You might want to watch this video first. It’s about taxes, specifically the United States Federal Income Tax – and how it may not be legitimate.
The big argument is about whether or not there is a “law” that requires you to file a form 1040 and pay your taxes each year. The claim, of course, is that there is not.
Now, I hate taxes as much as anybody – maybe even more, just on principle – but I can smell propaganda from a mile away. And this whole issue just reeked of it. So, naturally, I did some research of my own (god bless you, Wikipedia). Here’s what I found:
- The power to lay and collect taxes is specifically granted to the Congress in Article One, Section 8 of the U.S. Constitution
- Direct taxes (such as an income tax) may be collected, so long as they are “in proportion to the census or enumeration herein before directed to be taken” (Article One, Section 9).
So far, so good, right? Now we get to the kicker:
- Before the Sixteenth amendment, taxes on income were ruled by the courts to have to be “in proportion,” which was very impractical – and therefore had the effect of limiting the ability to tax income
- The Sixteenth amendment removes the need for direct taxes on income to be “in proportion.”
Okay, so now taxes can be collected without regard to proportion. That pretty much leaves us where we are today, where we are not taxed in proportion to census results, but rather by rules set forth by the IRS and (by extension) the Congress. But what about all the arguments in the film? Let’s go through them, shall we?
The IRS won’t show people the “law” that requires them to pay taxes.
Although unusual, this isn’t in itself an admission of guilt of anything. The law is plain to see – Congress has the power to collect taxes. It’s right there in the Constitution, in plain language. Where things get tricky is in how the tax is collected. And Congress has taken ever step possible to make it as confusing and bureaucratic as possible (as they do with everything). They created the IRS (which they have the power to do; remember that Congress can pretty much make any sort of sub-entity that they want to, if they feel a need for it, and give that sub-entity any power that Congress itself holds) and came up with the obnoxiously confusing “IRS code.”
What is it the Oracle in the Matrix said?
“What do all men with power want? More power.”
The same goes for the IRS. They don’t want to answer your question because it gives them more power over you. They’re a bureaucracy, for crying out loud, of course they won’t answer questions in a straightforward way. That way, you become a “tax protester” and they can collect more money (in fees) from you – or even jail you. Now that’s power!
Of course, frankly, I think that no one in the IRS gives people an answer because the tax code is so complex that noone truly understands it!
Income (as in wages received for work) is not taxable.
This one is trickier to decipher, because “income” is not something that was defined in the Constitution or in the laws that created the IRS. Rather, the courts have ruled on what “income” is. This little snippet from Wikipedia sums it up pretty nicely:
The modern interpretation of the Sixteenth Amendment taxation power can be found in Commissioner v. Glenshaw Glass Co. . In that case, a taxpayer had received an award of punitive damages from a competitor, and sought to avoid paying taxes on that award. The Court observed that Congress, in imposing the income tax, had defined income to include:
- “gains, profits, and income derived from salaries, wages, or compensation for personal service . . . of whatever kind and in whatever form paid, or from professions, vocations, trades, businesses, commerce, or sales, or dealings in property, whether real or personal, growing out of the ownership or use of or interest in such property; also from interest, rent, dividends, securities, or the transaction of any business carried on for gain or profit, or gains or profits and income derived from any source whatever.”
348 U.S. at 429. The Court held that “this language was used by Congress to exert in this field the full measure of its taxing power”, id., and that “the Court has given a liberal construction to this broad phraseology in recognition of the intention of Congress to tax all gains except those specifically exempted.” Id. at 430.
The Court then enunciated what is now understood by Congress and the Courts to be the definition of taxable income, “instances of undeniable accessions to wealth, clearly realized, and over which the taxpayers have complete dominion.” Id. at 431. The defendant in that case suggested that a 1954 rewording of the tax code had limited the income that could be taxed, a position which the Court resoundingly rejected, stating:
- The definition of gross income has been simplified, but no effect upon its present broad scope was intended. Certainly punitive damages cannot reasonably be classified as gifts, nor do they come under any other exemption provision in the Code. We would do violence to the plain meaning of the statute and restrict a clear legislative attempt to bring the taxing power to bear upon all receipts constitutionally taxable were we to say that the payments in question here are not gross income.”
