. As pointed out in recent decisions, it does not extend the taxing power to new or excepted subjects..." 

Peck v. Lowe, 247 U.S. 165 (1918);

 

"[T]he settled doctrine is that the Sixteenth Amendment confers no power upon Congress to define and tax as income without apportionment something which theretofore could not have been properly regarded as income." 

Taft v. Bowers, 278 US 470, 481 (1929).

CtC Warrior Greg Sutton just unearthed two law review articles contemporaneous with the Brushaber ruling which summarize it very well:

"In Brushaber v. Union Pacific Railroad Co., Mr. C. J. White, upholding the income tax imposed by the Tariff Act of 1913, construed the Amendment as a declaration that an income tax is "indirect," rather than as making an exception to the rule that direct taxes must be apportioned."

Harvard Law Review, 29 Harv. L. Rev. 536 (1915-16).

 

"The court through C. J. White held that the tax was constitutional. The major proposition of appellant's argument is not true. Hence, the conclusion does not follow. The 16th Amendment does not permit a new class of direct tax, (in fact as it will be later shown, the court does not think that the amendment treated the tax as a direct tax at all)... The Amendment, the court said, judged by the purpose for which it was passed, does not treat income taxes as direct taxes but simply removed the ground which led to their being considered as such in the Pollock case, namely, the source of the income. Therefore, they are again to be classified in the class of indirect taxes to which they by nature belong."

Cornell Law Quarterly, 1 Cornell L. Q. 298 (1915-16).

Enjoy an excellent commentary by Greg on the legislative history of the amendment and the jurisprudence summarized in these journal articles here.

Treasury Department legislative draftsman F. Morse Hubbard summarized the ruling for Congress in hearing testimony in 1943:

"[T]he amendment 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..."

 

"The income tax... ...is an excise tax with respect to certain activities and privileges which is measured by reference to the income [earnings] which they produce."

Here is Legislative Attorney of the American Law Division of the Library of Congress Howard M. Zaritsky in his 1979 Report No. 80-19A, entitled 'Some Constitutional Questions Regarding the Federal Income Tax Laws':

"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…"

In 1988, the Supreme Court again re-iterates that the 16th Amendment doesn't allow the application of the tax to anything not already properly subject to it before the amendment was ever adopted:

"The legislative history merely shows... ...that the sole purpose of the Sixteenth Amendment was to remove the apportionment requirement for whichever incomes were otherwise taxable." 

So. Carolina v. Baker, 485 U.S. 505 (1988).

So.

Let that sink in.

DIDN'T HAPPEN.

Despite the strenuous and sustained campaign to plant the contrary in your mind by the beneficiaries of your ignorance of all the foregoing, there is no "unapportioned direct tax" or "direct tax free of the apportionment requirement".¹

There is no "income" tax on anything which would have required apportionment if taxed before the 16th Amendment. The Pollock court was wrong, a tax on otherwise excise-appropriate property-sourced dividends and rent ISN'T thereby properly taken out of the indirect excise category and into the direct property tax category. Its error has been overruled by the REAL "highest court"-- the People, acting through their several-state agents, by way of Constitutional amendment.

That overruling is ALL the 16th Amendment did, and what is taxable by the unapportioned "income" tax today is unchanged from what was taxable by the properly understood unapportioned "income" tax prior to the 16th Amendment. The tax is and remains an excise, falling only on subjects to which an excise is appropriate.

Okay, to resume then, we have nothing changing with the 16th Amendment about what is subject to the "income tax", and we have the rules for its administration remaining the same now as they were before the amendment.

Everything involved with the "income tax" has carried forward from its original implementation long prior to the 16th Amendment. The amendment didn't create the tax, or authorize it, or do anything except prevent its application in the case of "income" realized in two particular ways from being treated as the "capitation or other direct tax" that it never actually was, as briefly had happened under the Supreme Court's ruling in Pollock.

Clearly, if the rules for administering the tax² pre-date the 16th Amendment, and the definition of "income" didn't change, then what is to be reported in connection with the tax TODAY (and what qualifies as the "income" about which reports are made) remains what it was BEFORE the amendment. Taxed "income" can only be the specialized, privileged activities upon which an unapportioned excise can Constitutionally fall (or the gains resulting therefrom), and it CANNOT be anything a tax on which would constitute a capitation or other direct tax.

You understand now, don't you!!

OKAY, HERE'S THE FUN (AND KIND OF AWKWARD) PART: We didn't really need to go over ANY of that "history of the tax" stuff. As I said early-on, the tax laws-- as written-- completely and faithfully conform to everything I just showed you! Only the profitable exercise of federal prerogatives and the profitable exercise of federal privileges are taxed UNDER THE LAWS AS CURRENTLY WRITTEN! All you have to do is read them with your newly-cleared eyes and this will now be as obvious as the sunrise.

