Crackhead asking dangerous questions

[Famspear]

Losthorizons poster "freeme" writes:

Is it correct that before the Victory Tax, only those receiving money from federally privileged activities paid "income" tax?

And, if so, how can I document that?

freeme

http://www.losthorizons.com/phpBB/viewt ... 9a06#26917

After a few commments by other posters, SkankBeat chimes in:

Did you try reading CTC [Cracking the Code, the tax scam book by federal prison inmate Peter E. "Blowhard" Hendrickson]? I think it is mentioned in there, something like 3% prior to 1939. Keep in mind there was more going on than just the victory tax to roll out the income tax scam to the masses. Things really started picking up speed with the social security act of 1935.......

"Freeme" responds:

Yes, I have been through CtC multiple times, and, according to Pete, the percentage prior to the Victory Tax had gone as low as 3%.

I also understand about the groundwork.

What I am trying to find out is whether or not those who were paying prior to the Victory Tax were paying based upon federally privileged "income."

Uh-oh!



Don't even go there, "freeme."

Then, "freeme" writes:

I found this on the site below:

"Prior to World War II, no one outside the government paid income tax; the people were, and understood themselves to be, immune from that tax. During WWII, Congress passed the Victory Tax (56 Stat. 884) to impose an income tax on every individual in The United States of America, something which had not been done by any previous income tax act."

http://www.constitution.org/tax/us-ic/h ... orytax.htm

Is this true?

And, if it is, can it be documented?

freeme

Freeme is in dangerous waters now.

No Crackhead has ever responded to my challenge about the federal tax cases in the 1920s and 1930s, which I have posed repeatedly. The challenge is: If, as Peter Hendrickson claims, the federal income tax is imposed only on earnings received in an "activity" in connection with the exercise of a "federal privilege," how do you explain the court cases in the 1920s and 1930s where taxpayers who clearly were engaged in activities NOT connected to a federal privilege -- and these were the taxpayers making the big bucks with the heavy duty tax lawyers -- how do you explain why there is NO RECORD of any of these taxpayers ever raising the "federal privilege" argument in cases before the Board of Tax Appeals?

Freeme is in dangerous territory because, as far as I can tell, no Crackhead has ever thought to try to research the tax cases back in the 1920s and 1930s.

One of Blowhard Hendrickson's lies, if I recall correctly, is that in those olden days from 1913 to about the 1940s, everybody somehow "knew" that the federal income tax somehow applied ONLY to "income" connected to a federal privilege.

Yet, we know that no one with private sector income ever raised the "federal privilege" argument in court back then, despite the fact that the people paying the taxes were the people most likely to KNOW THE LAW and most likely to be able to afford tax lawyers.

Gee, I hope "freeme's" questions don't lead to some uncomfortable discoveries over there......

[fortinbras]

This guy's entire argument begins with a false premise. The income tax under the 16th Amendment was NEVER confined to govt employees. From the very beginning it was intended to be as broad as possible in application. The earliest income tax litigation shows that it was applied to non-govt people in an enormous variety of situations.

If it had been intended to be imposed only on civil servants, the Amendment would not have been necessary; just a provision in the civil service laws trimming back the take-home pay. But the demographic of civil servants was very small in 1913. It's too much like a perpetual motion machine to imagine that govt thought it could keep running by taking just a bit from only the persons it was paying.

[Gregg]

Personally I would think that up until the 1940s, government salaries being what they were and the tax tables at that time, that hardly any government employees made enough money to actually owe any income tax. Originally, IIRC, it was a tax on the rich that didn't effect most normal people, not because they were exempt for any reason, but because they just didn't make the kind of money you had to in order to owe anything. I think the 3% figure, if true, (and being from Pete that's a big if) tends to support my assumptions on that.


And in the greater scheme of things, it's still in large part only a tax on the rich (relative to world history). One of the things I sometimes rant about is that there's not a lot of poverty in this country. Our poor people have cell phones, cable TV, and are more often than any rational reason explains obese. Until about 200 years ago being obese was almost in itself evidence of some wealth, the "middle class" in the middle ages meant you were living above malnutrition. And to this day in the US, more than half the population doesn't pay any income tax, and the half that does etc.... we know the stats on that.

