Wednesday, April 14, 2010

Tax Law and how it affects you

More Tax Law
William G Burmer

Second consideration: What is a Direct Tax and how does it apply to the People?

In the Constitution under Article 1, Section 9, Clause 4. “No Capitation, or other direct, Tax shall be laid, unless in Proportion to the Census or Enumeration herein before directed to be taken”.

Answer: According to the Constitution any direct tax imposed by Congress must be apportioned. If it is not apportioned, it is an indirect tax. The current “income” tax is not apportioned, and must thereby be an indirect, or excise tax. We will discover from the following Supreme Court cases that this is a tax of privilege, and does not apply to private payment for labor, which the constitution sought to protect.

Question, what is a capitation tax?

The answer is found in the following Supreme Court case:

U.S. Supreme Court

SPRINGER v. U S, 102 U.S. 586 (1880)

102 U.S. 586 102 U.S. 586

October Term, 1880

“Our conclusions are, that direct taxes, within the meaning of the Constitution, are only capitation taxes, as expressed in that instrument,”

Returning to the Pollock case we see how the Supreme Court ruled with regards to “income.”

U.S. Supreme Court

POLLOCK v. FARMERS' LOAN & TRUST CO., 158 U.S. 601 (1895)

“A tax upon one's whole income is a tax upon the annual receipts from his whole property, and as such falls within the same class as a tax upon that property, and is a direct tax, in the meaning of the constitution”

Meaning the tax must be assessed according to the census (must be uniform) or population, neither the individual nor his property can be taxed directly.

U.S. Supreme Court


What is an excise tax?

“(A)n excise tax (is a tax) upon the conduct of doing business in a corporate capacity, Italics added. . . .Evidently Congress adopted the income as the measure of the tax to be imposed with respect to the doing of business in corporate form . . . property which, considered by itself, was not taxable. . . . This court had decided in the Pollock Case that the income tax law of 1894 amounted in effect to a direct tax upon property, and was invalid because (it was) not apportioned according to population as prescribed by the Constitution. . . .The act of 1909 avoided this difficulty by imposing not an income tax, but an excise tax upon the conduct of business in a corporate capacity, measuring, however, the amount of tax by the income of the corporation, with certain qualifications prescribed by the Act itself. Flint v. Stone-Tracy Co., 220 U.S. 107; McCoach v. Minehill Co., 228 U.S. 295; United States v. Whitridge, (decided at this term, ante, p. 144). Parenthesis added.

U.S. Supreme Court

FLINT v. STONE TRACY CO., 220 U.S. 107 (1911)

220 U.S. 107

“The tax under consideration, as we have construed the statute, may be described as an excise upon the particular privilege of doing business in a corporate capacity, IE., with the advantages which arise from corporate or quasi corporate organization; or, when applied to insurance companies, for doing the business of such companies. As was said in the Thomas Case, 192 U. S. supra, the requirement to pay such taxes involves the exercise of [220 U.S. 107, 152] privileges and the element of absolute and unavoidable demand is lacking. If business is not done in the manner described in the statute, no tax is payable.”

U S v. WHITRIDGE, 231 U.S. 144 (1913)

Argued October 21, 1913.
Decided November 10, 1913.

“As repeatedly pointed out by this court, the corporation tax law of 1909-enacted, as it was, after Congress had proposed to the legislatures of the several states the adoption of the 16th Amendment to the Constitution, but before the ratification of that Amendment-imposed an excise or privilege tax, and not in any sense a tax upon property or upon income merely as income.”

U.S. Supreme Court

TRUAX v. CORRIGAN, 257 U.S. 312 (1921)

“This right to carry on business-be it called liberty or property-has value, and he who interferes with the right without cause renders himself liable” A man’s property is inviolable or secure against violation. Blacks law 3rd page 1007


Nos. 480-487.
Argued March 10, 11, 1943.
Decided May 3, 1943.

“A state may not impose a charge for the enjoyment of a right granted by the federal constitution. Thus, it may not exact a license tax for the privilege of carrying on interstate commerce”

U.S. Supreme Court


“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

In conclusion then: we have learned from the above supreme court cases about

the Direct tax that it is defined as:

(1) A Capitation tax within the meaning of the constitution. Subject to apportionment.

(2) Property cannot be taxed considered by itself, unless the property is incorporated (which is a voluntary act) and used for corporate commercial purposes.

(3) If you choose not to incorporate, business conducted on your property is not taxable.

(4) The “right” to carry on business has value and the IRS, Federal State, County, or any municipality may be held liable if they interfere with that right.

(5) No state can exact a license to carry on interstate commerce.

(6) A man’s labor is his property; property cannot be taxed and is protected under the apportionment clause of the constitution.

U.S. Supreme Court

BRUSHABER v. UNION PACIFIC R. CO., 240 U.S. 1 (1916)

240 U.S. 1

No. 140.

Argued October 14 and 15, 1915.

Decided January 24, 1916.

See page 3: “That the authority conferred upon Congress by section 8 of article 1 'to lay and collect taxes, duties, imposts and excises'. . . it has never moreover been questioned that the conceded complete and all-embracing taxing power was subject, so far as they were respectively applicable, to limitations resulting from the requirements of Art. 1, 8, cl. 1, that 'all duties, imposts and excises shall be uniform throughout the United States,' and to the limitations of Art I., sec 2, cl. 3, that 'direct taxes shall be apportioned among the several states,' and of Art 1, sec 9, cl. 4, that 'no capitation, or other direct, tax shall be laid, unless in proportion to the census or enumeration hereinbefore directed to be taken.'

Affirms the Pollock case.

SEE PAGE 6 . . . the Amendment shows . . . that it was drawn with the object of maintaining the limitations of the Constitution and harmonizing their operation.”

Next: Third consideration: The Internal Revenue Service and their claims to enforce tax law.


And The American Constitution


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