Bulten on how to earn statutor wages

[John J. Bulten]

Dan helpfully provided the entire Reading v Commissioner:

Taxpayers brought suit in the United States Tax Court contesting a deficiency assessment of $ 2,486.45 by the Commissioner for their 1975 federal income taxes. The deficiency assessment was based on (1) disallowing itemized deductions for housing, food, schooling, and medical expenses (not otherwise deductible under 26 U.S.C. § 213) because those expenses were nondeductible personal living or family expenses under 26 U.S.C. § 262, and (2) a determination that taxpayers owed self-employment taxes on reported self-employment income.

Before the Tax Court taxpayers conceded the disallowed deductions were for living or family expenses but they contended that by disallowing deductions for those expenses Congress exceeded its authority to lay and collect income taxes under the sixteenth amendment, and that income means the gain or income received less the expense of living. The Tax Court rejected taxpayers' claims but redetermined the deficiency to be $ 2,468.29, and on January 25, 1979, the court entered its decision for the Commissioner. On appeal taxpayers claim they had no income, for income tax purposes, and on appeal they challenge the constitutionality of the tax laws and Tax Court.

The standard of review on appeal from the Tax Court is whether the Tax Court's factual findings are clearly erroneous (See, e.g., Commissioner v. Duberstein, 363 U.S. 278, 291, 80 S. Ct. 1190, 4 L. Ed. 2d 1218 (1960); Smith v. Commissioner, 608 F.2d 321, at 322 (8th Cir. 1979)), and "findings of fact are not clearly erroneous unless the reviewing court on the entire evidence is left with the definite and firm conviction that a mistake has been committed." Smith v. Commissioner, supra, 608 F.2d 321, at 323, Citing United States v. United States Gypsum Co., 333 U.S. 364, 394-95, 68 S. Ct. 525, 92 L. Ed. 746, Rehearing denied, 333 U.S. 869, 68 S. Ct. 788, 92 L. Ed. 1147 (1948). The findings of the Tax Court that all except $ 78 [footnote 1] of the claimed deductions were not expressly deductible under the 1954 Internal Revenue Code and were thus nondeductible under 26 U.S.C. § 262, and that taxpayers owed self-employment income tax on their self-employment income was correct. We have repeatedly rejected attacks on the constitutionality of the income tax laws; taxpayers claims of unconstitutionality are without merit, and thus we adopt the well reasoned decision of the Tax Court filed August 21, 1978.

It is so ordered.

- - - - - - - - - - - - - - Footnotes - - - - - - - - - - - - - - -

1. $ 78 for state gasoline tax was not otherwise claimed as a deduction and was held by the Tax Court to be deductible as a tax expense under 26 U.S.C. § 164.

- - - - - - - - - - - - End Footnotes- - - - - - - - - - - - - -

Not on point. It is obvious that in TC, taxpayers admitted the amounts were income; and it is obvious that the 8th Circuit refused to rehear that legal conclusion of whether the amounts were income, ruling only on whether the facts were erroneously found. Since petitioners stipulated payments derived income equal to their value (by attempting to deduct therefrom), there was no proof that this derivation was solely because they were union-state pay-for-work after 3/1/1913.

Banjo is also too easily answered. (a) Wealth from state exports. (b) 1.9.5. (c) Steward v Davis et al.

Now I should specify that some apparent accessions to wealth must be taxed directly and some indirectly. For example, stock dividends (additional stock issued and paid in lieu of a cash dividend) may only be taxed directly per Eisner v Macomber (relying on 1.8.1, 1.9.4, and the 16th), which has not to my knowledge been overturned on this point.

Did you perhaps want to rereview Butchers v Crescent City, Jones v Opelika, and the like?

[Famspear]

Dear Mr. Bulten: You may want to re-read Eisner v. Macomber. A stock dividend, as that term is used in Eisner v. Macomber, is not an accession to wealth at all. That was kinda the whole point of the case.

You may want to re-read Jones v. City of Opelika. No issue involving the validity or application of Federal income tax laws was presented to or decided by the Court. And while you're at it, read up on the legal concept of precedent.