[jg]

The simple fact that the exemption amount was large enough in the past to preclude most individuals from having any tax liability (or even a filing requirement) is confused by tax deniers to mean that the tax was not imposed on those taxpayers.

In a practical sense it is true that the income tax was not imposed on individuals when the exemption amount was large relative to individual income; but that does not mean that those individuals had been not subject to the income tax law. It simply means that the application of the law was less burdensome at that time.

http://taxhistory.com/ is provided as an asnwer to freeme and it claims:

To this end, from 1913 to 1939 the Federal Income Tax was strictly imposed upon commercial net income and the personal exemption allowance did prevent the indirect tax from operating directly upon the life of the person receiving the income. However, that all changed in a matter of five years. The Revenue Acts of 1940 to 1944 not only created millions of new "individuals (single owner entities)," but also forever changed the intent of the income tax system. No longer would the tax fall strictly on commercial net income, nor would the personal exemption insulate the human person from the effects of the income tax operating directly upon their lives. No longer would the tax be upon "wealth, not want; accumulated possessions, not consumption" as envisioned by those that wrote the law. No longer would the tax be imposed strictly upon the surplus wealth of our country, for after all, even those of meager means owes something to their federal government, even if it takes away their ability to support themselves or their families.

The intent of the income tax law (which is revenue generation) was not changed. The application was changed to generate more revenue.

Even if an original intent to apply the tax to relatively few individuals was changed, that would be the prerogative of the legisalture at the time of the change. We may not agree and wish to change their application; but that does not invalidate the law as it was written. The law was written to allow application to all individuals and that later expanded application is valid under the law.

The site above goes on to try to distinguish income of individuals from other sources of income but it is a distinction without a difference in regard to the inclusion of income subject to the income tax.

Of course, the site referenced to attempt to placate freeme does not support the nonsense that federal privilege (whatever that may be) is the basis for including or limiting what income is subject to the income tax.

[Gregg]

The whole garbage argument of some federal privilege is just a crock anyhow. Several of the biggest and loudest crackheads have been Pilots (tell me how giving you a commercial pilot certificate so you can earn a living flying planes is not a federal privilege) at least one is in fact a Government Employee (local, not federal, which means he works for the only local government I ever have heard of that doesn't take any federal funding) one the most active posters now is a guy who works for a non profit and he went through the motions of due diligence to find that it was X % funded by the federal government, but rationalized to himself that HIS pay wasn't coming out of THAT part of their funding....

They are at heart liars and cheats who start with the "I don't want to pay my taxes" and then write a collection of strung together out of context and downright crazy quotes, laws, theories and conclusions to justify their greed. They often whine, especially when getting their backsides handed to them in courtrooms, that the tax laws are "too complex for any normal person to understand" when the body of dreck they create to avoid admitting the common sense meaning of the word "includes" is more voluminous and complex than the tax code itself, and the grammar is a lot worse too.

[Las]

Wasn't one of the first court cases arguing that the 16th amendment did not apply to them occur a couple of years after its ratification and involved a woman and income taxes owed on stock dividends she received?

I am pretty sure it has been mentioned on this board too.

Would that fit the example of a non-federal related activity being taxed, and being one of, if not the first post 16th Amendment federal income tax cases?

That is assuming I remembered things correctly......

Ya, that's Eisner v. Macomber.

That and Old Colony Trust (1929) were (I think) about the first cases read in Federal Income Taxation (entry-level income tax law class.) Anyway, they were both before WW2 so it's absurd that anyone would argue that everyone knew that the income tax only applied to federal employees.

edit: made a mistake in first post.

[jg]

One of my favorite earlier cases that flies in the face of tax denier nonsense about prior tax law not applying to individual's earninigs or the imagining of a requirement that there is a federal privilege is UNITED STATES v. SULLIVAN, 274 U.S. 259 (1927)

Mr. Justice HOLMES delivered the opinion of the Court.

