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This Is Not Rocket Science… In response, the 16th amendment, stating that “Congress shall have the power to lay and collect taxes on incomes, from whatever source derived, without regard to any census or enumeration” was proposed and ultimately declared ratified. Over the next few years, the Supreme Court established the meaning of the 16th as that while direct taxes remain subject to the apportionment rule (noting that the 16th did not repeal the relevant sections of the Constitution), the argument that taxation of an income derived from a source amounted to taxation of the source itself would no longer hold sway. Thus, while property still could not be taxed directly (by virtue of its simple possession), certain uses of it-- measured by an income derived from it-- could be taxed indirectly. Specifically, the court said that such a tax, though previously classified by virtue of the “amounts to a tax on the property itself…” argument as a direct tax, was now officially confined to the class of taxes known as excise taxes, (established in Hylton v. United States, 3 Dall. 171, as collectable from the owner of a thing only if based upon its use rather than its mere ownership) and was thereby in harmony with the Constitutional limitations on the taxing power (Brushaber v. Union Pacific Railroad, 240 U.S. 1). Further, the court said that in order for any particular receipts to qualify as ‘income’ (now a specific Constitutional term with a fixed meaning), they had to have the characteristic of being profit-- a gain in addition to the property or thing from which they are derived, separate from the thing itself (Eisner v. Macomber, 252 U.S. 189). Income, therefore, does not amount to ‘all that comes in’, rather it is confined to only that which comes in as a derivative of, and increase above, a source, which source remains untaxable except under apportionment, and which must therefore be identifiable and measurable. (Thus, for instance, receipts from the rent of land can be taxed in their entirety, but only receipts amounting to profit above and beyond the basis (cost) value of the land can be taxed upon its sale).
In summary, then, taxes levied on an income are not subject to consideration of the source from which they are derived; can only be applied to such receipts as amount to an increase in wealth over and above the original measurable source from which they are derived and not the source itself; and fall into the class of excise taxes and must be administered accordingly, which is to say, indirectly, uniformly, and upon the use or disposition of property, not its mere possession. Additionally, of course, as with all taxes, they cannot be levied upon, or as a consequence of, the exercise of a right. Applying the criteria above to private, unpriviliged wages and salaries, it is readily seen that such receipts are not amenable to extractions under an income tax. First of all, there is the issue of the measurability of the source. In order to determine that any given receipt represents an increase or profit, thus qualifying as income, the starting value of the source must be determined. As it is the fair market value that establishes this basis, and as that is equal to, and in fact constitutes exactly the private-sector wage that a worker is paid, such wages by their very nature are incapable of the character of profit or gain. Just as one who trades a car for fair market value has received no income thereby, so the trader of labor has not. Indeed, this is in fact acknowledged by the tax code which provides for the deduction from gross receipts, as a measured expense, of the amount traded for your labor by your employer. There are at least two ways to use measurable labor and derive an income thereby: through its employment as a paid resource in a business, where its cost, as noted above, can be measured by the dollars traded for it; and through the investment of an accumulated surplus, the original amount of which constitutes a measurable source. But no one derives an income by purchasing negotiable paper with long hours of labor. Then there is the issue of the indirectness requirement. The Pollack court contemplated the taxing of an income from the land as amounting to taxing the land itself, because without the income from the land its ownership was meaningless. They were thus stretching a point; the two things are not literally the same, as the ownership of the land itself has not been compromised by the tax, and it can yield an income for its owner in the future. However, taking the dollars for which a worker has traded his labor is actually taking the labor itself-- and not only because such dollars are no more than that workers labor converted to a more storable and negotiable form. After all, the laborer will never again have value from the hours and days converted into those dollars, in a loss of the same nature as that of a landowner losing an acre of her real estate to a tax directly upon the land. Further, after having been forcibly extracted, those dollars may even be used to pay their original owner for specific work done at the behest of the extracting government, which is indistinguishable in practical effect from forcibly driving that worker into the fields or mines to deliver their labor firsthand. Indeed, in an interdependent and specialized economy such as ours, each dollar extracted from any worker is so used through one avenue or another. No form of taxation could be more direct short of outright chattel slavery. There is no difference between seizing a quarter of a farmers crop at harvest and forcing him to work the government’s fields for 2 out of every 8 hour workday throughout the growing season. (The Fifth Amendment specifically prohibits the taking of private property for public use without just compensation, which is why no tax directly of property itself has ever been proposed outright, nor would be sustained; it is only through such obfuscation as a 7 million word tax code and a determined campaign of disinformation that such a tax upon labor property has been accomplished). The Supreme Court has, in Butcher’s Union Co. v. Crescent City Co., 111 U.S. 746, and elsewhere, recognized that labor is property, and that the trading of labor for compensation is a right. In fact, the court has described labor as the most fundamental form of property, from which all other property is derived, and its trade as a sacred right. We do not, of course, need such pronouncements to know these things-- they are obvious to any child and the commonest of common sense. Thus the taxing of labor or its trade violates one of the most basic principles of legitimate governance and another of our criteria, that the exercise of a right may not be impeded or burdened. There is no meaningful argument that can be made that it is not the simple and most fundamental act of working for a living that is being taxed when an income tax is levied upon wages