YOU NEED NEVER PAY ANOTHER DIME IN INCOME TAXES
The Supreme Court has already ruled that:
~ez_bull~ The government's present method of collecting income taxes is unconstitutional.
~ez_bull~ Wages, rents, dividends, and interest are not income.
~ez_bull~ Income can only be a corporate profit.
That is why there are no laws requiring anyone to:
~ez_bull~ File income tax returns.
~ez_bull~ Pay income taxes, or
~ez_bull~ Submit to IRS audits.
Learn the facts and discover why the Federal
income tax is a gigantic hoax and why
millions of law abiding, patriotic Americans
no longer pay this illegal and destructive tax.
Freedom Books . 544 East Sahara Blvd. . Las Vegas, NV 39104
In THE GREAT INCOME TAX HOAX, Irwin Schiff- the nation's leading tax expert - proves that for over seventy years the government has been ILLEGALLY collecting income taxes. While staggering, the implications in Schiff s expose are nonetheless true. You will discover that the Federal government itself is the nation's most prolific lawbreaker; confiscating property without statutory authority and jailing people for tax crimes that do not exist.
For example, did you know that the Supreme Court has ruled that:
1. The income tax is unconstitutional as currently enforced?
2. The 16th Amendment did not amend the Constitution?
3. Rents, dividends, and interest are not "income" and you do not have to pay any "income" taxes on such items?
4. The only "income" subject to income taxes is corporate profit - so if you do not have a corporate profit you cannot be subject to an "income" tax? (Even corporations, however, are not subject to the current income tax.)
5. According to the Supreme Court's official definition of "income," wages are not subject to taxation as "income" under our laws?
6. There is no law that says you can be "liable" for Federal income taxes or that your are "required" to pay them?
You can stop rubbing your eyes in disbelief since all of the above is true -including the fact that the entire Federal judiciary is in on the swindle and is knowingly breaking the law!
Schiff supports his claims with extensive excerpts from every important Supreme Court case bearing on the income tax and from the Internal Revenue Code itself. His book is probably the most extensively researched and documented book that has ever been written about Federal income taxes. It proves that the whole system is a gigantic legal hoax and that THE FEDERAL JUDICIARY KNOWINGLY PUTS PEOPLE IN JAIL WHEN THEIR ONLY CRIME IS THAT THEY KNOW THE LAW AND ARE NOT TAKEN IN BY THIS HOAX.
Schiff does not simply make naked charges. He substantiates each and every statement he makes. He proves that the entire Federal "court" system, from district court up to Supreme Court itself, is in on this hoax. He also proves that in order to illegally collect income taxes the Federal Government, with the help of the "courts," has managed to throw out the entire Bill of Rights along with every constitutional provision that limited the Federal Government's taxing powers. In addition, extensive appendix material includes a expose of the illegal nature of all U.S. coin and currency.
Schiffs book not only provides the reader with a comprehensive understanding of the income tax, it also describes the constitutional basis of Federal power and how it is abused in various other areas. While it deals primarily with taxes
mum* i \x HOAX
Freedom Law School
9582 But*,mere Road xL^ Phelan, C/\ 92371
ŁT (760) 868-4271
Irwin Sctaif f
HIE GREAT INCOME XIX
Why You Can immediately Stop Paying This Illegally Enforced Tax
544 East Sahara Blvd
Las Vegas, NV 89104
visit our website at: www.paynoincometax.com
This book is designed to provide the author's findings and opinions based on research and analysis of the subject matter covered. This information is not provided for purposes of rendering legal or other professional services, which can only be provided by knowledgeable professionals on a fee basis.
Further, there is always an element of risk in standing up for one's lawful rights in the face of an oppressive taxing authority backed by a biased judiciary.
Therefore, the author and publisher disclaim any responsibility for any liability of loss incurred as a consequence of the use and application, either directly or indirectly, of any advice or information presented herein.
Sections of the Internal Revenue Code reprinted by permission from the Tax and Professional Services Division, The Research Institute of America, Inc. Copyright ©1984.
Copyright© 1985 by Irwin A. Schiff
Library of Congress Catalog Card No. 85-070036
ISBN-0-930374-05-3 nn nn n i m m s <i ~ez_bull~? i i
Melville Weston Fuller, Chief Justice of the United States from 1888-1910, and Stephen Johnson Field, Associate Supreme Court Justice from 1863~ez_mdash~1897, for the judicial integrity they displayed in holding an income tax unconstitutional; and for their magnificent opinions which, by contrast, clearly reveal the criminal nature of today's Federal judiciary.
BOOKS BY IRWIN SCHIFF
The Federal Mafia ~ez_mdash~ How It Illegally Imposes and Unlawfully Collects Income Taxes ~ez_mdash~
The Great Income Tax Hoax How An Economy Grows and Why It Doesn't
The Social Security Swindle ~ez_mdash~ How Anyone Can Drop Out ~ez_mdash~
How Anyone Can Stop Paying Income Taxes
The Kingdom ofMoltz The Biggest Con: How the Government Is Fleecing You
1. Direct vs Indirect Taxes............................................. 11
2. Constitutional Restrictions Regarding
Direct And Indirect Taxes........................................ 19
3. The Intent Of The Constitution................,................... 25
4. The Federal Government's General
Taxing Powers...................................................... 31
5. What The U.S. Government And America
Are All About....................................................... 39
6. Federal Real Estate Taxes ~ez_mdash~ How They
Were Levied and Collected....................................... 55
7. The Civil War: The Seeds Of Tax
Tyranny Are Sown................................................. 67
8. The Supreme Court Declares an Income
Tax Unconstitutional..........................................__ 77
9. The Agitation For The Income
Tax: 1895-1909..................................................... 123
10. The Corporation Excise Tax of 1909 ............................... 131
11. The Sixteenth Amendment.......................................... 149
12. Surprise! The Income Tax Is An Excise
Tax: The Brushaber Decision .................................... 181
13. Income ~ez_mdash~What Is It?................................................ 205
14. Why No One Can Have Taxable Income........................... 223
15. Income Tax "Laws" and How The IRS
Disregards Them .................................................. 239
16. TheFederal"Judiciary" ............................................. 263
17. Tax "Court" and Other Tax-Related Scams....................... 295
18. HOW TO END THE INCOME TAX NOW!.................... 377
Appendix A: The Total American Tax Take.............................................................409
Appendix B: The Elliot Debates ....................................413
Appendix C: 18th and 19th Century Federal Tax Statutes ..............................................439
Appendix D: Brief Supporting Contention That Wages Are Not Income ................................461
Appendix E: Briefs Exposing Government's Illegal Monetary Policies.................................479
Appendix F: Miscellaneous Correspondence and "Court" Decisions.................................523
Reference Materials: Books, Reports
and Tapes by Irwin Schiff........................................ 555
This book will shock you. It will convince you that for over seventy years the Federal government has been illegally collecting income taxes and that the courts (if not Congress) know it. Federal judges allow property to be illegally confiscated and knowingly send innocent people to jail in order to intimidate an uninformed public and to aid the IRS in illegally enforcing Federal tax law. The reason the public can be duped and intimidated is because it does not know the law or even the legal meaning of income. Most Americans do not realize they have no income that can be legally taxed under our income tax laws.
This book will clearly explain the law to you so that you will know why you can legally stop paying income taxes immediately and how you can protect yourself from IRS harrassment and control.
In essence, history has repeated itself and America now finds itself in the same circumstances as Thirteenth Century Egypt. In the Twelfth Century, slaves known as Mamelukes (literally "owned men") were brought to Egypt to serve as soldiers to the Sultan. In 1250 they overthrew the government they were supposed to serve, installed one of their own as Sultan and ruled Egypt for the next two hundred and fifty years. America has essentially the same problem.
The Federal government was created (with limited power) by the people of America in order to protect their unalienable rights to life, liberty, and property. Federal employees were recruited and sent to Washington to administer the laws commensurate with this limited grant of power. Initially, these employees were conceived as servants of the people; however, as the Mamelukes before them, the Federal bureaucracy has now illegally installed itself as the master while the people have become their servants.
In order to manage this, America's Mamelukes had to destroy the very document designed to limit their power and keep them in check. This was largely achieved by those assigned the role of "judges!" In addition, the key ingredient in the expansion and preservation of Mameluke control of America has been their success in installing and illegally enforcing the income tax.
Many Americans are now united in a struggle to depose American Mamelukes and to retrieve and reestablish both the document and the freedoms they have destroyed. The days of Mameluke control of America are numbered. More and more Americans are learning to recognize our
Mamelukes for the usurpers they are. They are learning how to successfully fight them. This book was written to help in that struggle and to persuade you to join the battle. The faster we get rid of our Mameluke masters and their illegal income tax the better off we will all be.
Not only is the battle to free America from Mameluke control exciting, it will also allow you to have more money to spend while enjoying life, your new-found liberty, and your increased ability to pursue your own happiness. According to the April, 1983 issue of Life magazine some 20,000,000 working Americans have stopped filing income tax returns ~ez_mdash~ WE NOW HAVE THE MAMELUKES ON THE RUN!
Direct vs Indirect Taxes
In an 1819 decision Chief Justice John Marshall wrote: "The power to tax involves the power to destroy!' History agrees. From the beginning of organized government, kings and ruling castes used taxation as an instrument and a weapon. Throughout recorded history, moreover, capricious or heavy-handed taxation led to insurrection or, less dramatically, to the dissolution of the ties which bind people to their government. In Twelfth Century England, outrageous taxation inspired the Peasants' Revolt which rampaged until Richard II skewered the head of Wat Tyler, its leader, on a pole. It was the very issue of taxes that sparked the American Revolution and today the tax system in America is as vi-olative of the rule of law and the Constitution as the "judges" who administer it.
In ancient times, kings and emperors needed taxes for the support of their courts and armies. Men-at-arms and the nobility produced no wealth so they had to be supported by those who did. Historically, governments have been run by non-producers and non-producers generally gravitate to government service. But to the extent that government performs its limited social function ~ez_mdash~ that of protecting society from external enemies and maintaining internal peace and order by eliminating social predators ~ez_mdash~ the cost of supporting government workers can be born out of the increased productivity that a limited, well-run government will generate.
The first 150 years of America bears excellent testimony to this principle. Unfortunately, history demonstrates the accuracy of Lord Acton's observation that "power corrupts and absolute power corrupts absolutely!' As government acquires more power1 it becomes arbitrary and corrupt. Taxes are increasingly raised for the support of entrenched government, not for the benefit of society. Eventually, the growing army
1 In America this unconstitutional expansion of federal power was achieved by the government, illegally maintaining and exercising (in peacetime) numerous emergency powers it acquired as "temporary" war-time measures.
of government created non-producers will no longer be able to be supported by the ever dwindling number of producers and the economic and social structure of society will ultimately give way.
This is the story of Rome and provides the explanation for what is happening in America today. The parallel between the decline of Rome and the decline of America is so sharp that only government-run schools could fail to make the connection.
Only People Pay Taxes
How should government extract taxes? Citizens could be required to pay a certain sum to the "royal" tax collector~ez_mdash~but how much? Since some citizens can afford to pay more than others, governments devised methods for taxing citizens according to their supposed ability to pay or, in simpler terms, according to their wealth which became one of the earliest forms of taxation. However, while such taxes appear to tax wealth, it is the citizen that is being taxed, not his wealth. He is being taxed according to his wealth. It is important to keep this distinction in mind. As you will see, the government seeks to fool the public on this simple issue. For example, property taxes are not really taxes on property but taxes on individuals based on the property they own. All such taxes fall within the constitutional category of "direct taxes."
The Importance of Tax Classes
The Constitution recognizes two classes of taxes and imposes different restrictions on the Federal government's right and ability to impose either. It is important, therefore, that the taxpayer be able to identify both classes in order to determine whether they are being levied constitutionally. The government and the courts have evaded the issue by claiming that the differences between the two taxing categories are unclear ~ez_mdash~ that the Founding Fathers (who were so specific in everything else) did not know what they were talking about and that their proscriptions on the power of taxation were the result of confusion and lack of clear thinking. This is self-serving nonsense. The courts know, as we all do, what great texts the Founding Fathers consulted, what they were influenced by, and how they debated the system they embodied in the Constitution. Not only were the framers of the Constitution keenly cognizant of the issues before them, they also had studied Adam Smith's definitive work, The Wealth of Nations, published in 1776 ~ez_mdash~ the same year the Declaration of Independence was written. I will quote extensively from this material so there can be no doubt in anyone's mind
regarding exactly what the Founding Fathers had in mind when they wrote these taxing restrictions into the Constitution.
The first category of taxes taken up in the Constitution were "capitation and direct taxes." This is what Smith had to say about them.
Capitation taxes, if it is attempted to proportion them to the fortune or revenue of each contributor, become altogether arbitrary. The state of a man's fortune varies from day to day, and without an inquisition more intolerable than any tax, and renewed at least once every year, can only be guessed at. His assessment, therefore, must in most cases depend upon the good or bad humour of his assessors, and must, therefore, be altogether arbitrary and uncertain.
Capitation taxes, if they are proportioned not to the supposed fortune, but to the rank of each contributor, become altogether unequal; the degree of fortune being frequently unequal in the same degree of rank.
Such taxes, therefore, if it is attempted to render them equal, become altogether arbitrary and uncertain; and if it is attempted to render them certain and not arbitrary, become altogether unequal. Let the tax be light or heavy, uncertainty is always a great grievance. In a light tax a considerable degree of inequality may be supported; in a heavy one it is altogether intolerable.
In the different poll-taxes which took place in England during the reign of William III. the contributors were, the greater part of them, assessed according to the degree of their rank; as dukes, marquisses, earls, viscounts, barons, esquires, gentlemen, the eldest and youngest sons of peers, etc. All shopkeepers and tradesmen worth more than three hundred pounds, that is, the better sort of them, were subject to the same assessment, how great soever might be the difference in their fortunes. Their rank was more considered than their fortune. Several of those who in the first poll-tax were rated according to their supposed fortune, were afterwards rated according to their rank. Serjeants, attornies, and proctors at law, who in the first poll-tax were assessed at three shillings in the pound of their supposed income were afterwards assessed as gentlemen. In the assessment of a tax which was not very heavy, a considerable degree of inequality had been found less insupportable than any degree of uncertainty.
In the capitation which has been levied in France without any interruption since the beginning of the present century, the highest orders of people are rated according to their rank, by an invariable tariff; the lower orders of people, according to what is supposed to be their fortune, by an assessment which varies from year to year. The officers of the king's court, the judges and other officers in the superior courts of justice, the officers
of the troops, etc. are assessed in the first manner. The inferior ranks of people in the provinces are assessed in the second. In France the great easily submit to a considerable degree of inequality in a tax which, so far as it affects them, is not a very heavy one; but could not brook the arbitrary assessment of an intendant. The inferior ranks of people must, in that country, suffer patiently the usage which their superiors think proper to give them.