The defendant in error was convicted of willfully refusing to make a return of his net income as required by the Revenue Act of 1921, Act Nov. 23, 1921, c. 136, 223(a), 253 (42 Stat. 227, 250, 268 (Comp. St. 6336 1/8 kk, 6336 1/8 v)). The judgment was reversed by the Circuit Court of Appeals. Sullivan v. United States, 15 F.(2d) 809. A writ of certiorari was granted by this Court.

We may take it that the defendant had sufficient gross income to require a return under the statute unless he was exonerated by the fact that the whole or a large [274 U.S. 259, 263] part of it was derived from business in violation of the National Prohibition Act (Comp. St. 10138 1/4 et seq.). The Circuit Court of Appeals held that gains from illicit traffic in liquor were subject to the income tax, but that the Fifth Amendment to the Constitution protected the defendant from the requirement of a return.

The Court below was right in holding that the defendant's gains were subject to the tax. By section 213(a), being Comp. St. 6336 1/8 ff, gross income includes 'gains, profits, and income derived from ... the transaction of any business carried on for gain or profit, or gains or profits and income derived from any source whatever.' These words are also those of the earlier Act of October 3, 1913, c. 16, section II, B (38 Stat. 114, 167), except that the word 'lawful' is omitted before 'business' in the passage just quoted. By section 600 (42 Stat. 285 (Comp. St. 5986e)), and by another Act approved on the same day Congress applied other tax laws to this forbidden traffic. Act Nov. 23, 1921, c. 134, 5 (42 Stat. 222, 223 (Comp. St. 10138 4/5 c-10138 1/5 e)). United States v. One Ford Coupe , 272 U.S. 321, 327 , 47 S. Ct. 154, 47 A. L. R. 1025;1 United States v. Stafoff, 260 U.S. 477, 480 , 43 S. Ct. 197. We see no reason to doubt the interpretation of the Act, or any reason why the fact that a business is unlawful should exempt it from paying the taxes that if lawful it would have to pay.
...

See http://caselaw.lp.findlaw.com/cgi-bin/g ... ol=259#264 for the full decision.

Imagining or convoluting that wages are not subject to income tax, or that the tax law was only applicable to an activity that involves a federal privilege (whatever that may be) when illegal income was within "gains or profits and income derived from any source whatever" is beyond being unsupported or unreasonable.

Of course, the scammers and gurus (such as Hendrickson) never bother to address these cases.

[Nikki]

I fail to comprehend why otherwise rational people pay so much attention to someone who's only qualification is his ability to beat his skank

[fortinbras]

If the income tax, pre-WW2, applied only to federally-paid income, why/how did Al Capone go to prison??

[LPC]

Wasn't one of the first court cases arguing that the 16th amendment did not apply to them occur a couple of years after its ratification and involved a woman and income taxes owed on stock dividends she received?

Merchant’s Loan & Trust Co. v. Smietanka, 255 U.S. 509, 518 (1921).

[Cpt Banjo]

Wasn't one of the first court cases arguing that the 16th amendment did not apply to them occur a couple of years after its ratification and involved a woman and income taxes owed on stock dividends she received?

Merchant’s Loan & Trust Co. v. Smietanka, 255 U.S. 509, 518 (1921).

I believe CKB is referring to Eisner v. Macomber, 252 U.S. 189 (1920). Smietanka involved that taxability of a trust that had income from sales of stock.

[Quixote]

If the income tax, pre-WW2, applied only to federally-paid income, why/how did Al Capone go to prison??

That's a whole 'nother conspiracy theory.

[Famspear]

If the income tax, pre-WW2, applied only to federally-paid income, why/how did Al Capone go to prison??

That's a whole 'nother conspiracy theory.

I really like the Al Capone question.



The one I keep asking followers of Pete Hendrickson (and so far I've never received a reply) is: Why did the fatcats, the high income earners, from 1913 forward into the 1920s and 1930s pay federal income tax on private-sector, non-federally privileged income? In all the cases at the Board of Tax Appeals (predecessor to the Tax Court), you see the high rollers fighting with the IRS about taxes. They win some, they lose some, but their hot shot tax lawyers never raise the "private sector" argument.

