Thread: Federal tax on earned wages raises valid constitutional questions

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Since federal tax time is here, I thought it would be interesting to explore some legal aspects of today's federal tax on earned wages.

For the record, let us all acknowledge that the Sixteenth Amendment is part of our Constitution, and it declares:

”The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several States, and without regard to any census or enumeration.”

Now keep in mind the Sixteenth Amendment does not declare:

”The Congress shall have power to lay and collect direct taxes on incomes, from whatever source derived, without apportionment among the several States, and without regard to any census or enumeration.”


Nor does the Sixteenth Amendment declare:


"The Congress shall have power to lay and collect taxes on earned wages, from whatever source derived, without apportionment among the several States, and without regard to any census or enumeration."


Additionally, our Supreme Court has repeatedly confirmed, after the adoption of the Sixteenth Amendment, direct taxes laid by Congress are still required to be apportioned.

For example, if Congress, under the authority of the Sixteenth Amendment, asserts to be taxing incomes, but the tax, as it is applied, takes the form of a direct tax, and it is not being apportioned, the Supreme Court will strike the tax down as violating the constitutional protection requiring direct taxes to be apportioned, "notwithstanding the Sixteenth Amendment", as stated in EISNER v. MACOMBER , 252 U.S. 189 (1920):

"Thus, from every point of view we are brought irresistibly to the conclusion that neither under the Sixteenth Amendment nor otherwise has Congress power to tax without apportionment a true stock dividend made lawfully and in good faith, or the accumulated profits behind it, as income of the stockholder. The Revenue Act of 1916, in so far as it imposes a tax upon the stockholder because of such dividend, contravenes the provisions of article 1, 2, cl. 3, and article 1, 9, cl. 4, of the Constitution, and to this extent is invalid, notwithstanding the Sixteenth Amendment."
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It seems relatively obvious when considering the above stated FACTS, the contention made by some that today's federal tax on a working person's earned wages may very well violate our federal constitution and has great merit for the following reasons:

Today's federal tax on earned wages is not in harmony with the original objective of adopting the Sixteenth Amendment which was to allow for a federal tax on “unearned” incomes [stocks, bonds, etc.] as can be contrasted from “earned” wages.

Today’s federal tax on a working person’s earned wages takes the form of a direct tax, is not being apportioned, and thus violates the constitutional protection requiring direct taxes to be apportioned.

Finally, and in respect of the Sixteenth Amendment and calculating today’s federal tax on earned wages “ . . . 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.” EISNER v. MACOMBER , 252 U.S. 189 (1920)

Today’s federal tax on earned wages does not follow the set rules laid out in EISNER V. MACOMBER to calculate and distinguish what portion, if any, of a working person’s earned wages falls within the definition of “incomes” as the term is used in the Sixteenth Amendment.

JWK

Why have a written constitution, approved by the people, if those who it is meant to control are free to make it mean whatever they wish it to mean?

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With regard to the meaning of taxable "income" as it appears in the Sixteenth Amendment, we find that meaning in Eisner v. Macomber 252 U.S. 189, 206 (1920):


"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, 231 U.S. 399, 415 , 34 S. Sup. Ct. 136, 140 [58 L. Ed. 285]; Doyle v. Mitchell Bros. Co., 247 U.S. 179, 185 , 38 S. Sup. Ct. 467, 469 [62 L. Ed. 1054]), '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, 247 U.S. 183, 185 , 38 S. Sup. Ct. 467, 469 (62 L. Ed. 1054). 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."


So, we now learn that all money that comes in is not “income” within the meaning of the 16th Amendment, but only that portion which represents a “profit” or “gain”. Keep in mind also that “profits“ or “gains, are calculated by deducting all necessary expenses and outlay from gross receipts …the remaining portion being “profit” and or “gain“!

It seems to be self-evident that a wage earner does in fact invest capital in pursuit of earning a wage, e.g., the cost of transportation to and from work; the cost of food which fuels the wage earners body during working hours; the costs involved with housing, medical needs, and even clothing are all expenses incurred by the wage earner and are necessary expenses and outlays which makes one’s labor possible. And this does not even take into account the “investment” of eight hours of life itself which the wage earner makes available to their employer, and that is in addition to the actual physical and mental labor invested by the wage earner, which is also made available to their employer.

So, the question to be answered here is, why is the capitalist allowed, and rightly so, to deduct their capital investments from money coming in, to arrive at their taxable income as per Eisner, while the wage earner is not?



