The Income Tax: What Is It? Who Pays It? Why? What?
In a nutshell: while the income tax is constitutional, direct taxes are NOT. The IRS has been fraudulently applying the income tax as a direct tax, and that's what needs to be challenged. Not "everything that comes in" is taxable income.
Let's break that down.
The Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defence and general Welfare of the United States; but all Duties, Imposts and Excises shall be uniform throughout the United States;
Does this mean Congress can tax anyone anytime anywhere for any reason in any amount? Of course not. The Founders had been tax slaves, that's what the Revolution was about. The Constitution severely limits Congress' ability to tax income.
There are three basic facts that must be understood:
A tax is either direct or indirect.
A direct tax is a tax on a thing or a person.
An indirect tax is one on an activity or a privilege.
A direct tax is a tax on a thing or a person. When a tax is levied on a person, it's also called a capitation tax, or a head tax: a tax on your head. A tax on YOU.
"YOU" includes your property: the goods and chattels that you own, but not just that. Your property also includes your person, your body, which extends to your labor, which means that YOU includes everything YOU produce. The product of your labor and/or your mind is YOURS. Therefore, a tax on your property or on anything you produce is a capitation tax, a direct tax.
This is the critical, foundational principle the Founders understood all too well; one we 21st century Americans understand not at all, thanks to public schooling.
Remember that the Founders were slave-owners. They understood keenly the difference between self-ownership and slavery. You either owned yourself and what you produced or someone else did. They never intended that the government they created would own its people via taxation, as it does today.
In Article 1 Section 2, the Constitution details what direct taxes may be levied and how. A direct tax is forbidden unless it is apportioned:
Representatives and direct Taxes shall be apportioned among the several States which may be included within this Union, according to their respective Numbers, which shall be determined by adding to the whole Number of free Persons, including those bound to Service for a Term of Years, and excluding Indians not taxed, three fifths of all other Persons.
"Apportioned among the several states" means that the amount of the direct tax is to be divided among the states equally according to population as determined by the census taken every 10 years. In order to divide it equally between the several states, the amount of the direct tax must be determined beforehand. Further, once that amount is collected, the direct tax goes away.
Why did the Founders include a clause allowing Congress to collect a direct tax? Because sometimes there is an emergency and the feds might need a certain amount of cash to deal with it. The emergency was usually war related. So the Constitution allows Congress to collect emergency cash via an apportioned direct tax. Here's how it's set up:
First Congress has to decide how much they need and why (and it better be good so they don't lose any re-election votes over it).
Then they look at the census and decide what each state's share of the total is based on population.
Then they leave it to the states to collect--the feds did not collect any direct taxes. The Founders did not want you to be required to reveal your private life to the federal government. The feds were never meant to collect any tax directly from a person.
Once the total was collected, the direct tax went away.
Unwieldy? Oh yeah. On purpose. Direct taxes were designed to be complicated and difficult to implement. The Founders knew what they were doing. This mess was by design.
What's important to you and me is this: a direct tax that is not apportioned is unconstitutional. Period.
Indirect taxes are taxes on an activity or a privilege: duties, imposts and excises. An indirect tax is NOT a tax on property. For example:
Sales taxes are indirect taxes. The tax is not on the item sold; the tax is on the sales activity. The value of the item sold is used to determine the amount of the tax.
Being licensed to sell alcohol is a privilege granted by government. Ever since Washington suppressed a certain rebellion in PA, whiskey is taxed by the gallon. It's not the whiskey that is being taxed. It's the privilege of getting to distill the whiskey that is taxed. The amount of the whiskey distilled is the measure used to determine the tax.
Working for the government--whether local, state or federal--is a privilege. When you work for a government, the amount you are paid is the measure of the tax. The tax is not on your income, but on the privilege of getting to work for the government.
Ask Yourself: "Is This Tax Avoidable?"
Direct taxes are unavoidable; they must be paid.
Indirect taxes are avoidable. If you don't do the activity, if you don't take advantage of the privilege, you don't pay the tax.