While you're reading up on what a precedent is, you may want to re-read Butcher's Union. No issues regarding the power to tax incomes were presented to or decided by the Court, and the word "tax" does not appear in the text of the decision.

Find PRECEDENTS for what you believe. (Hint: there are no precedents supporting tax protester arguments. Tax protester arguments are meritless and frivolous.). Yours, Famspear

[Cpt Banjo]

Banjo is also too easily answered. (a) Wealth from state exports. (b) 1.9.5. (c) Steward v Davis et al.

Try again. The point, which you originally raised, dealt with the taxability of accessions to wealth, not the taxability of wealth itself (I predicted correctly: you did try and weasel out by changing the subject). It is exports themselves, not the income derived from exporting, that can't be taxed by Congress. Income from exports is constitutionally taxable. See Peck v. Lowe.

Steward v. Davis provides no support for your claim; to the contrary, its expansive conception of excises, duties, and imposts would support the argument that any accession to wealth can be constitutionally taxed.

Now I should specify that some apparent accessions to wealth must be taxed directly and some indirectly. For example, stock dividends (additional stock issued and paid in lieu of a cash dividend) may only be taxed directly per Eisner v Macomber (relying on 1.8.1, 1.9.4, and the 16th), which has not to my knowledge been overturned on this point.

What in heaven's name makes you think a stock dividend is an accession to wealth? Or are you so abysmally ignorant of basic economics that you think the stock's per-share value is unaffected by the split?

[Quixote]

Not on point. It is obvious that in TC, taxpayers admitted the amounts were income; ...

Wrong.

Before the Tax Court taxpayers conceded the disallowed deductions were for living or family expenses but they contended that by disallowing deductions for those expenses Congress exceeded its authority to lay and collect income taxes under the sixteenth amendment, and that income means the gain or income received less the expense of living.

... and it is obvious that the 8th Circuit refused to rehear that legal conclusion of whether the amounts were income, ruling only on whether the facts were erroneously found.

Despite the 8th Circuit's discussion of the standard of review, the court addressed that conclusion and upheld it.

Since petitioners stipulated payments derived income equal to their value (by attempting to deduct therefrom), there was no proof that this derivation was solely because they were union-state pay-for-work after 3/1/1913.

The petitioners stipulated no such thing. Had they done so, there would have been nothing to appeal, because that was their whole case. There was no proof of your absurd notion because it isn't true.

[John J. Bulten]

(I predicted correctly: you did try and weasel out by changing the subject).

I'm sorry you think so, my perception was that you changed the subject and I was trying to bat you away with a weak reed so we could get back to the subject. I do believe I said I was here to have fun. Oh, do you subscribe to any norms of debate?

I know Congress can tax any accession to wealth they can tax. And Constitutional income necessarily means "any accession to wealth they can tax". Just observing that something is an accession to wealth does not prove Congress can tax it. Sorry.

It's entirely self-evident that they can tax that that they can tax, that they can tax profits that they can tax, and that they can't tax profits that they can't tax. That was the subject you seized on.

To this entirely axiomatic observation, you apparently imported the proposition that "all accessions are taxable". You bear the burden of proof, and Glenshaw and Kowalski don't carry it, as already adverted. But you threw the burden of proof to me for the negation of your proposition, and I'll admit I fell for it.

Since you wanted the Constitution on taxation, everyone knows the Constitution only makes one prohibition and two qualifications about taxation, so I spit that out, and maybe it wasn't on point. I threw Steward v Davis in because I know it affirms the unconstitutionality of taxing state exports. The only place the Constitution otherwise talks somewhat explicitly about what Congress can't tax is the 10th Amendment, but other amendments implicitly restrict Congressional power to tax as well.

Similarly, I only said stock dividends were "apparent accession to wealth". Now getting back to the point, it might be observed that there was and remains heated disagreement about what constitutes profit or accession to wealth. And, there was and remains heated disagreement about what is within Congressional jurisdiction to tax.

But getting around that Banjo-driven digression, here are the subjects that might interest you IMHO:

1. Quatloos supporters do not wish to subscribe to any normative standard for their often-anonymous posts, they have much more fun just back-and-forthing all day. I made this a threshold condition for real debate. Banjo, by asking questions in a nonanswer-based forum, has the burden of demonstrating his questions are real rather than flip, if he wants real rather than flip answers.

