All Caps Nonsense

[Imalawman]

So, John, what do you expect to happen? That the courts will suddenly say, "oop's all the other court cases were wrong, wages aren't taxable after all". The gov't, like it or not, needs the money. Next year, they insert a line that says, "wages means pay for work, this includes every conceivable way to earn money". Then where are you? I just don't see how in the end, you're ever going to avoid paying taxes.

[wserra]

To my knowledge taxpayers have made this argument in exactly 3 cases, and each time the court ruled that some other argument was incorrect

Uh, John - when you make an argument and lose the case, that means your argument lost. Perhaps the court did not address it to your satisfaction. However, there is nothing whatsoever in the law that requires a court to address every silly little thing a litigant raises.

I think we've had this conversation before. It's still true.

[Famspear]

Cpt Banjo wrote:

----"Really? So if I come up with an inane theory that has never been ruled on then it's still an open issue? How about the argument that all persons with my exact name that were born at exactly the same time and in exactly the same place as I are exempt from the income tax. Is that merely an "untested challenge" or is it, like all of Bulten's irrationalities, pure crackpottery?"

That's a great idea!

Now, my theory is that under the U.S. Federal income tax law, all persons with the last name of "Bulten" are taxed at a flat rate of 99% on all income. It's a special rule just for people named "Bulten." Oh, I know that there's no statute that actually SAYS that, and I know that there's no court that has ever RULED that, but I won't be satisfied that I'm wrong unless Bulten can find a case -- someday, somehow -- where that particular issue was litigated and the court ruled otherwise.

Try harder, Mr. Bulten. --Famspear

[Cpt Banjo]

Clue: As far as the old days (let's say, pre-1970s) are concerned, the reason there are no reported cases is that virtually NOBODY LITIGATED your silly nonsense theories. That just might be because nobody concocted these silly theories until about 60 years after the taxes were imposed. The fact that you have found no cases is still further indication that you arguments are nonsense.

--Famspear

The absence of cases supporting Bulten's position is telling. Since only those with incomes over $3,000 were taxable in 1913 (that's around $60,000 in today's dollars), one would think that they could afford the finest tax lawyers in the country to argue that pay-for-work wasn't income. Heck, Charlie Chaplin was earning $10,000 a week ($200,000 today) in 1916-1917. Why didn't his lawyers anticipate Bulten's arguments? Could it be they weren't that brain-dead?

[Famspear]

----"The absence of cases supporting Bulten's position is telling"

Yes, it's the same with many of these tax protester theories: "The ABSENCE of anyone who has been stupid enough to come forward to litigate my particular doofus rehashed reworked 86th revised version of some prior doofus nonsense theory --that some other clown WAS STUPID ENOUGH to waste a court's time with -- is somehow EVIDENCE that MY doofus theory is correct, and that 99.9% of all the judges and lawyers and CPAs and law professors and Congressmen and IRS employees for the last 94 years -- literally hundreds of thousands of experts -- have been wrong all along. But someday somebody as stupid as I am WILL litigate my theory, and when he loses on my theory it's prove he just didn't use the right magic words or didn't say it just right, and then I'll work up another theory."

It's like people "discovering" in the mid 1970s that the Sixteenth Amendment was somehow "not properly ratified" - when a person born in February of 1913 would have been about sixty years old. Somehow, nobody in the state legislatures of all those states happened to ever "notice" that people were having to "illegally" pay income taxes for over sixty years.

