Saturday, April 12, 2014

                        

 Why I am against "Tax Reform"-and YOU should be too!

Many conservatives and libertarians support one or both of the so called radical tax reforms that are currently being considered in Congress and in the punditocracy. They are the flat tax and the national sales tax.

If you are a taxpayer, that is, subject to the income tax, these alternatives may make sense to you.

However, if you are like most working persons, neither the flat tax or the national sales tax is preferable to the biggest loophole of all- the recognition that the income tax cannot and does not apply to you.

Both the flat tax and the national sales tax are flawed from a constitutional viewpoint.  The great taxing clauses of the Constitution have not been changed by or since the 16 Amendment was ratified. There are still two classes of tax, Direct and Indirect (Imposts, duties and tariffs). Direct taxes are laid directly on property and a federal income tax on everything that comes in, as it is currently collected, is a tax on property. It should be  apportioned among the states.

Therefore the income tax lawfully has to be an indirect tax. But wait-an excise tax is not laid on the income itself, but on the underlying privilege or activity taxed by Congress for revenue purposes. The income is only a way to measure the taxable value of the privilege or activity. That leaves us with a fundamental question.

Do you believe that working for a living is a privilege, or a right? To put it in the particular, rather than the abstract, if your job requires an oath to the Constitution, or if you work under a special Federally Licensed Occupation or activity  that generates taxable income, you likely have excise taxable income. If you want more federal oversight over immigration and foreign investment, you might be interested to know that non-resident aliens can be  subject to the income tax. But for the most part, the amazing thing about the income tax is that it is large organized enterprises,  mostly government agencies and  instrumentalities, who are actually liable for the tax. In other words, those who PAY income rather than those who RECEIVE income are generally those who are liable for the tax. This  applies even to your private sector employer,as well, if you work with a W-4. The employer, not the employee, is liable for making returns and paying the tax. Obviously, the game is played so that if the IRS comes after you, your employer does not acknowledge his liability. But that is how the law is written, as it has to  be to remain constitutional.

The  proposed flat tax and even the national sales tax both assume that everyone owes an income tax unless they earn less than the normal statutory exemptions. But this flies in the face of the Constitution. No, the Sixteenth Amendment did not correct the tax clauses. It was passed to correct  the two very misunderstood Supreme Court cases called Pollock vs Farmers Loan and Trust.  It is true that Associate  Judge Stephen Field, whom I hold in high regard, made sweeping declarations in his opinion  about socialism and other evils in writing these opinions. Nevertheless, these cases  misapplied the direct tax rule to include rents and dividends earned from privileged property as property itself rather than income. The 16th Amendment in its famous clause "from whatever source derived" corrected this error by saying that rents and dividends and other privileged incomes  are taxable as an excise tax, separate from the source from which derived.

Since the 16th Amendment did not change the great taxing clauses of the Constitution, there are still only two classes of federal tax, direct and indirect. There is no third "income tax " class.

By careful legal subterfuge , since the "Victory Tax" of World War II, and the 1954 tax code rewrite, these facts are obscured. I recently listened in dismay to a Republican Congressman declare that the current IRS scandal regarding abuse of Conservative Exempt Political Groups is undermining the public's perception of the "integrity" of the IRS , and he hoped that it would not hurt "voluntary compliance".

The point is that your compliance is voluntary  if you are a working person. The legal deception that voluntary really, really means mandatory starts  from the practice of your employer who hands you a W-4 to sign when you join the company. There is no mandate in Subchapter C of the Internal Revenue Code for most private sector companies to withhold taxes. This is because a careful reading of the definition of "employer" includes only public sector entities. The private employer is not mentioned. So, either the corporations and other entities who voluntary petition the federal government for an EIN number are ignorant of the law or they are opting into the status of " Employer" voluntarily. But, if your hiring corporation has so volunteered, does that mean that you must volunteer as well? 

Voluntary compliance as the politicians mean it that the taxpayer has to "voluntarily" pay his taxes by performing his own computations and submitting his own forms applies only to those who receive direct notice that they are subject to the tax, because their income is derived from an activity taxed by Congress for revenue purposes. The majority of workers , earning money in occupations of common right, are not subject to, or liable for, an income tax because the activity of working for a living is not a taxable event. It was the same Judge Steven Field who overreached when he wrote Pollock but was firmly correct when he dissented in the Slaughterhouse  Cases. The jurisprudence of his court was one of the most  economically classical liberal of all the Supreme Courts. Some critics  claim he pulled his economic libertarianism out of a constitutional hat, but the right to work and own property and provide for yourself and family is one of the most recognized of common law rights that his Court affirmed. If the Ninth Amendment could be linked to any one un-enumerated right I would say it would be that one.

Both the flat tax and the national sales tax would obscure this almost lost Constitutional distinction. A flat tax on earnings declared as income would obscure or destroy the distinction between a tax on the income itself instead of on the federal activity or privilege. A national sales tax would in similar fashion obliterate the ability to avoid an excise tax by not engaging in the particular privilege.

How can a flat tax on "income" preserve the Constitutional rule that the income is not taxed, but the taxable event or privilege is taxed, with the income being a guide to the value of the privilege or activity?If it codifies the public misconception about income being everything that comes in for everybody, then how does it measure what the privilege is worth? If your government privilege enables you to rake in 6 or seven figures, should you still pay the same percentage as the average worker making far less?

I AM arguing for a graduated income tax, but so long as it is understood to be a tax measured  by  a privileged activity or event. I am NOT arguing for a graduated tax on those engaged in occupations of common right, and I AM arguing for those individuals and families and businesses to be not taxed at all.

Therefore I urge you to NOT support reforming the tax code by means of a flat tax or national sales tax. I urge you to support the tax honesty movement instead, and fight to abolish the income tax as it is collected. The income tax should be retained as it is actually written in  law and under the Constitution: as a tax on federal privileges and offices. And NOT as a tax on "everything that comes in."




Thursday, March 6, 2014


                                    



To File or Not to File

It has been a year since I started this blog and my first post asked  if you understood what you were doing when you file your Individual  Income Tax Return 1040. A year later we now understand that the 1040 Form is a very old English contract called a Recognizance under the 13 century  Statute of the Staple whereby you pledge your property, your freedom, and that of your family, in order to secure a government granted privilege. In England, that was usually the privilege of a foreign merchant to do business in a particular English jurisdiction under the auspices of the local mayor.
In America, that privilege is  an event or occupation that is connected to a public office or license from the federal government.  If you sign and file a 1040, you are saying that your earnings come from a federal office or privilege that you voluntarily assumed. Of course, the IRS never puts it that way, but if you want to volunteer to maintain the government, who are they to prevent you from being, as Joe Biden said, patriotic?

If you did not earn receipts from a federal  privilege, but  you "voluntarily comply" with the generally accepted view of the  tax obligations  under coercion, it is likely you are  afraid of the modern version of the  "Pain of the Staple" as it was called in old England, or put differently,  the credible threat of force against you if you do not "comply". Can the government lawfully collect income taxes under this supposedly voluntary but actually coerced  system? Do you in fact have, in most cases, a right NOT to volunteer to sign the 1040 recognizance?

