Thursday, August 14, 2014

WHY WE FIGHT


Collection of taxes is out of control in America. The Progressives have placed very high tax rates cleverly baked into our federalist system with its thousands of jurisdictions demanding cumulatively high property, income, and excise taxes. Yet the government dominated society they have produced, with its tens of thousands of laws, regulations and administrative case law is frankly a basket case. Big government policies are a disaster, fueled by taxes, fines and incarcerations of  poor and minority working and unemployed Americans. While the upper classes in our Republic  are very well off, and they do in fact contribute the most to the tax base, there is a great disparity of incomes and many are struggling to make ends meet. It is certainly true that the poor in America are relatively wealthy compared to the poor in other countries, even many developed countries. Nevertheless, there is little reason why the poor should exist in our wealthy nation to the extent they do. Even more so, there is little reason why the lower and middle classes in America  should have to endure the many large and petty  hardships most endure.

The US Individual Income Tax is the most egregious example of inefficient, corrupt and tyrannical taxation in America. It is so cleverly designed and so ruthlessly enforced that nearly everyone it seems pays their income taxes out of sheer fear or the pitiful expectation of a refund  for part of their earnings withheld from them in expectation of a tax liability. Even if fundamentally no such liability actually exists.

                                                      WHERE IS THE LAW?



The IRS pervades our lives in many ways that do not even include the money they take from us. We are supposed to have free speech in this country, yet everyone who participates in the political process has to register with the IRS and promise to obey their regulations in order to receive tax free status and enable their donors to deduct their donations. Why?

The disputes over taxation and medical marijuana illustrate vividly how the right to medicate or recreate and in commerce facilitate that right with others is overshadowed by the IRS enforcement of money laundering laws and tax deductions for the new legal marijuana industry. And through Obama care the IRS is becoming involved in our very private  health care decisions.

All manor of social engineering is accomplished through the tax code, from home and real estate purchases to solar panels to electric cars and how many children you can claim as deductions. Every American annually  or even more often sends these testimonial reports to to the government as a routine they groan and moan about but seldom think of what rights they are forfeiting in the process.

Only a relative few stop to think about how absurd this is. What have we gotten for all this time and effort reporting and paying to the government? Certainly in the last decade more people are asking this question. We are 17 trillion in debt, our nation is weary of decades of no win wars, our educational system is failing, the government is reading our emails and our property is being taken from us without our consent for this bullshit?

Clearly government  creates more problems than it solves. Foreign adventurism, economic decline and domestic turmoil created by government  are the calamities that the founders of our nation warned us against.

Since the 1970's a few people have asked fundamental questions about the income tax. Many have suffered and paid dearly for their questioning of authority. I have tried to explain the basic principles for which they have given their time, property and freedom in this blog.

There needs to be a many pronged lawful peaceful rebellion against the Progressive Administrative Welfare/Warfare State if we are to restore freedom and the blessings of liberty to our nation.  The Federal Reserve, the military industrial complex, the national security apparatus have all become the subject of respectable debate in recent years.  Yet  tax honesty people are still relegated to the back of the policy policy debate bus. It is time to bring these arguments against the income tax  out into the public arena. It is time to discuss what the income tax actually is and what we can do about it as citizens of a free Republic that should respectfully acknowledge, if not welcome the discussion.







Sunday, August 10, 2014

Reforming the IRS begins with the Seventh Amendment



                                                      How to reform the IRS


If you work in public policy, or you are a candidate looking  for a policy, and think the income tax system is  horrifically unjust , inefficient, unfair, incomprehensible and worse, then I encourage you to start talking realistic, achievable reforms.  The income tax, in tandem with centralized fiat money banking, has fueled the excessive growth of the federal government , while diminishing the power of individuals and states. Not a happy situation for a lover of liberty.

I have talked before about the choices individuals have on April 15. No matter which level of tax compliance you may be in, the important battle will be fought in the public policy arena. Attention is focused now on the IRS/Lois Lerner scandals, but while it further deteriorates the image of the IRS, it doesn't directly help the individuals who are suffering from IRS abuse.

Unfortunately, elected representatives who profess to sincerely  oppose the IRS , such as Senator Ted Cruz and former governor and Libertarian Party Presidential candidate Gary Johnson are only issuing bombasts such as "Abolish the IRS" to fire up their constituents. This ignores the nature of the tax, and promotes Constitutionally flawed alternatives, such as a "flat tax" and a "Fair Tax".
Absent such simplistic rhetoric, what are reforms of the IRS that a freedom lover could support? More importantly, what are the most important reforms of the IRS that might have a chance of success?