2. The thread topic is statutory wages. I gave a summary on LH, was quoted here, and then defended my summary by quoting the law. Banjo has not taken the burden of either disputing my selection of law, nor disputing my summary thereof. (Hint: this one requires you to discuss that messy topic, "inclusion".)

3. I then made a summary position statement: "There is no law which demonstrates that the income derived from payment received within a union state for work performed on or after 3/1/1913 is equal to the value received less expenses." Banjo has not taken the burden of finding a simple counterexample. (Hint: Section 61 doesn't carry it, as already adverted.)

4. I made some self-evident side observations (unconsciously recalling McCulloch, below) to reinforce my point that there is no law about what Congress can't tax. This side trail was seized upon by Banjo, apparently to reinforce the belief "all accessions are taxable", but without taking the burden of proving this unstated assumption.

5. Banjo demanded certain answers about "any accession", which I haphazardly answered by throwing out some borderline accession cases. Banjo pretends I changed the subject. Well, if you mean the unintentional temporary confusion of "accession to wealth" with "wealth", perhaps. But we are a couple subjects removed from the real subject already, and there's another level too, because:

6. It appears Banjo really wanted to get closer to the subject by talking about, not "any accessions", but the particular accessions from value received for labor less expenses. Banjo did not, of course, admit the difference between the question and the potential intent, but it's moot. The burden of proof is on those who say all accessions are taxable, not on those who say no law makes an accession taxable.

I have professed my allegiance to the written law, shown the laws I rely on, summarized them properly, and avowed the nonexistence of any contrary law.

If Banjo wants me to answer objections to his unstated assumption, he ought to first provide:
- his standards for how true answers are arrived at
- any errors in my definition of statutory wages
- any law that converts American post-1913 nonfederal pay into income

However, even though he ought strictly to provide those, I will be even more gracious and throw out a couple more answers which address, as well as I can understand him, what he's getting at.

- Certain objects cannot be taxed by Congress without apportionment, such as land and people and stock dividends and exercise of Constitutional rights.
- Certain objects can be taxed without apportionment, such as privileges associated with exercise of Constitutional rights (for example, licenses or charters).
- The activity of working for pay in itself, if not associated with any privileges or federal nexus, is a Constitutional right and cannot be taxed without apportionment.

First see the inalienable rights in the Declaration and their reference in the 5th and 14th Amendments, as well as the restrictions of the 10th. Now consider:

1. "The liberty thus guaranteed ... denotes not merely freedom from bodily restraint but also the right of the individual to contract, to engage in any of the common occupations of life ...." —Justice James McReynolds, 1923 (Meyer v Nebraska, 262 US 390, 399)

2. "Included in the right of personal liberty and the right of private property— partaking of the nature of each— is the right to make contracts ... of personal employment, by which labor and other services are exchanged for money or other forms of property." —Justice Mahlon Pitney, 1915 (Coppage v Kansas, 236 US 1, 14)

3. "The first amendment, which the Fourteenth makes applicable to the states, declares that 'Congress shall make no law ....' It could hardly be denied that a tax laid specifically on the exercise of those freedoms would be unconstitutional .... A state may not impose a charge for the enjoyment of a right granted by the federal constitution." —Justice William Douglas, 1943 (Jones v Opelika, Murdock v Pennsylvania, 319 US 105, 108, 113)

4. "The power of the state in that respect is not unlimited, and one of the limitations is that it may not impose conditions which require the relinquishment of constitutional rights." —Justice George Sutherland, 1926 (Frost v California, 271 US 583, 593, 594)

5. "To take over to its control any one of the great number of subjects of public interest, jurisdiction of which the states have never parted with, ... by a so-called tax ... would be to break down all constitutional limitation of the powers of Congress." —Chief Justice William Taft, 1922 (Bailey v Drexel, 259 US 20, 38)