The organized Tax Honesty movement arose in the 1970's and despite numerous setbacks including prison terms for some of  its adherents still survives and influences  the political discourse.  If you question the federal income tax laws, there are essentially four ways you can go.

1. File and pay but support political change
2. Don't file
3. File an alternative  1040 Form
4. File an "informal claim for refund"

Let's briefly look at the options:

                                  File and Pay

This will probably be the choice for most people. We would hope you would support tax honesty causes while you continue to be compliant. Write a letter to your Congress critter asking for real change to the tax code, not just a reduction in rates or  a consumption or flat tax. How about rising up to demand an end to the unapportioned direct tax on labor? Didn't Ron Paul say that people should be able to "opt out" of the financial  debt and tax system the Progressives have created?

Don't put "revenue neutrality" as the goal of tax reform. Ask the candidate if he believes it his duty to keep the federal government's revenue flow the same or greater, of if he would support a major cut in revenues from citizens because they became aware of the truth about the income tax. Ask why they have never given IRS Whistleblowers a public hearing. Demand they strengthen the Taxpayer Bill of Rights to confirm the right to a face to face hearing and to put a real cause of action against IRS employees who do not comply with due process. Demand oversight hearings on  the frivolous filing penalties that have a chilling effect on political speech and are improperly assessed.

You DO NOT have to demand the repeal of the 16th Amendment. Instead you should scold any public figure who states there are three types of taxes: Direct, Indirect and Income. Insist  they admit the Income tax belongs squarely in the Indirect excise tax category.

Remember that you are at risk even if you comply. No one accuses the IRS of being fair, or auditing only those who really need an audit. If you are a compliant  filer, you have lost the right to question the basis of the tax, and can only argue that you do not owe the amount of tax claimed  based on the complicated statutes and regulations written for taxpayers that deal with deductions and credits.


Don't File

Those who do not wish to, or can't afford to, "contribute" to the federal leviathan often choose to simply not file. The law states that if you did  not earn "income" above the statutory personal exemption you are not required to file. So if you believe your receipts do not constitute gross income under the law, you may decide to simply not file.

This approach has its benefits and pitfalls. Remember the government depends on third party information returns to give it a reason to believe you had taxable income. If you work on short term contracts with numerous payors, not filing may make sense. You may skate for years and not feel much pain.  Perhaps you live a lot off the grid, do not have a stationary address, have some kind of alter ego like a corporate sole or family trust, etc., so  it may make sense not to declare yourself to the state as a taxpayer. That is how many people become non taxpayers-they earn money informally, and soon they do not want to or are afraid to come in out of the cold.

Keep in mind if you do not file there is no statute of limitations. If the government does find out about your earnings, they can come after you many years after the fact, with penalties and interest added on. Non Filers may lose some procedural rights. You can possibly be charged with willful failure to file. You may have tax liens against property you did not know existed.

File an Alternative 1040 Return

Since the early days of the Tax Honesty rebellion , people have attempted to protest on constitutional grounds by altering the 1040 Form. There was the "Fifth Amendment Return", where you would write "Fifth Amendment" on every line, in order to object to being forced to be a witness against yourself. The government's own Privacy Act Notice states that they can give your information to other government agencies, law enforcement or even foreign governments. This is a valid objection, but an invalid way of objecting. The courts have ruled this is not a valid return, and you can be fined or even prosecuted for willful failure to file using  one of these old methods. Others cross out the jurat, or write over it with their own statement. This is also frowned upon in the courts. You can make a little addition to the jurat, such as UCC 1-308, which is a minor statement of reservation of rights, and it will be accepted. A substantial alteration to the jurat will invalidate the return. Others have defaced the return to claim that only gold or silver is money. All of these actions have not fared well in court, and the IRS has generally collected taxes and penalties, and some have court imposed sanctions as well.

Then after Irwin Schiff was released from prison  for not filing and being public about it, he started to advocate the "zero-income" return. This involves filing a 1040 return with zeros in every line that asks for amount of "income" received or taxes due.  The Ninth Circuit Court of Appeals  ruled that a zero return is a valid return in 1980. After all, the court reasoned, zero is just  a number. The judges were confident that the IRS could assess a tax from a form with zeros on it just as easily as they could with a form with other incorrect numbers. Irwin is currently languishing in a federal prison in the Ninth Circuit, but largely because he will not disclose the names of his clients, and for advocating rebellion in general in his books, especially "The Federal Mafia".

The Ninth Circuit got it right.  If you file a zero income return and do not object to the information returns such W-2 and 1099 returns, that is all the IRS needs to assess a tax and fine you as well.

 Pete Hendricksen then appeared and refined Irwin Schiff's zero income return idea by advocating the use of the Form 4852 Substitute for W-2 or 1099 filed along with the zero income 1040. Mr Hendricksen recognized  how crucial the information returns are. They are in fact a testimony or accusation from third parties that purport to show that you earned gross income during the year that is subject to tax. That testimony is "prima facie valid" for legal purposes, meaning that on its face it is presumed correct. However, prima facie evidence can be rebutted in an administrative or judicial proceeding.

The "CTC educated return", named after his major  book, "Cracking the Code", is his methodology  to rebut the information returns and request refunds of taxes withheld. His "Warriors" send him copies of the forms , IRS correspondence and refund checks  that show  his methodology works. He claims he was the first person to receive a full refund of not only of all his withheld  income tax, but his payroll taxes as well. He puts the amount of refunds his warriors have obtained at over 11 million and counting. The testimony on his website certainly looks like valid IRS correspondence. He does not sell an "untaxing" packet for hundreds of dollars . He simply offers his books and t-shirt for sale, and invites you to get his newsletter, attend his forums, and comply with the law as you believe it is written and applies to you.  Nevertheless, he was convicted of "promoting an unlawful tax shelter scheme" and spent two years in prison. In 2013 his wife Doreen was acquitted of contempt of court charges stemming from her refusal to sign a "compliant" 1040 return after his conviction. He insists none of the Warriors  who use his filing methodology have ever been convicted of a crime. However some have failed in civil litigation.
He has done extensive research on the history of the tax, and contrary to the generally accepted accounts, believes the income tax is essentially unchanged since 1862, when it was first laid during the  Civil War. The 16th amendment merely corrected a technical ruling  in 1895 by the Supreme court  that declared that income from a source such as dividends and rents cannot be an excise tax but must be regarded as a direct tax subject to apportionment. The Court then   ruled in the flagship case  Brushaber vs Union Pacific Railroad (which  the IRS also always references as affirming the constitutionality of the income tax)  and a series of following cases that the 16th amendment granted no new powers of taxation. Judge White's majority  opinion in Brushaber ruled  that income derived from dividends or rent did not require apportionment because the 16th Amendment merely corrected the Pollock court's error by stating  that income can be from "any source derived". An income tax on (privileged) rents and dividends is an excise tax and Brushaber returned the tax to that category, correcting the Pollock Court's decision that  income derived from rents or dividends was a tax on the income AND the source, and therefore had to be apportioned as a direct tax. The Union Pacific Railroad was a federal corporation at the time, incorporated in the territory of Utah, and enjoyed enormous federal privilege. Dividends derived from the stock in the company was excise taxable as income that measured the amount of that privilege.