1. Eliminate, reduce or ameliorate the $5000 civil penalty for frivolous submissions. This penalty is out of proportion to the tax amounts due for many individuals. It has a chilling effect on free speech. Furthermore, it is misapplied. Section 6702 of the IRS code, which authorizes frivolous civil penalties, by the plain language and by a large body of case law, applies only to individuals involved with an organized economic enterprise who have a duty to perform a specific act . In most cases, this means the person in payroll or accounting , or a third party offering the services to a corporation, who submits a "frivolous" return for trust fund or excise taxes he has a duty to report  and pay over. It does not apply to ordinary individual taxpayers. In fact, the statutes only talk of "false or fraudulent" returns. The IRS simply uses this pejorative to shut off due process.
But, it is used against ordinary taxpayers routinely and despite the limiting  statutory and case law it is extremely hard if not impossible to abate unless you surrender and become in full "compliance" with the IRS.

2. Revisit the Taxpayer Bill of Rights and strengthen it.
The Internal Revenue Restructuring and Reform Act of 1998 ( Taxpayer Bill of Rights) provides for due process in tax collection by instituting the Collection Due Process Hearing. Many of the participants in this process are pro se.
However, the original intent of the law has been watered down by IRS practices. In particular, the IRS will deny a face to face hearing, in which the proceedings can be recorded and a transcript obtained for appeal . This deprives individuals of the right to crucial evidence that can be used in an appeal.
The Collection Due Process hearing procedures should be strengthened, as well as other provisions of tax collection in the RRA.

3. Fix wrong judicial interpretations of IRS code Section 7433, which authorizes suits against IRS agents who intentionally or negligently abuse their authority. The courts have not complied with the will of congress and are making it very hard to sue IRS agents. A lot of it is done by unnecessarily restricting the statute of limitations, resulting in too many summary dismissals. The IRS frequently abuses its own due process rules, and flaunts the intent of Congress as the Statutes are written . It is just very hard to get due process with the IRS in any situation. Most middle and working class individuals who face the IRS are pro se. There must be a realistic opportunity to use the courts to sue negligent or intentionally hostile IRS agents.



4. Restore  the Seventh Amendment right of Americans to demand a civil trial in tax cases UNLESS there is a jeopardy assessment, a notorious insolvency, or a clear link to a public office or other direct contract with the federal government that allows for a seizure of property before trial. This is the ultimate goal of Tax Honesty. US Citizens by the holding of the Supreme Court have "the rights of Englishmen as they existed in 1791 and were recognized in at least some of the Colonies and do not violate the spirit of our Revolution".


Those rights of Englishmen include the right to trial by jury even against the king, going back to the Magna Charta. This is the ultimate due process whereby the Government has to prove its claim, if objected to, by a preponderance of the evidence to a civil jury.There are three situations when this right does NOT exist, which are named above, and in previous posts. They are jeopardy , insolvency and contract. IF you are not an absconding criminal or debtor, or not in a notorious insolvency, or are not an individual or agency that is responsible by contract or specific  employment to turn over tax funds to the government, then you by right should be able to claim a jury trial.

These principles of due process and individual rights have been turned upside down in the income tax arena. In income tax, you are constantly being coerced into signing testimonial affidavits under the routine guise of tax compliance without any clear legal authority that puts the burden of proof entirely on you with only a modicum of procedural rights.

Instead of conceding this moral ground to the collective corporate state by talking about the Flat Tax or the Fair Tax, I believe we must talk about something more fundamental. We need to talk more about the rights of individuals, which is what this whole liberty movement is about. We need to talk about the right to earn a living in the ordinary occupations of life without taxation. We need to talk about real due process in tax collection.






Monday, August 4, 2014

How Backlash Against Republican Corruption Gave Us the 16th Amendment




An Illuminating Snippet of Income Tax History
How Republican Party Crony Capitalism Led to the 16th Amendment







In 1884, the American people were sick to death of the corruption of the Republican party and its clients and cronies. In a spasm of cleansing, Stephen Grover Cleveland, a strict limited-government Jeffersonian who campaigned against most (if not all) of the economic and centralizing policies of Lincoln and his successors, was elected president of the United States. Four years later, Cleveland again won the popular vote, but due to the quirks of the electoral college he was denied a second term at that time, surrendering the White House for a term to Republican Benjamin Harrison. In 1892, Cleveland yet again won the popular vote, and this time also won the electoral college majority for the second time, both by wide margins.