If you are ever confused about whether a tax is direct or indirect, ask yourself if you can avoid paying it. If you can, it's an indirect tax. If you can't, it is a direct tax and unconstitutional, unless it has been apportioned.
For instance, let's say you build a chair.
You built the chair, you own the chair. This is not a taxable event in any way.
You decide to sell the chair for $30. You find a buyer and do the deal.
The state has imposed a 5% sales tax. The sales tax is not a tax on the chair, it is a tax on the sales activity. As such, it is an indirect tax and constitutional.
You just traded your chair for $30. The $30 is still your property, still the product of your labor. No income was gained: you made a chair worth $30. You traded a $30 item for $30 cash.
The state, however, calls that $30 "income" and decides it deserves a cut. It imposes an income tax of 25%. Please write a check for $7.50 to its collection agency, the IRS.
But, wait: that $30 is your property, still the result of your labor. If the state taxes this, that tax is a capitation tax, a direct tax. An unapportioned direct tax. Which makes it unconstitutional.
Yep. Now you are catching on.
A Little Income Tax History: How We Got Snookered Into the Hoax
This is a condensed version of a very long and complicated history:
1. In 1862, during the Civil War, Lincoln instituted the first income tax: he started taxing the privilege of working for Uncle Sam. If you took home a government paycheck, you had to pay back some of it at the end of the year. This was called a "tax return" because you were returning a portion of the taxes from which you were paid.
2. Some other stuff happened: in the 1895 Pollock decision, the Supremes confirmed that direct taxes on property were unconstitutional. Yay! Specifically:
Gain from privileged activity ("income")--i.e., corporate profits, federal employment, federal contracts, federal pensions, anything paid out or allowed or sanctioned by the beast--IS indirect-taxable.
Anything you produce is your private property. It is not constitutional income and not subject to taxes.
Congress was not to be deterred, however, so it gave us the 16th Amendment, ratified specifically to overcome Pollock. While the 16th Amendment gives Congress no new taxation power, it does allow income from real estate to be excise (indirect) taxed, not property (direct) taxed. Using Roberts' Obamacare logic, this is sorta good because it confirmed in a roundabout way that unapportioned direct taxes are still unconstitutional.
If you want to dig in even more, read up on Brushaber.
Things cooked along fine until WWII. Up till then, only about 4% of Americans paid income tax. This 4% paid indirect taxes on income derived from corporate (privileged) profits. Since the state grants the privilege of being able to operate as a corporation, indirect taxes may be demanded for the privilege.
Remember: the tax is not on the income. The tax is on the privilege. The income is used simply to determine the amount of the tax.
3. 1942: we need money to fight WWII. Roosevelt introduces the VOLUNTARY Victory Tax. So voluntary, Donald Duck had to make patriotic propaganda films to loosen your purse strings. It worked: many, many people signed up. Uncle Sam made it easy: your employer would simply withhold your donation out of your paycheck (after you gave him permission with a W4)!
When the Victory Tax was repealed after the war, withholding, well, it just... continued. No worries, though: you could get your money back with that handy tax return form! And, hey, you were helping Uncle Sam who had just defeated the Nazis and
murdered retaliated against the Japanese for Pearl Harbor. Heck, lots of people never even asked for their money back! What suckers we are.
So... When Will This Wrong Be Righted?
Hahahaha. Never. The feds would have to a) stop collecting all that loot and b) admit that a massive fraud has been perpetrated on you and me. Never. Gonna. Happen. Here's what is likely to happen: once too many people know these facts--or just before that--we'll see some "tax reform" that will allow the feds to continue stealing directly from us.
Bonus Income Tax Round
Want to know two questions you can ask the IRS to which you will NEVER get an answer?
1. What is the subject of the income tax? [Meaning on what is the tax paid?]
2. Where is the liability statute for the personal individual income tax? [The liability statute describes who is liable for the tax. Every tax has one... except the income tax.]
Do You Have Questions About the Income Tax?
And who doesn't? It's a tricky topic. By design.