More telling is the motivation (or motivations) behind all this. The ultimate motivation is not an ethically pure effort to expose a supposedly "invalid" tax system. The motive varies, but it can be an effort to attack authority figures in connection with a psychological transference involving a parent figure, or a self-delusion induced by greed, or a con game, or a part of a larger pattern of psychopathological, anti-social behavior, or who knows what else. The number of causes and motivations may be unfathomable. The fact that Mr. Bulten and other protesters can work themselves up into such kinds of monumental self-delusion is a testament to the complexity -- and malleability -- of the human mind. --Famspear

[John J. Bulten]

Grammarian, I did not make a distinction between "income ..." and "profit ...". I said tax laws were imposed on income derived from compensation, not on compensation:

SECTION II. A. Subdivision 1. That there shall be levied, assessed, collected and paid annually upon the entire net income .... B. That, subject only to such exemptions and deductions as are hereinafter allowed, the net income of a taxable person shall include gains, profits, and income derived from salaries, wages, or compensation for personal service of whatever kind and in whatever form paid .... D .... On or before the first day of March, nineteen hundred and fourteen, and the first day of March in each year thereafter, a true and accurate return, under oath or affirmation, shall be made by each person of lawful age, except as hereinafter provided, subject to the tax imposed by this section, and having a net income of $3,000 or over for the taxable year ....

You might also be interested to know what was specifically included in income derived from compensation, since 1919 or earlier:

GROSS INCOME DEFINED. SEC. 213. That for the purposes of this title (except as otherwise provided in section 213) the term "gross income"-- (a) Includes gains, profits, and income derived from salaries, wages, or compensation for personal service (including in the case of the President of the United States, the judges of the Supreme and inferior courts of the United States, and all other officers and employees, whether elected or appointed, of the United States, Alaska, Hawaii, or any political subdivision thereof, or the District of Columbia, the compensation received as such), of whatever kind and in whatever form paid ....

And BTA regularly heard cases from the 1910s for some time after its founding in the early 1920s; but the exact year is not the issue.

Famspear, there are no statutes or decisions supporting your argument either (that "pay for labor" was taxed as income under the 1913 Act)! Not until 1937 was the conventional wisdom (that it wasn't) questioned, and then in Steward v Davis it was only held that an excise may "extend" to pay for labor because of Social Security. You are repeating yourself without showing any counterexamples as requested, which should be easy to find if your bald assertions are true.

I'll try it another way. Since you think that pay for labor was taxed as income in 1913, you'd grant that (theoretically) for every tax year since 1913, every laborer who earned over the exemption should have paid tax. And when the exemption was dropped to $1,000 in 1918, just below the average annual pay, you'd grant that a large number of laborers, most every single worker above average pay, should have paid the tax and filed. So would you grant that there should theoretically be a large number of returns disproving my position, which should be historically discoverable through such sources as BTA cases? I'm not even asking you to find them, just to admit that they are a logical necessity of your belief. (Then look at the graphs on the homepage of taxhistory.com and see if they accord with your belief.)

Banjo, a little logic, please. You beg the question by assuming the theory is inane to start with. And you faultily deduce that if some compensation is nontaxable, all dividends are nontaxable. Next you faultily assume it was necessary to argue pay for work wasn't income, when I just explained it wasn't. I simply asked you to show that (e.g.) Chaplin paid tax on his pay for ordinary labor. Did you have some response as to the particular syllogism I started with here, such as an answer to:

My first request is for you to show any case from the 1910s where pay for work was authoritatively held to be income in itself. My second request is for you to show any statutory change in the meaning of "income derived from compensation".

The rest of you, since you didn't answer these easy questions either, will just have to wait.

[grammarian44]

The Federal income tax laws have been imposed on compensation for personal services pretty much continuously since 1913." No, they were imposed on income (profit) derived from compensation.

Then you said:

Grammarian, I did not make a distinction between "income ..." and "profit ...". I said tax laws were imposed on income derived from compensation, not on compensation

OK, let me correct my question:

Please cite for me a case stating that there is a distinction for purposes of federal tax law between taxes imposed on "income derived from compensation" and taxes on compensation.

You see, Bulten, all you ever do is insist that other people misunderstand you. You draw distinctions when there are none to be drawn, to make it appear that you're making an argument with some sort of legal force.

You can rewrite the picayune distinctions all you want. Just cite me one case in which your position on the taxation of wages has been upheld so as to render wages not inherently taxable until there is "income derived from" them.

