the truth does not fear investigation

[allclear]

Well..that's not my quote but I think its applicablility in todays world is fundamental.

Here's my problem guys/gals...and I need your help.

I must confess...I almost got hooked on the anti-tax protesting conundrum.

But I am hoping for someone to help me answer/refute some of the key arguments made by the anti-tax movement, since they are very compelling for those illiterate in the law. I am also surprised that this site can easily dismiss the arguments, but yet the site provides zero reference material or bibliographic representation for their position. If this site really is looking to assist people in knowing the truth, then maybe disapproving the primary arguments of the anti-tax movement is critical to establishing/affirming the correctness of the tax law.

God knows...the law is complicated. My primary beef is that laws should not be so overtly complex that a majority of layperson cannot understand them, or properly interpret them to avoid legal consequences. I realize that the world is very convoluted and complex, yet I believe this is done to benefit a few and to tilt the game against the layperson. Why is it that I must spend over a week on my taxes, not to mention the additional hours spent during the year for accounting and tax recordkeeping purposes, for a simple family business that brings in less than 100K a year?

Well, sorry to get off topic on my own subject. My bad.


Here are the compelling arguments, as I have heard them.

1. States never ratified 16th amendment.
2. Income is defined as a gain, and therefore standard wages do not fall under the definition
3. There were no federal income taxes (or others I'm assuming) prior to 1913 when the fed reserve bank was re-established
4. There is no law that states we must pay fed income taxes
5. All federal income taxes collected go to paying the interest on money borrowed from the fed.

I think that summarizes the main arguments.

Can anyone provide links, references, law citations, etc. that disputes these arguments. I guess if you want to convince people, you must show them the opposite side of the coin.

TIA. BTW - great site...glad I found it.

MIKE

[ASITStands]

Spend a little time here:

Tax Protester FAQ

Then ask some intelligent questions based on what you read. Not that the ones you ask are not intelligent but answers to every one will likely be found on the site above.

It will save us all some valuable time for your to familiarize yourself with the subject.

[Paul]

1. States never ratified 16th amendment.

IF that were true, then (according to the Pollock decision), Congress could impose an income tax on your business and wages of workers, but could not tax the rental income of landlords. So, if you are a landlord and believe the 16th Amendment wasn't ratified, stop paying tax on your rental income. Otherwise, keep paying the income tax. You can read Pollock yourself at:

http://caselaw.lp.findlaw.com/scripts/c ... &invol=429

2. Income is defined as a gain, and therefore standard wages do not fall under the definition

Silliness. Gain is the amount you receive for something minus what that something cost you. Your labor cost you nothing, so anything you receive for it is gain. You tell me where you found YOUR definition of gain, and we'll talk about it.

3. There were no federal income taxes (or others I'm assuming) prior to 1913 when the fed reserve bank was re-established

Historical ignorance. The first federal income tax was enacted during the civil war, and was upheld by the Supreme Court. A second one was enacted in 1894, and was held unconstitutional by the Supreme Court in Pollock (now, really go read that case, and note that it discusses the Springer case upholding the civil era war tax) because it taxed the rent from land, and was thus a direct tax, and was not apportioned as required by the Constitution of direct taxes.

4. There is no law that states we must pay fed income taxes

Section 6012 of the Internal Revenue Code says every individual with income exceeding the exemption amount must make a return, and Section 6151 says everyone who must make a return must pay the tax required to be shown on that return. Just go to http://uscode.house.gov/search/criteria.shtml and search "title" 26 and the section number, and you can see for yourself. You want more detail than that, we can talk about it.

5. All federal income taxes collected go to paying the interest on money borrowed from the fed.

Economic ignorance. Money is fungible. Once a dollar goes into a bank account, and gets mixed with all the other dollars coming in, you can't tell which dollar comes out.

Besides, the income tax brings in more than the interest paid by the government.

