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--Robert D. $utton Man�s right to property is the implementation of his right to life: the right to sustain his life by his own effort would be meaningless without the right to keep, use, and trade the product of that effort. Furthermore, a right, unlike a permission, is inalienable. A man may lose his rights by violating the rights of others, but so long as he retains his rights, they are not to be violated for any reason whatsoever. Man is not "free unless humanity needs him." He is free--period. ANY legally sanctioned violation of property rights, no matter how small or "well-intentioned," implies that man has no right to live, or that his life belongs to the state (but I repeat myself). In principle, in the words of Ayn Rand, "the man who produces while others dispose of his product, is a slave." It follows that mandatory taxation, a blatant violation of property rights, cannot be morally sanctioned in ANY degree or form by any honest, consistent advocate of freedom. Nor can it be tolerated as immoral but practical--if man�s life is the standard of value, a "necessary evil" is a contradiction in terms. I'm of the view that government itself is unnecessary. But even if we needed a government, we would not need a system of compulsory taxation to finance it. If government is to be the "protector" of individual rights, it must not in the process become their violator. If government is to be the "servant" of the people, it must not become their master. The "power of the purse" is the ultimate "consent of the governed" to which government power must be tied. Voluntary financing sounds nice, but can it actually work? That depends. The practical, Ayn Rand once said, "depends on what one wishes to practice." If one wishes to support a full welfare, warfare, regulatory kleptocracy, then voluntary financing is impractical (and taxation is "practical" only so long as producers exist and willingly submit to the parasites feeding on them). If, however, one were to speak of a vastly reduced government--limited to police, courts, and a military for self-defense--then voluntary financing could sufficiently cover the costs of government. Military, police, courts. These are government�s legitimate functions, but it probably is not essential that the government assume full responsibility for providing them. For example, a substantial number of disputes are already being settled in private arbitration courts, and Americans are everyday turning to numerous private sector alternatives to police (e.g., locks, guns, alarms, neighborhood watch groups, private security firms). Private companies account for many prisons and rehab centers. Realistically, the only function for which government would probably end up bearing most of the cost is national defense. And even this would be far cheaper under a libertarian foreign policy, where the top priority is national defense, rather than policing the world and entangling ourselves in conflicts where we have no discernible interest. The above government would be radically smaller than what we have now. Military spending (about $250 billion) currently accounts for a quarter of the national budget, and would cost far less if we had a primarily defensive, non-interventionist foreign policy. Non-coercive methods of finance ought to be more than enough to support it. One way is to follow the example of private universities, and create �national defense endowment.� Such an endowment could be started by selling off the valuable lands the US government currently �owns� (about a third of the land in America!). The endowment money could then be invested, and the income used to finance defense. Donations are also a promising source of funds. If people are willing to finance the mere possibility of a better society (through donations to the groups working to bring about that society), it seems they would also be willing to contribute to the preservation of that society. Americans are already pretty generous: voluntary donations currently total about $165 billion a year. And since everyone would be wealthier in a freer society (earnings are not siphoned away by taxation, and products would be cheaper), they would probably be more willing to part with some cash for the common defense. It could even become a custom, like tipping for good service. The convention already exists to some extent, as when Americans have bought war bonds in times of crisis. It could become more institutionalized if the national defense endowment (again, following the lead of private universities) held a fundraising call-a-thon every now and then. The biggest obstacle to outright donations would be the fear that no one else would contribute. This could be overcome by having people pledge a certain amount of money in a contract, which would only become binding if enough other people signed on. An individual signer has nothing to lose. In the worst case, the other signers default, the contract becomes void, and the individual keeps his money. In the most likely case, it will probably be easy to offer all signers a price they are willing to pay, given that national defense is worth a lot more than it costs to provide. In any case, if charity alone weren�t enough, numerous other schemes have been suggested, including a lottery and selling contract insurance. Or maybe the government could do a little merchandising, sell some t-shirts and action figures, put on some more shows like �Cops�... Another possibility is for insurance companies to sell �war insurance,� and contribute a portion of the profits to national defense. Why would they make such a contribution? Because insurance companies always do what they can to minimize the risks against which they are insuring. They stand to make the biggest profit if the country is never successfully invaded. And if you're still having doubts over whether government financing MIGHT and OUGHT to be voluntary, consider the fact that it already IS.
