Some CTC highlights

[Dr. Caligari]

Those things listed in 26 USC 101-129.

And some others. The portion of gross receipts representing the cost of goods sold would not be income under the 16th Amendment whether or not Congress excluded it.

[Famspear]

so if everything that comes in is not income as in gross income what is not income?

Those things listed in 26 USC 101-129.

Various other provisions of the Internal Revenue Code exclude, from "gross income", various items that would otherwise be included in gross income. As noted above, see also 26 USC 130 through 139B.

More examples of provisions that effectively exclude certain items of income that would otherwise be part of "gross income": 26 USC 882(a)(2); 26 USC 882(b). I had to deal with these provisions a few months ago. (I think this is part of the batch of statutes that SteveSy thought he had "discovered" -- and cited to us -- in another thread several weeks ago.)

Another example of an Internal Revenue Code provision that excludes an item that would otherwise be included in gross income: 26 USC 911.

Some of the exclusions are not found in the Internal Revenue Code, but are in other federal statutes. See:

5 USC 5943
50 USC App. 1742
38 USC 5301
46 USC 53507
12 USC 531
38 USC 1562(a), (b), (c).

[Famspear]

My example of the loan proceeds above could be a bit misleading, though. Here's why.

You could have an event that does not increase your net worth -- and yet that event could be an income event that would result in gross income to you -- unless some separate provision of the tax law says it's not part of gross income.

Let's suppose that your employer pays your $100 health insurance plan premium for you (and just to make the argument clear, let's suppose that the payment is "in arrears", meaning that the payment is made for coverage that has already expired -- say, the coverage for the prior month). And let's say that you use the cash receipts and disbursements method for tax purposes, not the accrual method -- so by definition the liability for the premium is treated by you for tax purposes as "not accrued."

In this situation, if section 61 were the only "gross income" provision in the entire Internal Revenue Code, then the employer's payment to the insurance company would constitute $100 of gross income (specifically, constructive income) to you. (And let's assume that your employer is not giving you any option to choose between (A) taking the money directly, and (B) having the employer pay the health insurance premium -- the only thing the employer is agreeing to do is to pay the insurance company directly.) It's constructive income, at least in theory, because the employer pays the insurance company directly. However, the federal income tax law treats that payment as though the employer "really" paid the $100 directly to YOU, and then you turned around and wrote a separate check for $100 to the insurance company.

You ALSO have an insurance premium expense of $100.

Thus, you have simultaneous (or almost simultaneous) expense of $100 and revenue of $100, so there is no net change in your net worth (if you view the "two" transactions as being "one" -- as occurring at the same time).

However, this example is even a bit more convoluted.

Internal Revenue Code section 106 makes that $100 of income NOT be part of "gross income" under the Code. It's a contribution by an employer to a health plan covering the employee.

However, if section 106 weren't in the Code, that $100 would, under section 61, be includible in your gross income.

[Quixote]

Hendrickson explains the Springer case. The context of the following excerpt makes it clear that Hendrickson thought the 1862 act was the subject of the Springer case. Hendrickson believes, or at least would have his readers believe, that the 1862 tax is still in effect today. The material quoted by Hendrickson appears in Springer. The observation to which he refers does not.

In 1880, the [1862 tax - Q] act was tested in the Supreme Court in Springer v. United States, 102 U.S. 586 (1880), by an litigant attorney as a direct tax upon him in seeking a portion of the proceeds from his federally licensed profession and interest on bonds that he held. The court unremarkably ruled against him in a brief opinion of interest only due to an observation that to treat a tax on "incomes" as direct-- and therefore apportioned-- would be inequitable because,
'Where the population [of a state] is large and the
incomes are few and small, it would be intolerably
oppressive'~
If "income" is understood as meaning 'pay', or 'all that comes in', the court's observation is gibberish. It's possible that one of the welfare states of today might come to have a large
population with few people making a living, but in 1880 there certainly was no such place. With its observation,the court was matter-of-factly confirming the distinction between "incomes" and the common receipts of private-sector persons, just as had the 1862 act.