[wserra]

I am also surprised that this site can easily dismiss the arguments, but yet the site provides zero reference material or bibliographic representation for their position.

I don't know whom you are reading here, but many of us (including me) post citations every time we make a legal point. In any event, as ASITStands wrote, Dan Evans has put together an invaluable site which collects all of the authorities. Dan's specific answers to your questions, complete with citations:

1. States never ratified 16th amendment.

http://evans-legal.com/dan/tpfaq.html#ratification

2. Income is defined as a gain, and therefore standard wages do not fall under the definition

http://evans-legal.com/dan/tpfaq.html#exchange

3. There were no federal income taxes (or others I'm assuming) prior to 1913 when the fed reserve bank was re-established

I don't think Dan specifically addresses the point, so I will. (a) The first federal income tax was enacted in 1862. 12 Stat. 432. Please note the citation. (b) Even if you were right that the first federal income tax was in 1913, why would it matter?

4. There is no law that states we must pay fed income taxes

http://evans-legal.com/dan/tpfaq.html#liable
http://evans-legal.com/dan/tpfaq.html#file

5. All federal income taxes collected go to paying the interest on money borrowed from the fed.

Not so. But, if it were, what's your point?

Can anyone provide links, references, law citations, etc. that disputes these arguments. I guess if you want to convince people, you must show them the opposite side of the coin.

There ya go. Convinced?

[The Operative]

Welcome to Quatloos!

The others have answered your questions, but one was only briefly answered and I want to provide you some information.

5. All federal income taxes collected go to paying the interest on money borrowed from the fed.

The above conspiracy theory notion started with a misinterpretation of the Grace Commission report to President Reagan. In brief, the report really stated that a portion of income taxes were not collected. Another portion was used up in government waste. Finally, the rest went to pay interest on the debt. The report never says that interest goes to the Federal Reserve or that all income taxes go to the Federal Reserve. That contention is an obfuscation by anti-fed and anti-tax conspiracy theorists. To read the Grace Commission report, you can google it. Read the entire report though.

To completely debunk the statement, all it takes is a little knowledge about how the government borrows money. First, the government does not borrow money from the Federal Reserve. The government borrows money by issuing U.S. Treasury securities. These are T-Bills, T-Notes, and T-Bonds. These securities are sold at auction and anyone may buy them, even you. Since the government will not redeem these securities until their maturity date, the only method for a holder of these securities to get their money before that time is to sell them to someone else. This creates the secondary market. The secondary or open market is where the Federal Reserve buys and sells the Treasury securities it holds. This is also called Open Market Operations and is usually performed under the direction of the Federal Open Market Committee.
http://www.federalreserveeducation.com

BTW, this also debunks the misconception that China can ruin our economy by demanding payment on the U.S. Government debt China holds. Since U.S. Treasury securities cannot be redeemed until the maturity date, China cannot simply demand payment. China would have to sell the securities on the open market, just like everyone else. Additionally, China only holds about $500 billion or so and even if China dumped them all on the open market, it would only cause a temporary increase in interest rates.
http://www.ustreas.gov/tic/mfh.txt

Now, that I have briefly discussed one minuscule part of how the Federal Reserve works, let's look at the law. The Federal Reserve was created under Title 12 USC Chapter 3. You can read it at http://www4.law.cornell.edu/uscode/usco ... _10_3.html Under that law, earnings of the Federal Reserve banks are used to pay expenses and to pay a fixed dividend to the member banks of the system. Only national banks and some state banks may become members of the Federal Reserve system. Individuals, corporations that are not nationally chartered banks, foreign corporations and governments are not permitted to hold Federal Reserve stock. Once the expenses and dividends are paid, the surplus fund of the Federal Reserve district banks may be increased to equal the paid-in capital of the district bank. All other income is returned to the U.S. Treasury. This can clearly be seen on the independently audited financial statements of the Federal Reserve.
http://www.federalreserve.gov/boarddocs ... ec6/c3.htm

