The IRS is misapplying the Revenue Statutes of the United States!

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http://www.wepin.com/store/freetech/irscase/IncomeTaxBrief.htmlIncome Tax BriefNOTE: This brief replaces thedocument that originally occupied this space, the IRS Brief. The IRS Brief is maintained on this site for historical purposes but, inlight of later research, it contains several significant inaccuracies. Also, Ihave not personally verified the references in the IRS Brief. On the otherhand, I have personally verified approximately ninety-percent (90%) ofthe information in this Income Tax Brief. The information in this Income TaxBrief is an explanation, with case law citations, of how I came to theconclusion that:The IRS is misapplying the RevenueStatutes of the United States!
With that said, let's examine someof the issues surrounding what is commonly known as "The Income Tax".By the way, most of the materialbelow is taken from a book (The Biggest Tax Loophole of All) by Otto Skinner,mainly because his book has the clearest and best explanation of the issuessurrounding the so-called "Income Tax" as I have seen. Also, he hassome other materials that you should purchase and study before you even thinkabout fighting the IRS.

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Income Tax BriefPremiseIt can be concluded that in mostindividual cases, some agents of the Internal Revenue Service (IRS) areknowingly misapplying the revenue statutes of the United States in such amanner as to constitute fraud and extortion. The rest of thisbrief explains how that conclusion was arrived at.IntroductionThere is much confusion surroundingthe so-called "income" tax, both as to what is being taxed,i.e., the subject of the tax, and which individuals are liablefor, i.e., subject to the tax. In this brief, we willexplore both the United States Constitution and case law to show that the twoareas of confusion are, in fact, clearly defined. This brief will show that itis well settled in case law that income is not the subject of theso-called "income" tax. Rather, the subject of the so-called"income" tax is certain revenue taxable activities, such asimporting or distilling spirits or doing business as a corporation, and the incomederived from these revenue taxable activities is used merely to measurethe amount of tax due.It has been established thatgovernments have an inherent power of taxation. However, the US Constitutionrequires that Congress implement taxes in certain ways.Directversus Indirect TaxesThe original thirteen states did notgive the limited confederate government under the Articles of Confederation anypower to tax. Later, the national government was created under the UnitedStates Constitution. The United States Constitution provides a limited grant ofpower to the national government.The Powers not delegated to theUnited States by the Constitution, nor prohibited by it to the States, arereserved to the States respectively, or to the people.
United States Constitution, Tenth Amendment.The States possessed the inherentpower of taxation. The people of the States, through their representatives,gave the national government (by way of the Constitution) a concurrent, butcomplete, power of taxation, with one exception. The United States Constitutionexpressly forbids the national government from taxing exports.The power to tax was granted byArticle I, § 8, cl. 1.The Congress shall have power to layand collect taxes, duties, imposts and excises, to pay the debts and providefor the common defense and general welfare of the United States; but allduties, imposts and excises shall be uniform throughout the United States.
United States Constitution, Article I, § 8, cl. 1.The provision expressly prohibitingthe national government from taxing exports is found in Article I, § 9, cl. 5.No tax or duty shall be laid onarticles exported from any State.
United States Constitution, Article I, § 9, cl. 1.At the same time the foundingfathers granted the national government the power to tax, they laid down tworules that govern the imposition of the two great classes of taxes. Directtaxes are subject to the rule of apportionment. Indirect taxes are subject tothe rule of geographical uniformity.The rule requiring indirect taxes(duties, imposts and excises) to be uniform throughout the United States isprovided in
Article I, § 8, cl. 1, supra.There are two clauses in theConstitution that require all direct taxes imposed by Congress to beapportioned among the States according to population.Representatives and direct taxesshall be apportioned among the several States which may be included within thisUnion, according to their respective numbers, which shall be determined byadding to the whole number of free persons, including those bound to service fora term of years, and excluding Indians not taxed, three-fifths of all otherpersons.
United States Constitution, Article I, § 2, cl. 3. (In part.)No Capitation, or other direct, taxshall be laid, unless in proportion to the census or enumeration hereinbeforedirected to be taken.
United States Constitution, Article I, § 9, cl. 4.Black's Law Dictionary defines"Capitation tax" as follows.Capitation tax. A poll tax (q.v.). A tax or imposition upon the person.
Black's Law Dictionary, Sixth Edition. (In part.)Congress has never imposed acapitation tax but has imposed direct taxes on property. A direct tax upon realestate has been imposed by Congress several times in the history of the UnitedStates, starting as far back as 1798. These direct taxes on real estate havealways been apportioned among the States according to population. The last timea direct tax was successfully imposed by Congress was during the Civil Warperiod. See Pollock v. Farmers' Loan & Trust Co., 157 U.S. 429, 573(1895).We have now seen that all directtaxes must be apportioned among the States according to population and allindirect taxes must be uniform. Now let's look at the difference between adirect tax and an indirect tax. For this information, we will turn to thecourts, especially the United States Supreme Court.We will first look at indirect taxes(duties, imposts and excises).A tax laid upon the happening of anevent, as distinguished from its tangible fruits, is an indirect tax.