By the letter of the law, US citizens (and resident aliens) are NOT required to pay income tax on their own domestic income. The income tax is a FOREIGN tax, applicable only to the income earned by US businesses in foreign countries, and by foreign businesses and nonresident aliens in the US. This is fully and consistently reflected in the Constitution, Supreme Court rulings, and the Tax Code itself.
Let�s start with the Supreme Law of the Land. It is commonly thought that the income tax is a DIRECT tax on INCOME. Where in the Constitution is Congress authorized lay and collect such a tax? The Constitution actually authorizes two different kinds of taxes: direct and indirect. DIRECT TAXES: Article I, Section 2, Clause 3 of the Constitution states that "Representatives and direct taxes shall be apportioned among the several states..." Section 9, Clause 4 says that "No capitation or other direct tax shall be laid, unless in proportion to the census or enumeration herein before directed to be taken." This is simply saying that a direct tax must be divided up among the states, in proportion to their representation in Congress. So, if the federal government imposed a direct tax of $100 billion, each state would be obligated to collect a certain percentage of that amount, the states with more representatives having to collect more than the states with fewer. (This probably has something to do with the idea of "No taxation without representation"...) Whatever the exact procedure may be, it goes without saying that this is NOT how the federal "income tax," as we know it, is collected. In fact, when Congress passed an act in 1894 to impose an income tax on US citizens, the Supreme Court, So the income tax must fall into the other category of taxation... INDIRECT TAXES: Section 8, Clause 1 gives Congress the power to lay and collect "Taxes, Duties, Imposts and Excises...but all Duties, Imposts and Excises shall be uniform throughout the United States." So the income tax must be an indirect tax. Why this matters will be explained shortly.
The 16th Amendment (1913) states: "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. gives Congress the power to impose income taxes without apportionment. But in Article I, Section 2, Clause 3 (and Section 9, Clause 4) Congress is forbidden to impose DIRECT taxes without apportionment. Since these clauses have never been amended or repealed, and since the Constitution cannot contradict itself, the income tax must be an INDIRECT tax. This was, in fact, the ruling of the Supreme Court in Brushaber v. Union Pacific R.R. Co. and Stanton v. Baltic Mining Co. (two 1916 cases dealing with the income tax). The Court held in Stanton that "...by the previous ruling [Brushaber], it was settled that *the provisions of the 16th Amendment conferred no new power of taxation* but simply prohibited the previous complete and plenary power of income taxation possessed by Congress from the beginning from being TAKEN OUT of the category of *indirect taxation* to which it inherently belonged." So what IS an "indirect tax"? The Constitution lists three types: imposts, duties, and excises�so the income tax must be one of these. The first income tax, passed in 1861 to support the Civil War, was in fact a DUTY on foreign goods, so it was allowed by the Constitution. Nothing was substantially changed by the 16th Amendment. The Court ruled in Brushaber that "taxation on income was in its nature an excise�" So the 16th Amendment transformed what was once an indirect duty into an indirect excise. What is an excise? Well, in Flint v. Stone Tracy Co. (1911), the Court defined an excise as a tax on "the manufacture, sale or consumption of commodities within the country, upon licenses to pursue certain occupations and upon corporate privileges." The Court ruled further that "the *requirement to pay* such taxes involves the *exercise of the privilege* and if business is not done in the manner described *no tax is payable*...". So excises are essentially taxes on "privileged income." What is "privileged income"? Whenever the government goes beyond its normal function of protecting CITIZENS WITHIN its own borders�e.g., if it protects US citizens in FOREIGN countries under a tax treaty, or protects NONCITIZENS within its own borders�it is said to confer a "privilege" on the beneficiary. And privileges entail responsibilities�which is why "privileged income" is also TAXABLE income. The income tax is thus an indirect excise on the privileged income of either "foreign principals" (noncitizens in the US) or citizens under US protection in foreign countries. At the same time, the DOMESTIC income earned by US