This ain't advice.

[Dale Eastman]

Admin editorial comment added January 11, 2012:
This subject has been addressed on the main website and in better detail.
http://www.synapticsparks.info/tax/

I'm not Dear Abby. I'm not a CPA (certified public accountant). I'm not an EA (enrolled agent). I'm not an "income tax preparer". I'm not a lawyer.  So when you ask me questions, my replies are legally worthless. My replies are not tax advice, financial advice, nor legal advice. When I answer questions, you are getting a layman's answer.

With the legal stuff out of the way, I have immunized myself from entrapment. At this point in my own studies, I have become very wary of the immoral, unholy cretins that infest the IRS... No offense meant to the few that are not immoral, unholy cretins. With that said, your post, but not your identity is being made public. My purpose in doing this is to further the process of education regarding the issues.
Good morning.
 
A random internet search brought me to some posts of yours touching on the income tax.  I've dabbled in and out of the subject for a decade now and I like to dip my toe back into the water on occasion.
 
Currently this is my situational awareness:
 
I'm familiar with most of the major "arguments" against the income tax; 861, Schiff, "Show me the Law", Cryer, etc.  I have had several discussions with Tommy Cryer who helped formulate my current understanding of the matter.  However, he is still pursuing what I feel to be a self-evident fallacy, focusing on the missing "liability" statute in Congress' laws, which I feel burdens the majority of the movement.  It's my position that the liability stems from constitutional imposition as well as Supreme Court rulings, as such power to define the scope of taxation is superior to Congress' power, and thus will never be seen in the statutes.
 
Still, however, I am convinced that the income tax is being foisted upon us fraudulently.  In my limited resourced way, I'm trying to nail down the absolute definition of the term "Income" that Congress is bound by.  We have the Constitutional imposition of the excise; the Supreme Court's ruling that income is indeed an excise, as well as Eisner's and Brushaber's definitions.
 
What I take away from all that is this:  Income is gain derived from the employment of capital.  It's a privileged accession of wealth and fully taxable as such.  It is not part of, nor equated to the original capital or its value-equivalent.
 
Where I'd like to go with that, and you may have already derived or at least come across the arguments, is separating what is taxable as income from what is non-taxable property compensation.  That is, when one trades one's labor/intellect/time for market-rate compensation, that is an exactly-even trade with no room for profit, thus precluding common employment from being subject to the income tax for lack of income.
 
Can you then help me eliminate the distractions and get right to the heart of the definition, and thus scope of the term income?
 
Specifically:
What is the definition of income, and has it been obfuscated/expanded to include labor compensation in any form?
What is the criteria for being subject to the W-4 by both employer and employee?
Does being an employee subject someone to falling under the scope of the employer's privileged activity of running a business?
Where does the Supreme Court equate labor with property; i.e.- how do we equate labor/intellect/time with valued capital expended and thus compensated?
How do we argue away "You started with zero dollars and ended with $XXX, so you clearly profited $XXX.  (Clearly the test for income does not hinge on the possession of dollars).
 
These are the questions I need to lock down, and I don't feel I have the right to claim the answers just off of my own internet searches.
 
Thanks!

[Dale Eastman]

Can you then help me eliminate the distractions and get right to the heart of the definition, and thus scope of the term income?

Uh, No. I can't help you.

What I can do is examine the topics you have brought to my attention. Your last question is a topic that has been rattling around in the back of my head for awhile, so I'll address it here as a form of thinking out loud in preparation to eventually putting it on the main web site. In addressing that question, I'll be addressing most of your others.

Specifically:
What is the definition of income, and has it been obfuscated/expanded to include labor compensation in any form?
What is the criteria for being subject to the W-4 by both employer and employee?
Does being an employee subject someone to falling under the scope of the employer's privileged activity of running a business?
Where does the Supreme Court equate labor with property; i.e.- how do we equate labor/intellect/time with valued capital expended and thus compensated?
How do we argue away "You started with zero dollars and ended with $XXX, so you clearly profited $XXX.  (Clearly the test for income does not hinge on the possession of dollars).

[Dale Eastman]

Definition of income - Early History.

In August of 1909, Congress imposed a "special excise tax" known as The Corporate Tax Act of 1909. The tax was on the doing of business in the corporate form. The measure of the tax was the income produced by the corporation's activity. See FLINT v. STONE TRACY CO., 220 U.S. 107 (1911); STRATTON'S INDEPENDENCE, LTD. v. HOWBERT, 231 U.S. 399 (1913); DOYLE v. MITCHELL BROS. CO. , 247 U.S. 179 (1918)

As a result of the 1909 tax act, the Supreme Court was presented with this question: "Are the proceeds of ores mined by a corporation from its own premises income within the meaning of the aforementioned act of Congress?"