Tyler v. United States, 281 U.S. 497, at 502 (1930).Some people think that the excisetaxes on cigarettes and whiskey, for example, are taxes on the cigarettes orwhiskey as property, but this is not so. The subject of these taxes is themanufacturing, importing, or distilling of these products. A "sales"tax is not on the property sold but rather on the event, or activity, of thesale. The subject of an indirect tax (such as an excise tax) is never theproperty, but rather the event, activity, incident, or occasion, and these termsare used interchangeably when discussing indirect taxes.The United States Supreme Courttells us that:Excises are "taxes laid uponthe manufacture, sale or consumption of commodities within a country, uponlicenses to pursue certain occupations, and upon corporate privileges."Cooley, Const. Lim., 7th ed., 680.
Flint v. Stone Tracy Co., 220 U.S. 107, at 151 (1911).Thus, when trying to decide whetherthe subject of a so-called "income" tax is people, property,or activities, we must keep in mind that the subject of indirect taxes(duties, imposts and excises) is never property, but rather some taxableactivity.The fact that a direct tax must beapportioned is again verified by the United States Supreme Court in 1937. Inone of the "social security" tax cases, Steward Machine Company wasarguing that the tax collected from the corporation under the name of"unemployment taxes" was, for various reasons, unconstitutional. TheSupreme Court held that it was a valid excise tax. The Court further clarifiedthe fact that taxes on property and capitation taxes were indeed direct taxesand did indeed require apportionment.The subject matter of taxation opento the power of the Congress is as comprehensive as that open to the power ofthe states, though the method of apportionment may at times be different."The Congress shall have power to lay and collect taxes, duties, impostsand excises." Art I, § 8. If the tax is a direct one, it shall beapportioned according to the census or enumeration. If it is a duty, impost, orexcise, it shall be uniform throughout the United States. Together, theseclasses include every form of tax appropriate to sovereignty. [citationsomitted.] Whether the tax is to be classified as an "excise" is intruth not of critical importance. If not that, it is an "impost"[citations omitted], or a "duty" [citations omitted.] A capitation orother "direct" tax it certainly is not.
Steward Machine Co. v. Davis, 301 U.S. 548, at 581-582 (1937).Also, in a 1960 case, the UnitedStates Court of Appeals, Third Circuit, confirms the fact that taxes onproperty must be apportioned. In an income tax case, Penn Mutual IndemnityCompany challenged the tax as a direct tax on property and, therefore,unconstitutional because it was not apportioned among the States as theConstitution requires of direct taxes. Without going into many of the detailsof the case, certain excerpts are cited below.(This is an income tax case wherethe Tax Court has sustained the Commissioner [of Internal Revenue] as againstthe taxpayer, 1959, 32 T.C. 653.)Indeed, the requirement forapportionment is pretty strictly limited to taxes on real and personalproperty and capitation taxes.It is not necessary to uphold thevalidity of the tax imposed by the United States that the tax itself bears anaccurate label. Indeed, the tax upon the distillation of spirits,imposed very early by federal authority, now reads and has read in terms of a taxupon the spirits themselves, yet the validity of this imposition has beenupheld for a very great many years.We do not think it profitable,however, to make the label as precise as that required under the Food and DrugAct. Congress has the power to impose taxes generally, and if the particularimposition does not run afoul of any constitutional restrictions then the taxis lawful, call it what you will.Penn Mutual Indemnity Co. v. C.I.R., 277 F.2d 16, at 17, 19-20 (3rd Cir. 1960). (Emphasis andexplanation added.)So once again it is confirmed that atax on property is a direct tax and as such it must be apportioned among theStates according to population.Additionally, we see that the nameof the tax does not determine the nature of the tax (capitation,property, duty, impost or excise), as well as the fact that the name ofthe tax does not determine the subject of the tax. So the fact that wehave a tax called an "income" tax does not necessarily meanthat "income" is the subject of the tax.The United States Supreme Courtagrees.The name by which the tax isdescribed in the statute is, of course, immaterial.
