Updated CRS report on tax protesters

[Famspear]

The Congressional Research Service (CRS) has issued an updated report, 'Congressional Research Service Report for Congress --Federal Income Tax: Legal Analysis of Common Tax Protester Arguments". 110th Congress, Order Code 97-59 A. The update is as of June 11, 2008.

Here's an excerpt:

Summary

This report addresses some of the commonly raised historical, constitutional, procedural, and legal questions concerning the federal income tax.

The constitutional questions include a discussion of: Congress's taxing power; the difference between a direct and an indirect tax; Fifth Amendment protection against self-incrimination and tax returns; Fourth Amendment protection against unreasonable searches and seizures and tax collection practices; Thirteenth Amendment protections against involuntary servitude and tax withholding; Equal Protection and Due Process questions; and the legality of the ratification of the Sixteenth Amendment.

Other questions addressed include whether title 26 of the United States Code is positive law; the taxability of wages; the voluntary or involuntary nature of the income tax; what is meant by the income tax "being in the nature of an excise tax;" when was the Internal Revenue Service established; the authority of the Internal Revenue Service to operate outside of the District of Columbia; what is meant by the term United States or United States citizen in the context of the Internal Revenue Code; what is the "Liberty Amendment;" the use of the revenues raised through the federal tax on telephone usage; taxation without representation; the repeal of the original withholding act; and the frivolous tax return penalty.

Contents

.1. What Specific Limitations on the Power of Congress to Tax Are Found in the Constitution?

.2. Is the Federal Income Tax a Direct or Indirect Tax?

.3. What Does the Court Mean When it States That the Income Tax Is in the Nature of an Excise Tax?

.4. Was the Sixteenth Amendment Properly Ratified?

.A. Did the President sign the resolution which became the Sixteenth Amendment?

.B. Do clerical errors in the ratifying resolutions of the various state legislatures negate the ratification of the Sixteenth Amendment?

.5. Do Taxpayers Have the Right, under the Fifth Amendment, Not to Answer Questions on Their Tax Returns?

.6. Is Title 26 of the United States Code (Internal Revenue) Law?

.7. Are Wages Taxable as Income?

.8. Do We Have a Voluntary Tax System?

.9. Do the Internal Revenue Service's Collection and Auditing Procedures Violate the Fourth Amendment?

.10. Do Such Aspects of the Federal Income Tax as Graduated Rates, Deductions, and Exemptions Violate the Equal Protection Guarantees of the Constitution?

.11. Has the Withholding Act Been Repealed (Victory Tax Act Questions)?

.12. When Was the Internal Revenue Service Established and Where Does it Get its Power to Tax?

.13. Does the Internal Revenue Service Have Authority to Operate Outside of the District of Columbia (Seat of Government Act Questions)?

.14. What Is the Liberty Amendment?

.15. Is the Federal Telephone Excise Tax Used to Fund the Military?

.16. Does Withholding on Wages Constitute Involuntary Servitude in Violation of the Thirteenth Amendment?

.17. Are Not Individuals Who Are Too Young to Vote or Who Are Residents of the District of Columbia Unconstitutionally Subjected to Taxation Without Representation?

.18. What Is Meant by the Term United States in the Context of the Internal Revenue Code?

.19. May Congress Tax Occupations of Common Law Right?

.20. What Is Meant by the Term "Includes?"

.21. Do the IRC Source of Income Rules Exempt the Income of U.S. Citizens?

.22. What Is the Frivolous Income Tax Penalty?

I have not yet located a freely available link for the full report (I obtained this from the CCH Internet Tax Research website).

[LPC]

I'm going to try to get a copy through my Congresscritter. If I get one, I'll share it. (It's in the public domain, but the CRS doesn't provide them to the public, but only to Congress.)

Chris Hanson has a copy of the 2001 version on his SEDM website and includes a "response."

[ASITStands]

This looks like an interesting link ...

http://opencrs.cdt.org/

Doesn't have the recent report but likely will soon.