In answering the question, the Court stated:
[H]owever the [mining] operation shall be described, the transaction is indubitably 'business' within the fair meaning of the act of 1909; and the gains derived from it are properly and strictly the income from that business; for 'income' may be defined as the gain derived from capital, from labor, or from both combined, and here we have combined operations of capital and labor.

Furthermore, the Court re-iterated the definition of income used in the tax act. The tax was to be calculated on the "net income". The "net income" is the corporation's gross income minus the deductions listed. The corporation's gross income was gross receipts from from all sources, be it corporate business transacted or the return on invested capital excluding gross income that was already taxed.
See STRATTON'S INDEPENDENCE, LTD. v. HOWBERT, 231 U.S. 399 (1913)

Then in another case in regard to the Corporate Tax Act of 1909, the Supreme Court said this:
Selling for profit is too familiar a business transaction to permit us to suppose that it was intended to be omitted from consideration in an act for taxing the doing of business in corporate form upon the basis of the income received 'from all sources.' [...] Yet it is plain, we think, that by the true intent and meaning of the act the entire proceeds of a mere conversion of capital assets were not to be treated as income. Whatever difficulty there may be about a precise and scientific definition of 'income,' it imports, as used here, something entirely distinct from principal or capital either as a subject of taxation or as a measure of the tax; conveying rather the idea of gain or increase arising from corporate activities. As was said in Stratton's Independence v. Howbert: 'Income may be defined as the gain derived from capital, from labor, or from both combined.' See DOYLE v. MITCHELL BROS. CO. , 247 U.S. 179 (1918)

The court has pointed out that "income" is "something entirely distinct from principal or capital"

After the 16th Amendment was allegedly ratified, The Supreme Court examined whether an issue of a stock certificate qualified as "income" and was taxable as such under the 16th. Amendment. The Court said a stock certificate is not "income". See TOWNE v. EISNER , 245 U.S. 418 (1918); EISNER v. MACOMBER , 252 U.S. 189 (1920)

In the Macomber case, the court examined the 16th. Amendment and said this:
A proper regard for its genesis, as well as its very clear language, requires also that this amendment shall not be extended by loose construction, so as to repeal or modify, except as applied to income, those provisions of the Constitution that require an apportionment according to population for direct taxes upon property, real and personal. This limitation still has an appropriate and important function, and is not to be overridden by Congress or disregarded by the courts.

In order, therefore, that the clauses cited from article 1 of the Constitution may have proper force and effect, save only as modified by the amendment, and that the latter also may have proper effect, it becomes essential to distinguish between what is and what is not 'income,' as the term is there used, and to apply the distinction, as cases arise, according to truth and substance, without regard to form. Congress cannot by any definition it may adopt conclude the matter, since it cannot by legislation alter the Constitution, from which alone it derives its power to legislate, and within whose limitations alone that power can be lawfully exercised.

What the Court has said here is important. Congress can not change the meaning of "income" at whim, because that meaning is now, by the 16th Amendment, part of the Constitution.

The court goes on to examine what the meaning is.
The fundamental relation of 'capital' to 'income' has been much discussed by economists, the former being likened to the tree or the land, the latter to the fruit or the crop; the former depicted as a reservoir supplied from springs, the latter as the outlet stream, to be measured by its flow during a period of time. For the present purpose we require only a clear definition of the term 'income,' as used in common speech, in order to determine its meaning in the amendment, and, having formed also a correct judgment as to the nature of a stock dividend, we shall find it easy to decide the matter at issue.

After examining dictionaries in common use (Bouv. L. D.; Standard Dict.; Webster's Internat. Dict.; Century Dict.), we find little to add to the succinct definition adopted in two cases arising under the Corporation Tax Act of 1909 (Stratton's Independence v. Howbert; Doyle v. Mitchell Bros. Co., 'Income may be defined as the gain derived from capital, from labor, or from both combined,' provided it be understood to include profit gained through a sale or conversion of capital assets, to which it was applied in the Doyle Case.

After the above look at previous rulings as to the definition of "income", the court then examines the definition.