CITIZENS is earned BY RIGHT�not by permission�and is not subject to the income tax. To put it simply: If you earned it here, it�s yours�period. You owe the government nothing�LITERALLY. This isn�t what the IRS tells us (beyond kryptically mentioning that the income tax is "based on voluntary compliance and self-assessment"). Nevertheless, I will now endeavor to show, in as many ways as possible, that it IS reflected in the Tax Code. (It is also reflected in the General Index of the Annotated US Code. There are only two listings having anything to do with the income tax of citizens�"About to depart from US" and "Living abroad"�but there are nine PAGES of listings pertaining to the income tax of aliens. But this is only an indication, not yet a verification.) The first question we�ll want to ask before exploring this legal labyrinth is: What information does the law require us to supply to the IRS? This is established in Notice 609, a statement included (and required by law) with every correspondence the IRS sends. Notice 609 reads: "The Privacy Act of 1974 and Paperwork Reduction Act of 1980 say that when we ask you for information, we must first tell you our legal right to ask for the information�Our legal right to ask for information is Internal Revenue Code [IRC] sections 6001, 6011, and 6012(a) and their regulations. They say that you must file a return or statement with us for any tax you are liable for. Your response is mandatory under these sections." You must file "for any tax you are LIABLE for," but where exactly is your liability established? Sections 6001 and 6011 list the consequences of being liable, but they do not establish liability. Section 6012 gives us a hint: "Returns with respect to income taxes under SUBTITLE A shall be made by the following: Subsection (1)(A): "Every INDIVIDUAL having for the taxable year..." (emphasis added). Section 6012 refers us to Subtitle A, the part of the Tax Code (Title 26) dealing with the category of Income Tax. And Chapter 1, Part I, Section 1 (1.1-1) of Subtitle A is titled "Tax on Individuals." This is where our liability should be established. It reads: "...there is hereby imposed on the taxable income ... a tax�" Does this say that individuals are liable? No, only their TAXABLE INCOME. But what IS "taxable income," and how do you know if you have it? Let�s assume�as most Americans unwittingly do�that we are, in fact, liable under 1.1-1. What form(s) would we use to satisfy this liability? The IRS tells us to file a Form 1040, but how do we know that this is the right form? To comply with the Paperwork Reduction Act of 1980, the IRS supplied the Office of Management and Budget (OMB) with a table listing the Tax Code sections that require information, and the forms required to satisfy those requirements. (The forms are labeled by Document Control Numbers (DCNs), and the DCNs pertaining to the IRS always begin with the sequence 1545.) This table, which appears in 26 C.F.R. 602.101, is where we would look to see which forms we need to send in to satisfy our tax liabilities. According to an April 1994 version of this table, the ONLY Form required for compliance with 1.1-1 (Income Tax on Individuals) had DCN 1545-0067. This is the DCN of Form 2555: "Foreign Earned Income." This makes sense, because foreign income is, as explained above, TAXABLE income, which is what 1.1-1 establishes the liability for. The IRS "amended" the table, on May 26, 1994, "by removing the entry for �1.1-1� and amending the entry for �1.6012-1� by adding�the number �1545-0067.�" This obscures the law a bit�Section 6012 requires many forms�but it does not change it. Section 6012 (1.6012) is the section used to ENFORCE tax liabilities, but it does NOT have the power to create new ones�only to enforce the ones established elsewhere. Since 1.1-1 is the only section establishing the liability for income tax on individuals (or rather their "taxable income"), and since 1.1-1, while it appeared in the table, never required any form other than 2555, there is no reason to believe that the law has changed. Form 2555 should STILL be the form required to satisfy individual income tax (if you are even liable for it). And yet, the IRS has been telling us that we�re all supposed to file a Form 1040 (DCN 1545-0074): "US Individual Income Tax Return." Are we? According to our table, 1.6012 gives the IRS the power to require a Form 1040 to satisfy liabilities, but which liability is 1040 actually required to satisfy? What is it REALLY supposed to be used for�and by WHOM? Most of the Tax Code sections requiring Form 1040 (1.23-5, for example) deal with tax refunds, reductions, and credits�not satisfying income tax liability! The only situation in which Form 1040 would be used by US citizens to satisfy income tax liability is stated in Treasury Decision 2313, which was written shortly after the 1916 Brushaber ruling. It states that Form 1040 is to be used by US citizens to report the income they withhold from their foreign principals�not to report their own domestic income! (The American in the case, Brushaber, was ordered to pay the income tax because he was a "withholding agent" for foreigners, not because he was an American citizen.) So the only people who must use 1040 to satisfy their income liability are "withholding agents." But what (and who) exactly