In England the different poll-taxes never produced the sum which had been expected from them, or which, it was supposed, they might have produced, had they been exactly levied. In France the capitation always produces the sum expected from it. The mild government of England, when it assessed the different ranks of people to the poll-tax, contented itself with what that assessment happened to produce; and required no compensation for the loss which the state might sustain either by those who could not pay, or by those who would not pay (for there were many such), and who, by the indulgent execution of the law, were not forced to pay. The more severe government of France assesses upon each generality a certain sum, which the intendant must find as he can. If any province complains of being assessed too high, it may, in the assessment of next year, obtain an abatement proportioned to the overcharge of the year before. But it must pay in the mean time. The intendant, in order to be sure of finding the sum assessed upon his generality, was impowered to assess it in a larger sum, that the failure or inability of some of the contributors might be compensated by the over-charge of the rest; and till 1765, the fixation of this surplus assessment was left altogether to his discretion. In that year indeed the council assumed this power to itself. In the capitation of the provinces, it is observed by the perfectly well-informed author of the Memoirs upon the impositions in France, the proportion which falls upon the nobility, and upon those whose privileges exempt them from the taille, is the least considerable. The largest falls upon those subject to the taille, who are assessed to the capitation at so much a pound of what they pay to that other tax.
Capitation taxes, so far as they are levied upon the lower ranks of people, are direct taxes upon the wages of labour and are attended with all the inconveniencies of such taxes.
Capitation taxes are levied at little expence; and, where they are rigorously exacted, afford a very sure revenue to the state. It is upon this account that in countries where the ease, comfort, and security of the inferior ranks of people are little attended to, capitation taxes are very common. It is in general, however, but a small part of the public revenue, which, in a great empire, has ever been drawn from such taxes; and the greatest sum which they have ever afforded, might always have been found in some other way much more convenient to the people. (Emphasis added)
Examples of Capitation And Direct Taxes
As explained by Adam Smith there are a variety of capitation taxes2 and each can be levied according to different criteria: wealth, revenue, rank, occupation or even "upon the wages of labor!' Note that Smith (whose ideas were a major guide to the framers of the Constitution) stated that capitation taxes attempted to "proportion" taxes to either the fortune or the revenue of each contributor!' He made it absolutely clear that taxes related to income were direct taxes which is extremely relevant since the U.S. Supreme Court ruled that an income tax was not a capitation tax on the absurd claim that "Smith's work as to the meaning of such a tax" made no distinction between direct and indirect taxes (see page 105). This claim was patently false since Smith not only made a definitive distinction he also specifically labelled taxes related to income as being capitation or direct taxes!
There is no question that an income tax is clearly a capitation tax whereby the government seeks to tax individuals directly according to their income. It is important to remember, however, that in all capitation taxes (perhaps they should have been called decapitation taxes) it is not wealth, revenue, rank, or occupations that are being taxed but the individual ~ez_mdash~ and he is being taxed according to some arbitrary yardstick the government believes measures his ability to pay. If you think an "income" tax is a tax on "income" then let your "income" calculate and pay the tax! Instead of taxing you according to your income, the government could conceivably tax you according to your weight, say at $1.00 per pound. Someone who weighs one hundred pounds would pay a $100.00 "weight tax" and someone who weighs two hundred pounds would pay $200.00. But would such a tax actually be a tax on "weight"? No, it would be a tax on the individual measured by his weight. For the same reason an "income" tax is not a tax on "income" ~ez_mdash~ it is a tax on the individual measured by his "income."
Taxing People Directly
If a government decides to tax people directly according to their wealth, there remains the problem of how to determine that wealth. Will citizens be compelled to disclose the amount and nature of what they possess to the tax collector so they can be properly taxed? Under
3Note that Smith uses "poll" and "capitation" taxes interchangeably and says that either can relate to rank or fortune.
the Constitution, citizens cannot be compelled to provide information that can be used against them and they are further presumed to have a right to privacy. Yet all information on a tax return can be used against taxpayers ~ez_mdash~ and can even be given to other Federal agencies as well as to state and foreign governments to be used against them. Exactly how much privacy does a citizen have after giving all the information required on a 1040?3 Requiring Americans to file income tax returns violates the First and Ninth Amendments which is why (though few people seem to know this) no such filing requirement is contained in the law.
In England, direct taxes were once levied on chimneys and windows, the theory being that the more windows and chimneys a house had the wealthier the owner and the more taxes he could pay. Again, the tax was not actually on windows or chimneys but was, rather, on the individual who owned the home measured by the number of chimneys and windows he had (which presumably measured his ability to pay). In The Wealth of Nations Adam Smith gives an interesting description of how such taxes worked.
The contrivers of the several taxes which in England have, at different times, been imposed upon houses, seem to have imagined that there was some great difficulty in ascertaining, with tolerable exactness, what was the real rent of every house. They have regulated their taxes, therefore, according to some more obvious circumstance, such as they had probably imagined would, in most cases, bear some proportion to the rent.
The first tax of this kind was hearth-money; or a tax of two shillings upon every hearth. In order to ascertain how many hearths were in the house, it was necessary that the tax-gatherer should enter every room in it. This odious visit rendered the tax odious. Soon after the revolution, therefore, it was abolished as a badge of slavery.
The next tax of this kind was, a tax of two shillings upon every dwelling house inhabited. A house with ten windows to pay four shillings more. A house with twenty windows and upwards to pay eight shillings. This tax was afterwards so far altered, that houses with twenty windows, and with less than thirty, were ordered to pay ten shillings, and those with thirty windows and upwards to pay twenty shillings. The number of windows can, in most cases, be counted from the outside, and, in all cases, without entering every room in the house. The visit of the tax-gatherer, therefore, was less offensive in this tax than in the hearth-money.
This tax was afterwards repealed, and in the room of it was established the window-tax, which has undergone too several alterations and
8 The full details on this can be found in How A nyone Can Stop Paying Income Taxes by Irwin Schiff (FREEDOM BOOKS: 1982).
augmentations. The window-tax, as it stands at present (January, 1775), over and above the duty of three shillings upon every house in England, and of one shilling upon every house in Scotland, lays a duty upon every window, which, in England, augments gradually from two-pence, the lowest rate, upon houses with not more than seven windows; to two shillings, the highest rate, upon houses with twenty-five windows and upwards.
The principal objection to all such taxes is their inequality, an inequality of the worst kind, as they must frequently fall much heavier upon the poor than upon the rich. A house often pounds rent in a country town may sometimes have more windows than a house of five hundred pounds rent in London; and though the inhabitant of the former is likely to be a much poorer man than that of the latter, yet so far as his contribution is regulated by the window-tax, he must contribute more to the support of the state. (Emphasis added)
In Eighteenth Century England, the fact that tax collectors could enter one's home to count the hearths was considered such an "odious visit" that the tax was abolished as "a badge of slavery!' If such a visit was a "badge of slavery," how much more odious is a visit today from the IRS to search a taxpayer's papers, books, and private records ~ez_mdash~ in clear violation of the Fourth Amendment ~ez_mdash~ and to make them prove every expenditure?
In the final analysis, for any government to tax directly, it must first find the individual in order to tax him/her ~ez_mdash~ regardless of what yardstick (wealth, income, rank, occupation, etc.) is used. Governments, however, have discovered another way to tax individuals without having to catch them, or without even knowing they exist which leads us to the other category of taxes provided for in the Constitution.
Since individuals use a variety of products, governments have discovered another, easier way to levy taxes~ez_mdash~by putting taxes on the products they buy. The more a person buys, the more taxes he pays. Such taxes are not paid directly to the government; they are paid indirectly through the merchants who sell the products. Indirect taxes are relatively easy to levy and collect and are placed on products as they are produced within a country or imported. The manufacturer or importer pays such "excises" or "duties" and adds them to the price of the product, thus passing the tax on to the consumer.
An important distinction between indirect taxes and capitation (direct) taxes is that indirect taxes are avoidable. If the individual does not buy the taxed products he avoids paying the taxes imposed. Capitation taxes, on the other hand, are not avoidable since they are levied
directly on the individual. Since direct taxes are not avoidable they are subject to far greater tyrannical abuse than indirect taxes ~ez_mdash~ which is why the Constitution makes them subject to special conditions not applicable to indirect taxes.
The following passage fromThe Wealth of Nations will provide a clear understanding of the meaning of indirect taxes as understood by those who wrote our Constitution.
The impossibility of taxing the people, in proportion to their revenue, by any capitation, seems to have given occasion to the invention of taxes upon consumable commodities. The state not knowing how to tax, directly and proportionably, the revenue of its subjects, endeavours to tax it indirectly by taxing their expence, which, it is supposed, will in most cases be nearly in proportion to their revenue. Their expence is taxed by taxing the consumable commodities upon which it is laid out. (Emphasis added)
Note that Smith makes as clear a distinction as can be made that taxing people "in proportion to their revenue" is clearly a type of capitation tax as opposed to the taxes on "consumable commodities" which obviously fall into the category of indirect (excise) taxes. Here his statement clearly proves that the numerous claims by U.S. judges that "income" taxes are not capitation taxes (falling, rather, within the category of excise taxes) have been a cynical perversion of logic and law.
Government Now Fools The Public
It is crucial that the American public rediscover the distinction between direct and indirect taxes because the Constitution lays down different provisions regarding how each is to be lawfully levied. The Federal government (with the help of a perfidious Federal judiciary) now completely disregards these constitutional distinctions and is, therefore, able to collect taxes in a blatantly illegal manner.
Regarding Direct And
The Constitutional provision regarding how indirect taxes are to be levied is found in Article 1, Section 8, Clause 1, of the Constitution and also defines the Federal government's general taxing powers:
... Congress shall have the power to lay and collect taxes, duties, imposts, and excises, to pay the debts and provide for the common defense and general welfare of the United States; but all duties, imposts and excises shall be uniform throughout the United States. . . (Emphasis added)
Note that in the first portion of this paragraph Congress is given the power to lay: a) taxes, b) duties, c) imposts and d) excises but the word "taxes" is later deliberately omitted from the requirement that all such listed taxes be "uniform throughout the United States!' Only "duties, imposts and excises" were made subject to the requirement that they be uniform throughout the United States. Why? The reason the word "taxes" was specifically omitted from the latter phrase, is because the Constitution already provided (in Article 1, Section 2) for a different method of levying "taxes" which, in colonial times, generally meant direct taxes. So Article 1, Section 8 only sought to establish a constitutional method for levy ing "duties, ""imposts, "and "excises, "all of which are indirect taxes, since other sections of the Constitution provided the legal basis by which direct taxes were to be levied.
So, for excises, imposts and duties to be constitutional, they have to be levied on the basis of uniformity, while direct taxes must be levied according to another standard. Uniformity means that if the government levies a tax of 10$ on a pack of cigarettes, the tax must apply equally to cigarettes manufactured in every state. It would be uncon-
stitutional for the government to levy an excise or duty on a product in one state but exclude certain manufacturers or importers in other states from the same duty or tax. The government, however, can discriminate between products when imposing excises and import duties. It can tax one product and not another, or one type of manufacturer and not another. As long as all similar manufacturers and similar products are equally taxed in all states, the tax is uniform and, therefore, constitutional.
Direct Taxes Are To Be Apportioned
Article 1, Section 2, Clause 3 of the Constitution says:
... Representatives and direct taxes shall be apportioned among the several States which may be included within this Union, according to their respective numbers. . . (Emphasis added)
This requirement of apportionment of direct taxes is repeated in Article 1, Section 9, Clause 4 as follows:
... No capitation, or other direct tax shall be laid unless in proportion to the census or enumeration herein before directed to be taken. (Emphasis added)
The "herein before directed to be taken" refers to the prior reference contained in Article 1, Section 2, Clause 3.
Though not dealing directly with taxation, The Bill of Rights further protected citizens from the arbitrary use of taxing power. For example, the Fourth Amendment guaranteed that the right of the people to be "secure in their persons, houses, papers and effects ... shall not be violated" and that any searches and seizures must be supported by "oath or affirmation" and be court ordered only "upon probable cause!' And the Fifth Amendment guaranteed that: "... no person shall be held to answer" for an infamous1 crime "unless on a presentment or indictment of a Grand Jury ... nor shall he be compelled in any criminal case to be a witness against himself, nor be deprived of life, liberty, or property without due process of law, nor shall private property be taken for public use without just compensation." (Emphasis added in both quotes.) Today these constitutional guarantees are totally ignored by the "courts" and the IRS. Individuals are put to trial for tax "crimes" without indictments and without any probable cause being established; are jailed for refusing to turn over "papers and effects" to the IRS and
1 The Supreme Court has ruled that an "infamous crime" is one punishable by imprisonment. Exparte Wilson 114 US 417, Mackin vs US 117 US 348.
for refusing (in tax matters) to be "witnesses against themselves"; and are routinely deprived of property without "due process of law!'
\bu will note that the Founding Fathers, unlike Smith, drew a distinction between capitation taxes and all other direct taxes. This was because they regarded capitation taxes as direct taxes levied specifically on people (and therefore particularly abhorent because they could be levied arbitrarily), as opposed to other forms of direct taxes levied on property (both real and personal). In either case, people pay the tax directly to the government and, as such, both are (by definition) direct taxes. Therefore, though (in a constitutional sense) a capitation is a direct tax, not all direct taxes are capitations.
The requirement of apportionment of direct taxes is the only provision in the Constitution stated twice. It was written into the Constitution only after extensive debate and probably represents the most important compromise of the entire Constitutional Convention, and their inclusion most likely created more controversy and debate at the state ratifying conventions than any other provision. No less than five states recommended in their ratifying statements that these two provisions should be removed and the Federal government's direct taxing power be eliminated entirely. %t today these two provisions (though their force is still as undiminished and binding as the day they were written) are totally ignored by the U.S. government ~ez_mdash~ as if the limitations imposed upon the government by them did not exist at all!
In contrast to excises, imposts, and duties (indirect taxes), the Constitution requires that all capitation and other direct taxes be "apportioned among the states" (according to population) as opposed to the principle of uniformity. This means that for a Federal direct tax to be lawful it must be levied so that the total tax collected from the residents of each state must be proportional to each state's population (in that the amount collected from each state must bear the same proportion to the total tax as that state's population bears to the nation's total population). If any Federal direct tax is not levied in this manner it is unconstitutional and, therefore, illegal!
How Apportionment Works
The state of Arkansas has a population roughly equivalent to 1% of the nation so its citizens must (constitutionally) pay 1% of any direct tax imposed by the Federal government. If the Federal government imposes a direct tax (based on "income," for example) of $100 billion, the citizens of Arkansas must (collectively) pay $1 billion of that tax.
Californians, on the other hand, constitute 10% of the nation and would, therefore, have to (collectively) pay $10 billion of such a tax. As you see, another important distinction between direct and indirect taxes is that before direct taxes can be lawfully extracted (on a compulsory basis) the total amount to be extracted must be exactly determined beforehand so that the correct apportionment can be made. The amount to be collected by indirect taxes, on the other hand, does not have to be predetermined but can be imposed to generate whatever revenue they can bring in.
Based on the 1970 census, California had forty-three representatives in Congress and Arkansas had four. Californians would, therefore, have to pay ten times as much of any direct Federal tax as do the people of Arkansas. If they did this they would be paying the tax in direct proportion to their representation in Congress (as required by Article 1, Section 2, Clause 3 of the United States Constitution). As I stated previously, if any Federal direct tax is not imposed in this specific manner, it is imposed unconstitutionally and no American need take any notice of it.2 Since the concept of apportionment is so crucial for an understanding of the Federal government's legitimate taxing powers (and since this principle is practically unknown today ~ez_mdash~ let alone understood), we should nail it down even further.