Brief as it is, it indicates the characteristic and distinguishing attribute of income essential for a correct solution of the present controversy. The government, although basing its argument upon the definition as quoted, placed chief emphasis upon the word 'gain,' which was extended to include a variety of meanings; while the significance of the next three words was either overlooked or misconceived. 'Derived-from- capital'; 'the gain-derived-from-capital,' etc. Here we have the essential matter: not a gain accruing to capital; not a growth or increment of value in the investment; but a gain, a profit, something of exchangeable value, proceeding from the property, severed from the capital, however invested or employed, and coming in, being 'derived'-that is, received or drawn by the recipient (the taxpayer) for his separate use, benefit and disposal- that is income derived from property. Nothing else answers the description.
See EISNER v. MACOMBER , 252 U.S. 189 (1920)

In one final case, the Supreme Court, after reviewing all the above, plus a few more, said this:
[T]here would seem to be no room to doubt that the word [income] must be given the same meaning in all of the Income Tax Acts of Congress that was given to it in the Corporation Excise Tax Act, and that what that meaning is has now become definitely settled by decisions of this Court.
See MERCHANTS' LOAN & TRUST CO. v. SMIETANKA, 255 U.S. 509 (1921)

http://www.synapticsparks.info/tax/VerifyLegalCitations.shtml has links so that you may research the court citations for yourself.

"Income" is "something entirely distinct from principal or capital."
"Income" is gain derived and severed from the capital, however that capital is invested.

[Dale Eastman]

Taxation that is direct - Taxation that isn't.

If we examine what a "day" is, we know what a "night" is not. Likewise, if we examine what a "direct" tax is, we know what all the other taxes are not. We know that an "excise" tax is not a direct tax, so an examination of a direct tax will tell us what an excise tax is not.

The Supreme Court in its voluminous words has basically stated a direct tax is any tax on property that can not be legally avoided.  See POLLOCK v. FARMERS' LOAN & TRUST CO., 157 U.S. 429 (1895); POLLOCK v. FARMERS' LOAN & TRUST CO., 158 U.S. 601 (1895).   Warning, both are a long read.

I have noticed that a common characteristic of any direct tax on property is that the property is diminished by the tax because the tax can not be legally avoided.

Examples:
a. If the only property you own is $100 in cash, and a 10% tax is laid upon all cash held by the citizens, you would be required to hand over $10, leaving you with $90. Your original capital has been diminished by the tax.

b. If the only property you own is 10 acres of land, valued at $100 per acre, and a $10 per acre tax is laid, you will be required to sell one acre of your land in order to pay the total tax of $100, leaving you with 9 acres. Your original capital has been diminished by the tax.

c. If the only property you own is yourself, and a $100 head tax is laid, you would be required to sell your time/labor in order to get the money to pay the tax. The time you spent laboring to pay the tax is time you can not use for yourself. You no longer have your original capital - time, energy, and life force - for your own use.  Your capital has been diminished by the tax. Additionally, the case could be made that this is slavery. You are forced to work for somebody else with no compensation.
Direct taxes must be apportioned.

This rule is in the Constitution twice.
Representatives and direct Taxes shall be apportioned among the several States [...] Article 1, Section 2.
No Capitation, or other direct, Tax shall be laid, unless in Proportion to the Census or Enumeration herein before directed to be taken.[...] Article 1, Section 9.

The Supreme Court tells us:
Nothing can be clearer than that what the constitution intended to guard against was the exercise by the general government of the power of directly taxing persons and property within any state through a majority made up from the other states.

It is true that the effect of requiring direct taxes to be apportioned among the states in proportion to their population is necessarily that the amount of taxes on the individual taxpayer in a state having the taxable subject-matter to a larger extent in proportion to its population than another state has, would be less than in such other state; but this inequality must be held to have been contemplated, and was manifestly designed to operate to restrain the exercise of the power of direct taxation to extraordinary emergencies, and to prevent an attack upon accumulated property by mere force of numbers. See POLLOCK v. FARMERS' LOAN & TRUST CO., 157 U.S. 429 (1895).

The Supreme Court also said this:
Concluding that the classification of direct was adopted for the purpose of rendering it impossible to burden by taxation accumulations of property, real or personal, except subject to the regulation of apportionment, it was held that the duty existed to fix what was a direct tax in the constitutional sense so as to accomplish this purpose contemplated by the Constitution. See BRUSHABER v. UNION PACIFIC R. CO., 240 U.S. 1 (1916).

Apportionment, meant to restrain attack and burden of property, has a backlash force multiplier built in.

For purpose of example, consider a union of two states. State C has a population of 100, state CM has a population of 900. A direct tax is laid on cattle to raise $40,000. State C, being rural, has 1,400 cattle, state CM being urban, only has 600 cattle. That tax amounts to $20 per head of cattle. Applying the rule of apportionment, based upon population, state CM would be required to pay $36,000 on 600 cattle or, $60 per head of cattle. State C would be required to pay $4,000 on 1,400 cattle, or $2.86 per head of cattle.
A tax on property is a direct tax.

