The last statement is wrong.stija wrote:On top of that i never said that incorporating in Delaware makes the corp not liable. WHOEVER assumed this does not understand how the code works. The tax is levied on the activity and measured by the income.
From the Tax Protester FAQ:
To try to support their nonsense, tax protesters frequently try to rely on the following quotation:
Congressional Record of 3/27/1943, page 2580.“The income tax is, therefore, not a tax on income as such. It is an excise tax with respect to certain activities and privileges which is measured by reference to the income which they produce. The income is not the subject of the tax: it is the basis for determining the amount of the tax.”
Although this language appears in the Congressional Record, it is not a quotation from any Senator or Representative, but from a paper written by a lawyer named F. Morse Hubbard, who was formerly an employee of the Treasury Department. It is not clear whether any Senator or Representative agreed with Hubbard, or relied on his opinion.
Hubbard’s opinion in 1943 (30 years after the ratification of the 16th Amendment and the enactment of the first income tax under that amendment) about the nature of the income tax is flatly contradicted by a statement in 1913 by one of original authors of the income tax:
Representative Cordell Hull, Cong. Rec. (8/5/1913) (reprinted in Foster’s Income Tax.)“Under the proposed measure income is both the subject and the measure of the tax.”
Cordell Hull (1871-1955) was a recognized expert in tax, commercial, and fiscal policies, and would have known what he was talking about. He served in Congress from 1907 to 1931 and served on the House Ways and Means Committee for eighteen years, where he was one of the principal authors of the income tax provisions of the 1913 Tariff Act, along with the Revised Act of 1916, and the federal estate tax that was enacted in 1916. (He was also elected as a U.S. Senator in 1931, but resigned in 1933 when President Franklin D. Roosevelt appointed him to serve as Secretary of State, a position he held for 12 years, which is the longest term in U.S. History.)
That Hubbard was wrong in his 1943 opinion is clear from the following footnote to the paragraph quoted above:
Memorandum, note 4.“If the tax should be construed as a tax on income as a specific fund the disappearance of the fund before the date of assessment would prevent the collection of the tax. (See Foster and Abbott, op. cit., p. 85.)”
Hubbard seems to have been laboring under the misconception that, if Congress imposed a tax “on” income, and if the taxpayer spent the income before Congress could collect the tax, then Congress would be unable to collect the tax at all. But that is nonsense. As noted elsewhere, it is perfectly clear that the taxpayer who earns the income is personally liable for the tax, and I.R.C. section 6321 even imposes a lien for the amount of any tax that is assessed and unpaid on all of the property of the taxpayer, not just the income itself. So Hubbard’s semantic hair-splitting was completely unnecessary.
Hubbard also clearly believed that a tax measured by income would be an “income tax,” stating (for example) that the Corporate Tax Act of 1909 “was really an income tax.” But the Supreme Court flatly disagreed:
U.S. v. Whitridge, 231 U.S. 144, 147 (1913).“As repeatedly pointed out by this court, the corporation tax law of 1909 ... imposed an excise or privilege tax, and not in any sense a tax upon property or upon income merely as income.”
Stratton’s Independence Ltd. v. Howbert, 231 U.S. 399, 414 (1913).“As has been repeatedly remarked, the corporation tax act of 1909 was not intended to be and is not, in any proper sense, an income tax law.”
Anderson v. Forty-Two Broadway Co., 239 U.S. 69, (1915).“As has been repeatedly pointed out by this court in previous cases [citations omitted] the act of 1909 was not in any proper sense an income tax law, nor intended as such, but was an excise upon the conduct of business in a corporate capacity, the tax being measured by reference to the income in a manner prescribed by the act itself.”
So Hubbard was wrong about the Corporate Tax Act of 1909 being an “income tax.” What about the idea that the income taxes enacted following the ratification of the 16th Amendment are not taxes “on” income but taxes on “certain activities and privileges”? The Internal Revenue Code does not identify any “activity or privilege” being taxed other than the receipt of the income itself. And the Supreme Court has confirmed that it is the realization (or receipt) of income that creates a tax liability:
Helvering v. Horst, 311 U.S. 112, 115 (1940).“From the beginning the revenue laws have been interpreted as defining ‘realization’ of income as the taxable event rather than the acquisition of the right to receive it.”
To summarize, Hubbard’s characterization of the income tax is based on a faulty premise, is contradicted by one of the authors of the first income tax, and is inconsistent with the opinions of the Supreme Court. There is no getting around the fact that Hubbard was simply wrong.
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