If two states have the same population then citizens of both states have to (collectively) pay the same total amount of any direct Federal tax. If the tax concerned property (the Federal government can tax property, see Chapter 6), and if State A had half the amount of taxable property as did State B, the Federal property tax rate in State A would have to be twice as high as that in State B in order for both states to generate the same total Federal property tax. If the tax concerned "income" ~ez_mdash~ and the citizens of State A have half the taxable income as those of State B ~ez_mdash~ then the Federal income tax rates in State A have to be twice as high as those in State B in order, again, for both states to generate the same total "income" tax revenue. On the basis of population, since both states are represented equally in Congress, both states have to pay the same (equal) amount of any direct tax, making taxation and representation directly proportional ~ez_mdash~ on a state-to-state basis!3
1A fundamental principle of American law is "...anything repugnant to the Constitution is null and void..." This principle was laid down by John Marshall in Marbury vs Madison 1CR 137, and means that all citizens are free to disregard all Federal "laws" promulgated in obvious disregard of the Constitution. Such "laws" are, in reality, not laws at all but are born dead.
8 A state's taxing power, for example, is not limited by any such consideration, though no state can lawfully compel payment of state income taxes for a variety of other reasons!
A Compulsory Income Tax Must Be Related To State Population
Since the income tax is currently levied as a direct tax it must be based on state population. Since it is not, the tax is collected in a totally unconstitutional manner. When direct taxation was linked to state population and representation in Congress, a fundamental principle of the American Revolution ("taxation without representation is tyranny") was preserved and consciously incorporated into the U.S. Constitution. The Federal government, however, illegally destroyed this principle and that linkage (when it realized that the American public did not understand, nor was even aware of it) and, in so doing, completely destroyed the "federal" character of the American Republic. Tying direct taxation to state representation is, essentially, what Federalism is all about. Destroy that linkage and you no longer have a Federal republic.4
America ~ez_mdash~ No Longer A Federal Republic
The Federal establishment succeeded in engineering this fundamental change in the nature of our country with the help of a lawless Federal judiciary5 that is itself a part of that establishment. Federal employees thus increased their own power by illegally converting America from what started out as a democratic, federal republic into what we now have, which is essentially a centralized democracy ~ez_mdash~ a form of government never imagined, conceived, or contemplated by the framers of the Constitution. Such a form of government was, in fact, abhorent to and feared by them (see pages 43,44). For this reason, we should never, logically, refer to the nation's government as the "Federal" government since what we now have is a monolithic central government with almost no remaining constitutional checks and balances.6
4 For a practical example of how this works, see Chapter 6.
6 Someone once defined a judge as a lawyer who knew a governor. I believe this is accurate and helps explain the sorry state of our judicial system.
6 To the extent that I use the term "Federal government" I do so reluctantly and only because of style and clarity. But the term itself has ceased to have any meaning.
The Intent Of The Constitution
To determine whether our understanding of the government's con-situtional taxing powers is indeed correct, we need only refer to the pub-lished statements of those who wrote and ratified that document. One of the most authoritative works, The Federalist Papers, contains a collection of essays written by three of the most knowledgeable and influential men of their day: Alexander Hamilton, James Madison and John Jay. Hamilton served as our first Secretary of Treasury and was one of the most indefatigable workers on behalf of ratification. If not for the efforts and energy expended by Alexander Hamilton, the Constitution may never have been ratified. James Madison is, of course, regarded as the "Father of the Constitution" while John Jay served as the nation's first Chief Justice and presided over a number of sessions of the Constitutional Convention.
This towering triumverate combined to write The Federalist Papers (actually a series of essays that first appeared in New York newspapers between October, 1787 and March, 1788, written to rally public support for the proposed Constitution in a state where considerable opposition existed). New York was a crucial and influential state and if it had failed to ratify the Constitution we can only speculate as to the consequences.
The Federalist Papers (because of the depth and lucidity of their explanations and the influence of their authors) provide the best source for revealing the clear intent of those who wrote and ratified the Constitution.1In Federalist Paper #21 Hamilton writes:
There is no method of steering clear of this inconvenience, but by authorizing the national government to raise its own revenues in its own way. Imposts, excises, and, in general, all duties upon articles of consumption,
1 "The opinion of the Federalist has always been considered as of great authority. It is a complete commentary on our Constitution; and is appealed to by all parties in the questions to which that instrument has given birth!' Cohens vs Virginia 6 Wheat 2 (1821).
may be compared to a fluid, which will in time find its level with the means of paying them. The amount to be contributed by each citizen will in a degree be at his own option, and can be regulated by an attention to his resources. The rich may be extravagant, the poor can be frugal; and private oppression may always be avoided by a judicious selection of objects proper for such impositions. If inequalities should arise in some States from duties on particular objects, these will in all probability be counterbalanced by proportional inequalities in other States, from the duties on other objects. In the course of time and things, an equilibrium, as far as it is attainable in so complicated a subject, will be established everywhere. Or, if inequalities should still exist, they would neither be so great in their degree, so uniform in their operation, nor so odious in their appearance, as those which would necessarily spring from quotas upon any scale that can possibly be devised.
It is a signal advantage of taxes on articles of consumption that they contain in their own nature a security against excess. They prescribe their own limit, which cannot be exceeded without defeating the end proposed ~ez_mdash~ that is, an extension of the revenue. When applied to this object, the saying is as just as it is witty that, "in political arithmetic, two and two do not always make four!' If duties are too high, they lessen the consumption; the collection is eluded; and the product to the treasury is not so great as when they are confined within proper and moderate bounds. This forms a complete barrier against any material oppression of the citizens by taxes of this class, and is itself a natural limitation of the power of imposing them.
Impositions of this kind usually fall under the denomination of indirect taxes, and must for a long time constitute the chief part of the revenue raised in this country. Those of the direct kind, which principally relate to land and buildings,2may admit of a rule of apportionment. Either the value of land, or the number of the people, may serve as a standard. The state of agriculture and the populousness of a country are considered as having a near relation with each other. And, as a rule, for the purpose intended, numbers, in the view of simplicity and certainty, are entitled to a prefer-
1Here Hamilton clearly reveals that our Founding Fathers related capitation (direct) taxes "principally...to land and buildings (i.e. one's accumulated wealth). Our Founding Fathers did not even conceive of an income tax but obviously thought that any taxes other than those on consumption would be related to wealth, principally real estate. Presumably a tax on "income" is a tax on wealth though, in reality, it is not. An individual with considerable wealth could conceivably liquidate a portion of it in exchange for food, clothing and shelter. Another individual, however, with a lot less wealth might be forced to work in order to supply himself with the funds necessary to buy food, clothing and shelter. Thus, the second citizen might find himself paying more in "income" taxes than he would if a tax were directly related to wealth. This passage by Hamilton proves that our Founding Fathers believed that indirect taxes only applied to articles of consumption, while direct taxes were related to wealth. They never thought they were giving the Federal government authority to tax a citizen's "income", nor his estate at death, nor his right to transfer property during his lifetime since none of these taxes (i.e. income, estate and gift) relate to consumption nor are they imposed equally on all property.
ence. In every country it is an herculean task to obtain a valuation of the land; in a country imperfectly settled and progressive in improvement, the difficulties are increased almost to impracticability. The expense of an accurate valuation is, in all situations, a formidable objection. In a branch of taxation where no limits to the discretion of the government are to be found in the nature of the thing, the establishment of a fixed rule, not incompatible with the end, may be attended with fewer inconveniences than to leave that discretion altogether at large. (Emphasis added)
It is clear from this passage that our Founding Fathers were far more knowledgeable about the nature of taxes than contemporary Americans who make no distinctions whatsoever concerning them. They understood, for example, that direct taxes were not avoidable, that they did not "prescribe their own limit," but were a "branch of taxation where no limits to the discretion of the government are to be found in the nature of the thing." This principle ~ez_mdash~ which was obviously well understood by the statesmen responsible for our Constitution (which is why they included careful restrictions over the Federal government's power to levy direct taxes) ~ez_mdash~ is totally foreign to the mentality of those who now dominate most of America's legislative bodies. America's current state of affairs tragically confirms the taxing principles so well understood, explained, and warned of by Hamilton in this passage.
Government Must Look To Indirect Taxation
In. Federalist Paper #12, Hamilton uses Britain to explain why the new government must look to indirect taxes for the largest part of its revenue and why direct taxes would "yield but scanty supplies". It is also important to note that while in the former quote Hamilton suggests that direct taxes "principally relate to land and buildings", in the following passage he definitely acknowledges that direct taxes also apply to personal property. When he states "...and personal property is too precarious and invisible a fund to be laid hold of in any other way than by the imperceptible agency of taxes on consumption...," he means that the only way the state could conceivably tax the money hidden away in a citizen's strong box (compatible with constitutional rights) is for the state to tax the consumable products that might be purchased with that money.
It is evident from the state of the country, from the habits of the people, from the experience we have had on the point itself that it is impracticable to raise any very considerable sums by direct taxation. Tax laws have in vain been multiplied; new methods to enforce the collection have in vain been tried; the public expectation has been uniformly disappointed, and the treasuries of the States have remained empty. The pop-
ular system of administration inherent in the nature of popular government, coinciding with the real scarcity of money incident to a languid and mutilated state of trade, has hitherto defeated every experiment for extensive collections, and has at length taught the different legislatures the folly of attempting them.
No person acquainted with what happens in other countries will be surprised at this circumstance. In so opulent a nation as that of Britain, where direct taxes from superior wealth must be much more tolerable, and from the vigor of the government, much more practicable than in America, far the greatest part of the national revenue is derived from taxes of the indirect kind, from imposts and from excises. Duties on imported articles form a large branch of this latter description.
In America it is evident that we must a long time depend for the means of revenue chiefly on such duties. In most parts of it excises must be confined within a narrow compass. The genius of the people will ill brook the inquisitive and peremptory spirit of excise laws. The pockets of the farmers, on the other hand, will reluctantly yield but scanty supplies in the unwelcome shape of impositions on their houses and lands; and personal property is too precarious and invisible a fund to be laid hold of in any other way than by the imperceptible agency of taxes on consumption. (Emphasis added)
Many Against Giving Federal Goverment Any Direct Taxing Power
Federalist Paper #30 further demonstrates how hard Hamilton had to work to persuade his contemporaries to give direct taxing powers to the new government. Many of his contemporaries argued that the new government should have powers to levy direct taxes only after requisitions had failed.
The more intelligent adversaries of the new Constitution admit the force of this reasoning; but they qualify their admission by a distinction between what they call internal and external taxation. The former they would reserve to the State governments; the latter, which they explain into commercial imposts, or rather duties on imported artkles, they declare themselves willing to concede to the federal head. This distinction, however, would violate that fundamental maxim of good sense and sound policy, which dictates that every POWER ought to be proportionate to its OBJECT; and would still leave the general government in a kind of tutelage to the State governments, inconsistent with every idea of vigor or efficiency. Who can pretend that commercial imposts are, or would be, alone equal to the present and future-exigencies of the Union?
Let us attend to what would be the effects of this situation in the very first war in which we should happen to be engaged. We will presume, for argument's sake, that the revenue arising from the impost duties answers the purposes of a provision for the public debt and of a peace establishment for the Union. Thus circumstanced, a war breaks out. What would be the
probable conduct of the government in such an emergency? Taught by experience that proper dependence could not be placed on the success of requisitions, unable by its own authority to lay hold of fresh resources, and urged by considerations of national danger, would it not be driven to the expedient of diverting the funds already appropriated from their proper objects to the defense of the State? It is not easy to see how a step of this kind could be avoided; and if it should be taken, it is evident that it would prove the destruction of public credit at the very moment that it was becoming essential to the public safety. To imagine that at such a crisis credit might be dispensed with would be the extreme of infatuation. In the modern system of war, nations the most wealthy are obliged to have recourse to large loans. A country so little opulent as ours must feel this necessity in a much stronger degree. But who would lend to a government that prefaced its overtures for borrowing by an act which demonstrated that no reliance could be placed on the steadiness of its measures for pay' ing? The loans it might be able to procure would be as limited in their extent as burdensome in their conditions. They would be made upon the same principles that usurers commonly lend to bankrupt and fraudulent debtors ~ez_mdash~ with a sparing hand and at enormous premiums. (Emphasis added)
This would have been a logical enlargement of the taxing powers written into the Articles of Confederation. The Articles provided for the Federal government to make "requisitions" of funds from the various states, but the Federal government (under the Articles) had no recourse if the states failed to meet their requisitions.3
Apportionment Necessary To Keep States Honest
In Federalist Paper #54, Madison touches on another reason for relating direct taxation to representation. States would be less likely to inflate their population figures (to gain added political representation) since this would also increase their tax burdens if a direct tax were imposed.
1A requisition was a specific levy made by the Federal government on the states themselves with each state expected to use its own taxing power to collect the money from its own citizens and was provided for in the Articles of Confederation. The Articles, however, did not give the Federal government any independent taxing powers to collect the tax directly from individual citizens if any state ignored the "requisition". So, giving the new government direct taxing powers to be used if requisitions failed would still be a substantial grant of new taxing power over that contained in the Articles. But, is it logical (considering all the opposition to the proposed new Constitution) that those favoring it would have proposed going from a situation where the Federal government had no independent taxing powers whatsoever to one where it would have the seemingly unlimited power it exercises today?
In one respect, the establishment of a common measure for representation and taxation will have a very salutary effect. As the accuracy of the census to be obtained by the Congress will necessarily depend, in a considerable degree, on the disposition, if not on the co-operation of the States, it is of great importance that the States should feel as little bias as possible to swell or to reduce the amount of their numbers. Were their share of representation alone to be governed by this rule, they would have an interest in exaggerating their inhabitants. Were the rule to decide their share of taxation alone, a contrary temptation would prevail. By extending the rule to both objects, the States will have opposite interests which will control and balance each other and produce the requisite impartiality. (Emphasis added)
Therefore, another important purpose for the apportionment of direct taxes was to keep the states honest in reporting their population for the purpose of Congressional representation and to prevent poorer states from using their votes in Congress to simply drain wealth away from richer states. This they could accomplish by passing taxing bills that would allow their constituents to escape their proportional burden of the tax!4 This, of course, is exactly what has been happening ~ez_mdash~ poorer western and southern states used their disproportionate Congressional power to drain wealth away from richer northern states. Our Founding Fathers put the apportionment provisions into the Constitution to insure that this would not happen ~ez_mdash~ that taxation and representation would go hand-in-hand (regardless of wealth) and that Federal taxation could never be used to redistribute the nation's wealth. But this is precisely how income, estate, and gift taxes are being used today. As a result, the entire country ~ez_mdash~ North and South, rich and poor ~ez_mdash~ is suffering the economic consequences of such an unconstitutional practice.5
4 To see how this was ultimately accomplished, see the words of Representative Hill on page 176.
6 For additional historical references and supporting documentation regarding the constitutional meaning of direct and indirect taxes, see Appendix C.
The Federal Government's General Taxing Powers
Up to now we have examined the Federal government's specific constitutional taxing powers. Let us now examine its overall, legitimate taxing powers.
The people turned over general taxing power to the new government so it could achieve certain specific national objectives spelled out in Article 1, Section 8, Clause 1 of the Constitution (see Chapter 2) which limits the U.S. government's use of taxes to three specific areas. The U.S. government can levy taxes:
1. to pay the debts of the United States;
2. to provide for the common defense of the United States; and
3. to provide for the general welfare of the United States.