When the Supreme Court revisited the Pollock case, it said this:
Our conclusions may therefore be summed up as follows: First. We adhere to the opinion already announced,-that, taxes on real estate being indisputably direct taxes, taxes on the rents or income of real estate are equally direct taxes. Second. We are of opinion that taxes on personal property, or on the income of personal property, are likewise direct taxes. See POLLOCK v. FARMERS' LOAN & TRUST CO., 158 U.S. 601 (1895).

Taxes on property, be it real estate or personal property (realty and personalty) are direct taxes.

The Supreme Court re-affirmed this when they said:
We say this because it is to be observed that although from the date of the Hylton Case, because of statements made in the opinions in that case, it had come to be accepted that direct taxes in the constitutional sense were confined to taxes levied directly on real estate because of its ownership, the [16th] Amendment contains nothing repudiation or challenging the ruling in the Pollock Case that the word 'direct' had a broader significance, since it embraced also taxes levied directly on personal property because of its ownership, and therefore the [16th] Amendment at least impliedly makes such wider significance a part of the Constitution,-a condition which clearly demonstrates that the purpose [of the 16th Amendment] was not to change the existing interpretation except to the extent necessary to accomplish the result intended; that is, the prevention of the resort to the sources from which a taxed income was derived in order to cause a direct tax on the income to be a direct tax on the source itself, and thereby to take an income tax out of the class of excises, duties, and imposts, and place it in the class of direct taxes. See BRUSHABER v. UNION PACIFIC R. CO., 240 U.S. 1 (1916).

Taxation of property is a direct tax. A direct tax must be laid according to the rules of apportionment.

[Dale Eastman]

How an excise tax becomes unconstitutional.

The Supreme Court said:
Moreover, in addition, the conclusion reached in the Pollock Case did not in any degree involve holding that income taxes generically and necessarily came within the class of direct taxes on property, but, on the contrary, recognized the fact that taxation on income was in its nature an excise entitled to be enforced as such unless and until it was concluded that to enforce it would amount to accomplishing the result which the requirement as to apportionment of direct taxation was adopted to prevent, in which case the duty would arise to disregard form and consider substance alone, and hence subject the tax to the regulation as to apportionment which otherwise as an excise would not apply to it. See BRUSHABER v. UNION PACIFIC R. CO., 240 U.S. 1 (1916).

Examples of what the Supreme Court said now follow.
Example 1:
Capital of $100 is invested in an interest bearing instrument like a CD for a time period that gives an ROI (return on investment) of 10%. The gain or profit is $10. A tax of 20% on the income is due. $2.00 in tax is deducted. The capital is undiminished and ready to be re-invested. The rule of apportionment does not apply, the tax is not unconstitutional as enforced.

$110 gross receipts -$100 less capital deposited   $10 net receipts x  20% tax rate     $2 tax due

$110 gross receipts  -  $2 minus tax  $108 receipts after tax -$100 less capital actually invested      $8 income to be spent.

Example 2:
Capital of $100 is likewise invested for a time period that gives an ROI (return on investment) of 10%. The gain or profit is $10. A tax of 240% on the income is due. $24.00 in tax is deducted. The capital is diminished and can not be re-invested. The rule of apportionment does apply, the tax is unconstitutional as enforced.

$110 gross receipts -$100 less capital deposited    $10 net receipts x 240% tax rate    $24 tax due

$110 gross receipts - $24 minus tax   $86 receipts after tax -$100 less capital actually invested   -$14 capital diminished

Example 3:
Capital of $100 is invested (expended) in material and labor. The product created by labor working the material is sold for $110. The rest of this example is exactly the same as example 1. Likewise, whether this scenario is constitutional or not, is based upon the tax rate applied in the same manner as in example 2.

$110 gross receipts -$100 less material & labor deductions   $10 net receipts x  20% tax rate     $2 tax due

$110 gross receipts  -  $2 minus tax  $108 receipts after tax -$100 less capital actually invested      $8 income to be spent.

Example 4:
The example is exactly like example 3, but the expenditure of the capital is not allowed to be deducted.

$110 gross receipts   -$0 less material & labor deductions   $110 net receipts x  20% tax rate    $24 tax due

$110 gross receipts - $24 minus tax   $86 receipts after tax -$100 less capital actually invested   -$14 capital diminished

Longer term capital assets such as things like buildings, machines, and tools would have to be "depreciated" over the life expectancy of the capital asset in the same way as the deduction for the capital expenditure for labor and material in example 3. And likewise, if this loss of the value (depreciation) of the capital asset is not deducted from the receipts, the capital itself ends up being taxed, just like in examples 2 and 4.

Note how the same results happen in examples 2 and 4, arrived at by two different methods of enforcing the tax. When this happens, as the Supreme Court has said, "the duty would arise to disregard form and consider substance alone, and hence subject the tax to the regulation as to apportionment which otherwise as an excise would not apply to it."