6. "It has been well said that 'the property which every man has in his own labor, as it is the original foundation of all other property, so it is the most sacred and inviolable. The patrimony of the poor man lies in the strength and dexterity of his own hands, and to hinder his employing this strength and dexterity in what manner he thinks proper, without injury to his neighbor, is a plain violation of this most sacred property.' ... The right to follow any of the common occupations of life is an inalienable right, it was formulated as such under the phrase 'pursuit of happiness' in the declaration of independence." —Justice Samuel Miller, 1884 (Butchers v Crescent 111 US 746, 757, 762, quoting Adam Smith)

7. "All subjects over which the sovereign power of a state extends, are objects of taxation; but those over which it does not extend, are, upon the soundest principles, exempt from taxation. This proposition may almost be pronounced self-evident. The sovereignty of a state extends to everything which exists by its own authority, or is introduced by its permission." —Chief Justice John Marshall, 1819 (McCulloch v Maryland, 17 US 316, 427, 429)

So right to work is a 5th, 10th, and 14th Constitutional right (1, 2, 6); and such Constitutional rights are inalienable by tax (3, 4, 5, 6, 7). They cannot be taxed indirectly, and due to apportionment they can only alienate the state, not the individual, when taxed directly.

Let me add that Paul shows an abysmal civics education, even for an IRS worker, when he says 1776 has zero to do with the Constitution (or perhaps he just shows a typical public-school education). The Constitution's authors gave momentous and explicit weight to the 1776 independence of a certain nation in the twelfth (inclusive) year counting back from the year 1787 of their and our Lord. I'll leave Paul to research which nation and Lord was meant.

[John J. Bulten]

Quixote, don't you believe that tax protestors are often contradictory and are capable of simultaneously admitting the full gain amounts were income and then arguing that only gain less expenses was income? How did the Readings itemize deductions from income without admitting income?!?

The only way the 8th directly addressed "amounts were not income" was by affirming TC, where petitioner and respondent formally agreed amounts were income (petitioner via 1040). So any arguments in TC that payments were not income were inconsistent, and in the 8th were not under standard of review.

[Nikki]

Please demonstrate how an INCOME tax violates

So right to work is a 5th, 10th, and 14th Constitutional right (1, 2, 6); and such Constitutional rights are inalienable by tax (3, 4, 5, 6, 7). They cannot be taxed indirectly, and due to apportionment they can only alienate the state, not the individual, when taxed directly.

What specific section of the Internal Revenue Tax laws impinges on anyone's right to work?

[Quixote]

Quixote, don't you believe that tax protestors are often contradictory and are capable of simultaneously admitting the full gain amounts were income and then arguing that only gain less expenses was income? How did the Readings itemize deductions from income without admitting income?!?

The only way the 8th directly addressed "amounts were not income" was by affirming TC, where petitioner and respondent formally agreed amounts were income (petitioner via 1040). So any arguments in TC that payments were not income were inconsistent, and in the 8th were not under standard of review.

The same way PH and you claim withholding from wages without admitting wages.

The Readings didn't really itemize deductions. The simply used Schedule A as a shoehorn to introduce their unallowable expenses and thereby reduce their gross income. The Tax Court opinion makes that perfectly clear.

[John J. Bulten]

The main issue for most tax protesters is whether wages are taxable. Every court that has decided the issue has ruled that wages are taxable. Yours, Famspear.

Famspear, I wanted to address you separately to thank you for your uncommon civility and forthrightness. It's possible that you might actually break the curve on this forum and actually understand "Cracking the Code" by Pete Hendrickson, as described on losthorizons.com. The regulars do not understand it or deny it or both. Of course you'll need to keep in mind that we are discussing tax honesty, the position that the laws are Constitutional (e.g. earnings are not statutory "wages"), rather than tax protest, the position that they are not (e.g. wages are not income).

Though I posted some precedents already, which will give you something to chew on, I'd rather direct you back to one of the CtC insights about the definitions of "wages" I alluded to previously. The legal profession generally takes the tax accounting profession's word for it that all earnings are "wages" as defined in 3401(a) and 3121(a), two somewhat different definitions. But of course you know that expansive language in legislation only expands to subjects actually within the legislators' jurisdiction (Banana v Fruit), and the cites I just posted suggest right to work is not in the indirect taxation jurisdiction, strongly enough to give the wage definitions a closer look.