Let us now note that the income from an illegal business was held subject to income tax in United States v. Sullivan, 274 U.S. 259. Nevertheless, it was necessary to determine what that income was, and the cost of an illegal purchase of liquor was subtracted from proceeds of the illegal sale of the liquor in order to arrive at the gain from the illegal transaction which were then subjected to income tax in that case .

And, in Sullenger vs. Commissioner the Court allowed the business owner [who made illegal purchases of meat] to deduct the cost of meat purchased at a higher price then set by the Office of Price Administration, which he then resold for profit. The “income” from those sales was being taxed and was at issue in the case. The Court went on to cite Sullivan and concluded: “No authority has been cited for denying to this taxpayer the cost of goods sold in computing his profit, which profit alone is gross income for income tax purposes.”

The point being, not only does todays capitalist get to deduct, and rightfully so, their necessary expenses and outlays to arrive at a “taxable income”, but even crooks engaged in illegal and criminal activities are allowed to make such deductions _ and with the Courts’ blessing _ when computing their taxable “profit” or “gain”. But today’s lowly wage earner who, although invests in a number of ways, and makes countless outlays to earn a wage, is told to follow a different set of rules which do not recognize the wage earners’ various investments and outlays when calculating a profit or gain from selling the property each has in their own labor.

JWK

The whole aim of construction, as applied to a provision of the Constitution, is to discover the meaning, to ascertain and give effect to the intent of its framers and the people who adopted it._____HOME BLDG. & LOAN ASSOCIATION v. BLAISDELL, 290 U.S. 398 (1934)

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In regard to the subject of the thread, I was informed that taxing a working person on their income, which includes earned wage, is not a direct tax, and never, since the adoption of constitution, required the tax to be apportioned. The supportive documentation used to make such claims is the often cited case Springer v. United States, 102 U.S. 586 (1881), which upheld a tax on "income" as not being direct.


But the fatal flaw in citing Springer as confirmation that a tax on income, including a working person’s earned wage, could not have been considered a direct tax by our Founders, and thus requiring apportionment, is found in Justice Swayne's own words who delivered the written opinion. He states:


"The very elaborate researches of the plaintiff in error have furnished us with nothing from the debates of the State conventions, by whom the Constitution was adopted, which gives us any aid. Hence we may safely assume that no such material exists in that direction . . . "


Well, the assumption was wrong! In fact, there is evidence in the State ratification debates which do articulate characteristics which distinguish a direct tax from one which is indirect.

As an advocate in adopting the Constitution, James Wilson (who was a prominent delegate to the Constitutional Convention) pointed out during Pennsylvania’s ratification debates that:

“In this Constitution, a power is given to Congress to collect imposts [an indirect type of tax], which is not given by the present Articles of Confederation. A very considerable part of the revenue of the United States will arise from that source; it is the easiest, most just, and most productive method of raising revenue; and it is a safe one, because it is voluntary. No man is obliged to consume more than he pleases, and each buys in proportion only to his consumption." Elliots VOL II, page 467, Wilson


And this very characteristic identifying an indirect tax as a voluntary payment when buying articles of consumption, is again articulated, and more in depth during the Connecticut State Ratification debates by Oliver Ellsworth, who provides the following characteristics distinguishing a direct tax from one which is indirect.


January 7, 1788. [On this Power of Congress to lay Taxes.]

”Direct taxation can go but little way towards raising a revenue. To raise money in this way, people must be provident; they must constantly be laying up money to answer the demands of the collector. But you cannot make people thus provident. If you would do any thing to the purpose, you must come in when they are spending, and take a part with them. This does not take away the tools of a man’s business, or the necessary utensils of his family: it only comes in when he is taking his pleasure, and feels generous; when he is laying out a shilling for superfluities, it takes twopence of it for public use, and the remainder will do him as much good as the whole.”

Ellsworth goes on to note:

“The experiments, which have been made in our own country, show the productive nature of indirect taxes. The imports into the United States amount to a very large sum. They never will be less, but will continue to increase for centuries to come. As the population of our country increases, the imports will necessarily increase. They will increase, because our citizens will choose to be farmers; living independently on their freeholds, rather than to be manufacturers, and work for a groat a day.”

”On the other hand, direct taxes are not voluntary, nor, in general, are they avoidable. And with respect to direct taxes, the anti-federalist minority of the Convention of Pennsylvania warned that direct taxation “…is a tax that, however oppressive in its nature, and unequal in its operation, is certain as to its produce and simple in its collection; it cannot be evaded like the objects of imposts or excise …” ___ See Connecticut ratification debates Elliot’s VOL II, page 191, Ellsworth

So, a few characteristics which define an indirect tax are, it is voluntarily paid during the taxpayer’s consumption, and safe because no man is obliged to consume more than he pleases, and such a tax are costs added by government to things which individuals are free to acquired or reject, while direct taxes are those which are assessed to the individual by government, are oppressive, and not avoidable.