[Famspear]

Dear John: You wrote:

-----"Famspear, there are no statutes or decisions supporting your argument either (that "pay for labor" was taxed as income under the 1913 Act)!"

John, this is too easy. Look at your quote from the 1913 Act:

-----"That there shall be levied, assessed, collected and paid annually upon the entire net income .... B. That, subject only to such exemptions and deductions as are hereinafter allowed, the net income of a taxable person shall include gains, profits, and income derived from salaries, wages, or compensation for personal service of whatever kind and in whatever form paid ...."

Suppose that in December of 1913 you performed services working for a grocery store in Colorado, and that grocery store paid you, as compensation, $50,000 (assume zero withholdings of any kind).

Please ask yourself how that entire $50,000 is not includible in gross income under the 1913 Act.

By the way, it's pointless for your to cite cases like Steward Machine Co. v. Davis, 301 U.S. 548 (1937), if that's what you're doing. Aside from the fact that you've already pointed out that the case doesn't help you, you should also be aware that it is not a Federal income tax case. No issues involving the interpretation of any Federal income tax laws were presented to or decided by the Court. The term "income tax" does not even appear in the text. It was a Social Security tax case.

-----"Then look at the graphs on the homepage of taxhistory.com and see if they accord with your belief."

Really? Is this what you're down to? You are using, as support for the argument that the gross amount of compensation you receive for personal services in 1913, or 1935, or 1937, or 2007, is not 100% INCOME, not 100% PROFIT, that is includible in gross income, a GRAPH on the homepage of taxhistory.com?

And "all dividends are nontaxable"? Please, John, let's stick to one delusion at a time. --Famspear

[Famspear]

Dear John: Another way to look at this that you seem to be trying to make the argument -- without having to commit to actually saying it -- that the "income" or "profit" amount is some LOWER NUMBER (or even zero) even when the GROSS amount of compensation is, say, $50,000, to use the example. Your hesitancy to come out and spell out your position seems to evidence the trepidation you feel because you can't find a statute or a case to support your theory.

Others have tried variations of the theory that somehow the "income" amount is a LOWER number than the gross amount of compensation. Again, it's an attempt to try to create new, magic meanings for words that have legal meanings already set before you were born.

John, I suspect you picked up most if not all of this garbage on the internet -- including (I presume) your apparent reference to the Steward Machine case, a case cited over and over by protesters. Tax protesters have passed this kind of stuff around since the mid 1970s, but the internet has made it worse.

You have yourself stuck head first in a rabbit hole, all the way to your waist. I understand that for ego and psychological reasons it's very difficult sometimes to admit you're stuck. --Famspear

[Famspear]

Dear Mr. Bulten: Or, stated another way, ask yourself what could possibly be the difference between "income derived from compensation" and "compensation" -- since you contend that the tax laws are imposed on one and not the other.

Show us a court case where "income derived from compensation" and "compensation" have been ruled to be different dollar amounts. --Famspear

[Famspear]

Dear Mr. Bulten: Oops, I see Grammarian44 has already asked you essentially the same question.

As usual, you've boxed yourself into a corner. C-R-E-D-I-B-I-L-I-T-Y, John. Everyone already knows that you're wrong. Now, show us some character. Stop trying to bob and weave. You look silly. You can tug and pull all day long, but you're on a very short leash, and everyone can see you. You aren't fooling anyone. --Famspear

[grammarian44]

Bulten, I just completed a search for cases from any period, including the period about which you are so concerned, for any case drawing a distinction between a tax on income from wages and a tax on income "derived from" wages. I can't seem to locate any. In fact, I find case after case in which income from wages and income "derived from" wages are assumed to be the same thing.

For example:

Olson v. Commissioner, 24 BTA 702.
Daugherty v. Commissioner, 24 BTA 531.
Nordholt, 4 BTA 509.


