Problem: It has become settled knowledge, within the freedom and tax honesty movements, that the current enforcement of the tax code is unconstitutional and therefore illegal. It is also well known that the tax system is designed to feed the banking system to pay the interest on the money that Congress is supposed to mint, but they have given that power to the private bankers. This would be akin to a fox guarding the hen house scenario.
I have written in the past about the illegality of the current income tax scheme; or more correctly, the illegal and unconstitutional methods the IRS uses to force people who are not liable for income tax to pay income tax. Congress has specific and limited means by which it may raise revenue (taxes) for the operation of the federal government. This limitation was made by design to ensure that the abusive taxation endured by the colonists would not be repeated by their newly formed government.
Congress passed the Income Tax Act of 1894 which imposed a direct tax upon the income of U.S. Citizens. More specifically it applied that tax to Citizens living outside of federal jurisdiction. In Pollack V. Farmers Loan and Trust the Supreme Court stated that this act was unconstitutional, as it was a direct tax that was not apportioned among the many states.
The 16th Amendment was passed by Congress in 1909, and was arguably ratified in 1913. This amendment did not repeal any other section of the Constitution. In the 1911 case of Flint V Stone Tracy Co., the court stated the 16th Amendment allowed the Corporate Income Tax to be placed in the category of an excise tax, measured by income, "on the privilege of doing business in corporate form."
In the case of Murphy V IRS (2005), the Supreme Court stated: "The Sixteenth Amendment simply does not authorize the Congress to tax as "incomes" every sort of revenue a taxpayer may receive. As the Supreme Court noted long ago, the "Congress cannot make a thing income which is not so in fact." And further in McCulloch v. Maryland, 17 U.S. (4 Wheat.) 316, 431 (1819), the court stated: "it would not be consistent with our constitutional government, and the sanctity of property in our system, merely to rely upon the legislature to decide what constitutes income." (Bold added)
The courts have admitted that not all "incomes" are taxable, and congress cannot make a thing income when it is not income. The term "income," as it was used at the time of the passing of the 16th Amendment and therefore MUST be the meaning used today, meant profit derived from corporate activity.
Money that comes in from the exchange of time and talents is not "income" in the 16th Amendment sense; and therefore, a direct tax on the individual is unconstitutional if not apportioned.
The problem here is not the IRS code, or even its' existence; but it is how it is being interpreted and enforced. If the federal government were to abide by its' constitutional mandate, (that of interstate and foreign commerce), there would be no need to abolish the IRS, as the government would be working totally within their constitutionally defined power and scope.
To complicate things a bit further, let's talk a minute about jurisdiction. Within the Constitution (Article 1, Section 8) Congress is given the power of exclusive "Legislation in all Cases whatsoever, over such District (not exceeding ten Miles square) as may, by Cession of particular States, and the Acceptance of Congress, become the Seat of the Government of the United States, and to exercise like Authority over all Places purchased by the Consent of the Legislature of the State in which the Same shall be, for the Erection of Forts, Magazines, Arsenals, dock-Yards, and other needful Buildings," also known as federal enclaves. Congress can pass any law they desired within these areas; they have complete jurisdiction.
Initially this really did not matter much because so few people lived in those areas and they had the option to leave if they so chose. Then came the 14th Amendment which effectively created a new class of citizen, the federal or United States citizen. It also granted, or rather imposed, that no state could deny this new US citizen equal protection under the law; this included the laws of taxation. This also caused a change in the hierarchy of citizenship from the superior state citizen to the new superior federal citizen.
For many in the freedom and tax honesty movement dual citizenship or the dual meaning of the term "United States" Citizen causes a bit of confusion. The term "United States" when used in the Constitution means the many states of the Union however when used in federal statutes it means under federal jurisdiction within the federal enclave or territory.
Because the federal government has absolutely NO legal police/enforcement power outside of a federal enclave, a mechanism had to be put into place to create a nexus between the federal government and the people residing within the states of the Union. This was accomplished by the 14th Amendment. Currently the federal government operates under the assumption that all members of society are 14th Amendment citizens; and therefore, it ensures "their" citizen's privileges and obligations are protected, and that they have federal control over them wherever they reside. One further point to highlight when dealing with the 14th Amendment; this amendment grants privileges to this new class of citizen not rights, and any privilege granted by a government can be taken back by the government.