Note that the first limitation on the government's taxing powers is that it can only tax Americans to pay "the debts of the United States!' It obviously has no constitutional authority to tax Americans to pay anyone else's debts such as those of U.S. corporations (i.e. Chrysler), or of individuals (i.e. FHA mortgage or college loan guarantees), or the debts of individual states, and certainly not those of foreign countries (i.e. the interest on Polish Bonds owed to U.S. banks which was paid by the U.S. government). Government can only lawfully tax Americans to pay the debts of the United States.
The U.S. Constitution simply does not authorize the U.S. government to tax Americans for anything and everything that vote-seeking politicians and free-spending Washington lobbyists want them to pay for. The debts of private citizens and corporations as well as the debts of individual states and foreign governments are not the debts of the United States, and the U.S. Constitution does not give the U.S. government any authority to tax working Americans to pay for such things. All such payments are illegal and a blatant abuse by the U.S. government of its taxing powers.
U.S. Government Not Authorized to Lend Money
This constitutional restriction (allowing the U.S. government to tax Americans only to pay the debts of the United States) is further complemented by another constitutional provision contained in Article 1, Section 8, Clause 2 of the Constitution which states "Congress shall have the power... to borrow money on the credit of The United States." Notice that the Constitution specifically authorizes the Federal government to borrow money, but nowhere does it allow the Federal government to lend money, or to guarantee private or corporate loans or the debts of individual states.
The Constitution also does not allow the U.S. government to tax working Americans for funds to give to a World Bank or an Export-Import Bank to use to finance private, commercial transactions and the grandiose schemes of foreign governments. The U.S. Constitution provides no such grant of power (either express or implied) so all Federal taxes levied for such "banking" purposes obviously represent a clear-cut usurpation of power by the Federal government and are totally illegal and Americans need not submit to it according to Marbury vs. Madison I Cr. 137.
Taxes For The Defense "Of The United States"
The Constitution next grants the Federal government the power to tax Americans "to provide for the common defense of the United States!' Those, therefore, who refuse to pay income taxes because they object to this or that war or because they believe that too much of the nation's budget goes for armaments are on untenable ground. The Federal government has the constitutional authority to tax for these purposes. One might object to such expenditures as wasteful or even stupid and ill- advised but, at least, they are constitutional! Whether such expenditures are proper is a political question that should be resolved at the ballot box. Americans, however, have no lawful basis for not paying income taxes because they do not like political decisions. It is one thing not to pay income taxes because the law itself does not require it or because the levy is unconstitutional. It is another thing not to pay income taxes because one simply disapproves of the nature or amount of constitutional expenditures.
Americans Not Required to Pay Taxes for Unconstitutional Purposes
It makes greater legal sense for such individuals to stop paying U.S. income taxes because such taxes are raised unconstitutionally for unconstitutional purposes since Americans are legally free to refuse to
pay taxes for purposes not authorized by the Constitution. Ironically, those Americans who have refused to pay U.S. taxes because of antipathy to military spending have generally been enthusiastic supporters of government subsidies to private individuals (euphemistically called "social programs") ~ez_mdash~ thereby supporting illegal government expenditures and objecting to legal ones.
What is the "Defense of the United States"?
There are circumstances when what constitutes "the defense of the United States" can be open to question or interpretation. Can the U.S., for example, tax Americans for the defense of some foreign country? The answer to that is obviously no. However, if the defense of that foreign country is related to the defense of America or for the protection of America's vital interests, then the answer is yes. What should be noted, though, is that in this instance it is not the law that is being "interpreted" but the facts as they apply to the law. The facts can be open to "interpretation" but the law itself must be clear or it is not even law! Every freshman law student knows of the legal principle "void for vagueness" which means that if a law is vague (i.e. open to varied interpretation) "it must be void." If laws (including the Constitution) had to be "interpreted" then those laws (and the Constitution) would be "void for vagueness." The legal profession is continually misleading the public about the court's alleged authority to "interpret" the law. 1Any such "authority" is nonsense.
The General Welfare
It is, however, a total perversion of this last provision that has enabled the U.S. government to escape every restraint placed upon it by the Constitution. The government ~ez_mdash~ and supporters of more government ~ez_mdash~ have completely misled the public concerning the meaning of the "general welfare" clause of the Constitution. This has enabled the government to invade all areas it wishes to, regardless of what the Constitution has to say about it.
This provision should make clear, however, that the "welfare" intended is the "general welfare" of the nation as a whole and not the "welfare" of specific individuals, specific companies, or specific segments of society no matter how deserving those individuals, companies or segments of society might be.
1 For a fuller discussion of such "interpretation, "see How Anyone Can Stop Paying Income Taxes, pages 148-151.
If the United States, for example, builds a foreign embassy, such an expenditure is obviously for the benefit of all Americans. If the government launches a weather satellite, presumably it is for the benefit of all Americans (though some might benefit more than others from the increased accuracy of weather forecasting). Such expenditures would be constitutionally lawful since they are made for the "general welfare" of all the people.
When the U.S. government (through taxation) takes money away from some and hands it over to others (disguised as "subsidies," "grants," "rent supplements," etc.), such activities are not to "promote the general welfare of the United States" but rather for the specific welfare of some at the expense of others. Of course, such expenditures do promote the welfare of many politicians (and the U.S. bureaucracy) who gain public office by promising to provide benefits (literally stealing the property of some in order to buy votes from others) under the guise of promoting the "general welfare!' Not only are such payments not authorized by the Constitution, they also obviously violate the equal protection clause of that document.
If it is sophistically argued that such "grants," "subsidies," "supplements, " etc. are indeed for the "general welfare of the United States" (when such is obviously not the case) it is because it is possible to argue or attempt to justify just about anything! Spanish inquisitors argued that burning people at the stake saved their souls and was thus in their best interest. All attempts to rationalize farm subsidies and other "entitlement" payments as being for the "general welfare of the United States" fall into this category.
When farm subsidies (paying grown men not to produce) were first introduced it was argued that without such subsidies small farmers would go under, leaving fewer farmers who would then be free to raise farm prices. The hypocrisy of the farm subsidy argument was revealed when Congress refused to end tobacco subsidies. Congressmen in favor of this subsidy argued that eliminating it would force tobacco farmers to grow more tobacco (to make up for the lost subsidy) causing tobacco and cigarette prices to fall which, in turn, would encourage more smokers (cigarettes now being cheaper) and thus cause even more cancer in the long run! Therefore, those lobbying for the continuation of tobacco subsidies argued exactly opposite to those who had proposed agricultural subsidies in the first place ~ez_mdash~ and Congress bought their argument, too!
So we have the spectacle of the U.S. government spending millions on tobacco subsidies and millions trying to persuade Americans not to use the product they are taxed to subsidize. Presumably, subsidizing the spread of cancer is in "the general welfare of the United States!"
To further demonstrate the utter hypocrisy and illegality of such government payments and subsidies, the Supreme Court recently ruled that the Federal government could actually confiscate the home of a Dallas woman to satisfy alleged taxes owed by her late husband though her home was presumably protected by Texas homesteading laws. I get routine calls from individuals telling me that the IRS is trying to seize their homes in payment of back taxes. On the other hand, the Federal government purchased homes for the residents of Love Canal and provides rent subsidies to millions more. So here we have the U.S. government taking homes away from some in order to provide homes and rent supplements for others~ez_mdash~all in the guise of doing it for the "general welfare!' Such government activity not only violates the taxing power and equal protection clauses of the Constitution, it also violates all logic, decency, and common sense.
The government has literally forced businesses to close because of IRS liens for back taxes. It also routinely lends money to other businesses (either to expand or to provide start-up capital). Can it be lawful or logical for the government to be able to tax some businesses out of existence in order to get the funds to launch or expand the businesses of others?
A Land of Serfs
When the Constitution was written, serfdom still existed in parts of Europe. It existed in Russia until 1861 and continued within the Hapsburg monarchy as late as 1781. Serfdom was a state of half-freedom with serfs owing the "lord and master" approximately 25 percent of their productivity. Taxation also existed in Europe, but tax paying Europeans were hardly serfs and it was certainly not the intent of America's Founding Fathers to establish serfdom in America under the tutelage of the Federal government. What was the nature of taxation in Europe when Americans gave the government the power to levy direct taxes? Insight into this subject can be found in Smith's The Wealth of Nations:
In all countries a severe inquisition into the circumstances of private persons has been carefully avoided.2
At Hamburgh every inhabitant is obliged to pay to the state, one-fourth per cent, of all that he possesses; and as the wealth of the people of Hamburgh consists principally in stock, this tax may be considered as a tax upon stock. Every man assesses himself5and, in the presence of the magistrate, puts annually into the public coffer a certain sum of money,
2 Not so in America!
3 See How Anyone Can Stop Paying Income Taxes, pages 13,14 and 107.
which he declares upon oath to be one-fourth per cent, of all that he possesses, but without declaring what it amounts to, or being liable to any examination upon that subject. This tax is generally supposed to be paid with great fidelity. In a small republic, where the people have entire confidence in their magistrates, are convinced of the necessity of the tax for the support of the states, and believe that it will be faithfully applied to that purpose, such conscientious and voluntary payment1' may sometimes be expected. It is not peculiar to the people of Hamburgh. (Emphasis added)
Incredibly, this is how America's current income tax system is also supposed to operate ~ez_mdash~ on the basis of "voluntary payment" and "self-assessment." But most Americans do not know this. The current Internal Revenue Code only allows American citizens to assess themselves and gives the IRS no authority to do so if citizens refuse (see pages 256, 257). Of course the IRS (with the protection of U.S. courts) violates both the law and the principle of self-assessment and collects taxes on the basis of fraudulent and illegal assessments which the government has no authority to make. The IRS then proceeds to enforce payment by deceit, intimidation and extortion ~ez_mdash~ all under the protection of the U.S. Department of Justice and both Federal and States courts!
Note that the good citizens of Hamburgh "volunteered" (under oath) as to what they owed. Note further that they were "not liable to any examination upon that subject." Their sworn statements were considered good enough! Not so for 20th century Americans. Like so many robots, Americans line up and swear under penalty of perjury what they believe (incorrectly) they owe and then submit to exhaustive tax audits, thereby surrendering both 4th and 5th Amendment rights, which expose them to possible prosecution and conviction for tax evasion if their sworn statements are shown to be incorrect! If the U.S. government (as even 19th century Hamburghers must have known) is not going to accept a sworn statement as correct, why bother giving one in the first place?
It is obvious that 20th century Americans (despite all their apparent schooling) do not possess the understanding shown by 19th century Hamburghers. The tax paid by those good citizens of Hamburgh constituted only one quarter of one percent of their assets. Thus a citizen worth $100,000 need only have paid $250. Such citizens could afford to be honest!
4 See Chapter 1 ("Surprise! The Income Tax Is \bluntary!) of How Anyone Can StopPay-ing Income Taxes and pages 242-244 of this book.
How High Should Direct Taxes Be?
The Wealth of Nations, which deeply influenced Amerka's Founding Fathers, comments thusly:
In Holland, soon after the exaltation of the late prince of Orange to the stadtholdership, a tax of two per cent, or the fiftieth penny, as it was called, was imposed upon the whole substance of every citizen. Every citizen assessed himself and paid his tax in the same manner as at Hamburgh; and it was in general supposed to have been paid with great fidelity. The people had at that time the greatest affection for their new government, which they had just established by a general insurrection. The tax was to be paid but once; in order to relieve the state in a particular exigency. It was, indeed, too heavy to be permanent. In a country where the market rate of interest seldom exceeds three per cent, a tax of two per cent, amounts to thirteen shillings and fourpence in the pound upon the highest neat revenue which is commonly drawn from stock. It is a tax which very few people could pay without encroaching more or less upon their capitals. In a particular exigency the people may, from great public zeal, make a great effort, and give up even apart of their capital, in order to relieve the state. But it is impossible that they should continue to do so for any considerable time; and if they did, the tax would soon ruin them so completely as to render them altogether incapable of supporting the state. (Emphasis added)
A tax of 2 percent on capital was believed by Smith to be "too heavy to be permanent." Moreover, a tax of $2,000 paid by an individual worth $100,000 was believed to be so heavy a tax burden that it could not continue "for any considerable time" and would "ruin taxpayers so completely as to render them altogether incapable of supporting the state? This, of course, is exactly what is happening to America today. Smith believed a tax of $2,000 paid by a person with $100,000 was too severe to be permanent, yet many Americans today pay $5,000 in income taxes when they do not have $15,000 to their name. That's more than one-third of their worth! Some people actually have to borrow money in order to pay income taxes.
When the framers of the Constitution thought of direct taxes (as opposed to "duties," "imposts," and "excises") they were obviously thinking of a direct tax that might take from one quarter to perhaps two percent of an individual's capital. They certainly did not envision a type of direct tax that would take away more from Americans than what was taken from serfs by their lord and master ~ez_mdash~ or more than the total wealth they possessed!
U.S. Government Now Presumes to Own All Private Wealth
From time to time the U.S. government releases studies purporting to show how much revenue it loses because of certain tax exemptions and deductions. These studies invariably show how much the government (theoretically) "loses" because of interest, medical or charitable deductions, personal exemptions, etc. All such studies reflect the thinking that any money the government does not take in taxes it has theoretically lostl In essence, this philosophy reflects the thinking that any money taxpayers get to keep for themselves has somehow been given to them by a charitable government. Such reasoning could justify requiring citizens to send in all their money to the government ~ez_mdash~ with the government returning whatever it thinks the citizen deserves.
Sadly, our nation has arrived at a situation where (despite Constitutional safeguards to the contrary) working Americans are held in a form of feudal bondage by the U.S. government for the benefit of an illegal, parasitic, Washington-based, bureaucratic complex.5
slndeed, the Federal government has literally established a "slave state," see page 389.
What The U.S. Government
And America Are All
The U.S. government was created by people who did not, for a moment, believe they were creating a "new" government capable of destroying the sovereignty of the states and/or capable of intruding into practically every facet of a citizen's private life as the U.S. government now does. Such an undertaking was the farthest thing from their minds. Indeed, had they thought this possibility existed, the Constitution never would have been adopted at all. They believed they were creating a new government primarily to attend to the external affairs and needs of the thirteen states (and those destined to follow) and for a few important, but limited, internal matters. The problem facing them was how to give the new government enough power to accomplish these goals without making it so powerful that it could intrude and interfere with each state's sovereignty and the private lives of individuals. This presented a difficult problem and the document that emerged to solve it was the Constitution.
In preparing the Constitution our Founding Fathers studied the various forms of government that had, from time to time, flourished on this planet: the Cantons of Switzerland, the German Confederation, the Italian city-state, the Roman republic, and the Ionian League to name only a few. They sought to protect the American public from the problems, mistakes, and dangers they perceived in these and other forms of government. They also understood the power of demogogues and the danger of mob rule with which they associated "democracy" and they sought to protect America from this as well. Incidentally, Americans are now taught to believe that America is a "democracy!' Such a belief, however, is false. America was created as a democratic republic, and tragically most Americans do not have the slightest idea of what that term means or how it differs from a "democracy!' The following excerpts from Federalist Paper #10, written by James Madison, reveal why the Found-
ing Fathers never intended to create a democracy. They also reveal the level of insight, understanding, and sense of justice that existed among those who established our great Republic and the wide gulf that separates them from the charlatans who now run it. Such insights and concerns as expressed by Madison are totally foreign to the thinking of America's present-day legislators, while most of the barriers carefully thought out and erected by our Founding Fathers to protect the public and minority factions from the evils referred to by Madison, have long since been removed.