Here's the un-fun (and kind of awkward) part: Unless YOU start helping other people become aware of, and begin acting on, the liberating, state-restraining truth about the tax that you have just learned, what is true won't matter. You and most other Americans will keep getting bled and growing weaker, and the state and its pelf- and power-fed clients and cronies will keep getting fed and growing stronger.

IT'S ON YOU!!

***

BY THE WAY, we DON'T want to abolish the tax. IT'S A GOOD TAX!

As will be dawning on you now, the "income tax" actually falls on the political class and its clients and cronies. WE WANT SOME OF THE PROFITS ENJOYED BY THOSE FOLKS AS A RESULT OF EXPLOITING PUBLIC RESOURCES RETURNED FOR PUBLIC USE!!

So don't let yourself just fall into the mindless, "Abolish the IRS, repeal the income tax!" mantra, just because it's easier and less scary to chant such things than to file accurate, knowledge-based returns and reclaim your property, and to urge and educate others to do the same. The right thing isn't always the easiest thing. It's just always the right thing.

-Pete Hendrickson

P. S. I direct this letter particularly to the three gentlemen mentioned in the title because in addition to being voices with very bully pulpits from which to get it right and help restore the rule of law-- or get it wrong, and play host to others who get it wrong, and therefore do much ill-- these three have been receiving losthorizons.com newsletters for pretty nearly a year now. Thus, they really have something of a moral responsibility for being right on the subject of the tax by now.

Nonetheless, libertarian e-zine hosts Hornberger and Rockwell-- most of whose work both as writers and as editors I heartily endorse and to whose sites I have sent thousands of readers over the years-- both persist in constantly posting erroneous and harmful nonsense about the income tax. I want them to stop this bad practice, at least, and I really hope that they become instead active voices promoting the liberating truth about this subject. Their doing so would advance liberty more than they can apparently understand, and in any event their doing so would perfect their otherwise admirable work and allow me to appreciate their efforts without reservation.

In the case of Glenn Greenwald, the situation is a bit different. I have nothing but appreciation for Greenwald's work. He is one of the most reliably clear-headed pundits out there, is plainly impassioned about truth and respect for the rule of law properly understood, and is very widely read.

But Greenwald doesn't post on the subject of the tax at all. I direct this letter to him simply hoping to enlist him to the cause of promoting knowledge that will actually make happen what I believe he dearly wishes for-- the rising of the American people to their responsibilities as grown-ups upholding and enforcing the law. We in this CtC community who are already doing that work need good people like Greenwald lending a hand at rallying the rest.

However, all that said, this letter is also directed at everyone who has stood silent concerning the truth about the tax, or has helped perpetuate the bs by which ignorance about the subject is maintained and becomes ever-more deeply-rooted. In my mind, each such person has a moral responsibility to acknowledge the truth about this matter, and recognize its importance.

There is no cognitive assault more practically significant and philosophically dangerous than the campaign to convince the American people of the falsehood that the state has Constitutional authorization to seize their earnings, punish disfavored economic choices and scrutinize pretty-much everything they do economically and otherwise under the pretense that it all relates to a legitimate state interest. Thus, there is no more urgent imperative than thwarting that assault.

Americans are subject to a lot of usurpatious and threatening state behavior, but none is as mature, pervasive and ultimately fatal to liberty as the state's illegitimate pretenses about its "income taxing" authority. When Americans get that one back under control, a huge part of all the rest will collapse completely or shrink to drown-in-a-bathtub dimensions.

There's a reason material like what is presented above is so hard for many folks to take in, and it's not because the material is complicated or inadequate. It is because the state, at least, knows how fundamentally-important to its improper ambitions is the misunderstanding of the tax power, and its greatest efforts at propaganda and conditioning have been devoted to this subject. The very difficulty and resistance most folks feel at taking in the truth on this subject is the indication of just how important that truth is. Here is where Sauron, if you will, has woven his deepest and most potent defensive spells and illusions, because here is his Mount Doom.

^1. A number of jurists have over the years confusedly referred to the post-16th "income" tax as an "unapportioned direct tax", but these are not expressions that the "income" subject to the tax includes objects a tax upon which would be inherently direct (such as non-privileged activities or personal property). It is just an expression of a persistent opinion that as to dividend- and rent-realized "income", the tax isn't on the "income" itself but on the sources from which it is derived. Even these jurists presumably understand that this argument is now of no use, but they still see things as did the Pollock court.

^2. The "income tax" rules predating the 16th Amendment comprise far more than just the 1884 act cited in the Institute for Justice lawsuit. For instance, what is to be reported in connection with the tax, and how this is to be done, and what can be examined by the IRS in that regard, are among those ancient rules. In 1978, in United States v. LaSalle Nat'l Bank, 437 US 298, the US Supreme Court cites to the 1870 case of Stanwood v. Green, 1870 U.S. Dist. Lexis 279 to clarify the present-day examination authority and point out that it was granted in 1864.

The language of that old ruling is itself very useful for purposes of this commentary, by the way. In ruling that Green can be compelled to produce books and records in response to an Bureau of Internal Revenue summons, the court says:

 

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