The same year that the 16th Amendment was ratified the Federal Reserve was created. Coincidence? According to President Franklin D. Roosevelt "In politics, nothing happens by accident. If it happens, you can bet it was planned that way."
Our system of taxation is tied directly to our money system. When the Federal Reserve prints money, it trades that money to the government for a note. The interest on that note is then paid to the Fed from the "income" taxes of the American people. The tax, or more accurately, the income of the American people, is the collateral to the Federal Reserve on the debt instrument known as Federal Reserve Notes. The items we call money are actually debt instruments used to fund the central bank system of the United States; and it has no intrinsic value-- no backing other than the good faith of the nation.
Solution: Replacing our current tax system with a constitutional system would have a ripple effect that would require correction to other areas of our government and society. As this article is but a brief overview, we obviously cannot address all the concerns necessary to do this topic justice. However, the basic premise is identified; the task of correcting our governments' system of taxation is large, but it is not insurmountable. In my opinion, we need to address the following concerns:
1. Return the area of direct taxation identified in the 16th Amendment back to its original intent, namely gains derived from corporate activity. The corporate entity enjoys a level of protection the citizen does not, therefore for that protection they pay a tax to the government. This will provide an immediate stimulus package to the entire nation by the increase in disposable income in the hands of the citizen.
2. All government programs must be authorized by the enumerated powers within the Constitution. Any program/organization that is not authorized by the Constitution must be immediately phased out of existence. Obviously this could have devastating effects on wide sectors of society, especially for programs such as Social Security. Entitlement programs such as this will need to have a cut-off date for which entitlements will no longer be available and those persons will have to take responsibility for their own support.
3. Return to a tariff based revenue system for government operation. If tariffs prove insufficient to cover the legitimate costs of the federal government the balance will be apportioned to the states based on their proportion of population in relation to the country. If a state has 10 percent of the nation's population then it will be responsible for paying 10 percent of the deficit. The net effect of this type of taxation will be to bring awareness and discussion of federal spending to the state and citizen level rather than solely within the halls of Congress.
4. Mandate that any special use taxes be reserved solely for the designed uses and any excess taxes collected will be returned to the states or to the people. An example of special use taxes would be gasoline tax. These taxes are supposed to be collected and used for the building and maintenance of roads and bridges. Any taxes collected must be used only for those designated purposes.
5. Remove the Federal Reserve and return all money functions back to the government. All Federal Reserve banks should be converted to clearing houses for management of member banks. The banks system should be prohibited from practicing fractional reserve banking and the government should return to value based currency and prohibit debt based currency.
6. Congress must resume its' duties of minting US currency, and managing the value thereof, as outlined in the Constitution. If they cannot, or will not, uphold their responsibility, then we must get rid of them and find someone who will!
7. Repeal the 14th Amendment, and put the federal government back to its rightful position as inferior to the states of the union. The Constitution was designed with certain checks and balances to ensure liberty for all citizens. The federal government was designed to be the servant of the states and the people, not the other way around.
Once this has been accomplished, the cost of government would be drastically reduced; and the majority of the financial needs of the government could be met by the traditional constitutional means of taxation, namely, direct apportioned taxes, duties, imposts, and excises.
Liberals with whom I have discussed this topic inevitably ask "Where will the government get the money to pay for what it wants to do? My reply is, "What did they do before they started taxing the individual worker?" The government ran fine by taxing the areas within the Constitutional taxing authority for well over a hundred years. It was not until the government started expanding into socialistic programs, wealth redistribution, and massive funding of other countries that they needed to steal from the American population.
The answer is a return to a government guided by the constitution.
Funding the total operation of the government solely by constitutional taxation could be done if we were to remove the Federal Reserve, downsize the IRS, reduce overseas payouts (which amount to billions every year), cease to fund groups such as the UN, discard unnecessary social programs, and reduce our military footprint around the world. We are the most technologically advanced nation in the world and have the ability to attack any spot on the face of the globe; we do not need to have massive numbers of troops and equipment all over the globe.
The end result would be a massive infusion of capital into the economies of every state of the union. Disposable income would rise, new job opportunities would be created due to the rise in capital, and the value of the dollar would rise increasing our foreign buying power. All of these things could be realized by returning our government to the constitutional standard upon which it was created.