AMONG the numerous advantages promised by a well-constructed Union, none deserves to be more accurately developed than its tendency to break and control the violence of faction. The friend of popular governments never finds himself so much alarmed for their character and fate as when he contemplates their propensity to this dangerous vice. He will not fail, therefore, to set a due value on any plan which, without violating the principles to which he is attached, provides a proper cure for it. The instability, injustice, and confusion introduced into the public councils have, in truth, been the mortal diseases under which popular governments have everywhere perished, as they continue to be the favorite and fruitful topics from which the adversaries to liberty derive their most specious declamations. The valuable improvements made by the American constitutions on the popular models, both ancient and modern, cannot certainly be too much admired; but it would be an unwarrantable partiality to contend that they have as effectually obviated the danger on this side, as was wished and expected. Complaints are everywhere heard from our most considerate and virtuous citizens, equally the friends of public and private faith and of public and personal liberty, that our governments are too unstable, that the public good is disregarded in the conflicts of rival parties, and that measures are too often decided, not according to the rules of justice and the rights of the minor party, but by the superior force of an interested and overbearing majority. However anxiously we may wish that these complaints had no foundation, the evidence of known facts will not permit us to deny that they are in some degree true. It will be found, indeed, on a candid review of our situation, that some of the distresses under which we labor have been erroneously charged on the operation of our governments; but it will be found, at the same time, that other, causes will not alone account for many of our heaviest misfortunes; and, particularly, for that prevailing and increasing distrust of public engagements and alarm for private rights which are echoed from one end of the continent to the other...
The latent causes of faction are thus sown in the nature of man; and we see them everywhere brought into different degrees of activity, according to the different circumstances of civil society. A zeal for different opinions concerning religion, concerning government, and many other points, as well of speculation as of practice; an attachment to different leaders am-
bitiously contending for pre-eminence and power; or to persons of other descriptions whose fortunes have been interesting to the human passions, have, in turn, divided man kind into parties, inflamed them with mutual animosity, and rendered them much more disposed to vex and oppress each other than to co-operate for their common good. So strong is this propensity of mankind to fall into mutual animosities that where no substantial occasion presents itself the most frivolous and fanciful distinctions have been sufficient to kindle their unfriendly passions and excite their moat violent conflicts. But the most common and durable source of factions has been the verious and unequal distribution of property. Those who hold and those who are without property have ever formed distinct interests to society. Those who are creditors, and those who are debtors, fall under a like discrimination. A landed interest, a manufacturing interest, a mercantile interest, a moneyed interest, with many lesser interests, grow up of necessity in civilized nations, and divide them into different classes, actuated by different sentiments and views. The regulation of these various and interfering interests forms the principal task of modern legislation and involves the spirit of party and faction in the necessary and ordinary operations of government.
No man is allowed to be a judge in his own cause, because his interest would certainly bias his judgment, and not improbably, corrupt his integrity. With equal, nay with greater reason, a body of men are unfit to be both judges and parties at the same time; yet what are many of the most important acts of legislation but so many judicial determinations, not indeed concerning the rights of single persons, but concerning the rights of large bodies of citizens? And what are the different classes of legislators but advocates and parties to the causes which they determine? Is a law proposed concerning private debts? It is a question to which the creditors are parties on one side and the debtors on the other. Justice ought to hold the balance between them. Yet the parties are, and must be, themselves the judges; and the most numerous party, or in other words, the most powerful faction must be expected to prevail. Shall domestic manufacturers be encouraged, and in what degree, by restrictions on foreign manufacturers? are questions which would be differently decided by the landed and the manufacturing classes, and probably by neither with a sole regard to justice and the public good. The apportionment of taxes on the various descriptions of property is an act which seems to require the most exact impartiality; yet there is, perhaps, no legislative act in which greater opportunity and temptation are given to a predominant party to trample on the rules of justice. Every shilling with which they overburden the inferior number is a shilling saved to their own pockets.
It is in vain to say that enlightened statesmen will be able to adjust these clashing interests and render them all subservient to the public good. Enlightened statesmen will not always be at the helm. Nor, in many cases, can such an adjustment be made at all without taking into view indirect and remote considerations, which will rarely prevail over the immediate interest which one party may find in disregarding the rights of another or the good of the whole.
The inference to which we are brought is that the causes of faction cannot be removed and that relief is only to be sought in the means of controlling it effects.
If a faction consists of less than a majority, relief is supplied by the republican principle, which enables the majority to defeat its sinister views by regular vote. It may clog the administration, it may convulse the society; but it will be unable to execute and mask its violence under the forms of the Constitution. When a majority is included in a faction, the form of popular government, on the other hand, enables it to sacrifice to its ruling passion or interest both the public good and the rights of other citizens. To secure the public good and private rights against the danger of such a faction, and at the same time to preserve the spirit and the form of popular government, is then the great object to which our inquiries are directed. Let me add that it is the great desideratum by which alone this form of government can be rescued from the opprobrium under which it has so long labored and be recommended to the esteem and adoption of mankind.
By what means is this object attainable? Evidently by one of two only. Either the existence of the same passion or interest in a majority at the same time must be prevented, or the majority, having such coexistent passion or interest, must be rendered, by their number and local situation, unable to concert and carry into effect schemes of oppression. If the impulse and the opportunity be suffered to coincide, we well know that neither moral nor religious motives can be relied on as an adequate control...
... From this view of the subject it may be concluded that a pure democracy, by which I mean a society consisting of a small number of citizens, who assemble and administer the government in person, can admit of no cure for the mischiefs of faction. A common passion or interest will, in almost every case, be felt by a majority of the whole; a communication and concert results from the form of government itself; and there is nothing to check the inducements to sacrifice the weaker party or an obnoxious individual. Hence it is that such democracies have ever been spectacles of turbulence and contention; have ever been found incompatible with personal security or the rights of property; and have in general been as short in their lives as they have been violent in their deaths. Theoretic politicians, who have patronized this species of government, have erroneously supposed that by reducing mankind to a perfect equality in their political rights, they would at the same time be perfectly equalized and assimilated in their possessions, their opinions, and their passions.
A republic, by which I mean a government in which the scheme of representation takes place, opens a different prospect and promises the cure for which we are seeking. Let us examine the points in which it varies from pure democracy, and we shall comprehend both the nature of the cure and the efficacy which it must derive from the union.
The two great points of difference between a democracy and a republic are: first, the delegation of the government, in the latter, to a small num-
ber of citizens elected by the rest; secondly, the greater number of citizens and greater sphere of country over which the latter may be extended.
The effect of the first difference is, on the one hand, to refine and enlarge the public views bypassing them through the medium of a chosen body of citizens, whose wisdom may best discern the true interest of their country and whose patriotism and love of justice will be least likely to sacrifice it to temporary or partial considerations. Under such a regulation it may well happen that the public voice, pronounced by the representatives of the people, will be more consonant to the pubic good than if pronounced by the people themselves, convened for the purpose.. -1
... It must be confessed that in this, as in most other cases, there is a mean, on both sides of which incoveniencies will be found to lie. By enlarging too much the number of electors, you render the representative too little acquainted with all their local circumstances and lesser interests; as by reducing it too much, you render him unduly attached to these, and too little fit to comprehend and pursue great and national objects. The federal Constitution forms a happy combination in this respect; the great and aggregate interests being referred to the national, the local and particular to the State legislatures.
The other point of difference is the greater number of citizens and extent of territory which may be brought within the compass of republican than of democratic government; and it is this circumstance principally which renders factious combinations less to be dreaded in the former than in the latter...
... Hence,itclearlyappearsthatthesameadvantegBw/u'c/iarepub-lic has over a democracy in controlling the effects of faction is enjoyed by a large over a small republic ~ez_mdash~ is enjoyed by the Union over the States composing it. Does this advantage consist in the substitution of representatives whose enlightened views and virtuous sentiments render them superior to local prejudices and to schemes of injustice? It will not be denied that the representation of the Union will be most likely to possess these requisite endowments. Does it consist in the greater security afforded by a greater variety of parties, against the event of any one party being able to outnumber and oppress the rest? In an equal degree does the increased variety of parties comprised within the Union increase this security. Does it, in fine, consist in the greater obstacles opposed to the concert and accomplishment of the secret wishes of an unjust and interested majority? Here again the extent of the Union gives it the most palpable advantage.
1 Thus Congressional representatives are not supposed to vote in the way even a majority of their constituents want them to. They are supposed to be smarter and more knowledgeable than those they represent. Yet some Congressmen make a big thing out of polling their constituents (seeking their views) prior to voting on an issue.
The influence of factious leaders may kindle a flame within their particular States but will be unable to spread a general conflagration through the other States. A religious sect may degenerate into a political faction in a part of the Confederacy; but the variety of sects dispersed over the entire face of it must secure the national councils against any danger from that source. A rage for paper money, for an abolition of debts, for an equal division of property, or for any other improper or wicked project will be less apt to pervade the whole body of the Union than a particular member of it, in the same proportion as such a malady is more likely to taint a particular county or district than an entire State.2
In the extent and proper structure of the Union, therefore, we behold a republican remedy for the diseases most incident to republican government. And according to the degree of pleasure and pride we feel in being republicans ought to be our zeal in cherishing the spirit and supporting the character of federalists. (Emphasis added)
In the final analysis, our Founding Fathers viewed government as a protection from bullies and other forms of social and political predators (both foreign and domestic) that would interfere with their liberty and pursuit of happiness as they viewed it. It should also be noted that the American Revolution was the only revolution where the revolutionists did not seek any property or favors for themselves but only sought their own personal freedom as compared to, for example, the Russian or Cuban revolutions.
America Is Different
Americans today have no concept of what makes America different from all other countries. In Europe, for instance, through century after century, kings and emperors ruled and commoners had practically no rights at all. Bit by bit over the centuries, though, Europeans gained the rights they now have (though in many European countries, even today, individual rights as we know them ~ez_mdash~ such as habeas corpus ~ez_mdash~ are still unknown). After the American Revolution, however, Americans had all their rights and did not have to contend with a sovereignty other than that of their own state governments.
Unlike Europe (and most other places on earth) the U.S government did not give the people their rights ~ez_mdash~ it was the other way around. The people gave the Federal government its power, limiting it to certain restricted areas. These restrktions are what the U.S government has
8 Note that America eventually got all three of the "wicked projects" referred to by Madison: 1) paper money, 2) abolition of debt via government-created inflation and, at times, specific legislation suspending debt payments, and 3) legislation designed to equalize wealth via confiscatory estate, gift and income taxes.
constantly, over the years, sought to throw off. The U.S. government would like to operate like other interfering foreign governments^ but our Constitution forbids it!
The Purpose Of Government In America
American politicians (along with many of our nation's "educators" and media representatives) have thoroughly misled the American public concerning the legitimate role of government in America. Government now attempts to tell us what we can and cannot eat, who we can and cannot hire, what we must pay our employees, and how we must save for our old age. And now, according to the IRS, Americans are expected to keep daily logs of how they use their automobiles and home computers to justify tax deductions. Great numbers of Americans ("factions" as Madison would say) want something for nothing, and American politicians ~ez_mdash~ in exchange for votes ~ez_mdash~ seek to get it for them.
But, as worthwhile as some of these projects might appear, pursuing them is simply not the legitimate role of government in America, i The real role of government in America is the protection of individual rights ~ez_mdash~ not the pursuit of economic or social goals. The forces of free enterprise and private social agencies (which free citizens always create) will deliver more goods faster, better, and cheaper than any collection of politicians and bureaucrats. The real problem is keeping them out of the way.
The Declaration Of Independence Defines The Role Of Government In America
A fundamental principle of American jurisprudence is 'The intent of the lawmaker is the law!' Since the U.S Constitution is our supreme law, the intent of the lawmakers who drew it up is, therefore, as important as the law itself. That intent is clearly and eloquently revealed in the second paragraph of the Declaration of Independence:
We hold these Truths to be self-evident, that all Men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty, and the pursuit of Happiness ~ez_mdash~ That to secure these Rights, Governments are instituted among Men... (Emphasis added) '
So, in America, the proper role of government is to protect and "secure" our unalienable rights, not to try and provide us with all manner of economic services or to dictate how we should live or conduct our affairs (so long as we do not interfere with the rights of others).
If, however, our government's role is to protect both an individual's life and right to happiness, then it must also protect his property, since without property one can be deprived of both life and happiness.3
And, if individuals have an unalienable right to their property, how can the U.S government lay claim to so much of it under the guise of legitimate taxation and give it to others under various and sundry government programs such as farm subsidies, business loans, and "welfare" payments, to name only a few? It cannot. The U.S. government was not created so that politicians and bureaucrats could run our lives or the American economy.
The U.S. government was created to protect rights, period.4 The American economy, operating on the principles of free-enterprise, was expected to do the rest. The following citations from two authoritative sources will help illustrate this. The first comes from Grover Cleveland's Second Annual Message to Congress, delivered in December, 1886. The second is from the Supreme Court case of Loan Association vs.Tbpeka(1874).
When more of the people's sustenance is exacted through the form of taxation than is necessary to meet the just obligations of government and expenses of its economical administration, such exaction becomes ruthless extortion and a violation of the fundamental principles of a free Government. (Emphasis added)
And this is what the Supreme Court had to say on the subject:
To lay with one hand the power of the government on the property of the citizen, and with the other to bestow it on favored individuals . . .is none the less robbery because it is done under the forms of law and is called taxation.
3 If one has a right to life then one surely has a right to sustain that life. But it takes food, clothing and shelter to sustain life. Without such property one could die of starvation or of the elements. So depriving an individual of his property is tantamount to depriving him of his life and right to happiness. Liberals often talk about "human" rights as somehow being superior and often opposed to "property" rights. But "property" rights are "human" rights - they are a human's right to his own property and it is just as sacred and important as one's right to life. If, for example, slaves on a Southern plantation had all the rights with which we are generally so concerned (such as the right of free speech, of religion, of assembly, etc.) but all their productivity still belonged to their master, what good would all their other "rights" be? The difference between a slave and a free person is that a free person owns what he produces and a slave does not.
4 The U.S. Constitution did authorize the government to "establish post offices and post roads" but every other grant of power under the Constitution involved the protection of rights and/or the government's authority to regulate trade between the states, foreign governments or with the Indians.
Forgetting about the economic merits of free-enterprise over bureaucratic planning, what is clear is that the intent of the framers of the Constitution was to write a document that would protect an American's unalienable right to both his life and his property so he could pursue his own happiness ~ez_mdash~ free of both private and public interference. Today the average working American has 60 percent of his spendable income taken to support government and its activities.5 How can Americans pursue their own happiness when government takes away more than half of their spendable income? It was the absence of such taxes prior to World War II that accounted for America's spectacular growth and its economic superiority and moral power ~ez_mdash~ both of which are now largely gone.