Dawson v. Kentucky, 255 U.S. 288, at 292 (1921).We can now be certain that theso-called "income" tax cannot be considered tax on property since itis not apportioned among the States as would be required of direct taxes. Wecan also be certain that the so-called "income" tax cannot beconsidered direct tax of any sort. But if not "income", then what isthe subject of this tax?A particular United States SupremeCourt case which explains just how an indirect tax can be imposed on a revenuetaxable activity (the lawful subject of the tax), and just how theincome derived from that activity can be used merely to measure theamount of the tax, can be found in the United States Supreme Court Reports of1911. Numerous corporations took their issues to court and the cases wereconsolidated in the landmark case of Flint v. Stone Tracy Co., 220 U.S.107 (1911).On August 15, 1909, Congress passed"The Corporation Tax" law (Ch. 6, 36 Stat. 11). This revenue act waswritten without the use of abstract or cryptic language. In clear andunequivocal language, the statute names the lawful subject of the tax,which is the activity of carrying on or doing business by specifiedorganizations. In other words, it is the exercise of the privilege thatis the lawful subject of the tax. Section 38 of the Act reads in part asfollows:That every corporation, joint stockcompany or association organized for profit and having a capital stockrepresented by shares, and every insurance company … shall be subject to payannually a special excise tax with respect to the carrying on or doingbusiness by such corporation, joint stock company or association, or insurancecompany, equivalent to one per centum upon the entire net income over andabove five thousand dollars received by it from all sources during such year…
"The Corporation Tax" law (Ch. 6, 36 Stat. 11). (Emphasisadded.)The corporations challenged the 1909Act on numerous grounds. One of the grounds upon which the Act was challengedwas that it was a direct tax on the corporate franchise. The corporationsclaimed that to tax the income from this form of property (the franchise) wouldbe the same as a direct tax on the property and thus unconstitutional.Additionally, the corporations claimed the national government could not tax aState granted privilege. The United States Supreme Court explains in Flintv. Stone Tracy Co., 220 U.S. 107 (1911), why it was not a direct tax andthat the national government could indeed tax whatever the States could tax.As the latter organizations sharemany of the benefits of corporate organization it may be described generally asa tax upon the doing of business in a corporate capacity. … In other words, thetax is imposed upon the doing of business of the character described, and themeasure of the tax is to be the income, …
Flint v. Stone Tracy Co., 220 U.S. 107, at 146 (1911).Duties and imposts are termscommonly applied to levies made by governments on the importation orexportation of commodities. Excises are "taxes laid upon the manufacture,sale or consumption of commodities within a country, upon licenses to pursuecertain occupations, and upon corporate privileges." Cooley, Const. Lim.,7th ed., 680.
Flint v. Stone Tracey Co., supra, at 151.The tax under consideration, as wehave construed the statute, may be described as an excise upon the particularprivilege of doing business in a corporate capacity, i.e., with advantageswhich arise from corporate or quasi-corporate organization; or, when applied toinsurance companies, for doing the business of such companies. As was said inthe Thomas Case, 192 U.S. 363 supra, the requirement to pay suchtaxes involves the exercise of privileges, and the element of absoluteand unavoidable demand is lacking. If business is not done in the mannerdescribed in the statute, no tax is payable.
Flint v. Stone Tracy Co., supra, at 151-152. (Emphasis added.)We must remember, too, that therevenues of the United States must be obtained in the same territory, from thesame 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., supra, at 154. (Emphasis added.)Conceding the power of Congress totax the business activities of private corporations … the tax must be measuredby some standard. …
Flint v. Stone Tracy Co., supra, at 165. (Emphasis added.)It is therefore well settled by thedecisions of this court that when the sovereign authority has exercised theright to tax a legitimate subject of taxation as an exerciseof a franchise or privilege, it is no objection that the measure oftaxation is found in the income. …
Flint v. Stone Tracy Co., supra, at 165. (Emphasis added.)Clearly, in 1911, the United StatesSupreme Court has stated that a tax on a revenue taxable activity can bemeasured by the income derived from that activity, which in this case was the exerciseof a government-granted privilege.In equally clear language, thecourts have stated that capitation taxes and taxes on property imposed byCongress must be apportioned among the States as is required by the UnitedStates Constitution. And of course, the so-called "income" tax is notapportioned among the States. Thus, it cannot be considered as a capitation taxor a tax on property. To so consider it would make it unconstitutional on itsface. But then what, if anything, is the subject of this tax?TheSixteenth AmendmentMany people have been led to believethat the Sixteenth Amendment gave Congress some sort of new power to taxincome. In many articles and publications, we find statements to the effectthat "the Sixteenth Amendment eliminates the apportionment requirement oftaxes on income", leading the reader to incorrectly believe that anyso-called "income" tax is a direct tax. This section of the briefwill show that the following statements are well supported in case law.

1. The Sixteenth Amendment conferred no new power of taxation.
2. The Sixteenth Amendment did not extend the taxing power to new or excepted subjects.
3. The Sixteenth Amendment prohibited the power of income taxation, possessed by Congress from the beginning of our national government under the Constitution, from being taken out of the category of indirect taxation to which it inherently belonged.