Mr. Hendricksen affirmatively states that the federal government can require every American earner in receipt of  money paid  to file a return since withholding was instituted in 1941. He regards withheld money as sort of an escrow account against the possibility of taxable income, and thus still belongs to the worker who can ask for it back. Hendricksen holds that since your  receipts are not derived from an excise taxable event, but from your natural right to earn a living for yourself and your family, you have a constitutionally protected right to the refund.  He cites Federalist 21, where Hamilton discusses excise taxes that are like "water in a spigot" that can be turned off by people unwilling to engage in excise taxable activities. He cites an early  congressional hearing in which Milton Friedman, who as a young economist  helped craft the withholding laws, asked if the federal government would withhold from taxpayers and non-taxpayers equally. The Committee said the remedy was that nontaxpayers could apply for a refund.

This point, that the IRS has no choice but to refund taxes withheld from a non taxpayer, is crucial to understanding the methodology. This is where the rubber hits the road . If you follow Hendricksen's methodology, you are filing for the refund using the IRS forms and the  IRS must take your word that you are a non taxpayer, unless they can produce evidence and witnesses independent of themselves to testify against  you. Since they do not and cannot, they must violate your due process in order to contradict your sworn rebuttal of the information returns. The Taxpayer Bill of Rights states that if you make a "reasonable objection" to the information returns the burden of proof falls on the government to bring forth independent testimony from "competent fact witnesses" other  than the returns to show you are liable for the tax. Do you believe that the CFO or Withholding Agent or Payroll Department head of your  private non federally connected  business you work for will testify in open court that they personally   determined against your objection that  you had taxable income?  Especially if  you have already  revoked your signature and written to them well crafted administrative letters regarding  the facts at hand?  What facts do they have, other than the W-4 you signed under the impression you had to sign it to get the job?

Mr Hendricksen believes that the IRS is well aware that they must accept the declaration that you are a non taxpayer not subject to tax and process the refund. And his methodology does work, at least some or perhaps  even  most of the time. Read the testimony on his website from his "Warriors". However, some or perhaps most  of the time the IRS sends the CTC educated returns to the "Frivolous Filing" unit in Ogden Utah, supposedly  managed by one Maureen Green. The IRS insists that Green is a real person. The letters sent by her office have the same tax ID whereby  she claims to be both the manager and the examining officer, a violation of due process rights to know who is accusing you of having taxable income.  We have no idea what percentage, or why, some  returns are marked for the frivolous filing designation, while others are processed for the refund. Once you are in the frivolous filing pipeline, it can be very hard to escape. If you become "compliant" and submit "normal" 1040's from all the years that may be in question, the  policy is that all the $5000 penalties  for each year (!) are abated and instead only one  $500 administrative fine is collected. It may be that having been a non-filer makes it harder to use the methodology.

This does not mean that the frivolous filing penalty is correctly assessed. The law does not even mention "frivilous" filings, but only "false or fraudulent" filings. The Secretary has enlarged the statute by regulation, a no- no in administrative law. There is substantial case law that indicates an ordinary individual  filer cannot be the subject of the fine as written in IRC 6702, as it is only authorized for officers and employees of a corporation or other organized  economic enterprise who have a duty to collect and turn over various excise taxes including withholding trust funds. There are other indications in the computer records of the IRS that indicate the Frivolous Submissions or Filing Fines are improperly , even fraudulently, generated. The IRS must bear the burden of proof by a preponderance of the evidence that the fine is correctly applied and generated. Nevertheless, at $5000 dollars a pop, these fines can mount up and actually be on their face far more of a liability than the actual tax liability. They are a serious deterrent to those who wish to assert their rights as nontaxpayers.

Pete Hendricksen advises to write back to the IRS and try to straighten them out and according to the testimony on his website this  can work, at least some of the time. He is also working on a Writ of Mandamus that would require a federal court to rule the IRS must follow the law and process the CTC educated return.

FILE AN INFORMAL CLAIM FOR REFUND

Perhaps you have not filed in a while, and really don't want to start. Maybe you tried a CTC educated return and are now on the frivolous filing track. Perhaps you believe that you should file something but you honestly do not believe you owe an Individual Income Tax and do not want to support the welfare/warfare state if you don't have to. But you don't want to file a government form, for fear that will mark you as a "taxpayer" and could diminish your rights to question the tax itself.

The final alternative you have would be to file an "Informal Claim for Refund". The IRS divides returns into formal and informal. A formal return is always done on a government provided form, such as the 1040. An informal return is not done on a government provided form.

The law says you may file a "return or statement". In extreme cases, courts have ruled even a handwritten note on a napkin as simple as  "I do not owe a tax" and signed by the individual is a return, at least for tolling the Statute of Limitations. Remember, if you do not file a return there is no statute of limitations. Not that the IRS will scrupulously abide by the limitations, but they are there, and can be invoked.

There is case law that describes what an informal claim for refund should consist of. In Beard vs Commissioner, the tax court stated that it should:

    1. Purport to be a return of tax;

    2. Contain sufficient information for the Secretary to calculate an income tax;

    3.  Be signed under penalty of perjury (this is known as "perfecting a claim"; and

    4. Represent your honest and sincere attempt to meet any tax obligations you may have under the law.

How does a tax honesty individual file an informal claim for refund that meets these guidlines while still preserving his rightful status as a nontaxpayer?

The Tax Relief Team is doing ground breaking work in this area, working with Glen Ambort and John Bennet of "Taxation by Misrepresentation" fame to produce a good informal claim for refund and methodology to dispute information returns. If you feel this alternative meets your needs you are obviously interested in learning far more than the average Joe about the income tax and you should consider membership in a support organization such as the Tax Relief Team or similar  group that  offers training  in  how to use the Freedom of Information Act and Privacy Act to obtain your IRS  records. You also should learn how to  write administrative letters that are short and do not contain "constitutional arguments" that can be labeled as frivolous. Eventually you will need to sue the IRS for a refund or to correct the records the IRS keeps on you. 

The good thing about a properly done informal claim for refund is that it will likely not generate a frivolous filing notice. The bad thing is that they will not likely refund your money. The Internal Revenue Manual contradicts itself in that it states the IRS must accept and acknowledge these informal refund claims, but elsewhere it actually says they are not to be processed! Someone should be able to challenge this contradiction in court, but right now the status quo seems to be you will be safe from willful failure to file and some civil repercussions but you will have to take the IRS to court to have a chance for a refund, or in the alternative sue for damages due to violation of due process.