[Dale Eastman]

Not every thing that is received is gross income.

If I purchase a capital asset like a building for $100,000, I have converted my capital (money) into another form of property (a building). Nothing is gained, nothing is lost. My value of capital is the same. If I sell that building a year later, for $100,000, I have not received income. I have merely converted the capital from one form to another.

The Supreme Court has said:
An examination of these and other provisions of the act makes it plain that the legislative purpose was not to tax property as such, or the mere conversion of property, but to tax the conduct of the business of corporations organized for profit by a measure based upon the gainful returns from their business operations and property from the time the act took effect.

[T]he learned Solicitor General has submitted an elaborate argument in behalf of the government, based in part upon theoretical definitions of 'capital,' 'income,' 'profits,' etc., and in part upon expressions quoted from our opinions in Flint v. Stone Tracy Co. and Anderson v. Forty-Two Broadway with the object of showing that a conversion of capital into money always produces income, and that for the purposes of the present case the words 'gross income' are equivalent to 'gross receipts'; the insistence being that the entire proceeds of a conversion of capital assets should be treated as gross income, and that by deducting the mere cost of such assets we arrive at net income. The cases referred to throw little light upon the present matter, and the expressions quoted from the opinions were employed by us with reference to questions wholly remote from any that is here presented.

When the act took effect, plaintiff's timber lands, with whatever value they then possessed, were a part of its capital assets, and a subsequent change of form by conversion into money did not change the essence. See DOYLE v. MITCHELL BROS. CO. , 247 U.S. 179 (1918)

Labor is property.

The right to labor, the right to one's self physically and intellectually, and to the product of one's own faculties, is past doubt property, and property of a sacred kind. See IN RE SLAUGHTER-HOUSE CASES, 83 U.S. 36 (1872).

The common business and callings of life, the ordinary trades and pursuits, which are innocuous in themselves, and have been followed in all communities from time immemorial, must therefore be free in this country to all alike upon the same conditions. The right to pursue them, without let or hinderance, except that which is applied to all persons of the same age, sex, and condition, is a distinguishing privilege of citizens of the United States, and an essential element of that freedom which they claim as their birthright. It has been well said that 'the property which every man has in his own labor, as it is the original foundation of all other property, so it is the most sacred and inviolable. The patrimony of the poor man lies in the strength and dexterity of his own hands, and to hinder his employing this strength and dexterity in what manner he thinks proper, without injury to his neighbor, is a plain violation of this most sacred property. It is a manifest encroachment upon the just liberty both of the workman and of those who might be disposed to employ him. As it hinders the one from working at what he thinks proper, so it hinders the others from employing whom they think proper.' Smith, Wealth Nat. bk. 1, c. 10. See BUTCHERS' UNION CO. v. CRESCENT CITY CO., 111 U.S. 746 (1884)

The principle is fundamental and vital. Included in the right of personal liberty and the right of private property-partaking of the nature of each- is the right to make contracts for the acquisition of property. Chief among such contracts is that of personal employment, by which labor and other services are exchanged for money or other forms of property. If this right be struck down or arbitrarily interfered with, there is a substantial impairment of liberty in the long-established constitutional sense. The right is as essential to the laborer as to the capitalist, to the poor as to the rich; for the vast majority of persons have no other honest way to begin to acquire property, save by working for money. See COPPAGE v. STATE OF KANSAS, 236 U.S. 1 (1915).

An overview of invested capital and the gain derived therefrom.

As the Supreme Court has stated: "'Income may be defined as the gain derived from capital, from labor, or from both combined,' provided it be understood to include profit gained through a sale or conversion of capital assets."

The differentiation between capital and labor as the substrate that gain is derived from is a distinction without meaning.

To manufacture the proverbial wooden "Widget", the Wonderful Wooden Widget Corporation will invest capital by purchasing property such as machines, tools, and a factory building. Such capital assets will lose value (depreciate) over time from wear and tear and the loss of value is rightfully deducted from the gross receipts to make the value of the capital and the capital asset match the value of the capital originally invested.

The 3W corporation will also invest capital in purchasing property such as wood and labor to make the Widgets. Both the wood and the labor are capital assets consumed as capital expenditures. As such, the consumption of the capital asset through expenditure is also rightfully deducted from the gross receipts to make the value of the capital the same as originally invested.

In creating gross receipts, capital is consumed and capital is depreciated. Deducting capital consumed and capital depreciated from the gross receipts makes the capital whole again and severs the gain from the capital it is derived from. The excess over the consumption and depreciation of the capital is the gain derived from capital, from labor, or from both combined.

Wood and labor are both capital assets that are consumed in the creation of gross receipts.

