What sort of tax is income tax?

Answer 1

In the Constitution of the United States of America, there are two great classes of taxation, which are direct and indirect. Under that Constitution, direct taxes are subject to the rule of apportionment and indirect taxes subject to the rule of uniformity. Direct taxes are generally viewed as being capitation taxes or taxes on property. Indirect taxes are generally viewed as being a specific taxed activity such as excises, imposts, or duties. The so called "Personal Income Tax" which implies by name that it is a direct tax on your property can not possibly be a direct tax as it is clearly not apportioned among the several states. Of course, there are those who would argue that the Sixteenth Amendment relieved Congress from the rule of apportionment in regards to income taxation but this is categorically false. Congress can not by Amendment change the Constitution, (Although they most certainly did exactly that with Seventeenth Amendment), if the Constitution is to be changed it must be done so by Constitutional Convention. Thus, if the Sixteenth Amendment changed the rule of apportionment it would have most certainly been struck down as Un-Constitutional. It was challenged as being Un-Constitutional but The Supreme Court disagreed in two very seminal rulings; Brushaber v. Union Pacific Railroad 240 US 1 (1916), and Stanton v. Baltic Mining Co. 240 US 103. A simple reading of these Court rulings should make clear that the Sixteenth Amendment did not relieve Congress of the rule of apportionment but rather made clear that any non apportioned tax laid on income may not be viewed as a direct tax and must necessarily be viewed as an indirect tax. Amazingly, much of the modern day lower courts and the vast proliferation of lawyers and tax accountants who profit from all of the confusion generated by this so called "Personal Income Tax" insist that the Supreme Court held that the Sixteenth Amendment did relieve Congress from the rule of apportionment. In fact Wikipedia, the go to online source and internet encyclopedia says this about the Brushaber ruling: "The Sixteenth Amendment removes the requirement that income taxes be apportioned among the states according to population. The Revenue Act of 1913, imposing income taxes that are not apportioned among the states according to each state's population, is not unconstitutional." This statement is untrue and as one continues to read that Wikipedia article they will find it's author actually contradicts these words when it is stated: "Although the court stated that income taxes inherently belong in the category of excise tax (indirect tax), Brushaber is sometimes misunderstood by persons who argue that the case stands for the opposite meaning. Since 1913, however, the Supreme Court of the United States has never ruled that any Federal income tax is anything but an excise tax, not required to be apportioned as a direct tax, but requiring geographic uniformity." This statement is entirely true yet seems to, if not contradict the earlier statement, then only add to the confusion of how this tax should be viewed. Simple logic and reason dictates that if an income tax inherently belongs in the classification of indirect taxation then there is no need for Congress to relieve itself from the rule of apportionment. It should be noted that the only citation offered by the Brushaber ruling is a reference to an earlier Supreme Court ruling; Pollock v. Farmer Loan & Trust Co. In fairness to this Wikipedia article there is an honest attempt to make clear that the so called "Personal Income Tax" is an excise tax, however, it continues to phrase the meaning of the Sixteenth Amendment in terms of relieving Congress of the need to apportion any income tax. This is not what the Supreme Court ruled and there is no language in either Brushaber or Stanton to support such a notion.