It turns out that 3121(a) wages are dependent on 3121(b) employment, and 3401(a) wages are dependent on being a 3401(c) employee. Now as you know, "employee" doesn't always mean employee either, as in 3231(b) where it "means" only rail worker and "includes" rail employer officers. But in 3401(c), "employee" "includes" government workers and "includes" corporate officers, but no reference to common-law workers appears.

The tax beneficiary crowd would have us believe any proposition whatsoever that turns ordinary workers into 3401(c) employees. For example, 1. We should expand the word "employee" to include all workers?; but this is NOT the legal usage of "includes", and in fact yields a ridiculous result when applied to "includes" in 3231(b). 2. "Includes" is limitedly expansive because of 7701(c)?; but its expansion is limited only to other things otherwise within the meaning of the term defined by example, which the courts have demonstrated applies only to things that are in the same kind or class as the examples. 3. Private workers are in the same class as public workers?; but this is really just to repeat argument 1 without lawful basis, because the commonality of federal worker and corporate officer is obviously governmental nexus. The debate can go on but you see that it's at least well-founded and not hanging by a gold-fringe capital-letters nonresident-alien thread.

The 3121 demonstration is similar but more involved, but it comes down to definitions in 3121(e) where "United States" and "State" do not explicitly include the 50 states, as those definitions do when discussing, e.g., the petroleum tax. If you're interested in seeing these debated in great detail between myself and Dan Evans (moderator LPC here), check out:

http://www.losthorizons.com/Forum3/topi ... OPIC_ID=18
http://www.losthorizons.com/Forum3/topi ... OPIC_ID=38

This is all common knowledge to readers of CtC and the LH forum, and I've made it so here as well (knowledge but not belief). In short, CtC is about upholding the law, and cannot be defeated in court except by denying the law. As I've said, Pete was given an unprecedented, unenforceable order, based on an accusation of two frivolous positions he doesn't hold and never espoused (though one of them was forcefully wrested from a single sentence of his taken out of context). If his essential case was anything like any tax protestor, I'd be willing to admit the similarity. But the similarity is only in the DOJ's prosecution, not in the legal arguments given in response.

[natty]

So right to work is a 5th, 10th, and 14th Constitutional right (1, 2, 6); and such Constitutional rights are inalienable by tax (3, 4, 5, 6, 7). They cannot be taxed indirectly, and due to apportionment they can only alienate the state, not the individual, when taxed directly.

Gee, using that reasoning, Congress could not tax anything and we are back to the old Articles of Confederation where Congress could only make requisitions and only hope the States pay their share. Just declare whatever you are doing a "right". "I have a right to distill and sell whiskey, therefore, a whiskey tax is a direct tax that must be apportioned and collected from the States".

Your reasoning is just wrong and down right stupid.
Congress was given the power to lay and COLLECT taxes. So even with apportioned taxes Congress is not dependent on the States collecting their share.

And, because of the 16th Amendment, ALL taxation on income is not a direct tax; and no amount of specious reasoning can turn income not into "income" or into a direct tax that requires apportionment.

[Dezcad]

. In short, CtC is about upholding the law, and cannot be defeated in court except by denying the law.

This statement clearly reflects that you really don't understand American Jurisprudence or what the "law" is and how the "law" is determined.

[John J. Bulten]

The same way PH and you claim withholding from wages without admitting wages.

Quixote, you fell for making the easy sniping attack without addressing anything I said, which vitiates any later attempt you may make to claim you had something to say on point.

You also create the strawman that we claim "withholding from wages". We claim an overpayment of funds withheld for potential tax liability, which is a common category of payment when certain easily-made errors occur. Whatever you call it, it does not prove the existence of statutory wages.

Nikki, thanks for making my point: since the income tax is Constitutional, it does not impinge on right to work. If, however, it said "wages is all pay for work within the 50 states", it would so impinge, which is why it doesn't say that.

[John J. Bulten]

The Readings didn't really itemize deductions. The simply used Schedule A as a shoehorn to introduce their unallowable expenses and thereby reduce their gross income. The Tax Court opinion makes that perfectly clear.

