Taxing labor or income from labor Tax protester constitutional arguments

1 taxing labor or income labor

1.1 evans v. gore
1.2 southern pacific co. v. lowe
1.3 colonial pipeline co. v. traigle
1.4 lucas v. earl
1.5 coppage v. kansas
1.6 truax v. corrigan
1.7 butchers union co. v. crescent city co.
1.8 murdock case
1.9 redfield v. fisher
1.10 conner v. united states
1.11 eisner v. macomber
1.12 cases wages or labor ruled taxable
1.13 wages , salaries, sixteenth amendment, , cheek case
1.14 monetary penalties asserting argument on tax return

taxing labor or income labor

several tax protesters assert congress has no constitutional power tax labor or income labor, citing variety of court cases. these arguments include claims word income used in sixteenth amendment cannot interpreted applying wages; wages not income because labor exchanged them; taxing wages violates individuals right property; income tax on wages illegal direct tax on source of income, , several others.

another protester argument u.s. constitution authorizes income tax on income derived activities government-licensed or otherwise specially protected. courts have rejected theory, ruling congress has taxed compensation services, without regard whether compensation derived government-licensed or specially protected activities, … , has been construed cover earnings labor.

robert l. schulz , people foundation take positions government prohibited doing doing – taxing salaries, wages , compensation of working men , women of country , forcing business entities utilize labor of ordinary american citizens withhold , turn on irs part of earnings of workers , federal government not possess legal authority –statutory or constitutional– tax wages or salaries of american workers.

similarly, tax protester tom cryer, acquitted of willful failure file u.s. federal income tax returns in timely fashion, argued law not tax [a person s] wages , , federal government cannot tax [m]oney earned [and] paid labor , industry because constitution not allow federal government tax earnings (referring wages, salaries , fees [a person] earn[s] [himself] ).

arguments taxability of compensation personal services, whether called wages, salary, or other term, may either constitutional arguments in united states v. connor (see below) or statutory arguments in cheek v. united states, depending on details of argument. purposes of presentation, these arguments summarized here rather in article tax protester statutory arguments. rest of section explains these arguments in more detail.

evans v. gore

some protesters include false quotations in arguments. radio personality dave champion contends following verbiage quotation case of evans v. gore in own arguments on internet federal income taxes:

the sixteenth [amendment] not justify taxation of persons or things (their property) immune …it not extend taxing power new or excepted citizens…it intended remove occasions apportionment of income taxes among states. not authorize tax on salary. …

the quoted material dave champion false; not appear in court s decision. in evans v. gore, u.s. supreme court did rule federal income tax on income of federal judges unconstitutional. evans v. gore ruling has been interpreted barring application of federal income tax federal judge had been appointed prior enactment of tax. court s year 1920 interpretation of compensation clause , rule federal judges shall, @ stated times, receive services compensation, shall not diminished during continuance in office under article iii, section 1 of u.s. constitution. decision in evans v. gore eviscerated in 1939 u.s. supreme court decision of o malley v. woodrough, , expressly overruled u.s. supreme court in 2001, in case of united states v. hatter. in hatter, supreme court stated: overrule evans insofar holds compensation clause forbids congress apply applicable, nondiscriminatory tax salaries of federal judges, whether or not appointed before enactment of tax.

neither supreme court nor other federal court has ever ruled sixteenth amendment (or other part of constitution) not authorize federal income tax on compensation personal services.

southern pacific co. v. lowe

another united states supreme court case cited tax protesters southern pacific co. v. lowe,. tax protesters attribute following quotation court in case: income; used in statute should given meaning not include comes in. quotation not appear in text of supreme court decision.

this case began in united states district court southern district of new york. in decision in court, trial court judge stated: not think income used in statute, should given meaning include comes in. case did not involve compensation labor or services. instead, case involved federal income tax treatment of dividends paid central pacific railway company parent company, southern pacific company, owned 100% of stock of central pacific railway company. district court ruled dividends taxable southern pacific company. decision reversed supreme court.

what u.s. supreme court said was:

we must reject in case, have rejected in cases arising under corporation excise tax act of 1909 (doyle, collector, v. mitchell brothers co., , hays, collector, v. gauley mountain coal co., decided may 20, 1918), broad contention submitted in behalf of government receipts--everything comes in--are income within proper definition of term gross income, , entire proceeds of conversion of capital assets, in whatever form , under whatever circumstances accomplished, should treated gross income. term income has no broader meaning in 1913 act in of 1909 (see stratton s independence v. howbert, 231 u. s. 399, 416, 417), , present purpose assume there no difference in meaning used in 2 acts.