Looking at the annual report, the Federal Reserve collected approximately $40.3 billion in interest on U.S. Treasury securities in 2007. Of that amount, $34.6 billion was returned to the U.S. Treasury. Going back to income taxes, in 2007, the IRS collected approximately $1.16 trillion in individual income taxes alone. http://www.taxpolicycenter.org/taxfacts ... ?Docid=203 The government paid approximately $430 billion in interest on the debt in fiscal year 2007. http://www.treasurydirect.gov/govt/repo ... xpense.htm
Based upon all those numbers, it is obvious that income taxes go to more than just interest on the debt and that interest does not all go to the Federal Reserve.

[Gregg]

Gosh, that one's gonna leave a mark! Great answer!

Don't ya love it when some conspiracy theory tinfoil hat wearing guy brings up everything but the kitchen sink and "the phone company killed Kennedy" troll comes in and then gets his head handed to him?

[fortinbras]

Here are the compelling arguments, as I have heard them.

1. States never ratified 16th amendment.

This argument (like the others) has been tried and rejected in numerous court cases. Perhaps more significantly, none of the state legislatures that are counted as ratifying the Amendment have ever come forward to say that they didn't.

2. Income is defined as a gain, and therefore standard wages do not fall under the definition.

The definition that used "gain" was in a court decision regarding a business's income, not individual employees. From the very beginning, the 16th Amendment was interpreted as applicable to wages and salaries.

3. There were no federal income taxes (or others I'm assuming) prior to 1913 when the fed reserve bank was re-established.

The 16th Amendment was proposed by Congress in 1910, the Federal Reserve Act wasn't passed until 1913; their apparent congruence is only a coincidence. Prior to the 16th Amendment there were a number of federal taxes - including an income tax that was instituted during the Civil War - but, prior the 16th Amendment the federal govt's principal source of revenue was high tariffs on imports. This tended to trigger reciprocal behavior by the countries where we were hoping to sell stuff. The institution of the income tax in 1913 was in tandem with a major reduction of tariffs, which resulted in America becoming a major world commercial power.

4. There is no law that states we must pay fed income taxes.

Yes there is. In the Internal Revenue Code. Admittedly not easy to find.

5. All federal income taxes collected go to paying the interest on money borrowed from the fed.

Actually the Federal Reserve does not borrow -- its Federal Revenue Notes are backed by US Treasury bonds.

[Famspear]

Here are the compelling arguments, as I have heard them.

1. States never ratified 16th amendment.

This argument (like the others) has been tried and rejected in numerous court cases. Perhaps more significantly, none of the state legislatures that are counted as ratifying the Amendment have ever come forward to say that they didn't.

It is a testament to the gullibility of tax protesters that anyone would truly consider the Sixteenth Amendment non-ratification nonsense to be a "compelling" argument. As fortinbras just noted, if the 42 states that ratified the amendment (and it's 42 states, not 38 as reported in some government publications) didn't really ratify the amendment, then why has no one (outside of tax protesters) ever raised the "issue." I've always wondered how Bill Benson handled this in his "book" -- I assume he at least smart enough to come up with some sort of rationalization, but maybe I assume too much.

Another point that I and others have raised is: How come nobody raised the "issue" of the supposed non-ratification in a court of law? The non-ratification "theories" didn't even show up in reported court decisions until the year 1976, with the goofy "Ohio was not a state until the year 1953" version of the argument, in Ivey v. United States, 76-2 U.S. Tax Cas. (CCH) paragr. 9682, 38 Amer. Fed. Tax Rep. 2d 76-5909 (E.D. Wisc. 1976). The argument was rejected in that case, as it has been in every single case since. Then, there was a brief mention of a non-ratification argument in the case of Ex parte Tammen, 438 F. Supp. 349, 78-1 U.S. Tax Cas. (CCH) paragr. 9302 (N.D. Tex. 1977). In other words, back in 1913 nobody even thought to raise the supposed "issue" of the supposed "non-ratification" of the Amendment, and nobody mentions it in a court case until the year 1976, when a baby born on the day the amendment was ratified would have been 63 years old! Not only that, but the taxpayer in the Tammen case didn't actually raise the issue!