The U.S. Constitution
Our Founding Fathers understood and distrusted the nature of government and knew the danger of endowing it with too much power. Almost to a man each understood what the famous British historian Lord Acton was to say generations later, "The government that governs best is the government that governs least!' Thomas Paine (whose pamphlet, Common Sense, paved the way for the Declaration of Independence) observed that "Government, even in its best state, is but a necessary evil; in its worst state, an intolerable one." And Thomas Jefferson summed up the purpose of the Constitution with these words, "In questions of power, then, let no more be heard of confidence in man, but bind him down from mischief by the chains of the Constitution."
Laws That Apply To Government
The U.S. Constitution is "...the supreme law of the land, and the judges in every state shall be bound thereby..." In addition, all members of Congress and all executive and judicial officers both of the United States and "of the several states, shall be bound by oath or affirmation to support this Constitution..."6 Americans forget that this document is a body of law directed at government, not at individuals. It was designed to protect the people from too much government! It imposes no restraints on the people, only restraints on government.7 These restraints
8 See Appendix A.
6 United States Constitution, Article 6, Clause 2, emphasis added.
7The problem is, how do we prosecute U.S. government law-breakers when these lawbreakers have now taken over control of the courts and all Federal law enforcement activities?
and the Federal government's legitimate role is clearly and concisely explained in the following quote from James Madison, taken from Federalist Paper #45:
The powers delegated by the proposed Constitution to the Federal Government are few and defined. Those which are to remain in the State Governments are numerous and indefinite. The former will be exercised principally on external objects as war, peace, negotiations, and foreign commerce; with which the last, the power of taxation will, for the most part, be connected. The powers reserved to the several States will extend to all the objects which, in the ordinary course of affairs, concern the lives, liberties, and properties of the people and the internal order, improvement and prosperity of the State.
The operations of the Federal Government will be most extensive and important in times of war and danger; those of State Government in times of peace and security.8 (Emphasis added)
The U.S. Government's Constitutional Taxing Powers
With respect to the government's constitutional taxing powers, the intent of the Founding Fathers can be summarized as follows:
1. Taxes paid by the public directly to government are capitation or direct taxes and fall squarely within Article 1, Sections 2 and 9 of the Constitution and must be levied on the basis of apportionment.
2. All indirect taxes apply only to articles of consumption and fall within the provisions of Article 1 Section 8 of the Constitution and must be levied on the basis of geographic uniformity.
3. It was assumed that the Federal government's direct taxing powers would be used sparingly only during emergencies (principally war) and it was for that reason only that the new government was even given direct taxing powers.
4. The overwhelming majority of those who wrote and ratified the Constitution were totally opposed to the idea of the Federal government having direct taxing powers, but such authority was provided solely to enable it to raise revenue in times of war.
5. Those ratifying the Constitution fully believed that the new government would finance its normal, peace-time activities solely through indirect taxes (derived from taxing items of consumption).
6. Our Founding Fathers never would have given the new government taxing powers that would enable it to create "a Multitude of new Offices" containing "Swarms of Officers to harass our People and eat out their Substance" as is now the case.
8 How many people in the U.S. think of the powers of the Federal government as being "few and defined"? If the powers of the government are indeed "few and defined," how is it possible that it can now control so much of our personal and business lives?
7. The Constitution granted no taxing powers to the new Federal government for the purpose of redistributing wealth or for carrying out social and economic programs (thus establishing the unconstitutional and illegal nature of 60 percent of Federal expenditures),
The Constitution (Article 1, Section 8) only gives Congress power in sixteen clauses, seven of which deal directly with either military or foreign affairs. The so-called "elastic" clause (appearing at the end of that section) under which Congress is authorized to "make all laws which shall be necessary and proper for carrying into execution the foregoing powers," was clearly explained by Madison in Federalist Paper #44 as applying only to the enumerated powers listed in the previous sixteen clauses. Any attempts by the U.S. government to expand these enumerated powers under the "elastic" clause, would be, according to Madison, acts of "usurpation." This clause, however, is continually used by "educators" to justify U.S. involvement in almost any area it chooses to enter on the grounds that it made the Constitution a "living" and "adaptable" document. The 10th Amendment proves that no such "elasticity" was ever intended. And further proves that much of the power now wielded by the U.S. government is wielded illegally. It states:
The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.
You can clearly see that the only powers the U.S. government can legally exercise are those limited powers given to it in the Constitution with the States and individuals retaining all the rest.
The Bill of Rights
As added protection against any attempt on the part of the Federal government to encroach on individual rights, a Bill of Rights was immediately added to the Constitution listing specific rights (such as freedom of speech, of assembly, to petition, to bear arms, etc.), rights which the Federal government could make "no laws" prohibiting. These rights, however, are by no means all the rights secured under the Constitution as the 9th Amendment makes abundantly clear:
The enumeration of the Constitution of certain rights shall not be construed to deny or disparage others retained by the people.
Thus Americans are free to claim and assert numerous other rights not specifically mentioned in the Bill of Rights. For example, the Bill of Rights does not specifically list "privacy" as a protected right. You can,
however, assert this right as retained and protected under the 9th Amendment. Other rights can, of course, be claimed as 9th Amendment rights, such as one's right to take the type of medication one wants and not the type that government feels (however correctly) is appropriate.
A Brainwashed Public
Most Americans believe they must do everything the U.S. government tells them; that they have no rights that politicians, lawless U.S. judges, or the IRS cannot take away. For example, in 1971 three Connecticut chicken farmers were shown on television drowning baby chicks in a large tub. When asked by the reporter why they were doing this, they explained that the Nixon Administration's mandatory price ceilings on chickens would force them to sell their chickens below the cost of bringing them to market. So they destroyed them rather than lose money by marketing them. Incredibly these Americans believed that if it cost them $2.00 to produce a chicken the U.S. government could still compel them to sell it for $1.50. The very idea that the U.S. government has the legal authority to compel anyone to sell a product or service below cost is doubly ridiculous because, in addition to anything else, such an act would be in violation of the 5th Amendment, since it would deprive individuals of property without due process of law. Where in the Constitution, though, is the U.S. government even remotely authorized to dictate to anyone the price at which they can sell their wares? Yet this piece of legislation was passed by a "conservative" administration with a supposed bias for free-enterprise! But what is even more ridiculous is that the American public (including the media) accepted this outrageous piece of legislation without a murmur.
The Interstate Commerce Clause
A substantial amount of the U.S. government's illegally exercised power comes from its total perversion of the so-called "commerce" clause of the Constitution. This appears as the third clause of Article 1, Section 8 and states:
Congress shall have the power... to regulate commerce with foreign nations, and among the several states, and with the Indian tribes.
First of all, it is obvious why the U.S. government was empowered to regulate foreign commerce since one of the express responsibilities of the new government was in the area of foreign affairs, of which foreign commerce is obviously a part. The Indian tribes were treated as foreign
nations (we made treaties with them) so trade with them would also come under foreign affairs. The Federal government was given the power to regulate commerce "among the several states" to prevent individual states from raising tariffs or other trade barriers on the transshipment of goods across state boundaries. Such power was absolutely necessary to insure a free flow of goods between all the states. That this was the sole purpose and intent of this provision is made abundantly clear by Madison in the following passages from Federalist Paper #42:
The defect of power in the existing Confederacy to regulate the commerce between its several members is in the number of those which have been clearly pointed out by experience. To the proofs and remarks which former papers have brought into view on this subject, it may be added that without this supplemental provision, the great and essential power of regulating foreign commerce would have been incomplete and ineffectual. A very material object of this power was the relief of the States which import and export through other States from the improper contributions levied on them by the latter. Were these at liberty to regulate the trade between State and State, it must be foreseen that ways would be found out to load the articles of import and export, during the passage through their jurisdiction, with duties which would fall on the makers of the latter and the consumers of the former. We may be assured by past experience that such a practice would be introduced by future contrivances; and both by that and a common knowledge of human affairs that it would nourish unceasing animosities, and not improbably terminate in serious interruptions of the public tranquillity. To those who do not view the question through the medium of passion or of interest, the desire of the commercial States to collect, in any form, an indirect revenue from their uncommercial neighbors must appear not less impolitic than it is unfair; since it would stimulate the injured party by resentment as well as interest to resort to less convenient channels for their foreign trade. But the mild voice of reason, pleading the cause of an enlarged and permanent interest, is but too often drowned, before public bodies as well as individuals, by the clamors of an impatient avidity for immediate and immoderate gain.
The necessity of a superintending authority over the reciprocal trade of confederated States has been illustrated by other examples as well as our own. In Switzerland, where the Union is so very slight, each canton is obliged to allow to merchandises a passage through its jurisdiction into other cantons, without an augmentation of the tolls. In Germany it is a law of the empire that the princes and states shall not lay tolls or customs on bridges, rivers, or passages, without the consent of the emperor and the diet; though it appears from a quotation in an antecedent paper that the practice in this, as in many other instances in that confederacy, has not followed the law, and has produced there the mischiefs which have been foreseen here. Among the restraints imposed by the Union of the Netherlands on its members, one is that they shall not establish imposts disadvanta-
geous to their neighbors without the general permission. (Emphasis
The sole purpose of this clause was to prevent the states from laying "tolls or customs" on goods shipped across state lines. %t with this simple and limited clause the U.S. government has now taken centralized, bureaucratic control over the nation's entire economy, and with it, has reduced each state to a mere geographic expression.9
Note that the clause does not say the U.S. government can regulate any or all business engaged in commerce ~ez_mdash~ it only gave the U.S. government authority to regulate the "commerce" (i.e. shipment) itself. The dictionary defines "commerce" as "an interchange of goods, usually on a large scale, between cities, states, or countries." What was clearly intended was the regulation of the actual shipment of goods across state lines. There is absolutely nothing in the wording of the clause that even remotely suggests that the law was to apply to the regulation of the businesses engaged in such commerce! No such thought ever entered the minds of those who wrote this clause into the Constitution.
Because the U.S. government was given the power to regulate "tolls and customs" between states, it has "interpreted" this limited power to mean that it can broadly regulate the working conditions and internal affairs of practically every American business ~ez_mdash~ not just those that operate across state lines, but even those that merely use the products and services of out-of-state companies.
In 1976, for example, I operated an insurance agency that did business solely in the state of Connecticut. One day I received a notice from the U.S. Labor Department regarding the new increase in the Federal minimum wage law. Since I did not sell insurance in other states I could not see how I came under Federal labor laws but I decided to check with the Department of Labor anyway. I was asked if I sold insurance issued by out-of-state companies. I said yes.10 "In that case," I was told, "you come under U.S. Labor law!' Such an extension of the "commerce" clause of the Constitution is, of course, totally erroneous and an obvious perversion of both the law as written and the lawmaker's clear intent. But this is what U.S. judges have been allowing the U.S. government to do. Such "judges" have not been "interpreting" the Constitution, they have simply been ignoring it. In so doing they not only have violated their sworn oaths but they have become nothing less than subverters of the Republic.
9 The U.S. government now dictates state highway speeds through the withholding of subsidies. Today states have so little power they cannot even control their own speed limits!
10 It is practically impossible to run an insurance agency limited to the sale of policies issued only by in-state carriers.
U.S. Government's Power Illegally Acquired
Where did the U.S. government get most of the power it now wields if not from the Constitution? It usurped it. Apart from merely ignoring the law and clear intent of the interstate commerce clause, the U.S government "acquired" much of its illegal power by never relinquishing "temporary" emergency powers acquired during times of war.
For example, the U.S government only issued gold and silver coin until 1862 (pursuant to clauses in Sections 8 and 10 of Article 1 of the Constitution) when, for the first time, the government issued a limited amount of paper currency as a "temporary" war-time measure to finance the Civil War. From that moment on, the nation got paper currency on a permanent basis, even though the U.S. Constitution not only did not give the government any power to issue it, but it was specifically designed to eliminate such instruments from ever circulating. A provision allowing the Federal government to issue note currency (paper money) was actually included in the first two drafts of the Constitution, but it was stricken by a vote of ten to two. It was Madison who decided the vote for Virginia and he left this testimony:
The pretext for a paper currency, and particularly'for making the bill a tender, either for public or private debts, was cut off.
Commenting on this aspect of the Constitution, Robert Bancroft wrote:11
So the adoption of the Constitution is to be the end forever of paper money, whether issued by the several States or by the United States, if the Constitution shall be rightly interpreted and honestly obeyed.
Obviously, the Constitution is neither being "rightly interpreted" nor "honestly obeyed." And, because of it, the U.S. government is able to use fiat paper money to loot billions from the savings of an unsuspecting American public. Our Founding Fathers had first-hand experience with the financial tradgedies that stem from the use of such money. They had seen it become totally worthless. Similar currency had been issued by the Continental Congress (known as "continentals") and led to the saying "as worthless as a Continental." Some states also issued such currency. Rhode Island, for example, practically brought its entire economy to a standstill with repeated issues of paper money. Fully knowledgeable of the dangers of issuing paper currency, the framers of the Constitution sought to forever ban its use in America. Despite all
11Bancroft's History of the Formation of the Constitution, 2 Vol., page 137.
their precautions (and the monetary restrictions written into the Constitution), however, the nation is now flooded with "continentals" ~ez_mdash~ only now they are called "Federal Reserve notes."12 Franklin Roosevelt also ilegally nationalized gold in 1934 by resurrecting an "emergency" power created in 1918 in connection with World War I.
Witholding taxes were first imposed in 1942 as a temporary, World War II "Victory" tax. Subsequently it, too, became permanent and gave the U.S. government far more peacetime influence (since it now had substantially more money) and power than it ever had before. It is obvious that practically all of the monetary and fiscal powers currently exercised by the U.S. government were acquired as "temporary" war-time measures and are currently being illegally exercised in peace-time.
This gradual but relentless usurpation of power by the U.S government (and with it the erosion of both state and individual rights) was accomplished with the help of U.S judges who were far more interested in accommodating their employers (the U.S. government) than they were in enforcing the Constitution, so they continually bent the Constitution out of shape to help them do it. In the past U.S. judges merely bent the Constitution out of shape, today, however, (especially in tax matters) they have made it a dead letter.
Since our Founding Fathers never intended to give the Federal government more power than it needed to achieve its limited purpose (as explained by Madison), the American people are not bound by "laws" that obviously exceed the Federal government's "few and defined" legitimate powers. Regardless of what self-serving Federal judges say, Americans must now, en masse, heed the advice from James Madison as expressed in Federalist Paper #33:
If the federal government should overpass the just bounds of its authority and make a tyrannical use of its powers, the people whose creature it is, must appeal to the standard they have formed, and take such measures to redress the injury done to the Constitution as the exigency may suggest and prudence justify. . .it will not follow from this doctrine that acts of a larger society which are not pursuant to its constitutional powers, but which are invasions of the residuary authorities of the smaller societies will become the supreme law of the land. These will be merely acts of usurpation and will deserve to be treated as such. (Emphasis added)
12 For an in-depth discussion of this, see Chapter 1 ("The U.S. Money Swindle") of The Biggest Con: How the Government is Fleecing You, by Irwin Schiff (FREEDOM BOOKS: 1977).