Since most websites are loathe to quote Brushaber or Stanton directly, indeed the Stanton ruling with its much clearer language is rarely if ever even mentioned, perhaps a few citations in this answer might help clear up some of the confusion. In addressing the many erroneous contentions made by Frank Brushaber, Chief Justice White had this to say: "The various propositions are so intermingled as to cause it to be difficult to classify them. We are of opinion, however, that the confusion is not inherent, but rather arises from the conclusion that the Sixteenth Amendment provides for a hitherto unknown power of taxation, that is, a power to levy an income tax which although direct should not be subject to the regulation of apportionment applicable to all other direct taxes. And the far reaching effect of this erroneous assumption will be made clear by generalizing the many contentions advanced in argument to support it, as follows: (a) The Amendment authorizes only a particular character of direct tax without apportionment and therefore if a tax is levied under its assumed authority which does not partake of the characteristics exacted by the Amendment, it is outside the Amendment and is void as a direct tax in the general constitutional sense because not apportioned..." What Frank Brushaber was asserting was that the tax passed by the income tax was a direct tax on his property. Certainly it is understandable why anyone would view income as property. Indeed, income is property but so is the whiskey that is bought and sold within the United States yet any tax on that is not viewed as a direct tax on property and it is understood that what is being taxed is the distillation and importation of such property and as such is an excise tax being an indirect tax. Income also can be taxed, in fact is taxed in this manner. Because Frank Brushaber viewed the tax as a tax on his property he also viewed the Sixteenth Amendment as being a Constitutional Amendment that gave Congress the Authority to tax income directly without apportioning that tax. This is what Chief Justice White is referring to when he calls these assertions "erroneous assumptions". Chief Justice White goes on to say: "But it clearly results that the propositions and the contentions under it, if acceded to, would cause on provision of the Constitution to destroy another; that is, they would result in bringing the provisions of the Amendment exempting a direct tax from apportionment into irreconcilable conflict with the general requirement that all direct taxes be apportioned. Moreover, the tax authorized by the Amendment, being direct, would not come under the rule of uniformity applicable under the Constitution to other than direct taxes, and thus it would come to pass that the result of the Amendment would be to authorize a particular direct tax not subject to either to apportionment or to the rule of geographical uniformity, thus giving power to impose a different tax in one State or States than was levied in another State or States. This result instead of simplifying the situation and making clear the limitations on the taxing power, which obviously the Amendment must have been intended to accomplish, would create radical and destructive changes in our constitutional system and multiply confusion." The last remark made by Chief Justice White in that citation has taken on a profound sense of irony today given the total confusion that exists in regards to the so called "Personal Income Tax". And let's be clear about this, if there were no confusion in regards to this tax then there would not be so many tax lawyers and accountants making comfortable livings advising people on income taxation. What Chief Justice White is saying in this last citation is that if Frank Brushaber were correct in his assumptions then the Sixteenth Amendment would most certainly be unconstitutional and be in "irreconcilable conflict" with the Constitution.