CONCLUSION

These are your options in 2014 and  every tax year. I would hope you would stop and think what you are doing when you file or not file this year. The US is deeply in debt, barely recovering from a very serious recession, and carries a  bloated  federal behemoth that is out of control and a threat to our lives, property , finances and privacy. How you interact with the state is more serious than hitting a "like" button on Facebook. It is a moral as well as legal decision. Whatever you decide, I wish you well, and hope you will speak out for tax honesty and transparency in the important years ahead.







































Thursday, February 6, 2014

The Statute of the Staple Bond





                                            The Statute of the Staple

The Supreme Court has ruled that Americans have the same rights as Englishmen in 1791 against the tax collector. There are two paths of enforcement the Crown took against its debtors : a Commission of Inquiry  and the enforcement of a Recognizance, under the Statute of the Staple.

IF you receive an IRS 90 Day Notice, there is NO STATUTE listed as making you liable for the tax. Instead, the Notice of Deficiency says you owe a "1040 Type of Tax".

Because there is no statute named, the proceeding cannot be an Inquisition. Therefore, it must be the enforcement of a Recognizance.

Before they send you the 90 Day Notice of Deficiency, if you have not signed a 1040 Form, the IRS prepares a "Dummy Return". This return is never signed by the agent. The substitute return is not authorized in the IRS Code, the Regulations, or the IRS Manual for the 1040 return. The only returns so authorized are the  Trust Fund returns filed  by your company's Withholding Agent and other excise tax returns such as the Form 720.

Because the Dummy Form 1040 is unsigned, among other reasons, it is also not authorized under the Substitute for Return Statute, IRC 6020(B). In court the IRS swears that it acts under authority of  6020 B.  This false oath is one of the few evidential  documents that the IRS signs.

 The process most often used today  is called  the Automated Substitute for Return, which is merely a computer entry. It is input into your Individual Master File without referencing any foundational paper documents. What you get with a 90 Day Deficiency Notice are  work papers signed only by the Examination Group, and sometimes the Manager of all the Examination Groups, usually in the IRS campus in Ogden, Utah.  The Taxpayer Bill of Rights specifies that an individual examiner should sign, as does the examination  form itself, but it is never so signed.

When tax honesty activists question the tax, the most common rejoinder of those who support the income tax as currently existing quote the IRC sec 1 that appears to   impose a tax upon the taxable income of everyone. If this Statute actually means what the IRS and its supporters say, then why doesn't the IRS claim that statute on the Notice of Deficiency and in subsequent  documents?

If the IRS were enforcing a tax statute they would  be subject to a cross examination in  administrative or judicial Inquiries , and would have to produce the unsigned  "Dummy" 1040 as evidence. Any good attorney would be able to rebut the Dummy 1040. It is not a document that is authorized by statute. It is not signed by the alleged debtor or by the IRS.

                      What then is a Recognizance?

The Statute of the Staple passed by Parliament in 1353 codified practices dating back to the Magna Charta of 1215 and  established a process whereby a foreign merchant wishing to do business in England  would voluntarily present himself to the Mayor of the district (Staple)  and pledge his property and  even his freedom, in a  document called a  Recognizance. This is analogous to a bond required of the merchant so that the people of that area would be assured that they would receive the goods they contracted for. Of course he would pledge a percentage of the proceeds of the contract in return for his protection to the Mayor and King.

The "Pain of the Staple" would be read to the merchant before signing the Recognizance so it was absolutely clear that he understood the consequences of a default.If the merchant defaulted on the delivery or quality of the goods he sold, his debt would be enforced as a contractual default. There is no need for a specific statute because the Recognizance is self enforcing as a matter of contract law. 

 A careful reading of Title 26 and the regulations reveals that there is a strong voluntary component to the tax laws. The government and the courts admit that the code is based upon "Voluntary Compliance" but they do everything they can to limit that admission.

Anyone can voluntarily contribute to their Church or charity. But the Income tax seems to impose odious penalties for NOT volunteering. The courts have ruled that once you volunteer to do something, you are bound by the rules that you volunteer into. Military service in the US is voluntary.
But, once you sign on, you are bound by the Uniform Code of Military Justice and can be severely punished for infractions. You volunteer to work for a company, but then you have to obey the rules of that company.

The IRS dutifully reads you their "Pain of the Staple" which are the consequences of disobedience to their rules, in its forms, brochures,prosecutions, levies,  etc. The tax farming industry tells you of consequences of failure to be in"compliance". The Justice Department may prosecute you if you are outspoken and will limit what you can say in your defense.

   What they do not read you is what, if any,  obligation you have to volunteer into their system in the first place. The 1040 Form mirrors in modern practice the Medieval Recognizance, or Statute Staple Contract, Bond or Deed. If you did not affirmatively volunteer for a federal privilege why should you sign a Recognizance oath and pledge your life and property and that of your family to the government?   All the income tax statutes are in Subtitle A of Title 26. Those statutes define the income taxes and who is liable for them. Nowhere in that Subtitle  is everyone made liable for a tax on everything that comes in  as it is collected today.

              You are tricked into signing a Recognizance



The Income Tax Code uses many general descriptions like "Taxpayer", "Person", "Individual," "Trade or Business", "State", "Employee", "Wages" etc that are presumed to encompass what the words mean in common usage but on careful reading are found to be legal "terms of art" that have much narrower definitions that apply only to the tax code.

The IRS uses these narrowly applied terms to imply a claim that every American has an obligation to pay taxes under their complex system. The Tax Court and Federal Courts have generally rubber stamped their deceptive practices and have even violated procedures to assist them in the deception. The Congress has refused to listen to Tax Honesty arguments in an unbiased hearing.

 The IRS claims you do not have a basic right to keep what you earn  for your support and that of your family.  The tax court judges will say that if you received a pay check you earned taxable "wages". They do not recognize your right to your labor. They  claim you have no cost basis in your labor, and everything you earn is pure profit or gain that can be taxed. But,  the IRS provides no law or Supreme Court decision that supports this assertion. This basic right to the fruit of your labor is the right that the tax honesty movement is fighting for. There is some progress affording more due process to tax honesty adherents, including the Taxpayer Bill of Rights. Congress should be pressured to revisit that law and  put some teeth into it. You should be guaranteed a face to face hearing in a Collection Due Process Hearing if you ask for one. The  law needs to provide clearer procedures and more definite compensation for violations by the government and liability for IRS agents who willfully ignore the law.

This struggle  must turn into a political movement to be successful. The courts are thoroughly  corrupted on the law. All you can hope to do if it gets to the courts is win on violations of due process and internal procedures and by attacking the government's evidence and jurisdiction.  Some tax honesty advocates  go to prison,  some lose  property.  Many spend years in administrative procedures, wondering what some bureaucrat will do next. Legal Abuse Syndrome, a form of Post Traumatic Stress Disorder, can cause people who fight for their rights  in the legal process to suffer psychological harm. Some break down completely under the legal abuse  and do violence to themselves or others. But some also win, or the IRS simply drops the claims, or even refunds taxes withheld.