[Famspear]

I could copy and paste a copy here into Quatloos, but it's kinda long. I have it as a Microsoft Word file, and it comes to about 34 pages in that format, or about 636 kilobytes. Also, I don't know whether it would go here, or in another section of the forum.

[Demosthenes]

If you want, email it to me and I'll save it as a pdf, upload it, and post a link.

[grixit]

Go under an alias and put the link in your sig marked "The truth about your so called `tax liability' exposed here!" If other people on that forum click on it, hey, you didn't tell them to.

[Famspear]

Demo, I sent you an email from my hotmail account with the attachment as a Word file. Please let me know if you don't receive it.

[Demosthenes]

Just got home from running an errand.

Here's the report:

http://www.cheatingfrenzy.com/CRSReport.pdf

[Famspear]

Just got home from running an errand.

Here's the report:

http://www.cheatingfrenzy.com/CRSReport.pdf

Cool! Thanks!

[Demosthenes]

Piece of cake. Thanks for getting the report!

[Quixote]

The report could have used a good editor, or maybe just a proof reader.

The definitional argument concerning the taxation of wages is based on the contention that labor worth a certain amount is exchanged for money worth the same amount and therefore there is no income to be taxed. This argument fails from lack of understanding of the concept of taxable income.

There are at least two problems with that statement. First, as the subsequent discussion reveals, the phrase "taxable income" is used to mean gross income as defined in the IRC. Second, the problem is not a lack of understanding of the concept of taxable income or the concept of gross income, but rather a lack of understanding of the concept of income. The subsequent discussion does nothing to clarify the concept.

Gain, in the tax context, is the surplus when the basis of an item (in many cases basis is synonymous with cost) is subtracted from the item's fair market value.

So if I sell an item for more than the FMV, the excess is not gain? I don't think so. "Fair market value" shows up several times in the discussion. Fortunately, most of the instances are just a confusing waste of space.

[SteveSy]

I fail to see how anyone could buy into the "all transactions" are taxable by a federal excise.

Such a view would make the direct tax clause absolutely meaningless. Whatever your view for the reason the clause was put in place would be easily circumvented by merely taxing some related transaction associated. Everything requires some sort of transaction whether it be the ownership of property, slaves whatever. For instance if the clause was put in place to prevent slave owners from being hit directly all congress would have to do is simply tax the labor of the slaves. After all there is a transaction between the labor to pick cotton in the field and placing it in some storage facility. Simply telling the slaves what to do is a "transaction". An agreement between you and another person is a "transaction". Not even exports are safe from taxation, they too require a transaction. They wouldn't be taxing the export itself merely the transaction...give it a little time and it will happen if it hasn't happened already.

Simple common sense dictates that the people who lived during the ratification of the constitution would have never accepted that "all transactions" were taxable by perpetual graduated tax, not even the most liberal of them.


Whatever, as long as the government involves itself in handing out cash to the sheeple in one form or another, like the "stimulus" BS, the government can say the moon in made of green cheese and the sheeple will gladly accept it while holding out their hands in ignorance.

[Dr. Caligari]

Simple common sense dictates that the people who lived during the ratification of the constitution would have never accepted that "all transactions" were taxable by perpetual graduated tax, not even the most liberal of them.

(a) Your "simple common sense" is simply wrong as a matter of history. If the direct tax clause applies to anything, it applies to real estate, but during George Washington's administration the federal government imposed an unapportioned tax on deeds to land, which meant you couldn't buy, sell or otherwise transfer any real estate without paying a federal tax. The people who lived during the ratification of the Constitution never suggested that this was unconstitutional.

(b) More importantly, the intent of "the people who lived during the ratification of the constitution" is totally irrelevant. What is relevant is the intent of the people who lived during the ratification of the 16th Amendment.

[grixit]

I fail to see

We know.

[Famspear]

I fail to see how anyone could buy into the "all transactions" are taxable by a federal excise.