Federal Real Estate Taxes
~ez_mdash~ How They Were Levied
Now that we know the difference between direct and indirect taxes and the restrictions placed upon the Federal government's taxing powers by the Constitution, let us examine early Federal taxing statutes since they will reveal how the Federal government is still supposed to collect taxes (other than taxes on articles of consumption) even today. The first direct Federal tax was enacted on July 14,1798 when war with France appeared imminent. This, at least, fulfilled the expectations of those who argued that the Federal government needed an independent, direct taxing power since the tax was levied in response to an exigency. To prepare for that contingency Congress levied a direct tax of two million dollars.1 Much of the language and principles incorporated into that first direct tax act are still incorporated (though completely disregarded) in today's Internal Revenue Code. By analyzing and understanding this first direct tax law a better understanding of today's Internal Revenue Code, with less likelihood of being hoodwinked by the IRS, becomes possible.
Tax Apportioned To Each State
Under this first statute, the tax was apportioned to each state, right down to the pennies and mills. New Hampshire, for example, was apportioned the sum of $77,705.362, while New York was apportioned a tax of $181,680.707. So, in addition to New York's having to pay some $104,000 more, the state also had to come up with five more mills. The following, moreover, should be noted with respect to this first direct tax:
1 For the full text of this first tax statute, see Appendix C.
1. The tax was a direct tax based upon wealth, but the form of wealth was limited to "dwellings, lands and slaves." These forms of wealth were the easiest to identify and thus the easiest to assess because houses and lands are out in the open (with their ownership recorded in town records) and slaves can be counted. But how could the government pry open a citizen's strongbox and see how much gold and silver coin he had? Under this Act no citizen had to prepare his own tax return (listing his taxable assets) and swear "under the penalty of perjury" that such a "return" was true and correct and that he had computed his tax correctly. Assessing and computing U.S. taxes was the government's job (and still is today though Americans have been led to believe the opposite).
2. The law provided that the tax had to be first assessed before it could be owed. In other words, until an assessment was made no tax was due. The Internal Revenue Code, even today, provides for such assessments, but again, few Americans know this. Today the IRS even confiscates property in payment of taxes which have never been assessed pursuant to law. This first direct taxing statute clearly demonstrates that all taxes collected prior to an assessment being made are illegal, yet this is done today with the full knowledge and cooperation of U.S. courts.
3. In Section 2 the Act provided that dwelling houses "with the out-houses appurtenant thereto" on not more than two acres were to be valued at between $100 and $500, and were to be taxed at the rate of 20tf per $100 of assessed valuation. So the minimum tax in this category could be 200 and the maximum tax $1.00.
4. Taxes were then graduated from 300 per $100 on dwellings valued over $500 to a maximum rate of $1.00 per hundred on dwellings over $30,000.
5. A dwelling valued at $5,000 (which, in those days was a substantial one) would be taxed $25.00.
6. Slaves were to be taxed at the rate of 500 per slave.
7. The above amounts were to be "deducted from the sum. . . apportioned to (each) state" and the rest was to be assessed upon the lands within each state "at such rate per centum as will be sufficient to produce the said remainder!' Thus the tax rate that was to apply to land had to be set locally in order to produce the exact amount of the apportionment.
8. No tax was to be assessed upon properties which were "exempted from taxes by the laws of the states respectively!' Thus the Federal government was careful not to conflict with the taxing laws set up within each state.
This gives us a concrete understanding of how apportionment was supposed to work and what direct taxes are all about. Note that the tax rates themselves were well within (actually lower than) the limits referred to by Adam Smith. No one had to take out a loan to pay his taxes. Also note that all dwellings were taxed (albeit on a graduated basis) and no household escaped the tax because of an initial exemption. In addition, the Act did not provide for any deductions or exemptions. Though the tax was graduated, all those who had dwellings would pay something, even if it was only 200. A variable tax rate (set locally) was needed to produce the apportioned amount.
For the Federal government to legally collect direct taxes, these elements had to be present:
1. the total amount to be collected from all states had to be exactly determined;
2. specific sums then had to be exactly apportioned to each state, based on their congressional representation; and
3. variable rates of tax (of necessity) had to apply to each state to produce the apportioned amount.
It is therefore obvious that the Federal government, in levying direct taxes, cannot use a simple and uniform rate of tax to apply to all citizens throughout the country as it does today but, rather, must call on the states to develop their own variable tax rates.
How The Tax Was To Be Collected
1. Assessments were to be made by "supervisors of the several districts within the U.S" pursuant to instruction from the Secretary of the Treasury, "as soon as the valuations and enumerations had been completed in the state to which such supervisor belongs."
2. The tax became due and payable "after the expiration of three months after these instructions were received" by the supervisors.
3. The supervisors were authorized to reduce the tax rates if the sums assessed "will exceed the sum hereby apportioned." This re-emphasises the principle that individual tax rates must vary from state to state depending on the amount of each state's taxable wealth Lower tax rates would prevail in states with greater per capita wealth and higher tax rates would apply in states with lower per capita wealth. Though this way
seems unfair, it was designed to insure that Federal taxation would be directly related to representation. If a tax would be particularly burdensome to citizens of poorer states their legislators could work to defeat the tax. But our Founding Fathers were determined to make the constituents of voting congressmen directly responsible for the taxes their representatives voted to impose, and not be irresponsible as is the case today. This, again, was to prevent poorer states from using their congressional votes to drain wealth away from richer states (a principle that is reversed today). Thus rates (other than indirect ones on articles of consumption) when applied by the Federal government to the country as a whole, were to vary from state to state in order to fulfill the requirement of apportionment. The laws requiring apportionment are still in force today ~ez_mdash~ that is if the Constitution is still in force. The fact that these laws are disregarded by the Federal government is merely indicative of all the other laws it now disregards. 4. The supervisors were "authorized and required" to appoint their own tax collectors "within their collection districts" who would then collect the tax under the direction of the supervisors according to regulations.
5. After the assessments had been made the supervisors would "by special warrants . . . cause the surveyors of the revenue" to make out "lists" containing the amounts payable for "every dwelling house, tract or lot of land, and slave within each collection district, " and containing such other information as provided in the act. There were therefore three individuals involved in the collection of this tax: a) supervisors, b) collectors, and c) surveyors of the revenue. The surveyors also had to prepare a separate list of "lands, dwelling-houses and slaves" for property that was "not owned, or occupied by, or under the care or superintendance of any persons resident therein" of such owners "where known!'
6. The collectors were to be furnished by the surveyors of the revenue "with one or more of said lists signed and certified by such surveyor!' Before a citizen could be liable for any tax there had to be on record a "signed and certified" statement as to what he owed. Today the government (through the IRS) sends out notices of alleged income tax due that are not certified and, in many cases, are not even signed! Now what Federal official takes the responsibility for certifying that the income taxes the IRS claims is owed is legally owed? The reason for this is that no one can legally "owe" Federal "income" taxes since no such liability for them is written into the law!
7. Each collector, "on receiving a list," was to make three copies: one for the surveyor of the revenue acknowledging the "full and correct copy of such list" (said list to be open to "inspection of any person who may apply to inspect the same"); a second copy to be kept by the "inspector of the survey"; and the third copy to be kept by the "supervisor of the district." Thus all valuations and all taxes due were open to public inspection in much the same way as local property tax records are open to the public today.
8. The collectors were to be bonded "in at least double the amount of the taxes assessed on the collection district for which he may be appointed." This is one area where tax collection has substantially changed. Tax collectors are now full-time government employees.
9. Such assessed taxes would become "a lien upon all lands, and other real estate, and all slaves, of the individual for the same, during two years after the time when it shall become due and payable according to the act." Interestingly no such provision appears in the Code in connection with income taxes. No provision establishes a lien for such taxes or even states that such taxes "shall becomes due and payable." The reason is that the taxes provided for by the Fifth Congress were levied lawfully, pursuant to the Constitution, and did not violate anyone's constitutional rights. Being lawfully levied they could be collected by distraint (i.e. force). Since current income taxes are not levied pursuant to any taxing clause in the Constitution and do violate a number of constitutional rights, they cannot be legally mandatory or legally collected by distraint. That is why there is no requirement for paying income taxes, nor any penalties, nor any provisions for collecting them by distraint anywhere in the Internal Revenue Code. This being the case, the Federal government cannot legally confiscate property (as it now does) in payment of U.S. "income" taxes.2 However, Federal judges (in league with the U.S. Justice Department) allow the IRS to fraudulently use (in connection with income taxes) enforcement provisions that, by law, can only apply to certain valid excise taxes ~ez_mdash~ such as tobacco and alcohol ~ez_mdash~ and the public is none the wiser. Of course, the law is deliberately writ-
2 While the Code does provide for liens in general, the provision restricts their application to taxes for which one is liable, thereby excluding liens for "income" taxes (see pages 254^256.
ten in such a confusing manner as to make this outrageous scam almost impossible to detect.3
10. After the collectors got their lists they were to post them "in at least four public places in each collection district, (to note) that the said tax has become due and payable and the times and places at which they will attend to receive same."
The Revenue Act of 1813
Some fifteen years elapsed before Congress again exercised its power of direct taxation. This occurred on July 22,1813 when, as a result of the War of 1812, Congress levied a direct tax of three million dollars. An examination of that Act will show how the government again attempted to collect direct taxes expediently and lawfully and will bring us even closer to the language and principles contained in today's Internal Revenue Code. The Act differed from the Act of 1798 in four significant ways:
1. It provided for the apportionment of the tax down to the county as well as state level;
2. it did not contain any overall tax rates at all but left their determination to local assessors;
3. it provided for the making of "lists" by taxpayers; and
4. it provided that the states themselves could pay their apportioned amount and take a 15% discount.4
Federal Collection Districts
The Act created 382 Federal collection districts which conformed to county districts and apportioned the tax right down to these collection districts. The first page of this thirteen page Act (see Appendix C) shows how it provided for such districts in the eighteen states that made up the Union. It also provided for "one collector and one principal assessor" for each of these districts.
A Companion Act of August 2, 1813 provided for the exact apportionment of the three million dollar Federal tax both by state and district (county) level. This district breakdown accounted for seventeen of
3 For in-depth proof of this deception (and a discussion of how Treasury Regulations deliberately misstate the law) see The Schiff Report, Volume 1, Numbers 2, 3, 5 and 6 and Volume 2, Numbers 4,5 and 6.
4 For relevant sections of this Act see Appendix C.
the nineteen pages in the bill. The Act also provided for the appointment by the principal assessor of assistant assessors. All assessors were required to take an oath that they would execute their office "without favor or partiality" and that they would seek to do "justice in every case." It further provided for penalties against those assessors who did not take this oath. These penalties were to be in favor of both the United States and "to him who shall first sue for same, to be recovered with costs of suit, in any court having competent jurisdiction!' This penalty provision was further supplemented by Section 29 which provided for penalties against collectors who shall "be guilty of any extortion or oppression under color of law!' Note that Congress attempted to keep the assessors and collectors honest and within the law. No such consideration now even enters the minds (let alone the law) of the Federal government. In providing that individuals could sue in "any court having competent jurisdiction," the Federal government apparently made no attempt to limit such suits to Federal courts but allowed citizens to bring them in state courts~ez_mdash~where they belong.5 Today if a citizen sues an IRS agent in a state court the Federal government sees to it that it is removed to a Federal District Court where it is assured that its own judges will "bag" the case by seeing to it that the charges are arbitrarily dismissed.6
This Act established a new procedure requiring taxpayers to furnish the assessors with written "lists" of their taxable property. Such lists (while entirely different from today's tax "return") obviously served as their forerunner.
First, note that Section 5 specifies that the tax provided for is a direct tax and further states that such a tax "shall be assessed." This demonstrates that a taxing statute should identify the type of tax it is and, before anyone can be liable for the tax, it must be assessed by the government. The Internal Revenue Code today, however, does not give the government any power to assess income taxes on its own. Unlike excise taxes, income taxes (by law) are based on self-assessment. The gov-
5 Challenges to Federal taxes should be heard in state courts and vice versa since state and Federal judges cannot be impartial concerning the taxes in which they have a direct stake. Judges, by definition, must be impartial, but such impartiality simply does not exist among Federal Judges sitting on Federal tax cases,
6 In case after case Federal judges routinely dismiss as "frivolous" or rule "these issues have already been decided, case dismissed" when the grievance concerns the IRS's illegal enforcement of income taxes.
ernment and Federal courts, however, allow the IRS to contrive assessments on their own in violation of law. And, unlike the Act, nowhere does today's Code identify whether the income tax is a direct or an indirect (excise) tax. Code Section 4986, for example, clearly identifies the windfall profit tax as being an indirect, excise tax7, while numerous other Federal taxes are grouped in the Code in sections specifically labelled as excise taxes. But nowhere is the income tax identified in the Code (as is shown in Section 5) as being either an excise or a direct tax.
Let me repeat that Section 6 required that "all persons owning, possessing, or having the care or management of any land, lots of ground, dwelling-houses or slaves . . ." had to deliver "written lists of the same" to the assistant assessors, "in such manner as may be directed by the principal assessor!' This was a significant departure from the Act of 1798 since no such lists were required of taxpayers under that Act.
Section 7 further provided that if individuals did not provide these lists, but should "consent to disclose" such information, then "it shall be the duty of the officer to make such list, which being distinctly read and consented to, shall be received as the list of such person." This wording is almost identical to the current wording of Code Section 6020 which covers the voluntary making of tax returns.
Note further that Section 8 provided for a civil penalty if anyone submitted a "false or fraudulent list, with intent to defeat or evade" the tax. There were no criminal penalties for filing fraudulent lists or for failing to file any lists at all. The government criminally prosecutes individuals today for such tax "crimes." These "crimes" were not enumerated in this Act because tax statutes are civil statutes and the government cannot, by civil statute, create "crimes." In fact, nothing in today's Criminal Code (Title 18) gives Federal courts criminal jurisdiction over "crimes" enumerated in the Internal Revenue Code (Title 26), which is why the Code does not even refer to criminal jurisdiction. In contrast, civil jurisdiction (which is clearly provided for in Section 1340 of Title 28 ~ez_mdash~ the rules of civil procedure) is repeatedly mentioned in the Code. For example, Section 7402(f) states that Federal District courts have jurisdiction in "civil actions involving internal revenue!'
However, when this matter is raised by pro se litigants in the tax resistance movement when fighting false, criminal charges such as failing to file income tax returns ~ez_mdash~ there is no such requirement in the
7 The windfall profits tax is an illegal excise because it is not levied on a consumable product or even on a contrived privilege. In addition, it is not levied on the basis of geographic uniformity since Alaskan oil is excluded from the tax.
Code nor is there any provision making that a crime ~ez_mdash~ Federal judges simply ignore the matter and/or fabricate jurisdiction. But Section 8 of the Act of 1813 clearly shows that all criminal prosecutions for alleged tax crimes are illegal and that no criminal penalties in connection with such "crimes" were ever intended.
Section 10 provided that if taxpayers failed to submit lists of their own then it was to "be the duty of the assessor . . . to enter upon the lands, dwelling-houses and premises ... of such persons ... to make ... his own . . . list!' Taxpayers refusing to provide their own list could be fined $100.00. Note again that there were no criminal penalties for not filing, only civil ones. Also note that the government could not simply levy the fine but had to bring suit in court. Today the government levies $500 fines for allegedly filing "frivolous" tax returns or incorrect W-4s (employee withholding forms) without hearings of any kind and then proceeds illegally to collect these "fines" by garnishing wages and bank accounts without court orders.