Maybe my research is weak. Can you cite a case for me that makes the distinction you are making?

Let me add that if you are the one making a legal distinction between two terms, it is not up to me or anyone else to show that the distinction does NOT exist. You made the claim that the distinction is important; therefore, it is up to you to support it. So support it. SHOW US THE LAW!

[Cpt Banjo]

Banjo, a little logic, please. You beg the question by assuming the theory is inane to start with.

This is beside the point. Your premise is that any position that hasn't been definitively ruled on by a court is an "untested challenge". It therefore follows that any theory that even by your own standards would be considered 100% wacko is nevertheless entitled to its day in court and that it would be incorrect to state that the theory is legally incorrect. Don't you realize how inane your position is?

And you faultily deduce that if some compensation is nontaxable, all dividends are nontaxable.

No, the issue is a simple one of reading the statute. If all that's includable in gross income under the statute is "income derived from wages, dividends, interest, rents, etc." and you read this as meaning that it's not the wages themselves that are includable but only the income derived from wages, then it must be the case that the dividends themselves aren't includable but only the income derived from them. A little logic, please.

[Quixote]

What all you reasonable people are failing to notice is that JB, true to his sophist philosophy, is playing word games. In common speech, the two phrases "pay for work is included in gross income" and "the income derived from pay for work is included in gross income" mean exactly the same thing. Technically, the two phrases do not mean the same thing (see below), but in the context of a discussion of a tax on income, reasonable people ignore the difference for the sake of brevity. JB knows that all of you are ignoring the difference, but is pretending that everyone is recognizing the difference. Notice that he dd not respond to my post in which I expressly recognized the difference and answered the question he should have asked if he intended it to be relevant to a discussion of the income tax, rather than the deliberately confusing one he actually asked.



Income is an increase in wealth (cf, the Haig-Simmons definition of income). Money is not income, but the receipt of money results in an increase in wealth. Pay for work is not income, but the increase in wealth resulting from that pay is income, the income derived from that pay. As I noted above, the distinction is commonly disregarded, because it is not usually relevant. When the distinction between money received and the income derived from the receipt of the money is relevant, we use concepts such as cost of goods sold and basis to make it clear that only the increase in wealth resulting from the exchange of goods for money is gross income.

[grammarian44]

What all you reasonable people are failing to notice is that JB, true to his sophist philosophy, is playing word games. In common speech, the two phrases "pay for work is included in gross income" and "the income derived from pay for work is included in gross income" mean exactly the same thing. Technically, the two phrases do not mean the same thing (see below), but in the context of a discussion of a tax on income, reasonable people ignore the difference for the sake of brevity. JB knows that all of you are ignoring the difference, but is pretending that everyone is recognizing the difference. Notice that he dd not respond to my post in which I expressly recognized the difference and answered the question he should have asked if he intended it to be relevant to a discussion of the income tax, rather than the deliberately confusing one he actually asked.



Income is an increase in wealth (cf, the Haig-Simmons definition of income). Money is not income, but the receipt of money results in an increase in wealth. Pay for work is not income, but the increase in wealth resulting from that pay is income, the income derived from that pay. As I noted above, the distinction is commonly disregarded, because it is not usually relevant. When the distinction between money received and the income derived from the receipt of the money is relevant, we use concepts such as cost of goods sold and basis to make it clear that only the increase in wealth resulting from the exchange of goods for money is gross income.

To say, "Technically, the two phrases do not mean the same thing" is to give the impression that there can be some final sense in which the "true meaning" of the two phrases is once and for all different. The only thing that really matters is whether, for purposes of the imposition of an income tax on wages, salaries and other compensation, the distinction has ever been treated as meaningful. And it hasn't.

Sure, the distinction is relevant for purposes of separating out, for example, COGS, but we do that only because a deduction is allowed for COGS, and as everyone knows, deductions come after computation of income. Likewise, we subtract basis from the amount of money or FMV of property received in exchange for property separately from the computation of gross income only because there is a separate statute that lets us do that. The reduction is not built in to the definition of income; it is a separate step.