IS a withholding agent? A "withholding agent" is defined, in Subtitle F (Procedure and Administration), Chapter 79, 7701 (Definitions) (16) as "�any person required to deduct and withhold any tax under the provisions of sections 1441, 1442, 1443, or 1461." And the Code Sections starting with "14" are in Chapter 3, WITHHOLDING OF TAX ON *NONRESIDENT ALIENS* AND *FOREIGN CORPORATIONS*. These are the only groups subject to withholding. This is further illustrated in Publication 515, the instruction booklet on withholding that the IRS gives to employers. It is therein written, under the section entitled "withholding exemptions and reductions," that "If an individual gives you a written statement stating that he or she is a *citizen or resident of the United States*, and you do not know otherwise, *you do not have to withhold tax.*" (This is also stated, slightly differently, in 26 C.F.R. 1.1441-5.) So citizens (and, as it turns out, resident aliens) are not subject to withholding. But your employer might tell you otherwise, citing Section 3402�"Income tax collected at source"�which seems to authorize empoyers to withhold income tax from citizens. But does it? Subsections (n) and (p) of 3402 say that if you tell your employer you have no liability (with a written statement of citizenship) and do not *volunteer* to agree to withholding, then your employer need not (and CANNOT) withhold income from you. Furthermore, it is important to note that, according to Section 7806 (Construction of Title), descriptive titles (e.g., "Income tax collected at source") have no legal effect. That noted, we read in Subsection (a) (Requirement of Withholding) of 3402 that "every employer making payment of *wages* shall deduct and withhold upon such wages a tax...". So the tax is on wages, NOT income. What are wages? In 20 CFR 404.1041 (Wages), wages are defined (subsection (a)) as "remuneration paid to you as an employee for *employment*�" But you can�t stop there! "Employment" itself is defined (20 CFR 404.1003) as "generally any service *covered by social security* performed by an employee for his or her employer..." Guess what that means? If you don�t provide your Social Security number to your "employer" on a W-4, then your earnings are not "wages," and cannot be withheld! (A W-4 is the form where you "volunteer" to have your money withheld. Its execution creates "taxable income" in your name for Social Security purposes, and you request the withholding of income tax from your wages when you specify a number of deductions to be taken!) Furthermore, your boss doesn�t become an "employer" until he voluntarily applies for an "Employment Identification Number" (EIN), to participate in the Social Security system as a withholder of employment taxes (under Subtitle C). And here�s the big punchline: participation in Social Security is VOLUNTARY (one can choose a private retirement program). (In fact, it is considered discrimination based on national origin to refuse to hire someone who does not provide a social security number (Americans are not required!). This was established in EEOC v. Information Systems Consulting, a 1990 case held in Texas and supported by the Justice Department. The IRS never showed up to defend the employer who had discriminated on the basis of social security.) And then there�s Sections 3406 (Backup Withholding) and 3451 (Income Tax Collected at Source on Interest, Dividends and Patronage Dividends). These sections apply only to interest and dividends. There is no authority, anywhere in the law, to backup withhold income tax from the wages or earnings of US citizen, only foreigners. Moreover, your stockbroker (agent) cannot even backup withhold from your interest and dividends, because your Statement of Citizenship relieves him the duty of withholding income tax from you! (Furthermore, the Supreme Court ruled in the Pollack Case (1895) that it was unconstitutional to tax the interest and dividends of US citizens.) Section 6041 (Information at source) is where your boss is told to use a Form 1099 to report payments to individuals not "covered" by Social Security. However, this reporting requirement does not even require a social security number, TIN, or any other such number�it requires only your name and address. (That�s the theory�here�s the practice. Give your employer/clients your name and address on a Statement of Citizenship (claiming, as specified in C.F.R. 1.1441-5, to be a "person not subject to withholding"). Refuse to supply a social security number on a W-4 (it�s voluntary!) and tell them to report your earnings on a Form 1099 (instead of Form W-2), using your name and address as specified in the US Code.) The above provides a roundabout answer to our question: what is "taxable income"? There�s also the direct route. The IRS directs us to Section 63, which defines taxable income as "*gross income* minus the deductions�" What�s "gross income"? Section 61 (Gross income defined) defines it as "all income from whatever source derived�" Doesn�t look good, right? But it turns out that *Section 61 used to be Section 22 from the 1939 Code* (this is stated, in turn, by a footnote from the 1954 Code, which was dropped in the 1986 Code). And Section 22 was implemented (according to a table of 1991 enabling regulations for 1939 code sections, found in the CFR Index of Parallel Tables) under *Title 26, Part 519.