The exact wording of the SixteenthAmendment is:The congress shall have power to layand collect taxes on incomes, from whatever source derived, withoutapportionment among the several States, and without regard to any census orenumeration. (UnitedStates Constitution, Sixteenth Amendment)A cursory reading of the SixteenthAmendment would certainly cause a person to adopt the "direct tax"theory. And the "direct tax" theory certainly is in directcontradiction to the statements made in items numbered 1, 2, and 3 above. The"direct tax" theory is also in direct contradiction to the rulings ofthe United States Supreme Court and other courts.The Sixteenth Amendment was ratifiedin 1913. Immediately thereafter, Congress passed the Tariff Act of October 3,1913, (Ch. 16, 38 Stat. 166). There were a number of challenges to this revenueact that was supposedly written under the authority of the Sixteenth Amendment.After the Sixteenth Amendment andthe Tariff Act of October 3, 1913, two landmark cases were ruled on by theUnited States Supreme Court. The first was Brushaber v. Union Pacific R.R.Co., 240 U.S. 1 (1916). The next was Stanton v. Baltic Mining Co.,240 U.S. 103 (1916). Both of these cases were argued on October 14-15, 1915.The Brushaber Case was decided on January 24, 1916, and the StantonCase was decided on February 21, 1916.Chief Justice Edward Douglas Whitedelivered the opinions in both cases. The Brushaber Case is quitedifficult to read and comprehend and has led to much confusion andmisunderstanding. But in the Stanton Case, Chief Justice White quitenicely tells us what was settled in the Brushaber Case and the realpurpose of the Sixteenth Amendment. The Brushaber Case is the case mostrelied upon by the Internal Revenue Service (IRS) to show that the"income" tax and the Sixteenth Amendment are constitutional. The IRSis quite correct, but not because of the mistaken theory that the SixteenthAmendment conferred to Congress some sort of new taxing power or that theSixteenth Amendment authorized a direct tax without apportionment. Quite thecontrary.In the Brushaber Case, FrankBrushaber sought to restrain the corporation (Union Pacific Railroad Company)from voluntarily paying the tax that Mr Brushaber thought was unconstitutional.Mr Brushaber presented many erroneous contentions that the United StatesSupreme Court had to address. It must be pointed out that it will be mucheasier to read and study the Brushaber Case once you understand that theCourt spends considerable time paraphrasing Mr Brushaber's many erroneouscontentions, assumptions, conclusions, etc. The Court said:The various propositions are sointermingled as to cause it to be difficult to classify them. We are of theopinion, however, that the confusion is not inherent, but rather arisesfrom the conclusion that the Sixteenth Amendment provides for a hithertounknown power of taxation, that is, a power to levy an income tax whichalthough direct should not be subject to the regulation of apportionmentapplicable to all other direct taxes. And the far-reaching effect ofthis erroneous assumption will be made clear by generalizing the manycontentions advanced in argument to support it, as follows: (a) The Amendmentauthorizes only a particular character of direct tax withoutapportionment, and therefore if a tax is levied under its assumed authoritywhich does not partake of the characteristics exacted by the Amendment, it isoutside the Amendment and is void as a direct tax in the general constitutionalsense because not apportioned …
Brushaber v. Union Pacific R.R. Co., 240 U.S. 1 at 10-11. (Emphasisadded.)The Court proceeds to address theseerroneous assumptions, propositions, and contentions by saying:But it clearly results that thepropositions and the contentions under it, if acceded to, would causeone provision of the Constitution to destroy another; that is, they wouldresult in bringing the provisions of the Amendment exempting a directtax from apportionment into irreconcilable conflict with the generalrequirement that all direct taxes be apportioned. Moreover, the taxauthorized by the Amendment, being direct, would not come under the rule ofuniformity applicable under the Constitution to other than direct taxes, andthus it would come to pass that the result of the Amendment would be toauthorize a particular direct tax not subject either to apportionment or to therule of geographical uniformity, thus giving power to impose a different tax inone State or States than was levied in another State or States. This resultinstead of simplifying the situation and making clear the limitationon the taxing power, which obviously the Amendment must have beenintended to accomplish, would create radical and destructive changes inour constitutional system and multiply confusion.
Brushaber, supra, at 11-12. (Emphasis added.) In other words, the Court has saidthat if the tax authorized by the Sixteenth Amendment wereconsidered a direct tax, as Mr Brushaber had erroneously assumed,it would cause one provision of the Constitution to destroy another; bringingone part of the Constitution into irreconcilable conflict with thegeneral requirement that all direct taxes be apportioned. Obviously,this could not be allowed. If the Sixteenth Amendment was in irreconcilableconflict with other parts of the Constitution, it would have been held to beunconstitutional.Next, the Court lays out theconstitutional principles and the rules relating to direct and indirect taxesapplicable both before and after the Sixteenth Amendment.In fact the two great subdivisionsembracing the complete and perfect delegation of the power to tax and the twocorrelated limitations as to such power were thus aptly stated by Mr. ChiefJustice Fuller in Pollock v. Farmer's Loan & Trust Company, supra,at page 557: "In the matter of taxation, the Constitution recognizes the twogreat classes of direct and indirect taxes, and lays down tworules by which their imposition must be governed, namely: The rule ofapportionment as to direct taxes, and the rule of uniformity as to duties,imposts and excises." It is to be observed, however, as long ago pointedout in Veazie Bank v. Fenno, 8 Wall. 533, 541, that the requirement ofapportionment as to one of the great classes and of uniformity as to the otherclass were not so much a limitation upon the complete and all-embracingauthority to tax, but in their essence were simply regulations concerning themode in which the plenary power was to be exerted. In the whole history of theGovernment down to the time of the adoption of the Sixteenth Amendment, leavingaside some conjectures expressed of the possibility of a taxlying intermediate between the two great classes and embraced by neither, noquestion has been anywhere made as to the correctness of these propositions.