CTC, page 15 - 16

[Quixote]

My example of the loan proceeds above could be a bit misleading, though. Here's why.

You could have an event that does not increase your net worth -- and yet that event could be an income event that would result in gross income to you -- unless some separate provision of the tax law says it's not part of gross income.

Let's suppose that your employer pays your $100 health insurance plan premium for you (and just to make the argument clear, let's suppose that the payment is "in arrears", meaning that the payment is made for coverage that has already expired -- say, the coverage for the prior month). And let's say that you use the cash receipts and disbursements method for tax purposes, not the accrual method -- so by definition the liability for the premium is treated by you for tax purposes as "not accrued."

In this situation, if section 61 were the only "gross income" provision in the entire Internal Revenue Code, then the employer's payment to the insurance company would constitute $100 of gross income (specifically, constructive income) to you. (And let's assume that your employer is not giving you any option to choose between (A) taking the money directly, and (B) having the employer pay the health insurance premium -- the only thing the employer is agreeing to do is to pay the insurance company directly.) It's constructive income, at least in theory, because the employer pays the insurance company directly. However, the federal income tax law treats that payment as though the employer "really" paid the $100 directly to YOU, and then you turned around and wrote a separate check for $100 to the insurance company.

You ALSO have an insurance premium expense of $100.

Thus, you have simultaneous (or almost simultaneous) expense of $100 and revenue of $100, so there is no net change in your net worth (if you view the "two" transactions as being "one" -- as occurring at the same time).

However, this example is even a bit more convoluted.

Internal Revenue Code section 106 makes that $100 of income NOT be part of "gross income" under the Code. It's a contribution by an employer to a health plan covering the employee.

However, if section 106 weren't in the Code, that $100 would, under section 61, be includible in your gross income.

As it should. In the prior month you received $100 of insurance coverage, an increase in net worth, but did not include the $100 in income. The subsequent implied transactions were a wash, leaving you with $100 of income.

[Noah]

Isn't it fun swiming with the alligators ?

[Gregg]

In complete contradiction of one of Pete's main points, one big thing NOT included in taxable income is money paid to you directly by the government, to wit, interest on government bonds.
Crackheads hold it as some revealed truth that ONLY government connected payments are "taxable income" and I find it ironic that the payments most non governmental employees are likely to receive from the government are one of the things that is exempt.

[Number Six]

Ludicrous. The plain words of the 16th Amendment (my guess is that they didn't need very high-level scholars to craft it) are that income from whatever source derived is taxable. Cash, checks, any investment vehicle, hard assets. Untraceable income is the only practical problem for tax authorities. No, the $100 bills do not have an encodable strip that is currently being tracked (oops, another Illuminati secret disclosed). There is an encodable strip, but it is not being tracked.

[Gregg]

Ludicrous. The plain words of the 16th Amendment (my guess is that they didn't need very high-level scholars to craft it) are that income from whatever source derived is taxable.

Agreed.

Now, what does "income" mean? "Derived"? "Includes"? Before you convince some people, you need to define, just the right way for them, the meaning of every single word.

[Number Six]

It takes books and books of legal exposition to get to the bottom of all the nuances involved with the legal artifice involved in these words as they relate to "income". Is there any law college offering courses in "patriot" studies?

[Pottapaug1938]

Ludicrous. The plain words of the 16th Amendment (my guess is that they didn't need very high-level scholars to craft it) are that income from whatever source derived is taxable.

Agreed.

Now, what does "income" mean? "Derived"? "Includes"? Before you convince some people, you need to define, just the right way for them, the meaning of every single word.

The trouble is that "the right way" involves giving to a word, Humpty Dumpty-style, the meaning that the CtC/Loserheads want it to mean, before they will accept a definition.

[Quixote]

The trouble is that "the right way" involves giving to a word, Humpty Dumpty-style, the meaning that the CtC/Loserheads want it to mean, before they will accept a definition.