Gain MUST be severed from the capital it is derived from.

As shown in the 3W example, When gross receipts are created, capital is consumed and capital is depreciated. This capital that is consumed or depreciated is deducted from the gross receipts to make the capital whole. The excess that remains is the gain or profit derived from capital, however the capital is invested.

In the case of the 3W lumber supplier, the lumber is the supplier's consumable capital asset. When the supplier creates gross receipts, that capital asset is consumed.

If the supplier's capital was originally money, the supplier would change its form, but not its essence, by purchasing lumber. The lumber is sold to create the gross receipts, and in doing so, the capital asset is consumed. The capital consumed is deducted from the gross receipts to determine the gain or profit (the income) derived from the capital invested in the lumber. In deducting the capital consumed from the gross receipts, the gain is severed from the capital it is derived from and the capital is made whole.

The Legal Plunderer's assertion.

What if the supplier was gifted enough lumber to fill a warehouse? Inheritance taxes, if any, were paid, title to the lumber is free, clear, and unencumbered. As before, the capital asset is sold to create gross receipts, and in doing so, the capital asset is consumed. In this case, capital was not expended to purchase the lumber. According to the "legal plunderers" "The cost basis is zero, therefore the entire amount of gross receipts is income."

For those who would argue the example is not realistic, I submit that the example matches when the capital asset of labor is consumed to create gross receipts.

Your life-time, life-energy, and life-force is your capital. Labor is the consumption of your life-time, life-energy, and life-force. Labor is the consumption of your capital. Your capital is converted into money when you exchange your labor for money. The form of your capital is changed, the essence is not. It is still your capital and its consumption must be deducted from your gross receipts to make your capital whole, just like any other capital.

The "legal plunderers" assert that when you exchange your labor for money, "Your cost basis is zero, therefore the entire amount of your compensation for labor (gross receipts) is income".

There are several problems with this "belief".

Why the Legal Plunderers are wrong.

As the Supreme Court has said: "a gain, a profit, something of exchangeable value, proceeding from the property, severed from the capital, however invested or employed, and coming in, being 'derived'-that is, received or drawn by the recipient (the taxpayer) for his separate use, benefit and disposal- that is income derived from property. Nothing else answers the description."

Income is gain severed from the capital it is derived from. If a gain can not be severed from the capital, then the gain is not a gain, and therefore not income. After the gain is severed, the capital must remain whole, or the tax is a direct tax on the property (capital). In the case of labor, the entire capital is consumed, therefore there is no way to sever the alleged gain from the capital and leave the capital whole. Exchanging labor for money merely changes the form of the capital, and as the Supreme Court has stated in regard to capital: "a subsequent change of form by conversion into money did not change the essence."

My American Heritage Electronic Dictionary has this definition for "capital": 2.a. Wealth in the form of money or property, used or accumulated in a business by a person, partnership, or corporation. b. Material wealth used or available for use in the production of more wealth. c. Human resources considered in terms of their contributions to an economy.

This "legal plunderers'" "belief" denies labor is capital.

In the case of the capital asset of lumber, when the lumber is completely consumed, the original capital remains after the gain is severed from the capital and that capital can then be reinvested by purchasing more lumber. If the entire proceeds of the conversion of labor into money is income: then the income can not be severed from the original capital; the original capital can not be made whole; and there would be no capital left to purchase more life-time, life-energy, and life-force even if this wasn't impossible.

As the Supreme Court has pointed out, labor is property; and this property is "property of a sacred kind"

Converting labor to money does not change its essence. Whether in the form of labor or money, the laborer's property is still his capital, and to tax one form is to tax the other. If a person only requires 32 hours of labor to exist, and that labor is taxed at 20%, then a person would require 40 hours of labor to exist. It does not matter if the tax is imposed on the compensation for labor (money) or the (time) labor itself, the 8 extra hours of labor does not benefit the laborer.

As the Supreme Court has also said, if an excise tax is enforced in such a way as to make it a direct tax, "the duty would arise to disregard form and consider substance alone, and hence subject the tax to the regulation as to apportionment which otherwise as an excise would not apply to it."

Whether in the form of extra hours for the laborer, or any hours for the slave, the substance is the same: both are forced to work against their will, without compensation, for their masters. This is called S-L-A-V-E-R-Y.

Putting all the pieces together.