* And Part 519 (according to Chapter 1 [IRS], Dept. of the Treasury, Subchapter G [Regulations Under Tax Conventions]) is the *Canadian Tax Treaty!* Consistent with what we�ve seen from the first, the tax is imposed on income earned under foreign tax treaties�not domestic income. (As a side note, Section 61 no longer has any legitimate application at all within Title 26, since the Canadian Tax Treaty expired in 1993.) We�ve looked at our responsibilities as taxpayers, now let�s see what legitimate powers the IRS has. Where does the law give the IRS authority to assess income taxes? Well, Section 6201 (Assessment authority), Subparagraph (a)(1), allows the IRS to assess taxes shown on returns. If you don�t file a return, then the IRS can only assess "unpaid taxes payable by stamp" (2) and "unpaid taxes payable by prepayment credits" (3) (withheld taxes). Taxes, of course, are not payable "by stamp" (!), and, as mentioned before, American citizens (and resident aliens) are not subject to withholding. So what can the IRS do if you refuse to file a return? They claim that Section 6020b gives them the authority to file a Form 1040 for you�but does it? Chapter 5200 (proper legal use and invocation of 6020(b)) of the Internal Revenue Manual (IRM) suggests otherwise. The section on Scope (5291) says that the procedure "applies to employment, excise and partnership returns"�not individual returns! The section also lists the forms to which this procedure is applicable, and Form 1040 is NOT listed. The IRS knows Form 1040 isn�t covered, but they send filled out "substitute forms" for Americans to validate anyway. However, they do not sign the forms�despite being required to verify, under Sections 6061 and 6065, that the form was made out "under the penalties of perjury" and is valid. They can�t sign, because then they would have to assume liability for wrongfully demanding income from you. They would rather you assume their claims are true, and honor their unsigned, fraudulent work with your money. But what about those scary IRS letters threatening enforced collection? You�ll notice that such computer generated letters have a 3-digit computer paragraph (CP) code in the upper right hand corner. But the IRM clearly states that 3-digit codes are to be used in correspondence with BUSINESSES, not individuals (who get a 2-digit code). What happened here? The IRS must have illegally fooled its computers into thinking you were a business, by posting a business code on your Individual Master File (IMF). They had to do this, because the computer itself knows that citizens are not liable for taxes. You can use your IMF to expose their fraud in court. Let�s look at a few sections the IRS cites when they try to take away your property. They cite Section 6321, which gives them a lien (legal claim) on "any person liable" for taxes�but we have already seen that US citizens and resident aliens aren�t liable for taxes on their domestic income. The IRS cites Section 6331 as giving them the authority of "Levy and distraint," but this section applies only to federal employees, not individual citizens. This is shown by Note 5 (purpose) in the US Code Annotated for 6331. The Note also shows that the levy only applies to officials in US territories (again, the income tax is a tax on "privileged"�read foreign�income!). IRM Chapter 1100, Section 1132.75 (Criminal Investigative Division), "enforces the criminal statutes applicable to income, estate, gift, employment, and excise tax laws involving *United States citizens residing in foreign countries and nonresident aliens* subject to Federal income tax filing requirements." My the tax laws are consistent! Section 7203 covers the "Willful failure to file return, supply information, or pay tax." It begins: "Any *person* required under this title�" But Section 7343 (Definition of the term person) defines a "person" as, among other things, corporate officers (remember: privileged corporate income)�but never says the definition includes INDIVIDUALS. But here�s the best part. Chapter 5293.1(7)(b) of the IRM states that if someone�s Social Security Number(s) "cannot be determined, close the delinquency using TC (transaction code) 593 with the proper closing code." The IRS cannot do anything to you if you don�t give them your social security number! Social security is voluntary�remember? (And trust me, nobody from my generation who enters that federal Ponzi Pyramid scheme will see a dime!) The Supreme Court ruled in US v. Flora (362 US 145; 1958) that, "Our system of taxation is based on voluntary assessment and payment, not upon distraint (force)." The above provides consistent, conclusive proof that this is absolutely true in theory. It will become true in practice when people start complying with the Tax Code�TO THE LETTER. So what should you, the reader, do? If you value your freedom and your money, then reread this article and the original article it is meant to accompany. Learn the arguments and use them in class and debate. Check the sources for yourself (I will be working on a website with links to the proper documents). Send this article (or your own synopsis of it) to everyone you know. THINK about and APPLY this knowledge. WITHDRAW YOUR SANCTION FROM THE LOOTERS� GOVERNMENT!!! Notes Notes |