Difference Between A List And A Return
There are tremendous differences between a list and a return. For one thing, a list enumerated the individual's taxable property and no attempt was made either to value the property or to determine the tax due. The list only included the real estate owned and the number of one's slaves. In addition, a list did not ask for any personal financial information or require that taxpayers provide other personal information such as medical expenses or charitable contributions in order to arrive at their proper tax. As mentioned above, the most important distinction between a return and a list is that there was no attempt on a list to value the property listed or to calculate the tax due.
No Specific Tax Rates Applied
Another interesting aspect of this tax Act was that it made no attempt to establish specific tax rates! All applicable rates were to be established locally as provided in Section 16. The principal assessors were to "make out lists containing the sums payable according to the assessment . . . so as to raise upon the county or counties . . . the quota of the direct tax laid by the United States." Thus it became apparent that it was futile (due to the requirement of apportionment) to attempt to establish any uniform tax rate since the applicable rate would depend on the taxable wealth contained in each collection district.
Let us say, for example, there were 500 families in the county of Rockingham, New Hampshire, all living in houses worth approximately $3,000 each. This would amount to $1.5 million worth of "dwelling-houses!' Suppose the value of all land in Rockingham County was $500,000, making the total value of all land and real estate $2 million. The tax rate would have to be $12.65 per $1,000 to generate the total Federal tax due. Therefore, the average dwelling would be taxed at $37.95 and, if we assume that the land value was ten percent of the dwelling, we would get a total tax of $41.74 for the typical lot and house.
Suppose, however, that in Strafford County (which had to raise $17,698.60) there were only 300 dwellings worth approximately $2,000 each with all other land in the county worth $200,000. The tax rate in this county would have to be $22.10 per $1,000 to generate the apportioned tax. Therefore, in Strafford County the average household would pay $48.60 ($44.20 for the dwelling and $4.42 for the land) versus the average tax in Rockingham County of $41.74. So, while the average homeowner in Strafford was poorer than the average homeowner in Rockingham County, Strafford residents would have to pay a higher tax. A homeowner in Strafford County (having the same value dwelling and lot as a resident in Rockingham) would pay $72.93 as opposed to the Rockingham resident's tax of $41.74 ~ez_mdash~ or 74 percent more. However, the Act provided that the States, by an act of their legislatures, could equalize the apportionments between the collection districts within their state! And even the assessors, in certain cases, were permitted to equalize the valuations between assessment districts. So every effort was made to assess the tax equitably within each state, and the Act provided for local authority to do it.
A State's 15 Percent Discount
The companion Act of August 2,1813 contained another interesting provision. It allowed each state to take a 15 percent deduction if it paid its quota before the 10th of February, and ten percent if paid before May 1st. This almost converted the Federal tax to a requisition (as provided for in the Articles of Confederation) and forcefully drove home the principle of apportionment. So individual states, if they so chose, could eliminate Federal tax collectors completely ~ez_mdash~ and get a 15 percent discount to boot.
These were the major changes in the Act of 1813 over the Act of 1796, though the Act also contained more extensive provisions for hearings and appeals before assessments became final and prior to any tax becoming due. This is a big departure from today's method of collecting Federal taxes with individuals expected to pay such taxes before any assessments are made and before any hearings take place.
The third direct tax was for $6 million and was enacted on January 9,1815. This tax also was levied because of the War of 1812 and was similar to the Act of 1813 except that the Act made no attempt to apportion taxes down to the assessment districts, although the districts themselves were still maintained. The act provided for a "board of principal assessors" who would be responsible for equitably establishing the assessment for each district and the rate of tax in order to equalize assessments and tax rates within the state.
With respect to persons who did not pay up, the collector was to go at "once to their respective dwellings. . . and there demand the taxes payable!' If the taxes were not paid within twenty days, collectors were authorized to collect them by distress sale, for which they could keep an 8 percent commission. Certain items such as "tools or implements of a trade or profession. . . and household utensils" were to be exempt from such distress sales. There is no comparable section (relating to income taxes) in the current Internal Revenue Code. The Code actually establishes that property cannot be taken except by court order, but this provision is totally ignored by the IRS, the U.S. Department of Justice and the courts. IRS revenue officers routinely seize property for income taxes allegedly owed without court orders or hearings of any kind. For the constitutionally required due process and the requirements of the statute, the IRS has substituted intimidation~ez_mdash~aided and abetted by the courts.
The Act also provided for dismissal of collectors and included specific penalties if any one of them willfully refused or neglected "to surrender his collection list and to render a true account of all monies collected". More importantly, it provided for specific penalties in lawsuits brought against collectors who resorted to "extortion or oppression under color of this act or shall demand other or greater sums than shall be authorized by law ..." This was an important provision since it sought to protect the public from unlawful acts of tax collectors, a class who historically have a reputation for such abuses, and would serve to deter them from breaking the law.
Today the public apparently has no comparable protection. IRS agents now break both Federal and state law with impunity and the public tamely accepts it8. There is no comparable section in the Internal Revenue Code for the protection of the public. On the contrary, Section 7422 (c) of the Internal Revenue Code actually seeks to protect IRS lawbreakers and interposes the doctrine of res judicata in suits "against any officer or employee of the United States... for the recovery of any internal revenue tax alleged to have been wrongfully collected, or of any
8 Effective measures that citizens can take to fight back are discussed in Chapter 18.
penalty claimed to have been collected without authority, or any sum alleged to have been wrongfully collected." So where the Fifth Congress sought to protect the public from the abuses of tax collectors, present legislation does everything possible to protect tax collectors who engage in abusive and illegal acts. Indeed, all the enforcement activities of the IRS are practiced illegally and designed to terrorize the public into believing that our income tax system is really compulsory.
The Civil War: The Seeds Of Tax Tyranny Are Sown
Some forty-five years passed before America got another direct tax. This one was for $20 million and was enacted on August 5,1861 during the Civil War. Fort Sumter had been bombarded four months previously and the North had already suffered its first major military defeat at the first Battle of Bull Run in July. It was under such circumstances that the tax was passed.
The Act containing the tax also provided for another type of tax never before levied in America ~ez_mdash~ a Federal income tax. This tax was plainly unconstitutional on its very face and never could have been adopted except for the War (just as withholding tax never could have been foisted on the people had America not been in the throes of World War II). In passing this "income" tax, Congress contrived it as an indirect tax in order, it hoped, to circumvent the apportionment provisions of the Constitution, even as it flagrantly violated the Bill of Rights. The 1861 income tax was allowed to stand even after the war was over, until 1871, and set the stage for a pattern of complicity between the Federal judiciary and power-hungry Washington politicians who have since used it to expand the power of the U.S. government while eroding the rights of citizens and the lawful authority of state governments.
The Direct Tax Aspects of the Act of 1861
Since three prior direct tax acts had already been passed in which constitutional rights and procedures were preserved, this war-time Congress must have labored long to so radically subvert the taxing powers in the Constitution.
The Act (similar to all prior acts) apportioned the tax among all thirty-four states that then constituted the Union ~ez_mdash~ including the states in the Confederacy ~ez_mdash~ plus seven territories and the District of Columbia. Again, no rate of tax was established in the Act. Tax rates were to be set locally (depending on the amount of taxable property) to pro-
duce the apportioned amount. The provisions for levying and collecting the tax were similar in almost every respect to the provisions of the Act of 1815, in sharp contrast to its "income" tax provisions.
No Criminal Penalties Applied to Public
First of all, the Act stated that it was a direct tax to be "assessed and laid on the value of all lands and lots of ground, with their improvements and dwelling-houses" but unlike all prior Acts, did not provide for the inclusion of slaves when determining the tax due. Taxpayers were required to submit lists of their taxable property while the collectors were authorized to enter the "lands, buildings, dwelling-houses, and premises" and make lists of their own in cases where no lists were submitted. In addition, the Act only provided for civil penalties for those who filed either fraudulent lists or filed no lists at all. The President was authorized to appoint, for each assessment district, an assessor and collector who had to be "freeholders and residents within same." All collectors were required to be bonded and they (as well as the assessors) were authorized to appoint assistants who also had to be "freeholders? All assessors and assistant assessors were required to take the same oath as covered on page 61, and were liable to both the government and the public if they did not. A board of assessors was provided for and it was authorized 1) to establish the rate of tax, based upon the amount of taxable property in each collection district, 2) to hear appeals, and 3) to equalize assessments. The Act provided that if any inequality were found in the apportionment, it was to be reported to Congress so that it could be corrected. Section 22 established an appeals procedure wherein the assessors were to "receive, hear, and determine, in a summary way, according to law and right, upon any and all appeals. . . " In addition, Section 12 provided that the assessors, in preparing their lists of taxable property, were to do so "by all other lawful ways and means." The only criminal penalties provided by the Act were to apply to the collectors themselves ~ez_mdash~ those who did not turn over or account for the monies collected (as explained on page 65) while taxpayers were further protected by provisions in Section 47.
Pay for the assessors and assistant assessors was provided for in Section 30 while collectors were to be paid according to Section 48. The Act also contained provisions in Section 53 that allowed each State to pay its total quota of the direct tax and to deduct either 10 percent or 15 percent from the amount due, depending upon when the tax was paid. Thus the wording of the direct tax act of 1861 was almost verbatim to that of the Act of 1815.
The Income Tax Rears Its Ugly Head
The income tax portion of the Revenue Act of 1861 took up less than four pages and was covered in seven sections. For that feat we can, at least, take off our hats to the 34th Congress. Today's income tax and related sections, by contrast, take up more than 2,000 sections and 1,000 pages with thousands of pages of Treasury regulations.1 The four pages of the Act of 1861, nevertheless, laid the groundwork for an eventual American Gestapo through which the government would abolish every right contained in the Constitution. The full text of the income tax provisions of that Act can be found in Appendix C.
Three Percent Tax Rate
Note that the rate of tax was 3 percent for incomes in excess of $800 though Americans living abroad were taxed at 5 percent while "income" from U.S notes and other securities were to be taxed at 1-lVz percent. To put the tax in its proper perspective, it should be noted that an American earning $1,000 per year (better than average since the per capita annual income in America in 1860 was approximately $150) would owe $6.00 in income taxes. This was, at least, reasonable and close to the levels referred to by Adam Smith. Such a tax rate did not convert taxpayers into slaves or serfs (which rates in excess of 25 percent obviously do). In contrast, income tax rates reached 90 percent from 1944 to 1964. High levels of taxation may be justified in time of war when greater sacrifices from the people can be expected and demanded, so income tax rates reached a height of 3 percent during the Civil War for Americans living in the states.
What Constitutes "Income"?
With the exception of a deduction permitted for taxes, the Act did not provide for any deductions or exemptions. On the face of it, therefore, it should have been an easy tax to figure. The reality was something else. Since no "lists" were required to be completed (either by the assessors or the taxpayers) showing the "income" subject to the tax, how could one determine what type of documentation was used to establish the tax? It would appear from the wording of the law that, initially, it
1 So complicated is this overwhelming mass of regulations that IRS tax collectors are frequently found to be ignorant of its provisions.
was to be based on the assessor's best judgement. In addition, if no deductions were provided for, how was "income" determined?
Were farmers, for example, allowed to deduct the cost of seed, fertilizer, and the wages of hired hands (including the cost of their keep)? Could ranchers deduct the cost of their stock and all the costs of bringing their cattle to market? Could grocers and other merchants deduct the cost of their wares (as well as such costs as advertising, salaries, maintenance of their place of business, etc.) before their "income" was determined? The original Act did not say. It would appear that "income" had to be determined on a purely arbitrary basis if only by its vagueness and, as such, the tax had to be illegal, regardless of any other consideration. But, to the extent that the tax was arbitrary, it was not unlike today's income tax ~ez_mdash~ because what constitutes "income" today is just as arbitrary (regardless of the 1,000 pages in the current "law") and thus it too has to be illegal.
A Phony "Duty" Is Created!
In order to avoid the apportionment provisions of the Constitution, the Act of 1861 labelled the income tax "an internal duty!' This was done so that the tax would fall under Article 1, Section 8 of the Constitution and not under Article 1, Sections 2 and 9 and, therefore, it could be collected as an indirect tax ~ez_mdash~ one not subject to apportionment. An income tax is not, by any stretch of the imagination, a "duty" ~ez_mdash~ internal or otherwise. A "duty" is a tax applied to articles as they are imported into a country (though there are sometimes export duties) and is obviously an indirect tax. The tax is added to the price of the product and is passed on to the ultimate consumer who pays the tax indirectly. To the extent that such "duties" are levied internally, they are referred to as excise taxes. An income tax, however, is clearly not a "duty" ~ez_mdash~ it is a dir-rect tax, plain and simple. It is not paid indirectly by the public ~ez_mdash~ it is paid directly by them to the government. It is a direct tax, based not on real estate or slaves, but on "income," whatever that means. (Moreover, such a term can never apply to individuals! See page 222.) How can a tax based on income fall into a different basic category than one based upon wealth? The government could have just as logically called the tax based on real estate an "internal duty" and proceeded to collect it without apportionment, though since Congress had already correctly identified it as a direct tax, Congress could not now change it. But the income tax was a new tax ~ez_mdash~ so Congress felt that it could call it anything it wanted to, and who would be the wiser?
This was a clear case of government levying a direct tax in the guise of an indirect tax in obvious violation of the Constitution. The
government got away with it until 1872 when the tax was repealed. But this illegal, war-imposed tax, provided the basis for many other arbitrary and lawless acts to follow. It also laid the foundation for the Gestapo-like IRS we have today.
Act Created a New Federal Agency
Section 50 of the Act states that one principal assessor and one principal collector shall be appointed "in each of the States and Territories of the United States and in the District of Columbia, to assess and collect the internal duties or income tax imposed by this act. . . " Section 56 of the Act created a new position in the U.S. Treasury Department: a Commissioner of Taxes whose job it was to superintend "the collection of the direct tax and internal duties of income tax laid by this act!' Note that the word "duties" (in connection with income taxes) is used three times in this section. Note also that the Commissioner's salary was to be $3,000 per year and he was authorized to have "the necessary clerks . . . whose aggregate salaries shall not exceed six thousand dollars." In addition, Section 50 further authorized the assessors and collectors to appoint, with the approval of the Secretary of the Treasury, "so many assistants as the public service may require." The salaries of the principal assessors and collectors were to be $2,500 and $1,200 for their assistants ~ez_mdash~ a juicy patronage plum for the President. In addition, the collectors were to be bonded.
First, note that the assessors and collectors (in the case of the income tax) were to be Federal employees, as opposed to the assessors and collectors of the direct tax who were not. Second, the collectors and assessors of the direct tax had to be residents of the collection districts they were in charge of. No such residence requirement was attached to these positions in connection with income taxes. Thus the assessors and collectors of the income tax could be strangers in the community and could be shifted from one state to another. They would be rootless and thus ruthless.
Criminal Penalties Now Created for Taxpayers
There were no criminal penalties that applied to the public in connection with the direct tax but such penalties were now created in connection with income taxes! In addition, there was no oath that the assessors or collectors of income taxes had to take that was comparable to the one imposed on those collecting direct taxes, nor did the Act provide for any penalties for income tax collectors if they collected the tax unlawfully or extracted more from the public than the law demanded ~ez_mdash~ as was provided in previous statutes.