1. Income is gain or profit, derived from and severed from the capital, however the capital is invested.
2. An excise tax on the income, gain, or profit that diminishes the capital is a direct tax upon the capital and is unconstitutional if not laid according to the rule of apportionment.
3. When capital is consumed or depreciated, the diminution of the capital is deducted from the gross receipts to make the capital whole again. This frees undiminished capital to be reinvested.
4. When capital consumed or depreciated is not deducted from the gross receipts, then the capital can not be made whole.
5. If the alleged income, gain, or profit can not be severed from the capital it is derived from, then the capital can not be made whole.
6. If the capital is not made whole, then the capital is taxed. Such an excise tax enforced in this manner is a direct tax and if unapportioned is unconstitutional.
7. What was capital before conversion into money, is capital after conversion into money.
8. Labor is property.
9. Labor is not income, therefore labor must be capital.
10. Labor is exchanged for money and other forms of property.
11. Labor is capital before it is converted into money, Labor is capital after it is converted into money.
12. After the income, gain, or profit is severed from the capital, the capital remains whole, just as it was before being invested.
13. If the entire gross receipts from the conversion of labor (property, capital) into money (property, capital), then the alleged gain can not be severed from the capital, leaving the capital whole and ready to reinvest.
14. If the capital is not left whole, see points 3, 4, 5, & 6 again.

Labor is property, and any tax on property is a direct tax subject to the rule of apportionment.

[Dale Eastman]

However, he is still pursuing what I feel to be a self-evident fallacy, focusing on the missing "liability" statute in Congress' laws, which I feel burdens the majority of the movement.  It's my position that the liability stems from constitutional imposition as well as Supreme Court rulings, as such power to define the scope of taxation is superior to Congress' power, and thus will never be seen in the statutes.

The Supreme Court, citing a lower court judge, included his words in its opinion:
"Judge Gray, dissenting, said: 'Keeping in mind the well-settled rule that the citizen is exempt from taxation unless the same is imposed by clear and unequivocal language, and that where the construction of a tax law is doubtful, the doubt is to be resolved in favor of those upon whom the tax is sought to be laid, I cannot assent to the affirmance of the judgment of the court below in this respect." See SPRECKELS SUGAR REFINING CO. v. MCCLAIN, 192 U.S. 397 (1904).

"In the interpretation of statutes levying taxes it is the established rule not to extend their provisions, by implication, beyond the clear import of the language used, or to enlarge their operations so as to embrace matters not specifically pointed out. In case of doubt they are construed most strongly against the government, and in favor of the citizen." See GOULD v. GOULD, 245 U.S. 151 (1917).

"In view of other settled rules of statutory construction, which teach that a law is presumed, in the absence of clear expression to the contrary, to operate prospectively; that, if doubt exists as to the construction of a taxing statute, the doubt should be resolved in favor of the taxpayer..." See HASSETT v. WELCH, 303 U.S. 303 (1938)

What I take away from all that is this:  Income is gain derived from the employment of capital.  It's a privileged accession of wealth and fully taxable as such.  It is not part of, nor equated to the original capital or its value-equivalent.

Where I'd like to go with that, and you may have already derived or at least come across the arguments, is separating what is taxable as income from what is non-taxable property compensation.  That is, when one trades one's labor/intellect/time for market-rate compensation, that is an exactly-even trade with no room for profit, thus precluding common employment from being subject to the income tax for lack of income.

The sixteenth amendment authorizes the taxation of income "from whatever source derived" -- thus taking in investment income --"without apportionment among the several States."  The Supreme Court has held that the sixteenth amendment did not extend the taxing power of the United States to new or excepted subjects but merely removed the necessity which might otherwise exist for an apportionment among the States of taxes laid on income whether it be derived from one source or another. So the amendment made it possible to bring investment income within the scope of a general income-tax law, but did not change the character of the tax.  It is still fundamentally an excise or duty with respect to the privilege of carrying on any activity or owning any property which produces income.

The income tax is, therefor, not a tax on income as such, It is an excise tax with respect to certain activities and privileges which is measured by reference to the income they produce.  The income is not the subject of the tax: it is the basis for determining the amount of tax.
http://www.synapticsparks.info/evidence/c03/page2580.html

What is the criteria for being subject to the W-4 by both employer and employee?
http://www.synapticsparks.info/evidence/c05/index.html
http://www.synapticsparks.info/tax/W4InstructionsSay.shtml

Does being an employee subject someone to falling under the scope of the employer's privileged activity of running a business?
http://www.synapticsparks.info/evidence/c05/irc3401.html

[Reb]

I wish to post here--not elsewhere.

With all due respect to the good intention of the writer/moderator, he is attempting to question what is, or is not, INCOME.  By raising such a question, the court will shift onto the defendant the burden of proof to show the income does not apply in the issue before the court. Carrying the burden of proof will require convincing the court there is NO POSSIBLE WAY the unidentifed tax MIGHT apply to the accused.  This burden of proof is impossible to overcome.