If it was common knowledge back then that private sector income wasn't taxable, why didn't anyone ever raise the issue in court when they were being forced to pay tax on their private sector income?

Nobody at losthorizons dot com wants to touch that question.

[Gregg]

Skankbeat is trying tyo mix logic and statistics, can anyone else spot the errors with this reasoning?

You might go to the library research desk with your question. They may know ways to find this information without too much hassle. I went to the law library to confirm an entry in the 1943 Federal Register regarding "employee". The internet does not have all informtion.

But if roughly 3% of the population was employed by the federal government, and roughly 3% of the population was paying the federal income tax prior to the automatic witholding scheme in the early 1940s, there can only be one conclusion. If the federal income tax applied to everyone, then you would have seen a greater number than 3% of the population paying the tax. You would have had the roughly 3% of the population employed by the federal government paying the tax, and then a significant number of those outside the government paying the tax. So you would have seen at least 4%, if not 25% or 50% or more cited as a number of those paying the tax.

But hopefully you understand what the IRC says. If the law only applies to federal privileged activity, then it would be redundant exercise to do a headcount. Why headcount for 1939? Why not headcount for 1935, or 1865, or 1991, or 2010? Doing a headcount today would be meaningless because most people who pay the tax are not liable for it.

How about, first, using the original Hendrickson quote (which is not a safe thing to do) we assume that before the war the number of people paying tax was as low as 3% so what about when it was, according to Hendrickson, as high as 8%. And as I have mentioned before, it's a pretty good bet that MOST federal employees didn't pay the tax during that period. they didn't make enough money. And this isn't just the clerks and congressmen we're talking about, during the 30's a significant number of government employees were in such lucrative positions as the CCC, WPA thousands working on projects of the TVA and who knows how many certified government jobs that paid next to squat, they surely didn't make enough to payu income tax, the jobs were in many ways a more porductive form of welfare.
But when you start with the answer and work your way back, it's important not to let the facts get in your way.

[LaVidaRoja]

You mean, like asking what percentage of the persons bring actions to the Board of Federal Tax Appeals were Federal employees during that same period?

[LPC]

But if roughly 3% of the population was employed by the federal government, and roughly 3% of the population was paying the federal income tax prior to the automatic witholding scheme in the early 1940s, there can only be one conclusion.

Yes, and if 3% of all Republicans are gay, and if 3% of all asteroids are in earth-crossing orbits, there can be only one possible conclusion, which is that the earth will end as a flaming Republican.

[grixit]

But if roughly 3% of the population was employed by the federal government, and roughly 3% of the population was paying the federal income tax prior to the automatic witholding scheme in the early 1940s, there can only be one conclusion.

Yes, and if 3% of all Republicans are gay, and if 3% of all asteroids are in earth-crossing orbits, there can be only one possible conclusion, which is that the earth will end as a flaming Republican.

Actually, the Flaming Republican is one of the featured drinks at certain discreet clubs just outside the Beltway.

[Imalawman]

The simple fact that the exemption amount was large enough in the past to preclude most individuals from having any tax liability (or even a filing requirement) is confused by tax deniers to mean that the tax was not imposed on those taxpayers.

In a practical sense it is true that the income tax was not imposed on individuals when the exemption amount was large relative to individual income; but that does not mean that those individuals had been not subject to the income tax law. It simply means that the application of the law was less burdensome at that time.

http://taxhistory.com/ is provided as an asnwer to freeme and it claims:

To this end, from 1913 to 1939 the Federal Income Tax was strictly imposed upon commercial net income and the personal exemption allowance did prevent the indirect tax from operating directly upon the life of the person receiving the income. However, that all changed in a matter of five years. The Revenue Acts of 1940 to 1944 not only created millions of new "individuals (single owner entities)," but also forever changed the intent of the income tax system. No longer would the tax fall strictly on commercial net income, nor would the personal exemption insulate the human person from the effects of the income tax operating directly upon their lives. No longer would the tax be upon "wealth, not want; accumulated possessions, not consumption" as envisioned by those that wrote the law. No longer would the tax be imposed strictly upon the surplus wealth of our country, for after all, even those of meager means owes something to their federal government, even if it takes away their ability to support themselves or their families.