and salaries. Stop working and the interest of the tax collector turns elsewhere; start working and an elaborate machine designed to track and report your receipts swings into action. Wages and salaries are prominently represented to you as a taxable form of income; you only get them by working. You are not being taxed for having dollars; you are not being taxed for engaging in commerce; you are not being taxed for participating in transactions. You are being taxed for working. You are being taxed for pursuing happiness. You are being taxed for doing what is necessary to provide for yourself and your family. The Supreme Court has also observed, in the Pollack decision and elsewhere, that it is a characteristic of excise taxes (which, remember, it declared the income tax to be after the passage of the 16th amendment) that they are not legally compelled, as they fall upon activities or products which a citizen may choose to avoid or do without at will. Try not working. The last of our criteria is the uniformity requirement; a special problem for a tax which is graduated in its structure, like the current income tax, in which persons with different volumes of receipts are said to owe different percentages of them in tax. Defenders argue that uniformity is maintained because the variety of effects of such a tax are uniformly applied to anyone who comes to be in the disparate circumstances variously singled out for differing treatment. To simply say it is to reveal its absurdity. Such a twisted principle admits to an utterly limitless license to non-uniformity; for example, it would be completely consistent with this argument that Congress should declare that all 6’4" redheads named Joe Smith shall pay at a rate of 57% of income, and as that rate would be brought to bear upon any redhead named Joe Smith who happened to grow to that height, no matter where they lived, this ludicrous definition of uniformity would be respected. While the uniformity provision was intended primarily to ensure that one region of the country suffered no imbalanced burden of taxes compared to another, it was also an intended harmony of the Constitution through its various taxing provisions (none of which was repealed by the declared adoption of the 16th amendment) that by means of the apportionment requirement for direct taxes and avoidability for indirect taxes no-one and no class or region could thus be singled out for a special burden. It is because the income tax, as currently administered, does in fact illegally fall directly upon citizens and cannot be avoided as it would be if it really were enforced as an excise, that this injustice obtains, and the concept of uniformity can thus be properly stretched to challenge the propriety of an unconstitutionally misshapen application of the taxing power. In fact, however, little stretching of the uniformity principle is actually needed. In the previously mentioned Hylton case, the Supreme Court said that a tax on carriages (the subject of the controversy) could not be direct, and therefore apportioned, because the fixed amount of the levy, distributed per the population to the various states, would fall with unjust weight upon some citizens, while falling lightly upon others. As some states would have many carriage owners who would thus pay a small amount each to make up the total, carriage owners in states with few of their kind would suffer a higher rate from each of them, and thus such a tax would be unconstitutional, and could be levied only as an excise, of a certain amount per carriage, to be paid by each alike. Suffering from precisely the same flaw the Procrustean engine of revenue known as the income tax, malificently content to chop off or stretch bits of Constitutional and common law principle to make them fit its needs, falls unevenly and unjustly and thus is unconstitutionally non-uniform in that some states have larger number of persons being taxed at a higher rate than others and thus bear a heavier burden of the national expense than their neighbors. Finally, though a knowledge of history is increasingly rare these days, discouraged as it is by the government schools, even the most rudimentary student of the period will recognize the absurdity of the proposition that in 1913, in the full heat of the populist ascendancy, the muscular proletariat took time off from seizing the means of production in order to fasten upon itself a tax on labor. Even more ridiculous is that Congress, having been handed such a resource, should have waited a full generation-and-a-half (until 1942) before extending the tax to anyone other than the rich robber barons who owned them, we are so often told, heart and soul. Apparently, we were awash in an urge to tax ourselves silly for the common good, but we just couldn’t convince those statesmen in Washington to get with the program. Right. The sad reality is that it took that long for the big lies about the meaning of the words involved and the nuances of the relevant law to be firmly and reliably implanted in the minds of a critical mass of the population. Though it may seem a little thing, it is significant that the 16th amendment refers to a tax on ‘incomes’ and not ‘income’. While it would be completely consistent with the common usage of the term ‘income’ today, and the typical misapplication of the income tax, if the amendment had read “…a tax on income, from whatever source derived…” ‘incomes’, the term actually used, derives its meaning from the concept of “an income”-- something with a particular meaning in 1913, and one quite different from the “all that comes in” dictionary definition of ‘income’. At that time, and for generations prior, it was only the landed gentry and coupon clipping investors who had ‘an income’, a reference to an annual, perpetual supply of revenue, typically in the form of rent from real estate holdings or interest and dividends. The worker had a wage. Over time, the terms have been deliberately conflated, partly by those interested in extending the tax to subjects not properly available to it, and partly by mindless cheerleaders for egalitarianism of the sort perfectly willing to play dress-up with form without regard to the lack of corresponding substance. It is a classic irony that our inclination to such pretenses of aristocratic form has contributed substantially to our slow but relentless return to the status of serfs.
We can fix this situation, of course, with courage and a proper sense of outrage. Demand answers, don't back down, and remember that the bread of a lot of the people that you might be inclined to question about these things is buttered by the status quo. Remember this too: "The moment the idea is admitted into society that property is not as sacred as the laws of God, and there is not a force of law and public justice to protect it, anarchy and tyranny commence". -John Adams
That's not rocket science either.
© Peter E. Hendrickson
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