in southern pacific company v. lowe, supreme court ruled shareholder receives dividend representing earnings of corporation realized corporation prior january 1, 1913, dividend not includible in gross income of shareholder purposes of federal income tax act of 1913, ch. 16, 38 stat. 114 (oct. 3, 1913). no issues involving definition of income respect wages, salary or other compensation labor decided court.

colonial pipeline co. v. traigle

another case has been cited argument wages not taxable united states supreme court decision in colonial pipeline co. v. traigle. individual named william dixon @ web site called godissovereignfast claims following statement u.s. supreme court in case:

income taxes statutes apply state created creatures known corporations no matter whether state, local, or federal. , colonial pipeline co. v. traigle, 421 100.

this material alleged quotation not appear in text of case @ all. also, words wages , salaries not found anywhere in text, , there no ruling in case federal income tax statutes apply corporations. colonial pipeline case involved louisiana corporate franchise tax, not federal tax. validity of louisiana franchise tax upheld u.s. supreme court in case. no issues involving validity or applicability of federal income taxes presented to, mentioned by, or decided supreme court in colonial pipeline case.

lucas v. earl

for argument wages not taxable, tax protesters—including convicted tax offender irwin schiff—incorrectly attribute u.s. supreme court following language in connection leading tax case of lucas v. earl:

the claim salaries, wages, , compensation personal services taxed entirety , therefore must returned [i.e., reported on income tax return] individual has performed services produce gain without support, either in language of act or in decisions of courts construing it. not this, directly opposed provisions of act , regulations of u.s. treasury department, either prescribed or permits compensations personal services not taxed entirety , not returned individual performing services. noted that, language of act, not salaries, wages, or compensation personal services included in gains, profits, , income derived salaries, wages, or compensation personal services.

this language not court’s opinion in lucas v. earl. instead, direct quotation page 17 of taxpayer s brief filed in case. guy c. earl taxpayer, , brief written earl’s attorneys: warren olney jr., j.m. mannon, jr., , henry d. costigan. in printed versions of case, statement , other quotations , paraphrases pages 8, 10, 14, 15, 17, , 18 of taxpayer s brief re-printed headnote or syllabus above opinion of court. in case reprints include headnote (and many of them not show it), these excerpts not identified being taxpayer s brief. person not trained in analysis of legal materials not know verbiage, headnote or syllabus, not part of court’s opinion, perhaps leading confusion source of quotation. explained below, supreme court rejected arguments in quotation, , taxpayer lost case.

lucas v. earl leading case in area of u.s. income taxation, , stands anticipatory assignment of income doctrine. in case, mr. earl arguing because , wife, in year 1901, had made legally valid assignment agreement (for state law purposes) have then-current , after-acquired income (which earned solely him) treated income of both him , wife joint tenants right of survivorship, assignment agreement should determine federal income tax effect of income earned (i.e., half income should taxed him).

the u.s. supreme court rejected argument, ruling under federal income tax law future income earned mr. earl taxable him @ time earned income, though had assigned part of income wife, , regardless of validity of assignment agreement under state law. court in lucas v. earl did not rule wages not taxable.

coppage v. kansas

one case cited tax protesters wages not taxable argument coppage v. kansas respect following quotation:

included in right of personal liberty , right of private property-partaking of nature of each- right make contracts acquisition of property. chief among such contracts of personal employment, labor , other services exchanged money or other forms of property.

coppage criminal case involving defendant convicted, under kansas statute, of firing employee refusing resign member of labor union. no issues of taxation presented or decided court, , word tax not found in text of court s decision.

truax v. corrigan

tax protesters cite or quote case of truax v. corrigan argument income tax should not imposed on labor , @ least arguably relating labor right of property :

that right conduct lawful business, , thereby acquire pecuniary profits, property, indisputable.

the truax case involved mr. william truax owned restaurant called english kitchen, in bisbee, arizona. mr. michael corrigan , others former cooks , waiters @ restaurant. corrigan , others allegedly instituted boycott of restaurant, after dispute arose on terms , conditions of employment. strike allegedly ordered local union respect union members employed @ restaurant. restaurant’s business allegedly harmed, , mr. truax sued various parties on variety of grounds. lawsuit thrown out trial court before case heard, on theory mr. truax incorrect matter of law. mr. truax appealed , case ended in u.s. supreme court. u.s. supreme court ruled trial court should not have thrown out lawsuit, should have heard mr. truax’s case. case sent trial court trial take place. truax not tax case. no issues involving taxation presented or decided court.

butchers union co. v. crescent city co.

tax protesters cite u.s. supreme court case of butcher s union co. v. crescent city co. argument income tax should not imposed on labor, quoting following language:

a monopoly defined institution or allowance sovereign power of state, grant, commission, or otherwise, person or corporation, sole buying, selling, making, working, or using of whereby person or persons, bodies politic or corporate, sought restrained of freedom or liberty had before or hindered in lawful trade, grants of kind void @ common law, because destroy freedom of trade, discourage labor , industry, restrain persons getting honest livelihood, , put in power of grantees enhance price of commodities. void because interfere liberty of individual pursue lawful trade or employment.