If there were a statute that said, "The amount of gross income received from wages and other compensation shall be reduced by the amount of any expenditure by the taxpayer in earning those wages"--or words to that effect--then and only then would the distinction Bulten is making resemble the legitimate distinction you are making. But there is no such statute. And even if there were, it wouldn't change the fact that gross income would include the full amount of wages, salaries, and other compensation.

[LPC]

I'm here for the humor pursuit since nobody here wants to join me in truth pursuit:

http://quatloos.com/Q-Forum/viewtopic.php?t=348&start=0

Of course, Mr. Dolten has never responded to the TRUTH in the sixth message in that thread:

Are they 61 gross income for some reason other than 3401?

Not only did you not read the thread, but you didn't even read the entire message you quoted from, because you overlooked the most important legal issue:

The question is how you can use a definition from section 3401 to affect the meaning of section 61 when section 3401 specifically states that its definitions are ONLY for the purposes of section 3401 and its related sections, of which section 61 is not part.

[LPC]

To my knowledge taxpayers have made this argument in exactly 3 cases, and each time the court ruled that some other argument was incorrect

Uh, John - when you make an argument and lose the case, that means your argument lost.

Correct, but too subtle.

The simple statement "Liar!" is more likely to be understood.

He will never understand why he is a liar, so there is really no point in even trying to explain it.

[grammarian44]

Until 1935, there was no taxation of pay for labor to object to! The first objection was the 1937 Davis cases, but the USSC permitted the tax: because it only applied (rightly or not) to pay which the worker elected voluntarily as covered SSA "wages".

Then, John, can you please explain what was going on in the following cases?

Thomas v. Commissioner, 30 B.T.A. 725 (1935);
Wright v. Commissioner, 29 B.T.A. 1267 (1934);
Freuauff v. Commissioner, 30 B.T.A. 449 (1934);
Walls v. Commissioner, 21 B.T.A. 1417 (1931);
Crowell v. Commissioner, 21 B.T.A. 849 (1930);
Niles v. Commissioner, 20 B.T.A. 949 (1930);
Jones v. Commissioner, 6 B.T.A. 1048 (1927); Gordon v. Commissioner, 5 B.T.A. 1047 (1927);
Schock v. Commissioner, 1 B.T.A. 528 (1925).

In each of these cases the petitioner asserted that his wages were not taxable for some reason. In each case, the Commissioner asserted that the wages were taxable. In each case, the taxpayer lost. In each case, the court concluded that the wages were taxable by virtue of their being wages, not in virtue of their being any income "derived from" wages. In each case, the relevant statute of the day--which taxed "income derived from wages"--was cited to support the holding. In each case, there was no successful appeal to a higher court.

I could easily have added dozens of cases to these citations.

Now I'm still waiting for one citation that draws a distinction between the tax imposed on "income derived from wages" and a tax imposed on wages.

Got one for me?

[Famspear]

Still holding -- my breath -- waiting -- for -- Bulten -- to -- come up with ci -- tation to -- court case -- something -- anything -- that supports -- his position -- turning blue -- don't know -- how much -- longer -- can keep -- holding breath -- like this -- turning -- purple -- got to -- hold on -- just know Bulten -- will -- aaahhhagggg ! (clunk).

[Neckbone]

"All you have to do is find a court decision where a taxpayer made the argument you are making and THE COURT RULED THAT THE TAXPAYER WAS CORRECT. An impossible task? Yes. You lose." To my knowledge taxpayers have made this argument in exactly 3 cases, and each time the court ruled that some other argument was incorrect (there may be more such cases). Now ordinarily, when a tax position in itself has not been ruled on by any court, this is not proof of some LPC claim like "You lose", but accepted as an untested challenge to be ruled on in due time.