It was mentioned earlier that the only Brushaber citation made by the article about Brushaber in Wikipedia cited a reference to the Pollack ruling. One can not hope to understand the Brushaber ruling with out first understanding the Pollack ruling and how that ruling led to the passage of the Sixteenth Amendment. Pollack v. Farmers Loan & Trust Co. was another seminal ruling that struck down the entire portion of the Revenue Act of 1894 as unconstitutional because the income tax passed in that Revenue law was not apportioned and for whatever reasons the Pollack Court viewed that tax as a direct tax on property and thus subject to the requirement of apportionment. It is most likely because of the Pollack ruling that Frank Brushaber came to his erroneous assumptions, but this did not make the Pollack ruling an erroneous ruling and that ruling has never been overturned by any subsequent Court. Indeed, Chief Justice White affirmed the correctness of the Pollack ruling when he 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 subject the tax to the regulation as to apportionment which otherwise as an excise would not apply." Neither Congress with the passage of the Sixteenth Amendment nor the Supreme Court in either Brushaber or Stanton rebuked or overturned the Pollack ruling. In fact, Chief Justice White makes clear that the Pollack ruling acknowledged that income taxation by its nature belonged in the class of indirect taxation rather than direct taxation. Chief Justice White continues with this statement: "The contention that the Amendment treats a tax on income as a direct tax although it is relieved from apportionment and is necessarily therefore not subject to the rule of uniformity as such rule only apples to taxes which are not direct, thus destroying the two great classifications which have been recognized and enforced from the beginning is wholly without foundation." In this ruling, Chief Justice White was even more verbose than this answer tends to be and because of this it can be difficult to understand exactly what is being said. However, Frank Brushaber was not the only one who challenged both the Revenue Laws and the Sixteenth Amendment as being unconstitutional and so Chief Justice White, having the opportunity to form his thoughts with the Brushaber ruling found a much more clear and concise way to explain these thoughts in the Stanton v. Baltic Mining Co.: "By the previous ruling, it was settled that the Sixteenth Amendment conferred no new power of taxation but simply prohibited the previous complete and plenary power of income taxation possessed by Congress from the beginning from being taken out of the category indirect taxation to which it inherently belonged..." There should be no confusion at all to what Chief Justice White said in the Stanton Ruling. No new power of taxation was created by the Sixteenth Amendment, nor was any new burden of taxation placed upon the people by that Amendment. Chief Justice White goes further to acknowledge that Congress has the "complete and plenary power of income taxation" and has had so since the inception of the federal government. So, if this is the case then why do so many people keep insisting that this Amendment relieved Congress of the rule of apportionment in terms of income taxation? In fact, the Brushaber ruling makes clear that Frank Brushaber had made the "erroneous assumption" that the Sixteenth Amendment relieved Congress of the rule of apportionment and yet today "tax scholars" insist that the Brushaber ruling informs us that the Sixteenth Amendment relieves Congress of the rule of apportionment. Why would the Court disregard Brushabers assertion that this was the case and then turn around and say that this was the case? They, of course, wouldn't and didn't and perhaps because of the verbosity of that ruling it has been erroneously interpreted to mean that. Yet it still remains inexplicable why the Stanton ruling is so under reported. Rather than use the word relieve in terms of apportionment in the Sixteenth Amendment, the Stanton ruling uses the word "prohibit" instead. That's because that is exactly what the Sixteenth Amendment did.

The Sixteenth Amendment is every bit as much an act of prohibition as is the Thirteenth Amendment is and as the Eighteenth Amendment was. What is being prohibited in the Sixteenth Amendment is the perception that a non apportioned tax on income is a direct tax. Not only are the Courts prohibited from viewing such a tax as a direct tax, everyone is just the same as everyone is prohibited from owning slaves and used to be prohibited from distilling, importing, selling and drinking alcohol. Yet, like the speakeasies of the 1930's and the organized crime that flourished, so today we have countless people who disobey this Amendment and instead of organized gangsters we have organized tax attorney's and tax accountants. All based on peoples ignorance of the law.

What sort of tax is the so called "Personal Income Tax"? It is an excise tax. What does that mean? It means that those people engaged in specific taxed activities named by the Internal Revenue Code are subject to and therefore liable for this tax. How would one know if they are liable for this tax or not? Well, by reading the Internal Revenue Code for yourself, of course. Of course not! While ignorance of the law is no excuse and each and everyone of us is presumed to know the law, this so called law defies knowledge. Albert Einstein once said: "The hardest thing in the world to understand is the income tax." If a rocket scientist can't make heads nor tails of the code then how are people of average intelligence supposed to understand it? There are countless web sites, government, non profit and for profit that offer their "valuable expertise" on the meaning of the code, there are countless books and articles written about this code offering "valuable expertise" on the subject and perhaps even a cereal box or two that offers a super secret decoder ring to help one figure out the Internal Revenue Code, and yet confusion abounds.

