Down the Rabbit Hole

"Just how far down the rabbit hole do you want to go? — Morpheus to Neo in The Matrix

It’s April 15th. That’s the deadline for Americans, under threat of financial ruin, armed raids and imprisonment to reveal the intimate details of our fiscal affairs to the authorities. It’s time to expose our bellies to our masters.

I try to picture Sam Adams, Tom Paine, Thomas Jefferson, or George Washington filling out a tax return, but all I see are guys in satin pedal pushers and powdered wigs reaching for muskets. Jefferson thought government power could be “held down by the chains of the Constitution.” He never saw an IRS SWAT team.

Well into the 20th Century the Constitution still informed legislative decisions. Everyone knew the feds had no jurisdiction in the states. For world-improvers to prohibit alcohol they needed an amendment to the Constitution, the 18th. To have an income tax they needed another, the 16th. 

To regulate drugs, they taxed them, with the Harrison Act in 1906 and the Marijuana Tax Act in 1937, knowing they had no power to prohibit them. To regulate machine guns, same thing, the National Firearms Act put a tax on machine guns that was for the time prohibitively high. The feds knew they had no authority over anything that didn’t involve interstate commerce or foreign trade. They still don’t. But most Americans don’t know that now.

The 16th amendment was ratified in 1913. The income tax laws appeared right after that. In those days lawmakers were much more keenly aware of the limits of their power than they are today. They wrote the income tax laws the same way they wrote other laws at the time — with an eye to what was allowed under the Constitution.

The courts have ruled that the 16th Amendment, the income tax amendment, does not expand federal jurisdiction into the states, does not extend federal taxing power beyond the ability to tax certain incomes without apportionment, and does not allow Congress to tax every kind of income no matter where or by whom it was earned. For example, Congress clearly cannot tax Canadians’ earning money in Canada.

So what kind of income can they tax and whose?

It is on that question that a curious income tax case turns today. A Mr. Larken Rose has for years published his legal research on a website called www.taxableincome.net.  Based on the convoluted, but ultimately plain language of the law, he concludes the domestic income of most Americans is not taxable and never has been.

Aware of the limits of its power, the 1913 Congress wrote the law to apply only to income subject to federal jurisdiction, namely, that of aliens with U.S. income and Americans with foreign income. Although the law has been reorganized a number of times since then, and key explanatory phrases deleted, it has never been changed.

Other researchers have drawn the same conclusion. Those who have sold their advice and research have been silenced with injunctions against “fraudulent tax schemes.” Book burning comes to mind. Apparently, if you want to interpret the 110,000 pages of federal income tax law you have to

do it yourself

.

I get email every day selling me stuff that will let me shed 50 pounds in a week, earn a PhD in two days, make me irresistible to pneumatic coeds and equip me like Seattle Slew. Why don’t the G-men come running to protect me from those “fraudulent schemes?”

Clever Mr. Rose has never sold his research. He gives it away. He offers no tax advice. IRS attempts to silence him have failed. He has endured harassment, intimidation and personal smears, but no injunctions. The feds tried unsuccessfully to shut down his website. A dozen armed IRS agents raided his home. They held his family at gunpoint for 8 hours while agents rummaged his belongings and papers. The agents confiscated hundreds of videos explaining the law. They hauled off his computers and his financial records. They didn’t find anything he hadn’t already given them. It seems like a lot of trouble just to shut up a “frivolous tax protester.”

This guy must be on to something.

Mr. Rose quotes the law: “Section 861(b)...state(s)... how to determine the income of a taxpayer from sources within the United States.” Section 861 repeats that statement many times, in many different ways. 

The problem is, when you scurry all the way down the Section 861 rabbit hole there’s a big surprise at the tea party. The income earned in the United States by U.S. citizens is not on the list of taxable income. The regulations use peculiar, wordy, double negative legalese to define income that is “not exempt.” But the domestic income of most Americans is not on the “not exempt” list. 

Rose has organized letter writing campaigns to get answers to a few simple questions about tax law from someone, anyone, in government. His basic questions are “How do we determine our taxable income?” and “Should we use Section 861 and its regulations to do so?” The law tells us that we should. But if we do, we find our income isn’t taxable. Nobody in government wants to talk about it.

Rose and hundreds of others, including this writer, have sent the questions to Congressmen, IRS officials, tax professionals, attorneys, and accountants. Replies, when there are any, consist of irrelevant form letters, answers to unasked questions, arguments based on false assumptions, diatribes on Congressional taxing power, and often, open threats. No direct answers and certainly no citations of law.

Mr. Rose asked to be prosecuted in full page advertisements and letters to government officials. A federal prosecutor has granted him his wish. Mr. Rose has been charged with “willful failure to file” a tax return.

To prove “willfulness” a prosecutor must show that the accused believes he had an obligation to file. Mr. Rose has for nearly ten years asserted he has no such obligation. No one has refuted him with the law. He is unlikely to be refuted at his trial. If he thinks he must file, he has a funny way of showing it.

What he wants is a chance to read the law into evidence in a public court. Whether he will get that chance remains to be seen. My guess is he will not. The judge will tell the jury what the law is without debate. Nobody wants to talk about the law.

Rose’s trial is in July, fittingly, in the Cradle of Liberty, Philadelphia. Maybe he is wrong. Maybe he is nuts. Whatever he is, why not just answer his questions and be done with it? Arthur Miller said of his heavily flawed hero, Willie Lowman, “Attention must be paid to this man.” Flawed hero or fruitcake, Rose deserves our attention if only because of that thrill of fear that we feel typing in his web address. When supposedly free people are afraid of their government, it may be time to head down the rabbit hole to find out why.