Such a view would make the direct tax clause absolutely meaningless. Whatever your view for the reason the clause was put in place would be easily circumvented by merely taxing some related transaction associated. Everything requires some sort of transaction whether it be the ownership of property, slaves whatever. For instance if the clause was put in place to prevent slave owners from being hit directly all congress would have to do is simply tax the labor of the slaves. After all there is a transaction between the labor to pick cotton in the field and placing it in some storage facility. Simply telling the slaves what to do is a "transaction". An agreement between you and another person is a "transaction". Not even exports are safe from taxation, they too require a transaction. They wouldn't be taxing the export itself merely the transaction...give it a little time and it will happen if it hasn't happened already.

Simple common sense dictates that the people who lived during the ratification of the constitution would have never accepted that "all transactions" were taxable by perpetual graduated tax, not even the most liberal of them.


Whatever, as long as the government involves itself in handing out cash to the sheeple in one form or another, like the "stimulus" BS, the government can say the moon in made of green cheese and the sheeple will gladly accept it while holding out their hands in ignorance.

Steve, I think your discussion stems from a basic misconception. You seem to begin with the premise that the Founding Fathers, in drafting the Constitution, were trying to PREVENT the imposition of certain kinds of taxes. Just about the only "kind" of tax they decided to prevent was a tax on exports from a state.

Note: For purposes of my discussion of the word "kind", I am saying that an income tax (a tax on an event called a "realization of income") is a kind of tax. A sales tax (a tax on an event called a "sale") is a kind of tax. A property tax (a tax not on an event, but on property by reason of its ownership) is a kind of tax. An estate tax (a tax on an event known as the transfer of ownership of property by reason of death) is a kind of tax. A gift tax (a tax on an event known as an inter vivos gratuitous transfer of ownership of property) is a kind of tax. By contrast, the classifications of "apportioned" or "unapportioned" or "uniform" or "non-uniform" taxes can be thought of as ways of describing the mode of imposition of a tax, and not as "kinds" of taxes.

Tax protesters constantly struggle with the Constitution -- in part because tax protesters are always trying vainly to find a way to say that a particular kind of tax (the federal income tax, usually) should be prohibited. The problem is that the Founding Fathers did not intend to prohibit particular kinds of taxes (except where specifically stated - e.g., taxes on exports from a state). Since about the late 1960s or early 1970s, tax protesters have desperately beat on the text of the Constitution in an unsuccessful effort to find something to support the argument that the income tax should be ruled illegal.

After finding no such language, the protesters seized on the "direct" versus "indirect" language. Unfortunately, had the Founding Fathers wanted to prohibit any particular kind of tax, they could have done so -- by simply prohibiting it outright (as they did with taxes on exports from a state). Tax protesters fighting the federal income tax have found nothing but defeat after defeat, with the Supreme Court and the other federal courts pointing out, in agonizing step by agonizing step, the history and purpose of the "direct tax apportionment" clause.

As far as "direct taxes" (capitations and taxes on property by reason of ownership) are concerned, had the Founding Fathers intended to simply prohibit those, there would have been no need to put the "apportionment" restriction in the Constitution. Instead, they could have simply said, look, capitations and property taxes are prohibited (just as they did with taxes on exports from a state). Had they not wanted income taxes, they could have said look, income taxes are prohibited (just as they did with taxes on exports from a state).

Steve, your whole premise is faulty, because you argue that taxing certain transactions is somehow "circumventing" the purpose of the direct tax apportionment clause. You are wrong. Taxing a transaction (or other event) does not "circumvent" the purpose of the direct tax apportionment clause, for the simple reason that the direct tax apportionment clause was not intended to prohibit any particular KIND of transaction (or other event).

The purpose of the clause was to require that capitations and property taxes (taxes on property by reason of ownership) be imposed only with apportionment (pro-rata) among the states based on population.

I'll go a step further: Taxing INCOME from property does not "circumvent" the "policy prohibiting the taxation of the property itself" -- because there is no such policy!!!!! There has never been any such policy! In imposing the "direct tax apportionment" requirement, the Founding Fathers never intended to prohibit federally-imposed capitations. The Founding Fathers never intended to prohibit federal property taxes, either. And the Founding Fathers never intended to prohibit income taxes.

