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By Their Fruits Ye Shall Know Them

(Or, The Empire Punts Back)


 Six months ago, I published ‘Cracking the Code- The Fascinating Truth About Taxation In America’ and began sending it to enthusiastic customers all over America.  The book offers a detailed exploration of the actual revenue laws which are represented by the Internal Revenue Code (IRC).  The IRC, Title 26 of the United States Code, is not the law-- it is merely prima facie evidence of the law, as is observed by the U.S. Government Printing Office in this helpful sidebar from its website:

NOTE: Of the 50 titles, only 23 have been enacted into positive (statutory) law. These titles are 1, 3, 4, 5, 9, 10, 11, 13, 14, 17, 18, 23, 28, 31, 32, 35, 36, 37, 38, 39, 44, 46, and 49. When a title of the Code was enacted into positive law, the text of the title became legal evidence of the law. Titles that have not been enacted into positive law are only prima facie evidence of the law. In that case, the Statutes at Large still govern.

U.S. Government Printing Office  http://www.gpoaccess.gov/uscode/about.html

This means that while the IRC can be exhibited as a reflection of the actual law-in-force, it has no standing in a controversy (if the other side knows to invoke the overriding statutes).  Nonetheless, it is only the IRC that has been displayed to Americans ever since 1939, when the first version of Title 26 was concocted.  The actual words of the law-- still the only authority to which Americans are obliged to respond-- have been allowed to sink into obscurity.  Examination of that law reveals that the IRC’s representation is misleading-- wildly so, in fact-- and has been used to persuade the American public that the law imposes requirements which it not only does not, but in fact cannot.


 Everyone is aware that the United States Constitution requires, at Article 1, Sections 2 and 9, that ‘capitations’ (CAPITATION. A poll tax; an imposition which is yearly laid on each person according to his estate and ability.  2. The Constitution of the United States provides that "no capitation, or other direct tax, shall be laid, unless in proportion to the census, or enumeration, therein before directed to be taken." Art. 1, s. 9, n. 4. See 3 Dall. 171; 5 Wheat. 317.  Bouvier’s Law Dictionary) and other direct taxes can only be imposed by ‘apportionment’ (the division of a predetermined total revenue amount among the states for payment, on the basis of population).  That knowledge is correct.   Everyone believes that the 16th Amendment repealed or overrode that requirement, and that belief is wrong, as was noted by the Supreme Court in Brushaber v. Union Pacific R. Co., 240 U.S. 1 (1916):

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...”

“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 exempting a direct tax from apportionment into irreconcilable conflict with the general requirement that all direct taxes be apportioned."

The court explains that this irreconcilable conflict is not caused by the 16th amendment because the income tax is not a direct tax or capitation, it is an indirect (excise) tax on the voluntary enjoyment of the benefits of a federally-connected activity.  That is to say, the income tax is not “an imposition which is yearly laid on each person according to his estate and ability.”  And, in fact, the words of the law are fully in accord with this observation of the court.  As represented by the IRC, however, this limited and lawful character of the income tax is obscured to the point of invisibility; instead it is suggested that the tax explicitly IS “an imposition which is yearly laid on each person according to his estate and ability,” and if asked, the IRS will refer to the 16th Amendment as the reason that such a thing should be believed to be true.  This despite not only the unmistakable words of the court in Brushaber (and many other cases in which substantially the same declaration is made) but also the fact that perhaps as much as 30% of the IRC represents statutes passed into law before the 16th Amendment was even proposed!


 One of the keys to this confusion is that while the word ‘income’ has a common meaning of ‘all that comes in’, in the law ‘income’ is a legal term of far more limited application.  When the law claims an authority to impose a tax on ‘income’, it is not claiming an authority to impose a tax on ‘all that comes in’ (which would be a capitation), it is only claiming an authority to tax what is legally defined as ‘income’-- federally-connected privilege.