Brushaber, supra, at 13. (Emphasis added.)To further show that"income" taxes are not generically or necessarily direct taxes, theBrushaber Court said:Moreover in addition the conclusionreached in the Pollock Case did not in any degree involve holding thatincome taxes generically and necessarily came within the class of direct taxeson property, but on the contrary recognized the fact thattaxation on income was in its nature an excise entitled to be enforcedas such unless and until it was concluded that to enforce it would amount toaccomplishing the result which the requirement as to apportionment of directtaxation was adopted to prevent, in which case the duty [meaning theduty of the court] would arise to disregard form and consider substance aloneand hence subject the tax to the regulation as to apportionment which otherwiseas an excise would not apply to it.
Brushaber, supra, at 16-17. (Emphasis and explanation added.) [T]he contention that theAmendment treats a tax on income as a direct tax although it is relievedfrom apportionment and is necessarily therefore not subject to the rule ofuniformity as such rule only applies to taxes which are notdirect, thus destroying the two great classifications which have beenrecognized and enforced from the beginning [of the national government underthe Constitution], is also wholly without foundation …
Brushaber, supra, at 18. (Emphasis and explanation added.)Therefore, any statements made todayby anyone claiming the Sixteenth Amendment authorized a direct tax are whollywithout foundation.After having paraphrased some moreof Mr Brushaber's erroneous contentions, the United States Supreme Courtsaid:[T]he Amendment was drawn for thepurpose of doing away for the future with the principle upon which the PollockCase was decided …
Brushaber, supra, at 18. (Emphasis added.)[T]he command of the Amendment thatall income taxes shall not be subject to apportionment by a consideration ofthe sources from which the taxed income may be derived, forbids theapplication to such taxes of the rule applied in the Pollock Case…
Brushaber, supra, at 18-19. (Emphasis added.)Indeed, from another point of view,the Amendment demonstrates that no such purpose was intended and on thecontrary shows that it was drawn with the object of maintaining thelimitations of the Constitution and harmonizing their operation.
Brushaber, supra, at 19. (Emphasis added.)[T]he Amendment contains nothingrepudiating or challenging the ruling in the Pollock Case…
Brushaber, supra, at 19. (Emphasis added.)
(Also included in the citation below.)Probably the sentence in the BrushaberCase that has created the most confusion, and often times big problems forindividuals, is the 191-word sentence on page 19 of that case. It reads asfollows:We say this because it is to beobserved that although from the date of the Hylton Case because of statementsmade in the opinions in that case it had come to be accepted that direct taxesin the constitutional sense were confined to taxes levied directly on realestate because of its ownership, the Amendment contains nothing repudiatingor challenging the ruling in the Pollock Case that theword direct had a broader significance since it embraced also taxes levieddirectly on personal property because of its ownership, and therefore theAmendment at least impliedly makes such wider significance a part of theConstitution - a condition which clearly demonstrates that the purpose was notto change the existing interpretation except to the extent necessary toaccomplish the result intended, that is, the prevention of the resort tothe sources from which a taxed income was derived in order to cause a directtax on the income to be direct tax on the source itself and thereby to take anincome tax out of the class of excises, duties and imposts and place it in theclass of direct taxes.