The intent of the income tax law (which is revenue generation) was not changed. The application was changed to generate more revenue.

Even if an original intent to apply the tax to relatively few individuals was changed, that would be the prerogative of the legisalture at the time of the change. We may not agree and wish to change their application; but that does not invalidate the law as it was written. The law was written to allow application to all individuals and that later expanded application is valid under the law.

The site above goes on to try to distinguish income of individuals from other sources of income but it is a distinction without a difference in regard to the inclusion of income subject to the income tax.

Of course, the site referenced to attempt to placate freeme does not support the nonsense that federal privilege (whatever that may be) is the basis for including or limiting what income is subject to the income tax.

I don't have time to review that site in depth, but it looks like they're wrong a few points. I don't agree with their interpretation of the law prior to 1940. I wouldn't give the site the Quatloos seal of approval until I can check it out in more detail later.

[LPC]

I don't have time to review that site in depth, but it looks like they're wrong a few points. I don't agree with their interpretation of the law prior to 1940. I wouldn't give the site the Quatloos seal of approval until I can check it out in more detail later.

www.taxhistory.com definitely has an agenda. From the "about us" page:

This site is dedicated to resolving tax issues through education and the political process. The purpose of this site is to circulate a "PETITION FOR REDRESS OF GRIEVANCE" regarding the inadequency of the "Personal Exemption", as provided for under Subsection 151 of the Internal Revenue Code. The information provided within this site is taken from the Congressional Record of 1909-1913 and 1934-1944, and 1954. The Statistical Abstract of the United Stated 1918-1998, Supreme Court Cases, Federal Government web-sites and other documentation provided by government sources. This is not a tax protest. Our argument and complaint is that the "Personal Exemption" no longer represents a fair and adequate living, thereby making the "Income Tax" a direct tax upon life, not upon "Income".

Our arguments are based upon the following quotation taken from page 5679 of the Congressional Record of October 16, 1913. The author, "Judge" Hull, wrote the first "Income Tax" measure under the 16th Amendment and in his synopsis of the Revenue Act of 1913 he gave us this information:

"The statutory exemption of $3,000 is allowed for personal living or family expenses; however, this and other gross income for which special deductions are allowed by the law must be embraced in the return of gross income, and the commissioner of Internal Revenue will make these deductions when he assesses and computes the tax."

This statement has never been changed nor repealed, in fact, the Constitutional Amendment upon which it is based would prohibit the "Personal Exemption" from accomplishing anything less.

(Emphasis added.)

[LPC]

http://www.taxhistory.com definitely has an agenda. From the "about us" page:

Our arguments are based upon the following quotation taken from page 5679 of the Congressional Record of October 16, 1913. The author, "Judge" Hull, wrote the first "Income Tax" measure under the 16th Amendment and in his synopsis of the Revenue Act of 1913 he gave us this information:

"The statutory exemption of $3,000 is allowed for personal living or family expenses; however, this and other gross income for which special deductions are allowed by the law must be embraced in the return of gross income, and the commissioner of Internal Revenue will make these deductions when he assesses and computes the tax."

This statement has never been changed nor repealed, in fact, the Constitutional Amendment upon which it is based would prohibit the "Personal Exemption" from accomplishing anything less.

(Emphasis added.)

I has occurred to me that, under this "reasoning," the Social Security tax is unconstitutional because it is imposed without any "personal exemption" whatsoever.

(Yes, I realize that the impact of the FICA tax is blunted by the earned income credit, but the EIC is a relatively recent development, and the FICA was ruled to be constitutional back in the 30s or 40s.)

(And yes, I realize that Congress didn't need the 16th Amendment to impose taxes on earned incomes.)