"The income tax is, therefore, not a tax on income as such. It is an excise tax with respect to certain activities and privileges which is measured by reference to the income which they produce. The income is not the subject of the tax: it is the basis for determining the amount of tax."  F. Morse Hubbard, Treasury Department legislative draftsman.  House Congressional Record March 27th 1943, page 2580

Several other legal terms with confusing common-usage counterparts are also relied upon to obscure reality-- among them “wages”, the legal definition of which is remuneration paid to federal office-holders and workers, and which excludes the earnings of private-sector workers; and “trade or business”, which is legally defined as “the performance of the functions of a public office”.  These distinctions are clearly made in the law; in the IRC they can be discovered only by massive, laborious research.  My book reveals what is said in the law (and by the Supreme Court about the law); how the construction of the IRC obscures the truth; what mechanisms are deployed by its beneficiaries to capitalize on the IRC’s misrepresentations and steer unwary Americans into unnecessary and self-destructive behavior in connection with the internal revenue laws; and why this is a bad thing for individuals and for the country as a whole.


By a pleasant coincidence, it was while my book was at the printer last August, that my wife and I filed our tax return for 2002, fully in accordance with the knowledge informing my book.  It showed no income other than a little bank interest well below the exemption amount (read the book to know why that money was listed), and claimed a full refund of every penny withheld from my salary by the private-sector company for which I had worked that year, including that withheld for FICA and Medicare.  Upon receiving the return, the IRS at first balked at the claim of refund.  But after being told that we meant what we said, it obeyed the law.  On Nov. 3rd, the agency acknowledged every penny withheld as being an overpayment, and refunded it all.  (The relevant documents can be seen at http://www.losthorizons.com/overpay.htm.)


However, it is now revealed that even while doing so, the agency was casting about for some way of suppressing the truth that it had had to acknowledge with respect to our return.  Recognizing that widespread knowledge of that truth spells the end of what has long been a good thing for themselves and the people who sign their paychecks (if not worse), they took what most of us would view as a desperate and utterly corrupt step-- though I don’t doubt that it came easy for them:




Following the letter was:



In this space is a list of documents of all kinds each identified as being related to "the promotion", and then:.



I hope everyone takes note of the listing of "discussions of the constitutionality of income tax" as the promotion of an 'abusive tax shelter'!  The letter and forms were accompanied by another letter informing me that the agency might be contacting others about me, and a printout of pages from my website dealing with the tax, dated Sept. 11th, 2003-- about the same date that the agency would have been struggling with our 2002 claim for refund.  The effort to dissuade us from that claim, alluded to above, was dated Sept. 29th.


It should be sufficiently obvious to most that the pretense of investigating my book or my website as a “tax shelter promotion” is patently absurd-- actually, just an outright lie.  ‘Abusive Tax Shelters’, as the section 6700 referred to in the threatening letter makes clear, specifically and exclusively involve the creation of an entity, participation in which is then called upon as a pretext for fraudulently claiming a deduction or credit, supported by an evidentiary ‘statement’ furnished by the creator.  An example would be setting up a fictitious company, creating evidence of losses related to that company in the form of financial statements or the like, and furnishing them to participants on the basis of which write-offs are then claimed.  Conventional and proper tax shelters involve precisely the same elements, absent only the ‘fraudulent’ component.  Nothing that could be written in a book could amount to either variety, even if half of it was devoted to advocating such a thing or announcing the creation of such an entity and inviting one and all to participate.  Only the actual creation of such an entity (to start with) will do.


Nothing on my website, either posted for reading or available for sale creates or involves an entity of any kind; invites or makes possible the participation of anyone in any entity; furnishes evidence of any kind to anyone (other than evidence regarding the words of the law and the Supreme Court); or relates in any way to deductions, or to credits having anything to do with the amount of tax owed or due.  I qualify the ‘credit’ thing a bit because the law refers to money withheld from “wages” under chapter 24 of subtitle C as being claimable as credit against “income” taxes owed.  I don’t ‘furnish’ anything making that true (I couldn’t and don't need to-- it’s in the law) or changing its value to anyone, or proposing to do either of those things, but I do provide information on the subject both in my book and on my website.  I also provide sample language for the use of those who have made their own determination as to its fitness in creating ‘statements’ of their own-- ‘statements’ as in affidavits and declarations stating their demeanor toward the way in which they are treated by others under the auspices of the tax laws.  Such statements have no connection whatsoever with me, Lost Horizons, or any entity connected with either of us, nor do they in anyway constitute or provide evidence on the basis of which any deduction or credit might be established or supported.