Brushaber, supra, at 19. (Emphasis added.)The reason the above 191-wordsentence has caused big problems for individuals is that government personnel,as well as others, have totally misinterpreted the latter part of the sentenceby ignoring the word "prevention". Where the sentence showsthat the purpose of the Sixteenth Amendment was not to change theinterpretation of the Constitution or to change the distinction between directtaxes on property and indirect taxes (which are imposed on activities), but thepurpose of the Amendment was to prevent the courts from considering thesource of the income (such as the property from which income is derived) inorder to cause a direct tax on the income to be a direct tax on the source. Inother words, the purpose of the Amendment was for the courts to consider the activityand not the property to be the source of the income.For example, if a corporation ownedrental property, it would derive rental income from this property. In earliercases, the corporations would argue that a tax "on" this income wouldbe the same as a direct tax on the property and would be unconstitutional ifthe tax was not apportioned; attempting to rely on the 1895 ruling in the PollockCase cited below. For example, see Spreckels Sugar v. McClain, 192U.S. 397 (1904). Another example is shown in the Flint Case (1911),cited above, wherein the corporations argued that a tax "on" thecorporate franchise was a tax on the franchise as property. The command of theAmendment that "income" taxes shall not be subject to apportionmentby considering the source from which the income may be derived, forbids thecourts from treating an "income" tax as a direct tax on property. SeeBrushaber at pages 18-19 above. Thus, the courts can lawfully onlyconsider the activity, event, incident, or occasion that is being taxed to keepan "income" tax in the class of an excise, duty, or impost.In short, when the government, aswell as others, misinterprets this sentence, they do so by simply ignoring theword "prevention" and falsely claim that the purposewas "to take an income tax out of the class of excises, duties and impostsand place it in the class of direct taxes".Notice the words and phrases used bythe Court, such as "forbids", "maintaining thelimitations", "harmonizing their operation", "prevent","prevention", and "simplifying the situation andmaking clear the limitation".In using the word "forbids",the Court is saying that the Sixteenth Amendment forbids the courts fromapplying the rule of apportionment to "income" taxes. Brushaber,supra, at 18-19.In using the phrases "maintainingthe limitations" and "harmonizing their operations",the Court is saying that the Sixteenth Amendment was drawn with the object ofmaintaining the rule of apportionment as to direct taxes and the rule ofuniformity as to indirect taxes and to harmonize the operations of these tworules by not considering the property source from which the income is derivedwhen dealing with "income" taxes. Brushaber, supra, at 19.In using the word "prevent",the Court is saying that the Constitutional rule of apportionment was adoptedto prevent the imposition of direct taxes (including taxes on property) unlesssuch taxes were apportioned among the States according to population. Brushaber,supra, at 16-17.In using the word "prevention",the Court is saying that the Sixteenth Amendment was to prevent the resort to,or the consideration of, the property source from which the income was derivedin regard to "income" taxes. This leaves the courts in a position ofconsidering the activity (instead of the property) in regard to"income" taxes. Brushaber, supra, at 19.The purpose of the SixteenthAmendment was not to change an "income" tax from a direct tax into anindirect tax, as many people have erroneously concluded. This is an importantpoint. Direct taxes are taxes on property and capitation taxes. Indirect taxesare taxes on revenue taxable activities. Neither the Sixteenth Amendmentnor the United States Supreme Court changed the nature of any tax.In using the phrase "simplifyingthe situation and making clear the limitation", the Court is saying,in effect, that the Sixteenth Amendment eliminated the problem of determiningeach time whether a particular so-called "income" tax is a tax onproperty or a tax on an activity.Previous to the Sixteenth Amendment,cases would be brought to court arguing that a tax measured by the incomederived from an activity was direct tax on the property source of the incomeand, therefore, had to be apportioned in order to be constitutional. Each time,the courts would have to evaluate the statutes to determine whether theparticular tax was a direct or indirect tax, and perhaps "disregard theform and consider the substance alone". Brushaber, supra, at 16-17.According to the Brushaber Court, the purpose of the Sixteenth Amendmentwas to relieve the courts from considering the source. Brushaber, supra,at 18.Now, because of the SixteenthAmendment, the courts simply cannot lawfully, without violating the SixteenthAmendment, consider any so-called "income" tax as a property tax orany other kind of direct tax. The courts cannot lawfully consider the propertyor the property source as being the subject of a so-called"income" tax. But that leaves the courts in such a position that theycan lawfully only consider the activity as the subject of thetax. Brushaber, supra, at 18.Regardless of the difficulty one mayhave in reading and comprehending what Chief Justice Edward Douglas White saysin the Brushaber Case, he very plainly tells us in the Stanton Casewhat was settled in the Brushaber Case when he said:[B]y the previous ruling [BrushaberCase] it was settled that the Sixteenth Amendment conferred no new powerof taxation but simply prohibited the previous complete and plenary powerof income taxation possessed by Congress from the beginning [of ournational government under the Constitution] from being taken out of thecategory of indirect taxation to which it inherently belonged …
Stanton v. Baltic Mining Co., 240 U.S. 103, at 112 (1916). (Emphasis andexplanation added.)Thus, when people in government andothers falsely claim that the Sixteenth Amendment authorized a direct tax, theyare directly contradicting the ruling of the United States Supreme Courtas so clearly expressed in the Stanton Case.And just to cover all the bases,let's add the fact that in 1918 the United States Supreme Court stated:The Sixteenth Amendment … does notextend the taxing power to new or excepted subjects …
Peck & Co. v. Lowe, 247 U.S. 165, at 172 (1918).Some people have claimed that ChiefJustice White was simply fabricating the statement when he said that the PollockCourt recognized the fact that taxation on income was in its nature anexcise entitled to be enforced as such. Brushaber, supra, at 16-17. Itseems that the reason some people have come to such an erroneous conclusion isthat they do not see this particular wording in the Court's opinion in the PollockCase. Another reason is probably because these people do not read the restof that sentence. The latter part of that sentence explains that the courts(prior to the Sixteenth Amendment) would consider taxation on income as anexcise tax unless to enforce it the tax would amount to a direct tax on theproperty. If this were the case, the court would disregard the form (thewording) of the act of Congress and consider the substance (the effect of theact), and if to enforce the act would amount to a direct tax on propertywithout apportionment, the court would find the act of Congress unconstitutional.This is exactly what the Court did in Pollock in 1895.Let's take a look at the rulingsummarized in the Pollock Case.Our conclusions may, therefore, besummed up as follows:First. We adhere to the opinion already announced, that, taxes onreal estate being indisputably direct taxes, taxes on the rents or incomeof real estate are equally direct taxes.Second. We are of opinion that taxes on personal property, or onthe income of personal property, are likewise direct taxes.Third. The tax imposed by sections twenty-seven to thirty-seven,inclusive, of the act of 1894, so far as it falls on the income of realestate and of personal property, being a direct tax within the meaningof the Constitution, and, therefore, unconstitutional and void because notapportioned according to representation, all those sections, consisting of oneentire scheme of taxation, are necessarily invalid.