The bottom line is, those who assert a tax on a working person’s earned wages is not a direct tax, which requires apportionment, ignore the very words of those who framed our Constitution and participated in its ratification debates.

The question is, why are there so many who pretend that the bread which working people earn when selling the property each has in their own labor, is not a direct tax and requires an apportionment?

JWK

“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 him from 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.” ___ Butchers’ Union Co. v. Crescent City Co., 111 U.S. 746 (1884)

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See: US pledges $100 million to West African countries to combat extremism

March 27, 2023

”The United States has pledged $100 million to Ghana and four other West African countries to help them combat violent extremism and instability.”

So, where in our in our nation's rule book, the Constitution of the United States, is the President or Vice President authorized to plunder our federal treasury to provide for the general welfare of a foreign country?

Where in our federal constitution is there authorization to directly tax America’s laboring class Citizens to provide for the general welfare of citizens of a foreign power?

Is it not a self-evident fact that that money from our federal treasury is being plundered for an object not authorized under the specification of particulars found beneath Article 1, Section 8, Clause 1, for which Congress is authorized to tax and spend?

While our federal government neglects to spend necessary revenue to protect our southern border and defend against an ongoing invasion by millions upon millions of foreign nationals, it is more than happy to lay and collect an unconstitutional direct tax on America’s wage earners, and spend such revenue to provide for the needs of foreign nations.

When will the America people wake up to the fact that our federal government is acting in rebellion to our written Constitution, and turning America’s wage-earning citizens into taxed slaves, who now labor for the general welfare of foreign countries?

JWK

Our federal government, by the terms of our Constitution, is commanded to “guarantee to every State in this Union a Republican Form of Government and shall protect each of them against Invasion” ___ Article 4, Section 4. Constitution of the United States

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See: Biden pitches soak-the-rich tax plan: Here's what's in it

It is absolutely stunning to take note of how they wine and dine our ears endlessly, over their noble cause to “tax the rich” and “help the poor”, while they cleverly design ways under their “income tax code” so millionaires, with untold millions in unearned income, may avoid a meeting with the yearly tax gatherer, while at the same time they grind down on our nation’s poor wage-earning souls, who live on poverty’s doorstep, and are today paying thousands of hidden federal taxes levied on the necessities of life ___ supposedly to be ended by the 1913 beloved income tax ___ but today, in addition to paying these taxes on necessities, are also having their pockets picked with the most oppressive, and evil tax of all time ___ an unconstitutional direct tax which robs the meager earnings received when selling the property each has in their own labor.

But don’t believe me. Let us take a trip in a time machine and recall the words of REPRESENTATIVE JAMES, a zealous advocate of the income tax in 1909:

Mr. Speaker, this battle for an income tax will go on. This is the people's Government and -the right will prevail. During all these years the mighty rich-an army of millionaires-have been exempted from taxation, but the people are now aroused. There are two lines of battle drawn for this great contest. Under which flag will you stand-the flag of Democracy or the flag of plutocracy?
We shall win, for ---

Still, Truth proclaims this motto
In letters of living light: No question is ever settled
Until it is settled right.

[Applause on the Democratic side.]

And I would scorn, Mr. Speaker, a government whose taxing power provides that Lazarus must divide his crumbs with the taxgatherer, but that Dives shall not give of his riches.


[Great applause on the Democratic side.]

See CONGRESSIONAL RECORD---HOUSE, July 12, 1909, PAGE 4399, LEFT COLUMN
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Would it not be a blessing for our nation's laboring class citizens, whose station in life requires them to sell the property each has in their own labor, to be relieved from the tax gathers' heel on their necks which today robs the bread working people earn by the sweat of their labor?


JWK

“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, Clause 4

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See: Tax the Rich? Liberals Renew Push for State Wealth Taxes
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"All of the proposals face questionable prospects. Similar legislation has died in state legislatures and Congress. But the new push shows that the political left isn’t ready to give up on the populist argument that government can and should be used as a tool for redistributing wealth."
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Considering our constitutionally limited "Republican Form of Government" is being slowly turned into a democracy, we ought to remember the wisdom of John Adams who wrote:


" . . . democracy will envy all, contend with all, endeavor to pull down all; and when by chance it happens to get the upper hand for a short time, it will be revengeful, bloody, and cruel...".


Is the blood and mayhem not already showing its ugly head at our borders, in our cities, towns and streets?

JWK