Id. at 432-33. Tax statutes passed after the ratification of the Sixteenth Amendment in 1913 are sometimes referred to as the “modern” tax statutes. Hundreds of Congressional acts have been passed since 1913, as well as several codifications (i.e., topical reorganizations) of the statutes (see Codification).
Central Illinois Public Service Co. v. United States, 435 U.S. 21 (1978), confirmed that wages and income are not identical as far as taxes on income are concerned, because income not only includes wages, but any other gains as well. The Court in that case noted that in enacting taxation legislation, Congress “chose not to return to the inclusive language of the Tariff Act of 1913, but, specifically, ‘in the interest of simplicity and ease of administration,’ confined the obligation to withhold [income taxes] to ‘salaries, wages, and other forms of compensation for personal services'” and that “committee reports … stated consistently that ‘wages’ meant remuneration ‘if paid for services performed by an employee for his employer'”. Id. at 27.
Other courts have noted this distinction in upholding the taxation not only of wages, but also of personal gain derived from other sources – but there are limitations to the reach of income taxation. For example, in Conner v. United States, 303 F. Supp. 1187 (S.D. Tex. 1969), aff’d in part and rev’d in part, 439 F.2d 974 (5th Cir. 1971), a couple had lost their home to a fire, and had received compensation for their loss from the insurance company, partly in the form of hotel costs reimbursed. The court acknowledged the authority of the IRS to assess taxes on all forms of payment, but did not permit taxation on the compensation provided by the insurance company, because unlike a wage or a sale of goods at a profit, this was not a gain. As the Court noted, “Congress has taxed income, not compensation”.
The argument is starting to fall apart here. As much as you might not like taxes, it seems quite clear that Congress has the power to collect it in the way that they currently do.
The Courts said that the Sixteenth Amendment didn’t give Congress any new power to tax.
This is absolutely true, and is an example of a quote taken out of context. Recall that Congress already had the power to tax – the Sixteenth amendment simply took away a restriction on how that tax would be apportioned. Going around saying that “you don’t have to pay tax, the courts said that the Sixteenth Amendment didn’t give Congress any new power to tax us” is not just silly, it’s misinformed.
The Sixteenth Amendment was never properly ratified.
This argument really gets to the meat of the matter, but in a way, it’s also irrelevant. There do seem to be some inconstancies to the way that the Sixteenth Amendment was ratified, but since it was taken as properly ratified and never challenged, it sort of doesn’t matter – its acceptance by the states is a de facto ratification. Ultimately, the Supreme Court would have to rule on whether the Sixteenth amendment was properly ratified, since the Supreme Court decides all matters of law like this. And the Supreme Court has ruled on tax law before, putting some restrictions on what can and cannot be called income (i.e. compensation for damages) and so forth.
However, even if the Sixteenth Amendment was improperly ratified and is one day removed as invalid, Congress will still tax us – it’ll just have to do it differently. In fact, it would probably end up being even more complicated (if such a thing is possible). So there’s really no point in arguing about it in this context.
The money collected from income tax doesn’t pay for public services like defense, roads and highways, or education.
This isn’t a tax argument, it’s an argument about how bad our government is when it comes to spending money wisely. That’s a topic for another day – but suffice to say that our government does spend money badly, and this is just one example. However, it doesn’t make the income tax any more or less “legal,” just because the money is spent badly.
So, all in all, the arguments made in the film fall pretty much flat on their face. Unfortunately, the federal income tax is a legal reality. But really, who do we have to blame for this other than ourselves? We elect these people and they (in theory, anyway) do our will. If you don’t agree with it, vote for someone else. (Maybe a Libertarian, perhaps?)
(Personally, I think a flat sales tax is a better way to collect money for the government instead of an income tax, but that’s just me.)
So, having seen the film, read all of the above and the articles I’ve linked to, what do you think? Feel free to leave your thoughts in the comments!