Pollock v. Farmers' Loan & Trust Co., 158 U.S. 601, at 637 (1895).(Emphasis added.)

NOTE: The Pollock Case was before the United States Supreme Court twice: Pollock v. Farmer's Loan & Trust Co., 157 U.S. 429, and the rehearing, 158 U.S. 601. Together they are referred to as the Income Tax Cases.

It is important to note that the PollockCase has never been overruled. It was not overruled by either the SixteenthAmendment or the Brushaber decision.So when the Brushaber Courtuses the word "principle", it is saying that the SixteenthAmendment was drawn for the purpose of doing away for the future with the principleupon which the Pollock Case was decided. Brushaber, supra, at 18.The principal was to disregard the form, if necessary, and consider thesubstance alone. Now, after the Sixteenth Amendment, the courts can lawfullyconsider only the activity.Several times previously in thisbrief, it has been indicated that the purpose of the Sixteenth Amendment was toprohibit the courts from treating a tax on income as a direct tax on property.Up to this point, however, no concrete documentation to support this statementhas been supplied. Such concrete documentation can be found in a CongressionalResearch Service report.The Congressional Research Servicedoes legal research for Congress. The particular report of interest here isReport No. 84-168 A, 784/725, titled Some Constitutional Questions RegardingThe Federal Income Tax Laws, dated May 25, 1979, and updated September 26,1984. This report is on record in the Library of Congress and will hereinafterbe referred to as CRSR-84-168A.CRSR-84-168A was written by Howard Zaritsky, Legislative Attorney of theAmerican Law Division of the Congressional Research Service. It was updated byJohn R. Luckey, Legislative Research Assistant of the American Law Division ofthe Congressional Research Service.The Supreme Court, in a decisionwritten by Chief Justice White, first noted that the Sixteenth Amendment didnot authorize any new type of tax, nor did it repeal or revoke the tax clausesof Article I of the Constitution, quoted above. Direct taxes were, notwithstandingthe advent of the Sixteenth Amendment, still subject to the rule ofapportionment and indirect taxes were still subject to the rule of uniformity.Rather, the Court found that the Sixteenth Amendment sought to restrain theCourt from viewing an income tax as a direct tax because of its closeeffect on the underlying property.CRSR-84-168A, page 5. (Emphasis added.)So we now see that, as stated at thebeginning of this section:

1. The Sixteenth Amendment conferred no new power of taxation.
2. The Sixteenth Amendment did not extend the taxing power to new or excepted subjects.
3. The Sixteenth Amendment prohibited the power of income taxation, possessed by Congress from the beginning of our national government under the Constitution, from being taken out of the category of indirect taxation to which it inherently belonged.