I see that you edited, but your edit contains its own answer. Which is it, did they intend to "reduce their gross income", or did they claim they had no income to reduce? It's a confused TP who claims he has no income and then proves it by itemizing deductions from income. In TC, a factual admission of income in the present case vitiates a Constitutional argument about income in general, no matter how right or wrong the latter may be.

[natty]

1. We should expand the word "employee" to include all workers?; but this is NOT the legal usage of "includes", and in fact yields a ridiculous result when applied to "includes" in 3231(b).

It would be nice if you could correctly state the proposition, bulten.

Correctly stated and to be in line with 7701(c) - "We should expand the term "employee" to not exclude other things otherwise within the meaning of "employee". As you can see and hopefully understand, "to include" is not the same as "to not exlude".

[Quixote]

As usual with tax deniers, Bulten clearly understands that his position is indefensible, so he avoids discussing the root defects and prefers to discuss, at bizarre and nauseating length, trivia. Bulten knows that he he derives income from the pay he receives. He cannot directly argue that his does not, because that would make him look even more ridiculous than he already does, so instead he argues at length about if he receives wages, hoping people won't notice the difference. His ploy has some limited success because folks like Famspear can't believe that Bulten really thinks he doesn't receive wages and that he must be arguing that his wages are somehow not income. They are further confused by Bulten's habit of tossing out completely irrelevant statements as red herrings.

And he always has his fallback position: he's just here for amusement. Of course, that doesn't explain why he spouts the same nonsense on LostHeads.

[Quixote]

The Readings didn't really itemize deductions. The simply used Schedule A as a shoehorn to introduce their unallowable expenses and thereby reduce their gross income. The Tax Court opinion makes that perfectly clear.

I see that you edited, but your edit contains its own answer. Which is it, did they intend to "reduce their gross income", or did they claim they had no income to reduce? It's a confused TP who claims he has no income and then proves it by itemizing deductions from income. In TC, a factual admission of income in the present case vitiates a Constitutional argument about income in general, no matter how right or wrong the latter may be.

What about confused TPs who claim they have no wages, but claim to have had income tax and FICA withheld from their wages? Was that PH's mistake, admitting on his return that he had wages?

[Quixote]

The same way PH and you claim withholding from wages without admitting wages.

Quixote, you fell for making the easy sniping attack without addressing anything I said, which vitiates any later attempt you may make to claim you had something to say on point.

You also create the strawman that we claim "withholding from wages". We claim an overpayment of funds withheld for potential tax liability, which is a common category of payment when certain easily-made errors occur. Whatever you call it, it does not prove the existence of statutory wages.

Nikki, thanks for making my point: since the income tax is Constitutional, it does not impinge on right to work. If, however, it said "wages is all pay for work within the 50 states", it would so impinge, which is why it doesn't say that.

No, you claimed withholding from wages. That is a documented fact, unless the return you posted was not what you actually filed. You listed withheld income tax on Form 4852 and claimed a §31 credit for it on your return. If the money you claimed was not withheld from wages, then the statutory credit you claimed was invalid. If the money was not withheld from wages, you have no claim against the government, only against the payer for conversion.

[Nikki]

Nikki, thanks for making my point: since the income tax is Constitutional, it does not impinge on right to work. If, however, it said "wages is all pay for work within the 50 states", it would so impinge, which is why it doesn't say that.

John:

A couple of simple questions which can be answered with either "yes" or "no."

1 - Are wages a component of compensation for services?

2 - Is compensation for services a component of income?

[.]

That is a documented fact

That will not stand in JJ Bullshite's way. He will continue to embarrass himself, unless and until he runs away.

[LPC]

there are no precedents supporting tax protester arguments.

Not exactly. The Pollock decisions might be read as supporting at least some tax protester arguments, but the Pollock decisions were reversed by the 16th Amendment, which means that they are no longer *GOOD* precedents.

I have stated on several occasions, and assert in my FAQ, that not a single federal judge in the history of the United States has ever written anything in any opinion suggesting that Congress cannot tax payments for labor (i.e., wages), or that a tax on payments for labor (wages) is a direct tax that must be apportioned. Not one. Never.

Bulten has described my statement as "rash" and "over-reaching," and suggested in could not possibly be correct, and yet he has never been able to find a counter-example.