butchers union co. case involving interpretation of louisiana constitution , ordinances of city of new orleans. court ruled louisiana constitution , new orleans ordinances did not impermissibly impair pre-existing obligation under contract when laws ended slaughter-house business monopoly crescent city company. no issues regarding power tax incomes businesses, vocations, or labor presented or decided court, , word tax not appear in text of decision.

murdock case

tax protesters cite case of murdock v. pennsylvania (also known jones v. city of opelika):

a state may not impose charge enjoyment of right granted federal constitution.

murdock (or jones v. city of opelika) case involving validity of city ordinance (in jeannette, pennsylvania) worded follows:

that persons canvassing or soliciting within said borough, orders goods, paintings, pictures, wares, or merchandise of kind, or persons delivering such articles under orders obtained or solicited, shall required procure burgess license transact said business , shall pay treasurer of said borough therefore following sums according time said license shall granted.

1 day $1.50, 1 week 7 dollars ($7.00), 2 weeks twelve dollars ($12.00), 3 weeks twenty dollars ($20.00), provided provisions of ordinance shall not apply persons selling sample manufacturers or licensed merchants or dealers doing business in said borough of jeannette.

a group of people jehovah s witnesses went door door distributing literature in town. failed obtain license under ordinance. case ended in court, , went way u.s. supreme court, stated:

there evidence [the jehovah’s witnesses’] practice in making these solicitations request contribution of twenty-five cents each books , 5 cents each pamphlets accept lesser sums or donate volumes in case interested person without funds. … first amendment, fourteenth makes applicable states, declares congress shall make no law respecting establishment of religion, or prohibiting free exercise thereof; or abridging freedom of speech, or of press .... … hardly denied tax laid on exercise of freedoms unconstitutional.

the protester argument appears federal government should not able tax income labor because tax on exercise of freedoms mentioned in quotation. tax in case was, in effect, license fee imposed on door door sales people under city ordinance. city trying exact fee jehovah’s witness members going door door. questions validity of federal income taxes neither presented nor decided court.

redfield v. fisher

some tax protesters cite or quote redfield v. fisher:

the individual, unlike corporation, cannot taxed mere privilege of existing. corporation artificial entity owes existence , charter powers state; individual s rights live , own property natural rights enjoyment of excise cannot imposed.

the argument seems because individual s rights live , own property arguably rights against excise cannot imposed, federal income tax on income labor should therefore unconstitutional. however, redfield v. fisher oregon supreme court case, not federal case. no issues involving validity of federal income tax laws decided court.

conner v. united states

some tax protesters cite case called conner v. united states, quotation congress has taxed income, not compensation argument wages not taxable. case cited unsuccessfully lakerra sumter before u.s. court of federal claims in case of sumter v. united states. conner case involved taxability of compensation paid insurance company policy holder house had burned down. insurance company reimbursing homeowner costs of renting place stay after home burned down — under terms of insurance policy. insurance company not paying wages . court not presented with, , did not decide, issue involving taxability of wages.

eisner v. macomber

some tax protesters have cited u.s. supreme court decision in case of eisner v. macomber theory wages not taxable, or theory dividends not taxable. case dealt stock dividend on stock equivalent stock split, opposed cash dividend on stock. in case of kind of dividend stockholder not receive or realize additional value. example, if stockholder owns 100 shares of stock having value of $4 per share, total value $400. if corporation declares, say, 2 1 stock dividend similar stock split (and corporation distributes no money or other property), stockholder has 200 shares value of $2 each, still $400 in value - i.e., no increase in value , no income. pie still same size — s sliced more pieces, each piece being proportionately smaller.

more directly point, there has been no sale or other disposition of stock. taxpayer still owns same asset (i.e., same interest in corporation) owned prior stock dividend. so, if basis amount (generally, amount paid stock) less $400 value (i.e., if has unrealized or potential gain), still has not yet realized gain. court ruled kind of stock dividend not treated income shareholder.

the court in case did not rule on issue involving taxability of labor or income labor, or wages, salary or ordinary cash dividends — stockholder receives check company, etc. indeed, terms wage , salary not appear in text of decision in eisner v. macomber.

