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Truth in the Legality of Income Taxes Essay

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On April 15 Americans rush to a crowded parking lot, racing against a deadline to file their 1040. These well-intentioned, hard working, honorable Americans believe that they are duty bound and even bound by a law requiring them to pay an income tax on their labor. Also, there exists a populous with like-attributes who do not believe that they are bound by law nor is the payment of such taxes a duty but rather a disservice to the nation. This controversial issue first gained my interest about 1 year ago, when it was brought to my attention in a free speech tax debate.

As a well seasoned tax professional of 4 ½ years, and my major concentration of studies being in accounting and taxation, I was compelled to find out the truth about the legality of income tax. After much research, I have not been able to find the law that requires the American people to pay such a tax on their labor nor have I been able to find a provision for such a tax in either the Internal Revenue Code or the United States Constitution.

If there is such a law, requiring Americans to pay an income tax on their labor, the United States government should show the people that law.

     In order to understand the legality of taxes, we must first refer to both the constitutional provisions for taxes levied and the constitutional context of the terminology used in such provisions. “On every question of the construction of the Constitution, let us carry ourselves back to the time when the Constitution was adopted, recollect the spirit manifested in the debates, and instead of trying what meaning may be squeezed out of the text, or invented against it, conform to the probable one in which it was passed.” –Thomas Jefferson, Letter to William Johnson, Supreme Court Justice, 1823

While observing the taxation clauses of the United States Constitution, two types of tax can be determined, a direct tax and an indirect tax. Although, the term “indirect tax” does not actually appear in the Constitution, its meaning is implied here as “any tax that is not a direct tax.”

A direct tax is a tax that cannot be avoided nor passed on, if it is owed. The Constitution specifically states for the case of a direct tax, that it must be apportioned among the several states according to their population. An example of a direct tax in which the government may levy, is tax on land due to ownership, simply because the land exists. Meaning that regardless of what the land is used for or who owns it, the tax is on the land and the owner of the land is liable for the tax due.  (Constitutional Income: Do You Have Any?)

Meaning of Income

Although there are sections that mention the term “income”, term itself is not properly defined in the Internal Revenue Code. There is not clear cut definition with regards to this term. In the Internal Revenue Code’s Section 61a, the term “income” is vaguely implied. An example of this would be income as defined by IRS agents as (not even) earnings “from whatever source derived.

      The Supreme Court, however, has come up with a legal definition of income for the purposes of taxation. The Supreme Court   does not consider tax as something levied on a person’s earnings through his personal labor. Here are some cases to show an example. SO. PACIFIC v. LOWE, 238 F. 847 (U.S. Dist. Ct.  S.D. N.Y. [1917]; 247 U.S. 330 [1918]cite that  … ‘income’ as used in the statute should be given a meaning so as not to include everything that comes in.

The true function of the words ‘gains’ and’profits’ is to limit the meaning of the word ‘income’”. The case of Staples v. U.S., 21 F Supp 737 U.S. Dist. Ct. ED PA, 1937 likewise has a similar take on the term.  “Income within the meaning of the 16th Amendment and the Revenue Act, means ‘gain’ … and in such connection ‘gain’ means profit … proceeding from property severed from capital, however invested or employed, and coming in, received, or drawn by the taxpayer, for his separate use, benefit and disposal.”  (Legal Minds Community)

The Grace Commission

Peter Grace and Jack Anderson formed the Grace Commission in 1982. This was a rejoinder to then President Reagan’s PRESIDENT’S PRIVATE SECTOR SURVEY ON COST CONTROL.  The Grace Commission made recommendations that would save the taxpayers $424.4 billion over three years. The suggestions made did not compromise essential services or raising taxes. The Grace Commission also accurately predicted the accumulation of multi-trillion dollar government debt by 2000 if the government would do nothing to remedy the present situation.  (Truth in Taxation.US)

Furthermore, the Grace Commission revealed that tax collection is not a hundred percent. Only one-third of the total collectibles is collected and the remaining two-thirds is either wasted or not collected. The total amount collected goes to the payment of federal debt. The payment of wage taxes supports global banking but does benefit neither Americans nor the government in any way. In short, the payment of wage taxes goes to nowhere near providing benefits to the American people.  (Truth in Taxation.US)

The declaration of Independence defined labor as “property of the most sacred kind”.  Labor is among the unalienable rights. These include “the right of men to pursue their happiness, by which is meant, the right any lawful business or vocation, in any manner not inconsistent with the equal rights of others, which may increase their prosperity or develop their faculties, so as to give them their highest enjoyment”.  (Paul) That said collecting income taxes on an individual’s gains from his personal labor is illegal.

Works Cited

Constitutional Income: Do You Have Any? 2004. 25 October 2007 <http://www.constitutionalincome.com/first_chapter.php>.

Legal Minds Community. The 16th explained. 17 January 1998. 25 October 2007 <http://legalminds.lp.findlaw.com/list/fedtax-l/msg01860.html>.

Paul, Ron. Cases on Income. 2007. 25 October 2007 <http://irwinschiff.homestead.com/CasesOnIncome.html>.

Truth in Taxation.US. Where Do Your Taxes Go? 2003. 25 October 2007 <http://truthintaxation.us/?tax_inform=whereTaxesGo>.


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