If the Founding Fathers had wanted to require that taxes on INCOME from property be apportioned, they could have easily said so -- in the Constitution. Had the Founding Fathers wanted to require any other tax on any other kind of event or transaction be apportioned, they could have said so, just as they could have gone even further and could have simply prohibited such taxes -- had they wanted to do so. They did not.

[Leftcoaster]

I fail to see

We know.

I was sorely tempted to shorten that by a further two words

[SteveSy]

Tax protesters constantly struggle with the Constitution -- in part because tax protesters are always trying vainly to find a way to say that a particular kind of tax (the federal income tax, usually) should be prohibited. The problem is that the Founding Fathers did not intend to prohibit particular kinds of taxes (except where specifically stated - e.g., taxes on exports from a state). Since about the late 1960s or early 1970s, tax protesters have desperately beat on the text of the Constitution in an unsuccessful effort to find something to support the argument that the income tax should be ruled illegal.

I've never said that a tax should be prohibited. I'm simply saying, as I always have, that some taxes should be laid according to the plan devised. Certain taxes require apportionment. The reason was simple, a tax that directly falls on people should be apportioned according to representation.

After finding no such language, the protesters seized on the "direct" versus "indirect" language. Unfortunately, had the Founding Fathers wanted to prohibit any particular kind of tax, they could have done so -- by simply prohibiting it outright (as they did with taxes on exports from a state). Tax protesters fighting the federal income tax have found nothing but defeat after defeat, with the Supreme Court and the other federal courts pointing out, in agonizing step by agonizing step, the history and purpose of the "direct tax apportionment" clause.

Is this supposed to mean something? In all governments where the leaders over step their bounds to control the people the people find nothing but defeat after defeat. Your evidence to show tax protesters are wrong is ridiculously flawed.

Let's suppose a large corporation got to appoint and pay for their own judges. Let's also suppose you had no choice but to face one of these judges when you were attempting to expose a massive fraud within the corporation. Let's assume we're talking about Phillip Morris. Hmmm, I wonder how many cases would be won showing cigarettes cause cancer or any other life threatening disease?

Steve, your whole premise is faulty, because you argue that taxing certain transactions is somehow "circumventing" the purpose of the direct tax apportionment clause. You are wrong. Taxing a transaction (or other event) does not "circumvent" the purpose of the direct tax apportionment clause, for the simple reason that the direct tax apportionment clause was not intended to prohibit any particular KIND of transaction (or other event). The purpose of the clause was to require that capitations and property taxes (taxes on property by reason of ownership) be imposed only with apportionment (pro-rata) among the states based on population.

That's just failing to see the forest because all the damn trees are in the way.

No one can live without an "income" as the IRS has described it. Saying a capitation tax requires apportionment but saying EVERYONE is liable for a tax that covers everyone's ability to live does not is ridiculous. Capitation taxes don't have to be flat nor do they have to tax everyone, in fact NO capitation tax was laid like that. Why would a government chose to lay a $10 per head tax, that excludes the majority of the population over a tax that taxes a majority of people every single year without having to go through all the BS that apportionment requires.

In imposing the "direct tax apportionment" requirement, the Founding Fathers never intended to prohibit federally-imposed capitations. The Founding Fathers never intended to prohibit federal property taxes, either. And the Founding Fathers never intended to prohibit income taxes.

No one said they were intending to prohibit anything, that's your pathetic attempt at a strawman argument.

If the Founding Fathers had wanted to require that taxes on INCOME from property be apportioned, they could have easily said so -- in the Constitution. Had the Founding Fathers wanted to require any other tax on any other kind of event or transaction be apportioned, they could have said so, just as they could have gone even further and could have simply prohibited such taxes -- had they wanted to do so. They did not.

Ummm hmm that's why the only quotes that can be found in history from anyone in that era said a general tax on income would require a direct tax and not a single hint of anyone saying that an income tax falls under the indirect category.

[Nikki]

I've never said that a tax should be prohibited. I'm simply saying, as I always have, that some taxes should be laid according to the plan devised. Certain taxes require apportionment. The reason was simple, a tax that directly falls on people should be apportioned according to representation.

Hence the 16th amendment, which specifically removed the apportionment requirement with respect to income taxes.