Google The Tax Foundation and it will tell you that from 1955 to 2005 the Internal Revenue Code began with just 409 words and blossomed to 2,139 words with in that Code. However, another website called Trygve's Diary claims that the U.S. Government Printing Office claims that Title 26 of the Tax Code consists of 3,387 pages. Say what? Only 2,139 words in 3,387 pages? That can't be right. Scott Simon from the NPR organization claims the Tax Code is 67,204 pages long, there is an answer provided right here in Wikianswers that is using the same source just quoted, which is Trygve.com and that answers claims that in 2006 the Tax Code was 16,845 pages long. There is another question in Wikianswers that asks how many words are in the U.S. tax code and at this writing that question remains unanswered. The Hoover Institution out of Stanford University cites an unnamed source as claiming there are 5.6 million words in the Tax Code. Another site called fourmilab claims there are 3.4 million words in the Tax Code and here is what some of our U.S. Representatives past and present have to say about the Code: Former United States Representative John Hostettler (R) from Indiana says this: "The Internal Revenue Code and Regulations add up to one million words and is nearly seven times the length of the Bible." Former United States Representative Rob Portman (R) from Ohio and currently running for Senator says: "The Income Tax Code and its associated regulations contain contain almost 5,6 million words...seven times as many words as the Bible. Taxpayers now spend about 5.4 billion hours trying to comply with 2,500 pages of tax laws..." Former United States Representative J.C. Watts (R) of Oklahoma says this: "The heart of the IRS abuse lies in the existing tax code. Most of the folks who work for the IRS are good people just trying to do their jobs, but they are caught in a bad, overextended tax system. At 3,458 pages long, twice the length of the Bible, it's impossible for the average taxpayer to know, understand and accurately apply its provisions. The length is twice that of the Bible! Even tax experts can not do so reliably." Current United States Representative Spencer Bachus (R) of Alabama says this: "With its 6,00 pages and 500 million words, the complexity of our tax code is the prime source of frustration and anger felt by millions of Americans toward their government." Former United States Representative Bill Archer (R) of Texas says this: "The Internal Revenue Code and regulations now come in at one million words and 9000 pages." Current United States Representative Jo Ann Emerson (R) of Missouri says this: "The Bible, the guide or our lives, is 1,291 pages and contains 774, 746 words. But the tax code and its regulations which are referred to by some as a "persons worst nightmare come true" is 9,471 pages and over seven million words." Just recently retired United States Representative Vito Fossella says this: "The tax code runs 17,000 pages and contains a mind boggling 5.5 million words. By way of comparison, War and Peace is only 1, 444 pages and the Bible checks in at 1,291 pages." And President George W. Bush (R) had this to say: "The tax code is a complicated mess. You realize, its a million pages long." As for the Democrats and the Internal Revenue Code.... Current United States Representative Steny H. Hoyer (D) of Maryland says this: "As the deadline for filing federal income tax returns for 2004 rapidly approaches, the one thing that is clear is that America's tax code is a Kafkaesque maze of complexity and confusion that confounds millions of Americans every single year. And, unfortunately, our tax laws are becoming more complicated every year, with the Republican Congress orchestrating nearly 900 changes to the Internal Revenue Code in the last two years alone." Current United States Representative Chaka Fattah (D) in a news release that said: "The tax code's complexity and unfairness has a real effect on the average American family...The intricacy of the federal income tax alone costs Americans more than $200 billion, and 5 billion hours annually in compliance. " There may be more Democratic Congressman who have spoken on the complexity of the tax code but after more than an hour Google several different search engines this was the best this answer could find. The point is not that Republicans are more vocal about the complexity of the Code, the point is whether Democratic or Republican nobody seems to be able to agree on how many pages long nor how many words are in those pages. The following are a few quotes from former President Ronald Regan on the Tax Code: "Our federal tax system is, in short, utterly impossible, utterly unjust and completely counterproductive, it reeks with injustice and is fundamentally UnAmerican...it has earned a rebellion and its time we rebelled" "The Taxpayer-that's someone who works for the government but doesn't have to take the civil service exam." "The current tax code is a daily mugging." What sort of tax is income tax? Plato said this: "When there is an income tax, the just man will pay more and the unjust man less on the same amount of income." What sort of tax is the income tax? It is a Revenue Law and as such is bound by law itself. It has, as been illustrated by the Supreme Court rulings cited above, upheld as Constitutional therefore it must be a just law...of course, if no one can understand this law, as it has been clearly illustrated not even our government officials understand it, then how can anyone that doesn't understand it be held liable for it?