What form of government do Americans really want?
That was the resounding question asked by Congressman Ron Paul in the recent first GOP presidential primary debate hosted by MSNBC. The income tax and the nanny-state it presumably finances will both figure large in how that question is answered, but the only reason why this question has not already been resoundingly answered is the fact that, until now, America has never had a real choice.
Now it does - and that' s why the media networks are running so scared to keep Ron out of the debates (if they possibly can) or at least out of their televised and printed discussion of the debates (if they can't), or why they try their best to make him look like a far-out nut job if they are unsuccessful in the first two attempts.
Their problem is that he is anything but a 'nut job'.
He is well spoken. He is reasonable. He's always composed and polite - but he says the darndest things and then has the audacity to back them up with facts and reason.
In short: he says what a fast-growing segment of America is thinking in their hearts - and one of the top things in their heart of hearts is this question: Why on earth do we need the damn IRS? Does the law, as it now stands, really require us to pay a tax on our income? What about those people that say there is no such law?
So, let's get right to it:
The sixteenth amendment is utterly irrelevant to the issue of whether or not Congress has the power to lay an income tax. It was only designed to prevent the Supreme Court's prior ruling in the post-civil war Pollock case from taking the tax out of the class of indirect taxes (excises, etc.) to which it inherently belongs, and placing it into the class of direct taxes, which must be apportioned. (The Pollock court had labeled the 1861 tax a direct tax by stating that a tax on the income from property is the same thing as a tax on the property itself, and therefore a direct tax in need of apportionment). Brushaber v. Union Pacific Railroad, 240 U.S. 1 (1916).
(Under the Constitution, direct taxes must be "apportioned", which essentially is an administrative nightmare to do on a consistent, ongoing basis. Indirect taxes only need to be "uniform".)
Since it is therefore clear that the income tax is an indirect tax, the issue becomes: on what types of income can Congress lay a tax? An indirect tax can be levied only on activities or privileges, not on individuals orproperty. The question is, then, over what types of activities does Congress have jurisdiction to legislate? Under an "originalist" construction of the Constitution, at least, Congress has jurisdiction only over those matters expressly delegated to it by the Constitution, plus those matters over which it is "necessary and proper" to exercise jurisdiction in order to enable Congress to carry out those powers that were expressly delegated.
The real issue, however, is not whether Congress has the power to tax the income of all Americans, but whether is has actually done so via the current income tax code.
To answer this question, it is necessary to examine the provisions most often quoted by government lawyers in support of their efforts to stifle what the government likes to label as tax "protester" arguments. These provisions are Sections 61 and 63 of the Internal Revenue Code (IRC), which can be found in title 26 of the United States Code.
The government's argument always goes something like this: "You Honor, it is obvious that the Defendant's income constitutes compensation for services and it is therefore included in 'gross income' under section 61. After application of necessary deductions, his income therefore became 'taxable income' under Section 63. His arguments that his income is not subject to tax are therefore frivolous"
Sounds reasonable, at first blush, but there is a critical - or rather a fatal - flaw in this argument. If the argument was valid, an Italian shoemaker's income from shoes produced and sold only in Naples, Italy, would be covered by these provisions and woul therefore be "taxable income" under the IRC. The same would be true for the income of every non-resident alien on the planet even if he has no connections to the United States whatsoever. But the US government does not tax such income.