"The Federal income tax laws have been imposed on compensation for personal services pretty much continuously since 1913." No, they were imposed on income (profit) derived from compensation.

"Why can't YOU find a court case from the old days where some taxpayer said, 'Hey, this isn't right?'" Until 1935, there was no taxation of pay for labor to object to! The first objection was the 1937 Davis cases, but the USSC permitted the tax: because it only applied (rightly or not) to pay which the worker elected voluntarily as covered SSA "wages". In 1943, federal withholding was applied to another similar definition of "wages" and was touted as a voluntary patriotic duty by Donald Duck, and no one dared take this tax to the same USSC during its short-lived wartime appearance. By the Baby Boom, most everyone was paying tax on pay for labor because they had become convinced it was "wages" under both of those laws. The "wages are not income" argument dates back to this period (what arguers really meant was "earnings are not necessarily income"), but the courts rightly held it's frivolous as stated; if you admit it's statutory "wages", it's income. But nobody stopped to develop the point that the definition of "income derived from compensation" had never changed, and by the time they did, the machinery was in place to retain the confusion.

So, either the definition DID change, or pay for work was NOT taxable afterward any more so than it was before. When the two "wage" taxes were enacted, they could only create surtaxes on statutory "wages" which (being "income") should already have been subject to the normal tax. It was impossible for the "wage" taxes to truly create the new class of taxpayer-laborers without changing the scope of "income derived from compensation".

"So, how come essentially nobody noticed for 60 or 70 years that the Federal income tax was being 'applied incorrectly'?" Because, as Jefferson said to Kercheval, we had to work for 16 hours, turn over the pay of 15 of those to the government (recall the 90% tax cap?), and in the 16th have no time to call the mismanagers to account.

Here's the key questions again, which you haven't answered. (You continued to harp on my wording, perhaps you didn't notice I changed it.) My first request is for you to show any case from the 1910s where pay for work was authoritatively held to be income in itself. (BTA is just one potential source for such proof.) My second request is for you to show any statutory change in the meaning of "income derived from compensation".

"In 1913, the total amount derived BY A U.S. INDIVIDUAL from salaries, wages, or compensation for personal service of whatever kind and in whatever form paid was includible in the gross income of that individual for Federal income tax purposes." Do you mean that compensation is gross income? Or does the law mean (as I believe) that "income derived from compensation" is gross income?

John:

You're making the same tired argument Mr. Wendel used to make. The income tax is not on the source listed in Sec. 61 itself, the tax is only levied on the income (which you describe parenthetically as "profit") derived from the named source. If you're correct, perhaps you can explain what taxable income is derived from interest, alimony, rents, or discharge of indebtedness? I guess under your theory, you only pay income tax if you invest and earn interest (could that be the "profit" you refer to?) on the rent, alimony or interest you receive, right? But wait, that can't be correct, because you only pay tax on income derived from interest (one of the named sources), and if you invest your rent, alimony or interest and derive interest from the invested source is the interest so derived taxable? Well, I guess it is, or maybe not because it happens to be interest which is one of the named sources. But wait again, you derived interest (one named sources) from alimony, rent and/or interest (also named sources) so it must be taxable, right? John, I really am confused. How does it work in your world? And while you're at it, explain how one derives income from discharge of indebtedness (another named source). How does one invest discharge of indebtedness?

Aside to LawProf: The tax protesters' favorite lawyer, Larry Becraft, wrote a pretty good article called "Destroyed Legal Arguments". You can read it here: http://home.hiwaay.net/~becraft/deadissues.htm. Even Becraft thinks the all caps argument is stooooopid. Becraft also discusses the UCC nonsense and a few of the truly wacky flag-fringe style arguments. Dan Evans (LPC on this site) also does a great job destroying many of the TP arguments in his tax protester faq. http://evans-legal.com/dan/tpfaq.html. Good to have you aboard. Now if we can only get SteveSy to come back from vacation or wherever, we may have a fun Quatloos summer.

Neckbone