The next case after Ivey where a non-ratification argument was raised (this time the "Bill Benson" version of the argument) was in 1985 with United States v. House, 617 F. Supp. 237, 87-2 U.S. Tax Cas. (CCH) paragr. 9562 (W.D. Mich. 1985). In that case, Benson actually testified. Again, the argument was rejected in that case, as it has been in every single case since, without a single exception.

If the argument is so "compelling," how is it that no state official in the year 1913 ever came out and said, "Hey, wait, we never ratified that thing!"???

If the argument is so "compelling," how is it that no state official in any of the 42 ratifying states for the past 95 years has ever come out and said, "Hey, wait, we never ratified that thing!"???

If the non-ratification "argument" is so "compelling," how come nobody ever mentioned it in a court decision until 1976, some 63 years after the ratification?

If the argument is so "compelling," how is it that every court that has considered the argument from 1976 to the present day -- some 32 additional years -- has rejected it, in case after case after case?

[LPC]

Allclear, here are some other things you should mull over when consider "tax denier" arguments.

1. If their theories are so good, why is it people who actually pay a lot in income taxes never, ever, ever, ever use them? People with last names like Jobs, Gates, Perot, Buffet, Icahn,Winfrey, Stewart, Spielberg, Eisner, I could go on, but I think you get the point.

2. Secondly, if any of the "tax denier" thories actually held any water, how long would it take the IRS to issue a Revenue Ruling to close that loophole, or for Congrss to pass legislation doing the same?

I'm pretty sure I've told this story before, but I'm going to tell it again because I think it illustrates how little tax deniers understand how tax lawyers and Congress work.

In the 1980s, and lawyers for a taxpayer named Haffner made an argument that, if correct, would have created an enormous loophole in the federal estate and gift tax system. What happened to that argument is fairly illustrative.

1. Haffner won in a suit against the IRS in the District Court. See Haffner v. United States, 585 F. Supp. 354 (ND Ill. 1984). This had a lot of tax lawyers sitting up to take notice, but many lawyers were still reluctant to stick their necks out because the decision still seemed quirky and unreliable.

2. Haffner won on appeal to the 7th Circuit Court of Appeals. See Haffner v. United States, 757 F.2d 920 (CA7 1985). Now tax lawyers were all over this like flies on s**t. We were calling every existing and possible client we could think of to tell them about this loophole that had opened up.

3. The New York Times published an article about the loophole, and we all said a collective "oh s**t," because we knew that the proverbial cat was out of the bag.

4. Sure enough, just days after the article appeared in the NY Times, an amendment was introduced in Congress to a pending tax bill, and the amendment closed the loophole, retroactive to the date of the article appearing in the NY Times. The pending tax bill (with its anti-Haffner amendment) was eventually enacted as section 641 of the Deficit Reduction Act of 1984 (DEFRA), 98 Stat. 939.

5. It was then argued that section 641 was unconstitutional in some way, but the Supreme Court eventually made this all moot by ruling that the original Haffner decisions were wrong, and that the assets in question had always been subject to the federal estate and gift tax after all. See United States v. Wells Fargo Bank, 485 U.S. 351 (1988).

I believe that there are at least two lessons that can be learned from this example:

1. Lawyers are not out to "protect the system" but will in fact let their clients know about, and will act on, any argument that could let their clients avoid taxes. But the argument has to be a real argument that could succeed in a real court with a real judge, and not some tax denier BS.

2. Congress will act quickly and decisively to plug any real loophole that threatens tax revenues. Congress has not read "Cracking the Code" and has not acted to redefine "wages" and "employee" because it is clear that Hendrickson is an idiot, and his arguments are no threat to the tax system.