Cleveland's view of federal authority and the Constitution can be seen in his commentary upon vetoing an appropriation by Congress of $10,000 to buy seed grain for drought-stricken Texas farmers:

"I can find no warrant for such an appropriation in the Constitution, and I do not believe that the power and duty of the general government ought to be extended to the relief of individual suffering which is in no manner properly related to the public service or benefit. A prevalent tendency to disregard the limited mission of this power and duty should, I think, be steadfastly resisted, to the end that the lesson should be constantly enforced that, though the people support the government, the government should not support the people. The friendliness and charity of our countrymen can always be relied upon to relieve their fellow-citizens in misfortune. This has been repeatedly and quite lately demonstrated. Federal aid in such cases encourages the expectation of paternal care on the part of the government and weakens the sturdiness of our national character, while it prevents the indulgence among our people of that kindly sentiment and conduct which strengthens the bonds of a common brotherhood."

Among the key targets of Cleveland's restoration policies upon resuming the presidency in 1892 were high protectionist tariffs by which politically-connected manufacturers forced competition-insulated prices on consumers by burdening imported goods with a tax. Declaiming against the tariff in his third annual message to Congress during his first term, Cleveland had expressed his views thusly:

"When we consider that the theory of our institutions guarantees to every citizen the full enjoyment of all the fruits of his industry and enterprise, with only such deduction as may be his share toward the careful and economical maintenance of the Government which protects him, it is plain that the exaction of more than this is indefensible extortion and a culpable betrayal of American fairness and justice ... The public Treasury, which should only exist as a conduit conveying the people's tribute to its legitimate objects of expenditure, becomes a hoarding place for money needlessly withdrawn from trade and the people's use, thus crippling our national energies, suspending our country's development, preventing investment in productive enterprise, threatening financial disturbance, and inviting schemes of public plunder."

Cleveland also had his eye on the untaxed profits of investors in federally-subsidized railroads, whose huge profits resulted in large part from being spared the normal need to pay for the land over which their lines ran. Under the Lincoln administration during which the lines were begun, these railroads had enjoyed grants of right-of-way over federal lands on which to operate. Included in the right-of-way grants was permission for the railroad corporations to rent out such portions as were not being occupied by the tracks themselves. The railroad corporations were also given twenty-square-mile blocks of land alongside the track for each mile of track laid (which grants included the mineral rights associated with this land).

All-in-all, the grants were themselves a public benefit more than sufficient to make the resulting profits properly subject to federal tax as "income". What's more, by the time of the Grant administration the railroaders had expanded their reach into the public pocket enormously, and the overall corruption involved had become a national scandal.

Accordingly, in 1894, Cleveland and his congressional allies passed a revenue act simultaneously reducing the tariff and reviving the 22-year-dormant "federal income" excise tax with application to qualified gains realized as dividends and rents-- that is, the gains enjoyed by the freeloading railroaders. The tax applied at a rate of 2% on "income" gains above $4,000 (a value in today's world of anywhere from $108,000 to $4,270,000, depending on the way the relative value is calculated. Click here to run the sample yourself and see all possible results). Significantly (in ways that will become clear presently), also in 1894 Cleveland appointed Edward Douglass White to the Supreme Court.

In 1895, the United States Supreme Court held sections 27-37 of the revenue act invalid with its ruling in Pollock v. Farmers' Loan and Trust, 158 U.S. 601. The court's reasoning was that to apply the tax to gains derived in connection with the ownership of property (either the stock on the basis of which dividends were paid or the real estate from which rents were derived) amounted to a tax on the property itself, and thus failed to pass Constitutional muster for lack of apportionment in its administration. Cleveland's effort to lower the tariff was successful, but his effort to pluck for the public purse some of the pelf being pocketed by profiteering patrons of past Republican administrations was thwarted.

Fast-forward 15 years and we find Edward White elevated to Chief Justice by William Howard Taft, just a year after Taft called for a Constitutional amendment to remove the apportionment requirement for taxes on rent and dividends gains. This is not a coincidence.