 I am not advocating anyone disobey the law, although my assertion is that the law does not apply nearly as generally as it has been claimed by the IRS. I am only advocating that those who want the truth learn the truth. It is too much to expect the State to be truthful. But at least you should not be punished for asserting rights just because it potentially impacts government's revenue cash flow.

                     Due Process in Tax Collection


Benson and Ambort's contribution to our understanding of due process in tax collection is extremely important  to the tax honesty movement because federal courts have been loathe to uphold a Seventh Amendment right to a trial by jury in tax collection. Where are the previous studies by libertarians and conservatives about due process in tax collection? It is frankly  disappointing that it took to 2012 for two non academic , non bar certified attorneys or IRS licensed practitioners, but two pro se litigants to articulate the rights we have in tax collection. Is it a mere accident of history that the only Supreme Court decisions that talk about foundational due process in tax collection were only about the exceptions to basic rights? Where is the major Supreme Court case affirming these rights? The appellate courts have produced some case law affirming the right to trial by jury in tax collection, but they are largely ignored. We need  more research into the history of due process in the  British Exchequer that starts with the four treatises that the Supreme Court has said are dispositive legal sources.

The only legal paradigm that the US Individual Income tax falls into under the taxing clauses of the Constitution is that of an excise tax. We know the 16th Amendment did not create a new class of taxation because the Supreme Court has said so, many times. An excise tax is a tax on a taxable  happening, event or privilege . An income tax collected as an excise is not a tax on the income itself, but is on the happening, event or privilege. The income is only a means to measure the amount of the tax.

An income tax on public offices goes back in history to when the first king appointed an official who profited from collecting taxes and tributes and then demanded payback.  A tax on public offices is favorably  mentioned by Blackstone in his commentaries.  In the Constitution, there is specific mention that those who hold high office will receive "Compensation for Services", which phrase is incorporated in the tax code. The tax code defines a "trade or business" as the "functions of a public office".  Millions of Americans work in all kinds of employment for the government. Many more millions, however, do not. There are also instrumentalities of the federal government. The National Banks, for example, receive federal  privileges that the State Banks do not. A federal agency pays income tax. A corporate federal instrumentality would be a "person" liable for the tax. A federal nexus appears to be necessary to have to pay income tax but is it sufficient? No, because  the government also has to specify that the privilege is taxable and make someone liable for that tax.

Common privileges taxed by Congress for revenue purposes include occupational special licenses granted by the federal government. International Bond Dealers, International Insurance Brokers, and of course federal firearms license holders are taxed because of their federally granted privileges. (Now that the Supreme Court has declared gun ownership a right, not a privilege, someday  we may be able to end the BATF.)  The Bureau of Alcohol, Tobacco and Firearms is closely aligned with the IRS, and may deceptively provide most of its police powers. The DEA is also heavily involved with the IRS, and computer codes indicating violations of international drug treaties sometimes appear in the Individual Master File kept on tax honesty people.  Al Capone had a federal license to import a certain amount of medicinal alcohol from Canada. Of course, he imported far more than medicinal alcohol, and kept a secret set of books. The federal license was his Statute Staple Recognizance that he was found guilty of violating.

       Have you been notified  of your duty to pay a tax?

The Government by law is to formally advise you that you are liable to keep records and books and pay over a tax. Have you been so directly noticed? Of course, the withholding agent for a corporation or  government agency would be. So would the CFO of a national bank. When you work for a private corporation , you are given a W-4 and told to fill it out. Is that the direct notice? It is common practice, to be sure, and it gives the government reason to believe you earned "taxable income". But what is the privilege, the profit or gain, that is taxed? Is your honest labor merely a privilege bestowed by the federal government? If so,  the State can take 100% of your earnings, and what you keep is merely by their sufferance. The W-4  purportedly subjects you to the payroll taxes like FICA and FUTA which are also voluntary but are collected differently than the Individual Income Tax. Withholding of these payroll taxes are authorized in Subtitle C and F of the Income Tax Code, but only for a limited number and kind of employees. The income tax is exclusively authorized in Subtitle A.  But there is no statute that requires withholding for income taxes for most people. However, the legal theory is that the withholding is in case you actually do earn income from a federally taxed privilege or event, in which case the government is covered. As Congress actually said in a hearing with Milton Friedman when he worked on creating income tax withholding, if you are a nontaxpayer you can apply for a refund.

Pete Hendricksen has a filing method that he claims has produced over 11 million in refunds from the IRS. There are other legally recognized alternative  returns , called "informal claims for refund". But even though they are legal, the IRS rarely processes them. We need more research into how to file nontaxpayer style returns. They should indemnify against willful failure to file charges.

The Supreme Court has ruled that the income tax is an excise tax. But under the color of  contract law it operates   like a direct tax. If you have voluntarily pledged your property as surety for your debts and you become indebted, then the property can be directly taken from you. This is the trick whereby an excise tax is legally converted to a quasi direct tax. It may be legally converted, but is it LAWFULLY so converted?  As the Supreme Court said in Murray's, Congress cannot make any process due process of law by its mere will.  The Constitution is the Supreme Law of the land.

The  rights of free Englishmen as they existed in England in 1791 and
  •  were recognized in some of the American colonies, and  
  • that do not violate the US Constitution and the  Spirit of our Revolution 
 are our rights with respect to the collection of taxes. Tax Honesty demands that differences in  the law between what is a direct tax and an excise tax under the Constitution be well defined and   followed by the IRS. It demands the IRS recognize  a distinction between what is public and privileged, and what is private and free. It requires much more transparency and due process than  is afforded us today in tax collection. The use of coercion and violence to force those  Americans who object into the web of federal privileges and the Pain of the Staple has got to stop.
   Audit the Fed, Audit the Pentagon, Audit the IRS!

Lets let Glen Ambort tell you the basics: (Some audio static. We need more money for production!)





Wednesday, January 8, 2014

                                          Taxation by Misrepresentation:

We now know that Americans enjoy the "Rights of Englishmen as they existed in 1781" against the State's tax collection powers. However, the Supreme Court has never clearly defined these rights, as the only Supreme Ct jurisprudence ( only a handful of cases ) ruled on the exceptions to the rights, and did not clearly establish the  scope of the rights themselves in case law. What the Court did was point to four treatises written by English scholars that discussed the way taxes were collected in England down the centuries. So long as these methods did not violate the "spirit of our Revolution" and were in practice in at least some of the colonies before the Revolution, they are the due process rights we should enjoy.

There is some Appellate Case Law that also references these treatises, but is not generally cited. Without case law guidance, we are left with Title 26 and the regulations as the sole source of our rights without explicit constitutional guidance.

Then a legally blind "tax protester" , John Benson, and his caretaker and  colleague Glen Ambort, who were in prison together for teaching alternative methods of filing taxes, researched these treatises and published an ebook, "Taxation by Misrepresentation". This book is probably the most important research to come forth in several years in the Tax Honesty movement.