Furthermore, a tax shelter only has utility for a return showing an “income” figure that can be reduced thereby.  As is demonstrated by my own return, an American informed by the knowledge conveyed in my book and on my website will be taking no deductions, credits or write-offs-- none are necessary, whether they be fraudulent or legitimate.  You can’t take a deduction or credit to reduce “income” you never received in the first place.  The simple fact is, the IRS has no tools by which the truth can be directly suppressed, so it is trying to be adaptable.  Having a weapon against black but not white, it is calling white black, and attacking.


However, it knows when it is in a fight it cannot win.  The careful reader (which anyone dealing with any of the bilge issuing forth from the IRS must perforce be) will have noticed that while the ominous letter from agent Beukema contains a place and time of day at which she allegedly proposes to meet with me to discuss my nefarious plot, the date for such a meeting is missing.  Similarly, the ‘date due’ space on each of the ‘Information Document Request’ forms, which ran to three pages, are all blank.  I think the agent really doesn’t want to debate the matter with me at all.  But she does want to frighten me into halting the distribution of my book.


I waffled a bit in considering whether to discuss this grotesque assault publicly or not.  My concern was that some readers, reminded thus of the lawlessness and corruption which is the lifeblood of this blight on the American landscape known as the Internal Revenue Service, would find themselves intimidated into sinking back into the mire of supine victim-hood-- consciously accepting, even helping to tighten, their chains.  The idea of presenting material in response to which such a despicable choice might be made, even while earnestly arguing against it, gave me pause for a moment.  But only for a moment.  Samuel Adams words came to me as I thought on this decision, and I was troubled no more:

“If ye love wealth greater than liberty, the tranquility of servitude greater than the animating contest for freedom, go home from us in peace. We seek not your counsel, nor your arms. Crouch down and lick the hand that feeds you. May your chains set lightly upon you; and may posterity forget that ye were our countrymen.”

That says it for me.  Anyone dissuaded from their defense of, and claim upon, the rule of law due to reading that the IRS plays dirty to whatever degree the current legal and institutional status quo permits will not be missed.


I will point out to those who find themselves going a bit wobbly-- but who really want to do the right thing-- that even in the face of a slavering lust to shut me down, the agency is nonetheless taking care to not quite cross the line into the outright illegal.  I am not being compelled to do anything-- I am just being invited to go all a-flutter and consider self-evisceration.  I decline, and I hope all of you choose to do so as well.  Frankly, anyone who let themselves be intimidated by the frothing beast would be settling for a worse treatment than anything standing up to it will bring.  Surrender means not only losing your dignity and right to call yourself a free citizen, but it also means going back to paying tribute to the tune of a small fortune every year, the ruination of your children’s inheritance of wealth and freedom, and the ongoing feeding of the Leviathan which will eventually swallow you up entirely without the least regard to your having paid it craven homage.


I close with a plum for those who have stuck through this long exposition.  The lesson the IRS is offering to teach with its feeble attack is that it is a liar-- an institutional and pathological liar, willing to use every pretext to mislead and dissemble, while barely skirting outright criminal violation (although we shall see if it didn’t cross the line here-- come back to see my reply to Ms. Beukema, which will be posted below soon).  That lesson can be learned by anyone who reads my book and visits my website.  It will be unmistakably clear to those who do so that the ‘tax-shelter’ nonsense is just that.  Thus, it will be easier to entertain the notion that the agency has been lying all these years about the “income” tax in general as well.  This will make absorption of the truth that much easier for those who can’t quite shake the echoes of a lifetime of propaganda against it.


© Peter E. Hendrickson


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