Taft is often mistaken as a fellow traveler with "progressive" Teddy Roosevelt, but while at one time Taft was supported by Roosevelt, he was ultimately disowned and despised by TR once he revealed himself as a "rule of law" president hearkening back much more to Cleveland than to his immediate predecessor. The extent of Taft's off-the-plantation character is evidenced by his appointment of White, a Democrat and appointee of the very Jeffersonian Cleveland, to Chief Justice-- even though Taft himself was nominally a Republican. As Wikipedia puts it,

"Roosevelt for his part believed "the President has not just a right but a duty to do anything demanded by the needs of the nation, unless such action is forbidden by the Constitution or federal law." Taft's general opinion on the other hand was that "the President can exercise no power which cannot fairly be traced to some specific grant of power in the Constitution or act of Congress." (quoting Donald F. Anderson, William Howard Taft: A Conservative's Conception of the Presidency (Ithaca, N.Y., 1973)).

In fact, ultimately the Republican leadership began organizing against Taft-- a president nominally of their own party, with Robert LaFollette forming the National Progressive Republican League dedicated to booting Taft from office; and in 1912, Teddy Roosevelt actually formed the Progressive Party in order to run for the presidency against Taft. Roosevelt captured enough of the opposition vote to leave the disastrous Woodrow Wilson the victor.

However, Edward White remained Chief Justice, of course, and in 1916, White-- a man intimately familiar with the purpose of the 1894 act, the reasoning and effect of the Pollock decision which declared the relevant part of that act invalid, and clearly a man sharing Taft's views and understanding what Taft meant to accomplish with the 16th Amendment (and what he did not)-- wrote the opinion in Brushaber v. Union Pacific RR. CO., 240 U.S. 1, the landmark case declaring the meaning and effect of the 16th Amendment to be limited to nothing but undoing the Pollock loophole shielding privilege-based dividend and rent gains from the long-existing income tax.

This article is from Pete Hendricksen's website Lost Horizons

Friday, August 1, 2014

Now the GOP wants to "Abolish the IRS"

The national GOP Republican website wants you to sign a petition because they will "Abolish the IRS". http://www.gop.com/act/abolish-the-irs/

The Republican Party says:
Tax collection should be simple, not scandalous.
The IRS abused its power, attempted to silence conservative groups and potentially spent years lying about it.
As Congressman Paul Ryan said, the IRS can turn our lives “upside down.” But Americans have almost no recourse when the IRS abuses its power.
Tax collection should be simple, not scandalous.

This is all true. I want the GOP to make tax collection transparent and provide due process. I am not convinced the Republican Party  will do this. Grandstanding about the abolition of an agency that collects revenue is all well and good, and the IRS deserves all the criticism it gets. But unless we move to a voluntarist society without any taxes, simply abolishing the largest tax collection agency is not going to happen.

Why not talk about realistic reforms that empower individuals to receive due process in tax collection, and enable them to sue the IRS for violations of due process? Why not restore the 7th Amendment right to a trial on the facts and the law in tax collection?

These reforms if implemented could enable the people to abolish the IRS over time by asserting their rights against the tax collector as they existed in 1791.

See my next post.



Sunday, July 20, 2014

Pete Hendricksen's Fourth of July get together

Peter Hendricksen's July Fourth Party featured these four guests who gave testimony 
that his methodology works.




Saturday, July 19, 2014

Why Not Soak the Privileged Rich?