I ended the last blog with the revelation that the most important right they discovered was that there was a right to a trial by jury as part of the due process rights of Englishmen in 1781. There is very little chance of that for Americans today. What happened to this ancient right of Englishmen that the Supreme Court said  we should also enjoy?

                                                         Down the Pipe

The British equivalent of our Treasury Department is the Exchequer.  In the upper floors  the Crown's accountants worked on the King's tax accounts. When they believed that someone owed taxes, they sent the  accounting down to the basement in pneumatic tubes. There the clerks enrolled the amounts in the "Pipe rolls". Perhaps this is where the expression "Down the Pipe" or even "Pipe Down" comes from.  Etymologists don't seem to have a better explanation. Once these amounts were inscribed by the clerks in the Pipe rolls, that was the equivalent of what we call today an assessment.

Now the assessment had to be collected, and the question of rights begins.

Benson and Ambort  write that there were two collection paths available, that of by Commission, and the other by Statute Staple, Bond or Deed.

If the process was by Commission, then the accused debtor to the Crown enjoyed the protection of the rights of free Englishmen. There were rights to question the assessment, up to the right to trial by jury, without necessity of first paying the tax, and suing for a refund.

However, if the assessment was recorded by virtue of a Statute Staple Bond or Deed, then the rights were much more limited.The taxpayer's goods might be seized without a hearing, and only a post seizure hearing allowed, or he must pay the tax first, and sue for refund. The burden of proof would be on the accused debtor.

This second method sounds much more like what transpires with the IRS in nearly every case today. What then, is a Statute Staple, Bond or Deed?

Wednesday, October 9, 2013

"The Rights of Englishmen as they existed in 1791..."





Everyone in America thinks they have rights. People who disagree about taxes the government claims they owe are not as sure. It often seems the IRS has all the rights, and the individual few , or none.  The IRS is the most feared government agency that every American corporation, small business, family and individual routinely comes into contact with. Maybe the BATF, the EPA, and others come close to being as feared by some people, like gun dealers or ranchers, but for most Americans the experience of dealing with the IRS , or the mere fear of having to deal with them beyond dutifully filing by April 15, is analogous to getting a root canal every day for months or years.  The threat of having to undergo such a painful experience keeps most Americans “in compliance” with the tax laws that everyone, even IRS Commissioners, say are incomprehensible.

What rights do Americans have in the collection of taxes?

Two Americans who have  disagreed with the way the IRS does business have spent thirty years (around five each in federal prison) researching exactly what basic rights Americans have when the government comes after them for taxes.

John Benson and Glen Ambort have discovered that the Supreme Court has spoken directly to the  question of fundamental rights in the collection of taxes in only three (3) cases!  Statutes that mention the basic rights  are somehow overlooked, and seldom implemented . Certainly they are never applied for the average American “taxpayer” who routinely files a 1040 tax form.

Those who do not file a 1040 tax form out of principle, or file an alternative type of return, believe they must have rights but somehow they cannot get them. As mentioned before in this blog, the only rights they have been claiming with any success are procedural, administrative due process rights. Getting Constitutionally protected rights respected against the government tax collector is virtually impossible.

OK, so the Supreme Court has spoken directly to the question of Constitutional Rights in only three cases. Shocking. What did they say?

What the Supreme Court said is that in the collection of taxes you have the basic  “Rights of Englishmen, as they existed in 1791”, which was the year the Constitution was ratified. PROVIDING: That these basic rights were recognized by at least some of the American Colonies and in practice in the years before the Constitution was ratified, and that these historical rights were not contradictory to the letter and spirit of the American Revolution and the Constitution.

The Constitution then does NOT recognize some kind of universal human right in taxation that Jefferson might have penned in the Declaration of Independence. The “Rights of Englishmen as they existed in 1791” is rather about a concrete, historical procedure of tax collection that can be studied. In fact, the Supreme Court described four historical treatises as the most reliable means of discovering what these rights are. Each of these three Supreme Court cases references these four treatises.

If we want to understand our 21 Century constitutionally protected rights we have to study how the ENGLISH collected taxes historically up to 1791, then check those practices against the early American historical record to see if they were utilized here, and then make sure they do not in substance violate our new Constitution.

One stumbling block: These three Supreme Court cases were actually about the EXCEPTIONS to the Application of the Procedural Rights. All three times the Supreme Court told us we had rights in the collection of taxes, it was in cases where tax  collectors said they did not have to apply the rights! So, in the hundred years that the IRS has been collecting income taxes, we have three Supreme Court decisions telling us what our most basic rights are, but they are all about affirming the government’s power in certain circumstances to AVOID respecting those rights.

So, quite simply, we do NOT have a robust jurisprudence defining and enforcing the rights we have against the taxman, but rather most court cases are about NOT enforcing the rights!

The first case, actually last chronologically, is GM Leasing et al vs United States,et al. (As always on this blog, I prefer to use hyperlinks rather than long cites in sentences  or footnotes)

GM Leasing was decided in 1976.  It has nothing to do with General Motors. It is about a fugitive from justice, whose automobiles  were seized for taxes without a warrant or court judgement due to assessments that were determined during a jeopardy assessment. A jeopardy assessment is used when the IRS determines that taxes it claims are owed are in danger of not being collected due to extraordinary circumstances, such a fugitive absconding with the property out of the country. Federal agents also entered the property of a company that he had created. They had no warrant, but proceeded to seize the companies books and records. The IRS believed it was an "alter ego" or shell corporation created to hide assets illegally. The company denied this, and  argued that it was  NOT an “alter ego” of the individual, and that the seizures without a warrant and a judgment were unconstitutional. The Supreme Court disagreed, and said under the circumstances the IRS had the right to a “summary” seizure of the property. Later on, there could be a hearing and judicial review. A warrant issued by a judge was not needed to seize the property.

Significantly more powerful than the decision was that the IRS told the Court in G.M. Leasing  that they were only following the “standard procedures” for tax collection  laid out in a much older case, Murray’s Leasee vs Hoboken Land and Improvement Company, decided in 1853. The court agreed.

What was Murray’s Leasing about? This case was about a Government tax collector, in charge of the very lucrative New York City Customs House. The government audited him, and determined he was not turning over all the taxes due. In other words, he was either embezzling or negligent. The tax collector also demanded a court judgement and a warrant before his property could be taken to satisfy the shortfall. And again, the Supreme Court, after researching the treatises and practices, said he was NOT entitled to a hearing and a warrant before the government could seize what it believed to be its own money he had contracted directly with them to pay over.

The third case, Phillips v Commissioner , dealt with a notorious insolvency, where the property was placed in the hands of a Receiver. In this case, the Court once again affirmed that the Government did not need a judgment and a warrant to seize the property it claimed was owed for taxes. Any hearing could come later. Insolvency was also reason for summary collection of taxes owed.