A valid indictment requires the prosecutor to allege a "known legal duty" (a statutory responsibility) claimed to have been violated by the accused. If that requirement is not met, the indictment is void.

Federal individual income tax indictments consistently rely upon IRC 7201 or 7203 as that known legal duty.  Those statutes have been used to prosecute admission tax violations, fuel tax violations, marijuana tax violations, alcohol tax violations, etc.  They obviously cannot identify a duty for an income tax. The Supreme Court has also shown the statutes apply to ALL taxes collected by the IRS.  US v Sansone.

Tom Cryer, Larry Becraft, etc., decline to confront the courts with that knowledge.   

Ref:   http://www.synapticsparks.info/dialog/index.php?topic=31.0

[Dale Eastman]

I wish to post here--not elsewhere.

Well it certainly looks like what you posted is on topic, so here it will stay.

With all due respect to the good intention of the writer/moderator, he is attempting to question what is, or is not, INCOME.

 

There are a myriad of ways that show the tax does't apply according to the IRS propaganda. The definition of what income is, is just another way to show the fraud being perpetrated by the beast that has slipped it's chains.

There are a lot of things that are correct, but the courts have set up their filters, so to speak, to ignore these logically valid points.

By raising such a question, the court will shift onto the defendant the burden of proof to show the income does not apply in the issue before the court. Carrying the burden of proof will require convincing the court there is NO POSSIBLE WAY the unidentifed tax MIGHT apply to the accused.  This burden of proof is impossible to overcome.

The court isn't about to be convinced... Where do they get their money? In their minds, from that unidentified tax that they think you owe (them), the Grace Commission Report to Prez Reagan notwithstanding.

A valid indictment requires the prosecutor to allege a "known legal duty" (a statutory responsibility) claimed to have been violated by the accused. If that requirement is not met, the indictment is void.

Yep.
Now try getting the court to pay attention to the missing statute that creates that duty. Mcbribe (sic) was quoted by eyewitnesses as saying "The law will not be discussed in my courtroom."

Did you read the Simkanin transcripts?
http://www.synapticsparks.info/tax/simkanin/railroaded.html
And I just found this researching for my reply:
http://www.hiddenmysteries.org/law/research/U.S.%20v.%20Simkanin.pdf
1.5 MB. Look at page 505.

Federal individual income tax indictments consistently rely upon IRC 7201 or 7203 as that known legal duty.  Those statutes have been used to prosecute admission tax violations, fuel tax violations, marijuana tax violations, alcohol tax violations, etc.  They obviously cannot identify a duty for an income tax. The Supreme Court has also shown the statutes apply to ALL taxes collected by the IRS.  US v Sansone.

Right. Quoting 7203:

Any person required under this title to pay any estimated tax or tax, or required by this title or by regulations made under authority thereof to make a return, keep any records, or supply any information, who willfully fails to...

Do what the master says, shall have bad things happen to them.

Who is the person required, where in the title is the duty imposed?

If you trace it, it leads to 6012(a) which hinges on the definition of income.

Tom Cryer, Larry Becraft, etc., decline to confront the courts with that knowledge.   

Ref:   http://www.synapticsparks.info/dialog/index.php?topic=31.0

I'm out of time for using the board as it is designed, (I've been blocking spamdexing spammers doing ghost registrations on the forum and spambots abusing my bandwidth), so here's a link to a later look at "income": http://www.synapticsparks.info/dialog/index.php?topic=53.0

I've also been trying to do a re-write of the main website. I've got some good stuff written, but I need to connect it in a logical flow.

[Reb]

It is stated the court declared:

"The law will not be discussed in my courtroom."

I believe this is an expression that any challenge relating to the inadequacy of the law is to be presented to the judge, preferably in writing, as a motion.  Any discussion, particularily with the jury present, is not acceptable.

Additional reflections will follow.

[Reb]

It is written:

Did you read the Simkanin transcripts?
http://www.synapticsparks.info/tax/simkanin/railroaded.html
And I just found this researching for my reply:
http://www.hiddenmysteries.org/law/research/U.S.%20v.%20Simkanin.pdf
1.5 MB. Look at page 505 

The court is quoted: "....Something filed
 by the defendant called motion for reconsideration and request
 for pattern jury instruction regarding mistake, ignorance, and
 negligence, or gross negligence, and good faith instructions
 under Cheek versus U.S.  Mr. (Simkanin's attorney), I couldn't find in
 the Pattern Jury Charge --"
 transcript page 503 of 633.  discussion of this inability to find
confirmation of the implied wording in the PJC continued to page 505.

I read the pleadings that were posted by a friend of Simkanin during his trial. There were instrumental in early versions of the MTD at http://www.synapticsparks.info/misc/motion.html 

What should I understand from page 505 ??