This week former Libertarian Party presidential candidate Gary Johnson said we should “abolish the IRS” and institute a consumption based “FAIR TAX”. Well I like Gary Johnson but I am disappointed that he is proposing such a collectivist solution. It would  greatly expand the reach of the tax collector, because the freedom benefit of a properly levied excise tax is that it is laid on particular privileges and events that many people would not engage in, thus avoiding the tax. At the same time the revenues provide  feedback to legislatures as to how the people are taking to their policies. But a broad based consumption tax would be hard to avoid, and it would involve increased tax compliance by millions of small businesses.
A consumption tax is regressive, falling hardest on the poor and fixed incomes. Not willing to appear cruel, Fair Tax proponents are forced to provide different schemes to rebate part of the sales taxes to low income people thereby involving the IRS, or something like it, to process income statements and send refunds. What could possibly go wrong?
Naturally, the sales tax will be sold as revenue neutral, or even bring in more money to the Federal Behemoth.  So what have we gained? Very little, I would think. There would be a renaming of what would be largely the same. We would have expanded a regressive excise tax. Do you think progressives will fall in line to support this?  I doubt it has much to appeal to them, except for vague promises corporations might pay more tax.
Then another article in a major Lib webzine featured a takedown of the need for a new progressive tax. It was well written, but the fundamental take on the issue is incorrect. What if the income tax is being incorrectly collected? What if it is a tax only on those who earned income from a federal privilege? 
If it is understood that the vast majority of working people earning a living in the harmless occupations of life are not taxed under the constitution, and that only those engaged in federal privileges are, then why not agree with the Progressive! Of course the tax should be Progressive, my friend, just so long as it is a tax on a federal privilege!
Isn’t this a Libertarian solution that has something in it for all ?  For Libertarians, it defends  the individual exercising his natural right to work to support himself and his family. For Progressives, it shows you are open to some kind of progressive tax, and  you are joining with them against the 1% who earn their money from a federal privilege.
But you would have to forge new ground here. Libertarians would actually say that we cannot be rightfully taxed on our natural right to earn a living for ourselves and our family. That puts the power back to the individual. The only difference would be that you would signal support for a progressive tax on federal privileges. Demand we reform the IRS to have more due process and transparency. The slogan is we cannot squeeze the workers to pay for the greed of the crony corporate elite!





Thursday, July 17, 2014

 A Federalist Critique of the US Individual Income Tax

Does federalism preclude the Individual Income Tax as currently collected?

  The federal government can tax the same objects and within the same jurisdiction as the states. "We must remember, too, that the revenues of the United States must be obtained in the same territory, from the same people, and excise taxes must be collected from the same activities, as are also reached by the States in order to support their local government.” Flint v. Stone Tracy Co., 220 US 107, 154 (1911)

2.       Otto Skinner and other tax honesty writers  point out that the States party to the Constitution could only give the newly created federal government powers of taxation they already inherently possessed: (A) Directly tax people or property, but with a significant restriction: a direct federal tax must be apportioned among the several states by population. The States also gave the federal government the power to tax indirectly through excises, imposts, and duties.
3.       The focus, then, is on the authority the several states have to tax income vs. the authority to tax a right.
4.       If a State does not have the power to declare a right taxable, then it couldn’t have given that authority to the federal government, either.
5.       However, if a State could tax a privilege, so could the federal government (see A above) tax the same privileges. This indeed may answer why States can self-determine one’s taxable liability because the information return declares that you were engaging in a privilege.
6.The key question is this: Can a state tax labor and the enjoyment of the fruit of that labor as a right or is it a privilege that can be taxed? The Constitutional question is this: did the several States have the authority to grant the federal government the authority to tax the right to labor and the fruit of that labor?

7.Here is the issue:

Case law that firmly declares that working for a living is a right that cannot be taxed as a privilege is found at the state level. Here is one case:
“The individual, unlike the corporation, cannot be taxed for the mere privilege of existing. The corporation is an artificial entity which owes its existence and charter powers to the state; but the individual's right to live and own property are natural rights for the enjoyment of which an excise cannot be imposed: 26 R.C.L., Taxation, § 209, p. 236; Cooley, Taxation, (4th Ed.), § 1676; Opinion of the Justices, 195 Mass. 607 (84 N.E. 499).” Redfield v. Fisher, 135 Or. 180, 197-198 (1931)

8. Some state constitutions forbid an income tax, or have other provisions that prohibit  taxing labor, or protect the right to the fruits of your labor. If it was commonly understood at the founding that states could not tax the right to earn a living that would be a powerful argument against the federal income tax as it is commonly understood today, as an excise tax but under the color of an unapportioned direct tax on everyone who earns a paycheck.
If you can find sources for that proposition, such as common law principles in American Jurisprudence or other sources, please leave a cite in the comments below.

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John Benson passed away recently. He was the partner of Glen Ambort, and they collaborated on the Taxation by Misrepresentation e-book that details  how the 1040 Form is a modern day Statute of the Staple Recognizance that limits your 7th Amendment right to trial by jury because it is an assumed contract based on an old English voluntary pledge of property and freedom signed by foreign merchants who wanted to do business in medieval England.

John and Glen did several years in prison together where they collaborated in this research. John emerged from federal prison legally blind and very ill. Many of us passed the hat to help get him an apartment where he could continue his research. I only talked with him on the phone a couple of times and never met him. Because of John's  health Glenn was the spokesperson of the duo. He is eulagized as a very saintly and peaceful human being. We are saddened by his passing.