That given, you are entitled to your opinion as to what you think SHOULD be. Unfortunately, your opinion has very little relevance with respect to what actually is.

[jg]

Certain taxes require apportionment. The reason was simple, a tax that directly falls on people should be apportioned according to representation.

*begin loop
jg cites Springer
jg explains Springer holds income tax not a direct tax
SteveSy ignores
*end loop

Certain taxes does not include income taxes; but you do not agree.
Your disagreement with the Supreme Court does not mean that any error exists by the Supreme Court.

[Famspear]

I've never said that a tax should be prohibited. I'm simply saying, as I always have, that some taxes should be laid according to the plan devised. Certain taxes require apportionment. The reason was simple, a tax that directly falls on people should be apportioned according to representation.

And I'm saying that taxes are being laid according to the plan devised. I'm saying that the courts have ruled that the plan is being followed.

Is this supposed to mean something? In all governments where the leaders over step their bounds to control the people the people find nothing but defeat after defeat. Your evidence to show tax protesters are wrong is ridiculously flawed.

No, my "evidence" is not flawed. And it's not my "evidence." I'm simply telling you what the law is. Imposition of a U.S. federal income tax is not "stepping over bounds." The reason for defeat after defeat for tax protesters is that the tax protesters are wrong.

Let's suppose a large corporation got to appoint and pay for their own judges. Let's also suppose you had no choice but to face one of these judges when you were attempting to expose a massive fraud within the corporation. Let's assume we're talking about Phillip Morris. Hmmm, I wonder how many cases would be won showing cigarettes cause cancer or any other life threatening disease?

The problem is that with respect to the federal income tax, there is no "massive fraud." There is no massive fraud, no massive conspiracy, to impose an illegal tax. Your argument is just more tax protester rhetoric.

That's just failing to see the forest because all the damn trees are in the way.

No, I see both the forest and the trees very clearly. I may not like what I see. Some of the trees may be diseased or dying. Others may be healthy. I may want to cut some of the trees down. I may want to let the forest grow more in one direction. But I am not pretending that the forest and the trees are not what they really are merely because I don't like something about the forest or the trees.

No one can live without an "income" as the IRS has described it. Saying a capitation tax requires apportionment but saying EVERYONE is liable for a tax that covers everyone's ability to live does not is ridiculous.

No, it's not ridiculous to say that, Steve. You're simply arguing that because the federal income tax covers everyone's ability to live, it should be prohibited or at least required to be apportioned. That is not logic. That is emotion. And that is not the law.

Capitation taxes don't have to be flat nor do they have to tax everyone, in fact NO capitation tax was laid like that. Why would a government chose to lay a $10 per head tax, that excludes the majority of the population over a tax that taxes a majority of people every single year without having to go through all the BS that apportionment requires.

I don't care. The law is what I say the law is, because I have studied the law and I have reached correct conclusions about what the courts have ruled. I may not like the forest or I may not like some of the trees, but... you know the rest, Steve.

No one said they [the Founding Fathers] were intending to prohibit anything, that's your pathetic attempt at a strawman argument.

If only I had a nickel for every time a tax protester used the word "strawman." No, Steve, in substance your argument, and the argument of all tax protesters, is that the federal income tax is somehow invalid. That is, in substance, an argument that the federal income tax should be prohibited. But, that aside, are you now prepared to agree with me that the Founding Fathers did not intend to prohibit the federal income tax in its present form?

... the only quotes that can be found in history from anyone in that era said a general tax on income would require a direct tax and not a single hint of anyone saying that an income tax falls under the indirect category.

Unfortunately, even if that statement were true, the statement would be worth nothing. The law is what the courts rule the law to be, not what a bunch of tax protesters argue is "found in history from anyone in that era." The federal courts -- including the United States Supreme Court in its 1881 decision in Springer -- are not only better interpreters of the legal history of the Constitution than you are, Steve, the courts are also authoritative. The courts have ruled the way I say they have ruled. The forest is what I say the forest is, not what you say it is, Steve. And the trees are what I say they are, not what you say they are.