So, these are the three major exceptions to the rule regarding our rights:

  • If you are a fugitive, the government can seize your property they believe you owe for taxes before you  abscond with it. 
  • If you are in violation of a contract with the government to pay over monies, the government can summarily seize what its auditors claim you owe without normal full due process. 
  • And, if you are a notorious debtor, whose assets have been turned over to a third party, the government can seize what it has determined you owe in taxes, and any hearing would be post seizure.


There are other, older cases that go back to the Marshall Court or even before  which  outline these exceptions as well. What Benson and Ambort show is that in these three cases the Supremes explicitly said that we have the Rights of Englishmen in 1791 and there are four treatises that can be studied to explain what those procedural  Rights of Englishmen were in 1791. They are:

Joseph Chitty, Jr., A Treatise on  The Law of the Prerogatives of the Crown and the Relative Rights and Duties of the Subject(1820); 
George Price, A Treatise on the Law of the Exchequer : Stating and Explaining the
Course and Practice of the Court : as Founded on Precedent and the Principles of the
Jurisdiction Conferred by the King’s Prerogative, as a Court of Crown Revenue, of Common
Law Civil Pleas, and of Equity
(1830); 
Jeffrey Gilbert, Treatise on the Court of Exchequer(1758);
 Edward West, A Treatise of the Law and Practice of Extents in Chief and in Aid (1817).

But if the three Supreme Ct cases dealt with the exceptions to the rights, what exactly are the rights that we should normally enjoy that Englishmen enjoyed in 1791?

Unfortunately, these three cases did not directly speak to what the general rights and procedures that  Americans who are not fugitives, tax collectors, or insolvent, enjoy.

While there is, unfortunately, no body of jurisprudence at the Supreme Court level that speaks to what these rights are, there are a few Circuit Court cases that reference these four treatises, and do a good job of explaining what your rights are.

Benson and Ambort spent over a year tracking down copies of these out of print treatises. They studied them intently while in prison. John and Glen were actually incarcerated at the same prison for much of their sentences for  promotion of so called illegal tax shelters.
(Teaching people how to file alternative returns and file for a refund, essentially.)
John Benson became very ill, and legally blind, while in prison. Glen actually acts as his caregiver. If you are interested in their research, please consider a donation as they are living off social security at this point.

The Rights of Englishmen in 1791


The most basic right you have when the tax man comes after you is to demand a suit at common law, with a jury trial, before the government can seize your property.

An English freeman  after the Magna Charta was signed had the right to demand a jury trial before the tax man could seize his property. A jury trial! Unheard of ! Does the IRS today offer you a jury trial before it sends a notice of levy to your job or your bank? Not a chance. The most it offers you is a hearing in Tax Court, without a trial, with an administrative “judge” who is himself a former IRS agent.
Otherwise, you are told you must pay the tax first, then sue for a refund, and if you try to go to court before you pay the tax, they will slap you with the Anti injunction Act, and the case will be dismissed. And all along the way, there are threats of being assessed a $5000-$25000 fine for any “frivolous” arguments and submissions you might dare to present them.

What happened to our rights? How does the IRS in its “standard collection procedures” that are supposed to mirror the procedures in the English Exchequer manage to skip offering you that civil trial by jury that the four treatises say was available? That is the next question that Benson and Ambort answered, and their answer has lit up the Tax Honesty Movement in an AHA! moment since 2012.

See next post...

Friday, August 16, 2013

The "1040 Type of Tax"

I think it was indeed Irwin Schiff who first pointed out the amazing thing about the paperwork the government uses when it tries to collect income taxes from American workers: they never name the statute that makes the worker liable for the tax! If any of you have a copy of your local property tax bill, go ahead and take a look. I will bet you ten Edward Snowdens  to your one Michael Hayden that your local tax bill cites the statute (or ordinance) that makes you liable for a property tax.

Now look at the way the IRS sends you a bill, on their "90 Day Notice" :

2
Consider this NOTICE of DEFICIENCY, the first serious collection letter sent by the IRS, requiring  certified mail delivery. Notice if you can the bottom highlighted area references a statute, "IRS section 6651 (a) (1). This is not a tax statute per se, but indicates a penalty is being assessed . However, a late or erroneous filing penalty is NOT the primary liability that is under examination by the government here.  Now look at the highlighted area further up the image. Notice there is NO statute mentioned here. Instead, the government is calling the alleged tax deficiency a "Tax Form 1040". What is a FORM TYPE OF TAX?

This is not the only place you will see this. If you disagree with the IRS over so called "income tax", they will almost always call it a "1040" or "1040A" TYPE OF TAX on ALL their official documents. Very rarely, they may refer to an "Income Tax", but never, ever will they identify the Statute behind the tax they claim "you owe".  Always the tax is referred to by the 1040 FORM, not by a statute.

Why is this?

Some have speculated that there is a statute, but not the one you would think. Eddie Khan, who was Wesley Snipes' untaxing guru, and who is still in federal prison, suggested that it might actually refer to a 1040  statute found in Subtitle A, but actually referencing Subtitle B,  of the IRC.  Certain computer codes that are contained  in the IRS manuals suggest that there is a link between the Income Tax and a "Gift Tax". So Khan speculated there  is a 1040 Statute, but it relates to the 1040 Statute that references a tax on the transference of farm and other property from the estate of a decedent. Is that the subterfuge? Is the Income Tax somehow a GIFT TAX to the feds?

Certainly,  the inference caused by the non existence of a liability statute on official Federal legal documents is  that there is no statute that makes you liable for the tax debt claimed.  If the feds had one, why wouldn't they publish it, just once even?  A California based tax honesty organization, the Free Enterprise Society, has been attacking these Form Tax representations for years, saying that Congress has not created a "FORM TYPE OF TAX". This is correct as far as it goes. But, it doesn't really get to the bottom of the question. OK, the Truth in Taxation Movement believes that one major reason the Individual Income Tax is fatally flawed is because there is NO statute that directly makes most Americans liable for the tax.  After all, the Secretary of the Treasury himself promulgated a regulation that  warns us about this in very specific terms:

 An exaction by the US Government, which is not based upon law, statutory or otherwise, is a taking of property without due process of law, in violation of the Fifth Amendment of the Constitution. 26CFR Sec 601.106(f)(1) . (Italics added)

But what exactly does the word "otherwise" mean? Why the insistent reference to the tax on all IRS documents by the Form Number? If there is no statute making Americans liable for the so called US INDIVIDUAL INCOME TAX, why cover that up by using the form number to identify the tax on all administrative and judicial documents?

These partial  explanations were as good as any until 2012 when a legally blind tax honesty figure named John Benson and his co-defendant Glenn Ambort were released from federal prison after serving over five years  for what they believe was a non crime of advising people about alternative tax filings.  The research they did in prison and  published  has opened up a whole new understanding of how the Income Tax is being collected, what your rights are, why the IRS insists that you become "compliant" by filing all back taxes on the Form 1040, and why they call the US INDIVIDUAL INCOME TAX by its Form number, and never by a Statute.

