Cracking the Code scam & illegal income

[Famspear]

Over at lost horizons, a user named “Viking” has created a new thread, “Is this ‘privileged’ income?"

His first post is as follows:

Gift taxes.
And the income tax applies to income received from illegal activities such as embezzlement, drug dealing, and extortion, which are the direct opposite of governmental privileges.

http://www.losthorizons.com/phpBB/viewt ... d8b#p30459

Of course, the federal gift tax is not an income tax; it’s a tax imposed on the “transfer of property by gift” (IRC section 2501(a)(1)). And there is no requirement that the transfer be connected to the exercise of a federal privilege.

But Viking raises the troubling specter -- for followers of Pete Hendrickson's Cracking the Code tax scam -- of the federal income tax on illegal income – that is, on income from illegal activities.

Clueless crackhead “JHV” responds:

Viking, remember that any time you see the word income it is exclusively the result of exercising federal privilege or prerogative. There is no such thing as unprivileged income.

That, of course, is blatantly false. As used in the Constitution and the Internal Revenue Code, the term "income" is not exclusively the result of exercising federal privilege or prerogative, and Hendrickson has never cited a court decision that says otherwise.

And, here’s the clincher, from “BrainySmurf76”:

Hey JHV can you elaborate some on what was going on with Al Capone? I have seen many try to justify paying taxes using the statement seen above "tax applies to income received from illegal activities". Was it just a misinformed jury in Al's case? I'll look into it more but don't see how not paying a tax from illegal activities is even considered. The only crime should be the illegal act itself, not the gain from that illegal activity.

Again, false. Capone was convicted of federal tax evasion in connection with his criminal activities. Almost by definition, there is no federal privilege to engage in a criminal activity. As noted over and over and over and over again, the U.S. Supreme Court has ruled that amounts received in a criminal activity are included in the gross income of the wrongdoer recipient, even though the funds or other property received are not his, and even if he is later required to return them to their rightful owner. See James v. United States, 366 U.S. 213 (1961); and Rutkin v. United States, 343 U.S. 130 (1952).

[Famspear]

Now, user "stein51" offers his theory:

Prohibition via constitutional amendment was a grant of power from the people to the Feds in regards to alcoholic beverages (AB's). Importing, producing or selling AB's was now a privileged activity that was illegal to engage in. Should one engage in these prohibited activities a punishable crime is committed and any money earned as a result of the exercise of the prohibited privilege is taxable. Just because it's illegal to do the deed doesn't eliminate the chance of infliction of double judgement through the operation of excise taxation.

(large font added).

Oh, so now we have the concept of the "prohibited privilege."



Let me get this straight: The people of the United States of America supposedly converted non-privileged activities (the manufacture, sale, or transportation of intoxicating liquors within the United States, the importation of same into the United States, or the exportation of same from the United States, etc., for beverage purposes) into federally privileged activities -- by ratifying a constitutional amendment that PROHIBITED the very same activities?



S-T-O-O-O-O-P-I-D.......

[Gregg]

The imposition of widespread income tax and prohibition are in fact linked. Before income tax, most of the Federal Government's revenue was in fact from tax on distilled spirits. Prohibitionist, realized that it was financially impractical to do away with this revenue source and through the National Anti Saloon League (whose roots were in Ohio) they began to also support the income tax movement as well as the Women's Suffrage movement, which was also largely a dry movement.
All the prior prohibition organizations had been successful on a local basis but not until the National Anti Saloon League that the movement gained national political influence.

There, that's today's prohibition minute for you...

And for the record, none of the evidence in Al Capone's tax evasion trial had the slightest whit to do with bootlegging, the income in question was from gambling. The relevant evidence was the establishment that he in fact had X amount of income, on which he paid no income tax.



a good site about the trial...http://www.myalcaponemuseum.com/id146.htm

[fortinbras]

Before income tax, most of the Federal Government's revenue was in fact from tax on distilled spirits.

I am inclined to disagree. Prior to the 16th Amendment, the primary source of revenue for the federal govt was tariffs. US tariffs on imports triggered retaliatory tariffs on US goods by other countries. The first income tax law under the 16th Amendment spent about a quarter of its bulk repealing or slashing a long long list of tariffs and duties on imports. As a result of cutting its tariffs, other countries dropped their tariffs on US goods - which was a major factor in the US becoming an international trade giant.

[Pottapaug1938]

Before income tax, most of the Federal Government's revenue was in fact from tax on distilled spirits.

I am inclined to disagree. Prior to the 16th Amendment, the primary source of revenue for the federal govt was tariffs. US tariffs on imports triggered retaliatory tariffs on US goods by other countries. The first income tax law under the 16th Amendment spent about a quarter of its bulk repealing or slashing a long long list of tariffs and duties on imports. As a result of cutting its tariffs, other countries dropped their tariffs on US goods - which was a major factor in the US becoming an international trade giant.