cases wages or labor ruled taxable

the provisions of u.s. constitution authorizing congress impose taxes, duties, imposts , excises contain no express exceptions taxes on wages or labor, or taxes on income labor. courts have consistently rejected arguments wages or labor (whether denominated labor property or not) cannot taxed under internal revenue code. united states court of appeals eighth circuit has stated: taxpayers argument compensation labor not constitutionally subject federal income tax without merit. there no constitutional impediment levying income tax on compensation taxpayer s labors. see also:

united states v. connor (tax evasion conviction under 26 u.s.c. § 7201 affirmed united states court of appeals third circuit; taxpayer’s argument — because of sixteenth amendment, wages not taxable — rejected court; taxpayer’s argument income tax on wages required apportioned population rejected);
parker v. commissioner (taxpayer s argument — wages not taxable — rejected united states court of appeals fifth circuit; taxpayer charged double costs filing frivolous appeal);
perkins v. commissioner (26 u.s.c. § 61 ruled united states court of appeals sixth circuit “in full accordance congressional authority under sixteenth amendment constitution impose taxes on income without apportionment among states”; taxpayer’s argument wages paid labor non-taxable rejected court, , ruled frivolous);
sisemore v. united states (united states court of appeals sixth circuit ruled federal district court dismissed taxpayer’s frivolous lawsuit based on taxpayer’s tax return position wages not represent taxable gain because wages source of income , received in equal exchange labor);
white v. united states (taxpayer’s argument wages not taxable ruled frivolous united states court of appeals sixth circuit; penalty — imposed under 26 u.s.c. § 6702 filing tax return frivolous position — therefore proper);
granzow v. commissioner (taxpayer’s argument wages not taxable rejected united states court of appeals seventh circuit, , ruled frivolous);
united states v. russell (taxpayer s argument—that federal income unconstitutional on theory law cannot tax common law right work —was rejected united states court of appeals eighth circuit);
waters v. commissioner (taxpayer’s argument income taxation of wages unconstitutional rejected united states court of appeals eleventh circuit; taxpayer required pay damages filing frivolous suit).

related tax protester arguments respect wages paid employers employees (1) federal officers, federal employees, elected officials, or corporate officers employees purposes of federal income tax, (2) inclusion of united states government within definition of term employer operates exclude other employers definition, , (3) respect compensation, tax imposed on compensation paid federal government employees. these arguments have been rejected in court rulings.

another tax protester argument income labor should not taxable because amount worker receives in exchange or labor received in exchange of equal value, although exchange in true arm s length fair market value transaction is, definition, exchange of equal value. see, example, decision of united states court of appeals ninth circuit in united states v. buras, in taxpayer s theory — wages not taxable because (1) profit or gain, such sale of capital asset, constituted income subject federal tax , (2) [w]ages not constitute gain or profit because wages merely represent equivalent exchange 1 s labor — rejected. see decision of united states tax court in link v. commissioner, taxpayer s argument — pension income labor property , when taxpayer receives pension income former employer whom once performed services (or labor), amount receives in exchange labor nontaxable exchange of equal value — rejected. in boggs v. commissioner, penalty of $8,000 imposed united states court of appeals sixth circuit on taxpayers filing frivolous appeal using argument portion of wage amount not taxable return on human capital.

further, under u.s. federal tax laws, if labor considered property gain or income labor property defined excess of amount realized (for example, money received) taxpayer on amount of taxpayer s adjusted basis in property (see 26 u.s.c. § 1001). since taxpayer can have 0 basis amount in or own labor — personal living expenses incurred generate labor being both non-capitalizable and, under 26 u.s.c. § 262, non-deductible — gain equal amount of compensation received taxpayer. compare carter v. commissioner, united states court of appeals ninth circuit stated: assertion proceeds received personal services cannot given zero-basis purpose of assessment of taxation, frivolous. variation of wages not income theme, has been rejected repeatedly court. see reading v. commissioner (taxpayer s argument — gain labor of self-employed individual cannot determined until cost of doing labor has been subtracted amount received — rejected; validity of 26 u.s.c. § 262, disallowing deductions personal living expenses, upheld). see burnett v. commissioner (taxpayer s argument — wages represent equal exchange of property and, therefore, not taxable income — rejected). see in re myrland (ruling taxpayer not entitled deduct value of labor income in calculating taxes).

wages , salaries, sixteenth amendment, , cheek case

in dicta in cheek v. united states, united states supreme court labeled defendant john cheek s arguments constitutionality of tax law — arguments cheek had raised in various prior court cases — frivolous. prior conviction, john cheek had contended sixteenth amendment did not authorize tax on wages , salaries, on gain or profit.

monetary penalties asserting argument on tax return

the argument wages, tips , other compensation received performance of personal services not taxable income, argument such items offset equivalent deduction, argument person has basis in or labor equal fair market value of wages received, , variations of these arguments, have been officially identified legally frivolous federal tax return positions purposes of $5,000 frivolous tax return penalty imposed under internal revenue code section 6702(a).