The reasons will start to become clear on my next post.





Monday, August 5, 2013

Should we Abolish the IRS?




Let's take a break from technical stuff and look at what we have discovered so far:

There are good reasons to question the Income Tax as it is commonly applied today. But if you do question it, you may be into a world of hurt. So, if you are of the inclination to try to challenge the most hated federal agency, as  measured by its immediate impact on the most people's lives, you may have to devote a good bit of time and energy and you will therefore forego other opportunities that may be better for you financially  and for your physical and emotional health. Nevertheless, some brave Americans in fact do challenge the bureaucracy or help others to do so. This is the Truth in Taxation Movement, sometimes called Tax Honesty, and abbreviated by me in this Blog as TH.

OTOH, there is evidence that sometimes the challenge to the IRS is relatively easy. No one knows what percentage of those who use this challenge are successful, but at least some are. I am referring to the Pete Hendrickson methodology of filing a zero income 1040 return ALONG with a challenge to the Information Returns.

Whether or not you apply his methodology, there is no question that anyone interested in questioning  IRS authority should get a copy of Pete Hendrickson's  book, "Cracking the Code"


The questions regarding the US Individual Income Tax spring from a very old Constitutional question. The taxing clauses of the US Constitution say the government can tax a whole lot of stuff, but any direct tax has to be apportioned by the population of each state, while any "duty, impost or excise" has to be uniform among the States.

The National Government has in fact passed about a half dozen Direct Taxes apportioned among the States since the founding, mostly to retire war debts. There have been none imposed since the twentieth century.

The National Government imposes and makes someone liable for numerous excise taxes. Most are taxes on imports and other duties. Federal Government licensed occupations, such a Federal Gun Dealers and Dealers in Foreign Insurance and Bonds are taxed.  There is a national excise tax on gasoline,  which everyone  pays  when they buy gas. Can you think of other routine excise taxes? There are excise taxes on telephone service, cable service, etc. Airline tickets bear a federal excise tax of over 7% (in addition to other federal and local taxes).

All these excise taxes are called indirect, because the payor does not turn over his own property, but the property of others, to pay the tax. The "payor" is not you, when you paid at the pump for the gas. The payor is the Business which remits the gas taxes from everyone who paid up. That payor is actually the "taxpayer", not the drivers who filled up their tanks. And the payor is the one who is liable for the tax.

Remarkably, the US Income Tax is an excise tax just like the gasoline tax. But for workers in particular, it is being brutally enforced as a direct tax on their property without apportionment. An excise tax is not really laid on the money that is exchanged in  transactions at all, but the activity itself generates the tax, and the amount of money is only a measure of the taxed activity. But what activity does the ordinary worker, engaged simply in making a living for his/her self and loved ones, engage in that is taxable for revenue purposes by the federal government?

There is a presumption of liberty involved in the Constitution's restriction of direct taxes to the Rule of Apportionment. By this rule, the average working citizen is shielded, for the most part, from being directly taxed by the National Government. Only after Congressional debates and votes resulting in the laying of a specified tax which is then turned over to the States for enforcement can the worker feel the taxman's hand upon his property. This has only been done in the eighteenth and nineteenth centuries a half dozen times, mostly to retire war debts, under the theory that war was such a serious matter that all citizens should have to bear the cost. At least in those days the Congress actually declared war.

In 1913 the National Government claims it approved a Constitutional Amendment, Number 16, that declared that income, from "whatever source derived", can be taxed without apportionment.

In 2013 , one  hundred years later, we have what many consider the most hated federal agency, the IRS, that claims to enforce this income taxing power.  And under Obamacare, it threatens to become even more involved in our lives.

The US Individual Income Tax as collected on the Form 1040,  is an enormous revenue generator for the National Government. To challenge this tax is to threaten to plunge a dagger into the heart of the  welfare/warfare state. Now, some may elect to continue to pay the tax voluntarily in order to obtain hoped for benefits. There is no law against voluntarily paying money to the Federal Treasury. But those folks in a rational world would have to compete (as in Chile, for example) with private means of reaching the same ends.

The Federal Reserve has a monopoly on the printing of "money". The money is based on debt, not production. Then the Federal Government collects income tax in the same monopoly monetary denominations. This sops up excess federal notes and tampens inflation. Some have suggested this monopoly system is more about social engineering and control than actual taxes to run the government.

In the 1970's a small group of individuals, at that time about as small as the core that would later become the Libertarian Party, began to question the income tax as applied. Since then this group has remained small, and persecuted. By small I mean probably fewer than a quarter million  individuals who understand  even the basic principles involved. One of the most flamboyant of these  early entrepreneurs was Irwin Schiff.  Irwin published several books about his theories. Like many in this movement, he had clients whom he assisted in asserting their rights (as he saw them). He also has spent quite a few long years in federal prison, lately serving what amounts to a life sentence because he will not surrender his client list. Irwin was an aggressive self promoter  and abrasive, and at the margins he probably made some technical errors. However, his basic insights have resonated with the movement.  His prosecution  has been a recurring theme of the "Truth in Taxation Movement". People can lose their liberty by fighting for their liberty if they follow this understanding of the Constitution and valid taxation. Occasionally, as happened to Gordon Kahl, they can wind up dead.

The movement includes a few former IRS agents who have spoken out against the system. They are whistleblowers. Most have  been prosecuted for their beliefs. No one in the political system is reaching out to these whistleblowers. The Truth in Taxation movement has never had a Congressional Hearing, coming close only once. The party of less taxation, with the exception of former Congressman Ron Paul, ignores their insights. Every so often Republicans  propose "Tax Reform" but it comes down to lowering rates and eliminating deductions or talking about a National Sales tax or Flat Tax but not ever about what the income tax really is. Grandstanding about "Abolishing the IRS" will get nothing done.

The simple truth is that properly understood, the US Income Tax is actually almost benign. It is a tax on federal privilege, and when you tax something, you get less of it. We do not need to ABOLISH the IRS, we have to confine them by making them follow the law, the regulations, and their internal procedures. That is a practical thing that can be done. It requires no new sweeping laws, no repeal of or  new Constitutional amendments. But it is even more radical than abolishing the IRS. It would expose the overreach of the current system, it would focus attention on the Taxing Clauses of the Constitution, as well as on the Right to Earn a Living. It would Separate the private from the public, would expose crony capitalists, would enable the Federal government to spend much more time on oversight of its own sprawling agencies and instrumentalities. It could encourage more efficiency in the bureaucracies, making it easier to justify consolidation of redundant features, and abolition of worthless agencies. All this without threatening the earnings of most US workers!

So, properly understood, the US Income tax is a classical liberal tax of the first order. It should be preserved just as it is written, although it could be clarified as to certain contentious definitions and statutory constructions. But the rubber hits the road when we ask: just how do we rein in this agency and force it to follow the law?

Next up: The revelations about the 1040 Form that have rocked the Tax Honesty movement the last few years.