SteveSy wrote:
Seems a little absurd to me everyone was for an amendment that would allow the government to tax their wages directly AND allow the government to directly seize it from their paycheck before they even got it, far exceeding any tariffs that were laid, without limit I might add.
I hate to be the one to break it to you (and I'm probably not the first, anyway), but the Sixteenth Amendment created no new power of taxation, remember? Isn't that the language tax protesters love to quote? Congress has had the power to tax wages directly AND to seize it from a paycheck since approximately the year 1789. No, I realize that the STATUTORY withholding provisions weren't actually enacted until probably well into the 20th Century - that's a separate point.
Who told you that the purpose of the Amendment was to allow the government to tax wages directly? And do you really not realize that Congress always had that power, long before 1913? How do you explain the fact that compensation for services performed by individuals were taxed to those individuals off and on from the 1860s to 1895, when the Pollock decision came down? And how do you explain the Supreme Court's language in Pollock to the effect that a tax on income from "employments" (compensation for services) was an excise, an indirect tax? Do you understand that NO FEDERAL COURT has ever ruled that the Congress does not have the power to impose an income tax on compensation for services, whether called wages or anything else? And how do you explain the Court's statement of its reason, in Pollock, for ruling the entire 1894 statute invalid? Hint: I am deliberately hiding the ball here.
SteveSy wrote:
Not to mention its a little absurd to tax a gain that you haven't even gained yet, it was never in your possession nor did you have control of it.
Steve, you're confusing the concepts of "money" and "income." Whether you physically receive 100% of the
money or not, a taxpayer using what is known as the "cash receipts and disbursements method of accounting" (which is something of a misnomer, actually) is taxed on the entire gross income amount received
or constructively received. It's called the doctrine of constructive receipt.
Further, taxpayers who instead use the accrual method (mainly corporations, partnerships, etc.) are taxed on income when the income is EARNED, which is not necessarily when the "money" is received.
There is absolutely no problem under Article I of the Constitution (or under the Amendment) with these kinds of treatments, whether the taxpayer is using the cash method or the accrual method.
SteveSy wrote:
More importantly its income derived, it's not just income in general. The intent was to tax gains and profits derived from something you had like investments or business. No one has yet to explain how you can derive an income from a wage and the wage be 100% income, its nonsensical to argue you can derive something into existence.
Steve, the only person here having difficulty with the concept seems to be you. "From whatever source derived" essentially means "from whatever source received."
In the text of the Amendment, the term "derived" is essentially an inflection of "derive" -- meaning "to get or receive (from a source)", per Webster's New World Dictionary of the American Language, p. 380 (World Publishing Co., 2nd Coll. Ed. 1978).
Now, go back and study the Pollock case.
SteveSy wrote:
You can derive an income from a wage by paying wages to someone which in turn grants you gains or profits or you can invest that wage and derive income from it but you can't derive $100 from $100, the two things must be different for "derive" to be appropriate.
No, Steve, that's nonsense. You derive (receive) income from a source. The source can be thought of as your employer, or the source can be thought of as the wage itself, but either way, your pseudo-intellectual contortions over these terms gets you nowhere from a legal standpoint.
No two things have to be "different." And nobody is arguing over whether you can "derive $100 from $100" except you.
If you agree with your employer to provide personal services for $1,000.00, and the employer withholds Federal income tax, Federal Social Security tax, and Federal Medicare tax of $326.50 and pays you only 673.50, your gross income in the form of wages is $1,000.00 under section 61(a). Nuttin' you can do about it.
Some commentators, including my first tax law professor in law school, have opined that the term "derived" as used in Eisner v. Macomber (which you or somebody else cited earlier) is indeed arguably used in a slightly different sense of "separated from." The stock dividend in Eisner v. Macomber was deemed not be be "income" essentially because the shareholder either had not actually received anything -- no part of the shareholder's investment in the corporation had been conveyed to the shareholder -- OR because nothing had been SEPARATED from the stockholder's interest. Either theory gets you to the same place. The stock dividend in Eisner v. Macomber was roughly analogous to a pure stock split where the corporation did not give the shareholder option of receiving cash. Essentially, instead of owning an interest in a pizza with, say 2 slices, the shareholder was deemed to be owing an interest in the same pizza with 4 slices. Instead of owning, say, 10 shares worth $30 per share, the shareholder owned 20 shares worth $15 per share. The size of the pie did not change, and the size of the shareholder's unrealized share of the pie did not change. Since none of the slices had actually been separated from the pizza, the shareholder had derived no income. This goes to the tax law concept of "realization" of income.
By contrast, if you buy a vacant lot for $100,000 in an arm's length transaction and, 5 years later you still own it when it's fair market value is $150,000, you have an UNrealized gain of $50,000 for Federal income tax purposes. There has been no realization event, no income tax event -- just an increase in value.
Steve, you are struggling with this stuff in part I think because you want to come up with the result you feel is logical or fair or desirable. That's not a healthy approach in my opinion.
I am curious about something, though. In studying tax protesters, I (and others) have heard this kind of argument before -- that somehow the "income" amount can be some amount LESS than the wage amount -- based on a variety of theories, all of them specious. In your particular case, what materials on the internet (or elsewhere) have you read that have helped you formulate your own version of this theory? (I am not trying to pick on you on this, I just want to know.)
"My greatest fear is that the audience will beat me to the punch line." -- David Mamet