Humpty Dumpty-style would be giving the word the meaning Congress intended. Humpty's position was, strangely enough, an exagerated version of a position held by Charles Dodgson, who in a book on symbolic logic wrote that he had no problem with the author of a book redefining words, as long as he makes it clear what meaning he is assigning to them.

[LPC]

The portion of gross receipts representing the cost of goods sold would not be income under the 16th Amendment whether or not Congress excluded it.

Although it's worth remembering that Congress can tax transactions that do not result in any gain or other income.

The tax that was challenged in Nicol v. Ames, 172 U.S. 509, 515 (1899) was a tax on the gross selling price of commodities sold in an exchange, and the Supreme Court upheld the constitutionality of the tax as an excise.

And on rehearing, the Murphy court held that compensation for non-physical injuries could be taxed as a excise, even if the compensation received was not “income” in the constitutional sense. Murphy v. I.R.S., 493 F.3d 170, No. 05-5139 (D.C. Cir. 7/3/2007). vacating 460 F.3d 79 (8/22/2006).

The earliest decisions on the meaning of "income" were cases decided under the Corporation Excise Tax Act of 1909, so the meaning of "income" under the 16th Amendment was not an issue. And the purpose of the 16th Amendment was not to limit Congress to taxing only income, but to be clear that Congress could tax incomes from property without apportionment. So Congress is not limited to taxing only income, and the fact that a transaction does not result in "income" does not mean that Congress cannot tax it. For that reason, most cases on the meaning of "income" are really questions of statutory interpretation and not constitutional limitation.

[Imalawman]

The portion of gross receipts representing the cost of goods sold would not be income under the 16th Amendment whether or not Congress excluded it.

Although it's worth remembering that Congress can tax transactions that do not result in any gain or other income.

The tax that was challenged in Nicol v. Ames, 172 U.S. 509, 515 (1899) was a tax on the gross selling price of commodities sold in an exchange, and the Supreme Court upheld the constitutionality of the tax as an excise.

And on rehearing, the Murphy court held that compensation for non-physical injuries could be taxed as a excise, even if the compensation received was not “income” in the constitutional sense. Murphy v. I.R.S., 493 F.3d 170, No. 05-5139 (D.C. Cir. 7/3/2007). vacating 460 F.3d 79 (8/22/2006).

The earliest decisions on the meaning of "income" were cases decided under the Corporation Excise Tax Act of 1909, so the meaning of "income" under the 16th Amendment was not an issue. And the purpose of the 16th Amendment was not to limit Congress to taxing only income, but to be clear that Congress could tax incomes from property without apportionment. So Congress is not limited to taxing only income, and the fact that a transaction does not result in "income" does not mean that Congress cannot tax it. For that reason, most cases on the meaning of "income" are really questions of statutory interpretation and not constitutional limitation.

Yeah, good point, Dan. There are gross receipt taxes, so the notion is not unheard of. I'm not sure that COGS is in fact embedded in the 16th. I think its closer to legislative grace - seeing that income is properly measured by excluding certain costs - most importantly the COGS. Along the same lines of income is certain stock dividends and other transaction where there isn't any income, per se, but the value of the transaction is still taxed.

[Quixote]

On Page i of the Introduction to CTC, PH states:

Let's get this said loud and clear right at the outset: IF YOU HAVE TAXABLE INCOME, YOU ARE SUBJECT TO THE INCOME TAX. Section 1(a) of the Internal Revenue Code says:
"There is hereby imposed on the taxable income of [a tax of varying percentages]" Pretty straightforward. Of course, it does raise the question of exactly what is taxable ''income".

That is the last citation in CTC to any portion of the IRC relevant to the income tax. I suspect that reference stayed in only because PH knows that his target audience lacks the attention span to notice that by Page 30, PH is contradicting himself. Now the income tax is not a tax on income as he stated "loud and clear", but rather a tax on activities.

The true nature of money is an important issue for society for many reasons, but for our purposes here, it is because those benefiting from already confusing "income" tax laws try to further muddy the waters by focusing our attention on the acquisition of money-- as though the tax were laid upon money, rather than on taxable (privileged) activities, the extent of which is measured by the money they produce.