The Federal government still took in a fair amount of money from sales of alcohol (including beer). A recent book on Prohibition (sorry -- I can't remember the name) noted that the advent of the income tax allowed the Federal government to allow the advent of Prohibition without crippling its revenue stream.

[Gregg]

Before income tax, most of the Federal Government's revenue was in fact from tax on distilled spirits.

I am inclined to disagree. Prior to the 16th Amendment, the primary source of revenue for the federal govt was tariffs. US tariffs on imports triggered retaliatory tariffs on US goods by other countries. The first income tax law under the 16th Amendment spent about a quarter of its bulk repealing or slashing a long long list of tariffs and duties on imports. As a result of cutting its tariffs, other countries dropped their tariffs on US goods - which was a major factor in the US becoming an international trade giant.

The Federal government still took in a fair amount of money from sales of alcohol (including beer). A recent book on Prohibition (sorry -- I can't remember the name) noted that the advent of the income tax allowed the Federal government to allow the advent of Prohibition without crippling its revenue stream.

I think I read the same book. And fortinbras, you may be right about the majority of taxes being from tariffs, but the whiskey tax was a big chunk. Big enough that losig it without some replacement wasn't viable. The effect of cutting tarifs was also as you described, a major realignment of the USA as an economic power.

[LPC]

The imposition of widespread income tax and prohibition are in fact linked. Before income tax, most of the Federal Government's revenue was in fact from tax on distilled spirits. Prohibitionist, realized that it was financially impractical to do away with this revenue source and through the National Anti Saloon League (whose roots were in Ohio) they began to also support the income tax movement as well as the Women's Suffrage movement, which was also largely a dry movement.

There's a book somewhere that makes that same point, which is that the success of the prohibition movement was that it was able to tie itself to other causes.

I may be thinking of "Last Call: The Rise and Fall of Prohibition Paperback" by Daniel Okrent.

[LPC]

Clueless crackhead “JHV” responds:

Viking, remember that any time you see the word income it is exclusively the result of exercising federal privilege or prerogative. There is no such thing as unprivileged income.

I'm not sure what to call this kind of crap, by which morons get the result they want by re-defining words to make their square peg ideas fit into the round holes.

"Self-fulfilling tautology" is all I can come up with at the moment, but there should be a better way to describe it.

[The Observer]

"Self-fulfilling tautology" is all I can come up with at the moment, but there should be a better way to describe it.

Lie? Bulls%#@?

[grixit]

Christian theologians have a word: exegesis. It refers to the analysis of text to extract meaning. But when someone is misusing the technique to inject a meaning instead, it is called eisegesis. Sov scholarship is all about the eisegesis. See also, "The Great Cipher".

[Famspear]

"Self-fulfilling tautology" is all I can come up with at the moment, but there should be a better way to describe it.

Lie? Bulls%#@?

Prevaricatin' Pete and his followers run into this problem from time to time. Pete constructed this preposterous nonsense about the federal income tax being tied to the exercise of a "federal privilege" based in part on what other fraudsters before him had already litigated unsuccessfully. Part of Pete's problem was that he started with a result -- the desire to prove to himself and others that the Federal income tax was being incorrectly applied -- and, with his limited knowledge, worked backward to construct the phony underlying theory that he felt would "support" his phony conclusion.

I don't think he ever thought about the implications of what he constructed. I did a quick scan of the PDF copy of Cracking the Code that he made available on his web site. I may have missed it, but I see no explanation of why other indirect taxes -- such as the federal estate tax and the federal gift tax -- would be considered taxes imposed in connection with the exercise of a "federal privilege."

For example, if you die with $100,000,000 in cash and you leave it all to your son, how is the resulting federal estate tax somehow supposedly tied to the exercise of a "federal privilege"? If Hendrickson thought about it, he would be forced to either (A) come up with some phony rationalization to the effect that there's a federal privilege "in there somewhere", or (B) come up with the phony rationalization that the federal estate tax is not being properly "applied."

I'm not sure, but think I might have seen Pete make a half-hearted, inept attempt to address this problem of the federal income tax on illegal income somewhere on his web site a long time ago.

Because of his lack of training and experience, his amateur status with respect to the study of law, and his pathological, overwhelming desire to reach an intellectual goal that is beyond his capacity, Pete simply was not able to anticipate many of the logical problems with his nonsensical theory when he published it. Over the years, he has thus been forced to "add on" to it -- to construct one phony rationalization on top of another, rather like pasting band-aids on a gushing, mortal wound.

As shown above, his followers do the same thing -- simply making up new theories as they go, in attempts to try to plug the holes in their "logic". In their topsy-turvy, Alice in Wonderland-looking glass world, an "explanation" is potentially acceptable if it seems to help prop up the phony "structure" that is the Cracking the Code theory -- no matter how silly.

[.]

like pasting band-aids on a gushing, mortal wound.

PH has apparently not figured this concept out, after even two felony convictions. His idiot followers will never get it.

Go for it. 3 government hots and a government cot. Ironic. But is it privileged?