In plain English, the so-called"income" tax is and always has been an indirect tax meaningthat the subject of the tax must be a revenue taxable activityand that the income arising from the revenue taxable activity is used simply todetermine the amount of the tax.WhatDoes the Word "On" Mean?How could Chief Justice Whitecorrectly say that taxation "on" income was in its nature anexcise? Income is essentially profit or gain. Profit or gain always results inproperty (tangible or intangible) in one form or another. Income is not in thecategory of people, and it is not in the category of activities. Income canonly be in the category of property. Property taxes are direct taxes, notexcise taxes. So what does Chief Justice White mean when he talks about taxation"on" income being in its nature an excise?Let's look at the word "on"to see what it possibly could mean as used in the Sixteenth Amendment. The word"on" has more than one definition.One of the definitions given in Webster'sSeventh New Collegiate Dictionary (1971) shows that the word "on"means "with regard or respect to". The dictionary also showsthat the word "regard" means "an aspect to be taken intoconsideration".So the Sixteenth Amendment couldjust as easily read as follows:Congress shall have power to lay andcollect taxes with regard to or with respect to or inconsideration of or measured by the income, from whatever sourcederived, without apportionment among the several States, and without regard toany census or enumeration.The above definitions reasonably andlogically explain Chief Justice White's statement regarding taxation "on"income.Cases cited previously show thattaxes on property must be apportioned. The Flint Case (1911) tells usthat indirect taxes are never upon any kind of property, money or otherwise,but rather on revenue taxable activities such as the doing of business in acorporate capacity. The Brushaber Case (1916) reaffirms the fact thattaxation "on" income is in its nature an excise and thatexcise taxes are in the class of indirect taxes. The Stanton Case (1916)tells us that the Sixteenth Amendment (1913) conferred no new power of taxationand was to keep an income tax in the category of indirect taxation. The Peck& Co. Case (1918) tells us that the Sixteenth Amendment does not extendthe taxing power to new or excepted subjects. The Tyler Case (1930)tells us that indirect taxes are not on the tangible fruits (property) but onthe happening of an event. The Steward Case (1937) and the PennMutual Case (1960) (well after the Sixteenth Amendment) tell us that taxeson property must be apportioned and that the so-called "income" taxis not apportioned so it cannot be a tax on property.Based on the above information, theword "on" as used in the Sixteenth Amendment could notpossibly relate to a property tax, but only to indirect taxes with regard toor with respect to or in consideration of or measured byincome.There are other sources ofdocumentation to show that the income is not the subject of theso-called "income" tax. For example, the 1943 House CongressionalRecord reiterates these basic facts.The income tax is, therefore, not atax on income as such. It is an excise tax with respect to certain activitiesand privileges which is measured by reference to the income which they produce.The income is not the subject of the tax: it is the basis for determining theamount of tax.
House Congressional Record, March 27, 1943, page 2580.RevenueTaxable ActivitiesWhat activities are revenuetaxable? A search of the United States Code reveals the following revenuetaxable activities. Notice how specific persons are made liable for (subjectto) the taxes imposed.The distiller or importer ofdistilled spirits shall be liable for the taxes imposed thereon bysection 5001(a)(1).
26 U.S.C. § 5005(a)The manufacturer or importer oftobacco products and cigarette papers and tubes shall be liable forthe taxes imposed thereon by section 5701.
26 U.S.C. § 5703(a)(1)Each person who is engaged in thebusiness of accepting wagersshall be liable for and shall pay the tax under this subchapter on allwagers placed with him. Each person who conducts any wagering pool orlottery shall be liable for and shall pay the tax under thissubchapter on all wagers placed in such pool or lottery. Any person requiredto register under section 4412 who receives wagers for or on behalf of anotherperson without having registered under section 4412 the name and place ofresidence of such other person shall be liable for and shall pay thetax under this subchapter on all such wagers received by him.
26 U.S.C. § 4401(c)There shall be imposed a special taxof $500 per year to be paid by each person who is liable for the taximposed under section 4401 or who is engaged in receiving wagers for or onbehalf of any person so liable.
26 U.S.C. § 4411(a)Notice that the persons liablefor a given tax are specifically defined in terms of the revenue taxableactivities they are engaged in and that the revenue taxable activities arealso specifically defined. Should we not then conclude that, if none ofthe activities engaged in by any given individual are defined in statute asrevenue taxable, that such individuals are not liable for anyrevenue tax administered by the Internal Revenue Service?SummaryThis brief shows that it is wellsettled in case law that income is not the subject of the so-called"income" tax. Rather, the subject of the so-called"income" tax is certain revenue taxable activities, such asdistilling or importing spirits, and the income derived from theserevenue taxable activities is used merely to measure the amount of taxdue. It is also shown that activities that are revenue taxableare specifically defined in the revenue statutes of the United Statesand individuals engaged in activities not so defined are not liablefor any revenue tax administered by the Internal Revenue Service.ConclusionSince:1. The so-called "income"tax can only be applied to those individuals engaged in certain revenuetaxable activities as defined in the revenue statutes of the United States,and2. Some agents of the InternalRevenue service routinely apply the so-called "income" tax toindividuals that are not engaged in those activities,It can be concluded that thoseagents are misapplying the revenue statutes of the United States.Furthermore, since:1. Certain agents of the InternalRevenue service have been informed of this misapplication of the revenuestatutes of the United States, and2. These same agents of the InternalRevenue Service continue to misapply the revenue statutes of the United States,It can be concluded that thoseagents are misapplying the revenue statutes with the full knowledge that theyare, in fact, misapplying those statutes and, thus, operating under thecolor of law in such a manner as to constitute fraud.Furthermore, since the aforesaidagents use coercion and threats of fines, penalties, interest, andincarceration to fraudulently enforce those misapplied revenue statutes of theUnited States, those agents are operating under the color of law in sucha manner as to constitute extortion.