Talk:Sixteenth Amendment to the United States Constitution/Archive 5

message: Latest Introduction Dear fellow editors: My comments over the last few days and Famspear’s seeming non-Wikipedian reply to them (“nonsense,” “idiosyncratic,” “meaningless,” “silly,” etc.) along with the inaccurate and misleading claims in some of his own answers has led me to believe that I’ve hit a nerve on the direct tax issue. When one has no adequate response, one retreats to invective in an attempt to convince other readers that the subject under discussion is without merit even though no proof is offered. Famspear provided no countervailing authorities yet claimed that, for example, “[n]o court has ever come up with a ruling like this.” What he means to say is that he has not seen a case with a ruling like this. For this statement to be accurate he would have had to examine every case on the subject that has ever been handed down, and I doubt that he has done this. Therefore, his own statement shares the same characteristics he gives to mine.
Additionally, for example, he states: “The problem [with my claim] is that this Article I restriction [its limitation on direct taxes] was modified by the Sixteenth Amendment with respect to any kind of income tax you may want to consider.” I will add another invective to the mix about this particular claim: Hogwash! Furthermore, he offers no authority in support of his assertion—principally, in my view, because there is so much on the other side of the question. Even though the following statement by the Court is in the realm of ratio decidendi, as Famspear points out above, and even though the following case did not involve individuals, I believe that when the Supreme Court speaks to a broad subject in issuing a more narrow ruling that their statement falls within stare decisis. The 16th Amendment did not modify anything about Article 1. That’s my claim, because the Supreme Court said so:
”The Sixteenth Amendment must be construed in connection with the taxing clauses of the original Constitution and the effect attributed to them before the amendment was adopted.”—Eisner v. Macomber, 252 U.S. 189, 205 (1920)
Let’s see if we can figure this out in plain English. The above quote first says that “the 16th Amendment must be construed”. This means that its application must be determined. Then it says, “in connection with the taxing clauses (plural) of the original Constitution”. This means considered with the Article 1 limitations on direct taxes. Then it says, “the effect attributed to them”. This means as applied to the federal government. Then it says, “before the amendment was adopted”. This means before the amendment existed. Therefore, stringing everything together, we arrive at:
”The application of the 16th Amendment must be determined by being considered with the Article 1 limitations on direct taxes as applied to the federal government before the amendment existed.”—Eisner v. Macomber II (see above)
Hmmm. It would appear that this is a fancy way of saying that the 16th Amendment has absolutely no effect on the original taxing clauses. Also, there are other cases which say essentially the same thing differently. This is but one example of an inaccurate claim on Famspear’s part about my points.
I can’t crank out responses as fast or as voluminous as he can crank out inaccurate answers, so I can’t answer point by point. Also, after looking more closely at Wikipedia and at my admittedly brash “entrance” into its world of editing (as opposed to dialoging), I will fold my tent and remain on the sidelines for others to take up the gauntlet since I appear to not be the proper person for making encyclopedic entries. And to Famspear, I certainly do thank you for your efforts to keep the main page only encyclopedic in content and pointing out to me that my comments only belong here. I agree with your goal. But before returning to the sidelines, I would like to comment on Famspear’s latest post.
Brushaber Revisited In Famspear’s latest post he quotes Brushaber, with his own comments in brackets. Here, I will insert a paragraph from Brushaber with my own comments in brackets, then Frank Brushaber’s contention regarding a direct tax, followed by Famspear’s comments, then comment further.
My quote from Brushaber and comments: “We are of opinion, however, that the confusion [on Frank Brushaber’s part] is not inherent, but rather arises from the [his] conclusion that the 16th 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. [Brushaber claims that the 16th Amendment authorizes a direct tax that doesn’t require apportionment] And the far-reaching effect of this [Brushaber’s] erroneous assumption will be made clear by generalizing the many contentions advanced in argument to support it[.]” [Brushaber is wrong, as we will show]
Brushaber’s erroneous assumption: “(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 of the Amendment, and is void as a direct tax in the general constitutional sense because not apportioned.”—240 U.S. at 11 
Famspear’s quote and comments: “‘The actual language from Brushaber, with my bracketed insertions, is as follows: "But it clearly results that the proposition [by Frank Brushaber] and the [above listed erroneous] contentions under it [i.e., under Mr. Frank Brushaber’s erroneous proposition], if acceded to, would [incorrectly] cause one provision of the Constitution to destroy another; that is, they [Mr. Frank Brushaber’s erroneous contentions] 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." The Court was rejecting Frank Brushaber's contentions. As explained later in the text of the decision, the Court did not accede to Mr. Brushaber's contentions. Mr. Brushaber lost the case.”
My Analysis of the Above Quotes Above we have the Court’s analysis of why Brushaber was wrong and the bad things that would happen if his view prevailed. I certainly do agree with Famspear’s comments about the the above paragraph. However, as I read it, Famspear runs counter to his own arguments. Article 1 requires that all direct taxes be apportioned among the States. Frank Brushaber said, “no, the 16th Amendment authorizes a particular direct tax that doesn’t require apportionment.” The court said, “no, Mr. Brushaber, you’re wrong; all direct taxes require apportionment. If one didn’t, that would destroy the general requirement (in Article 1) that they all must be apportioned.” That’s what the above statement says, and I agree with it. In fact, the Court’s rejection of Brushaber’s contention that there can be a direct tax that is collected without apportionment is exactly why the federal tax on personal property (money) is not allowed under Article 1—it is a direct tax collected without apportionment, which the Supreme Court rejected in the Brushaber decision as being a tax without foundation. He claimed that his tax was unconstitutional because the 16th Amendment allowed an unapportioned direct tax of a particular character that did not require apportionment, and the tax on the dividends from his shares of Union Pacific was outside that provision of the Amendment. He lost the case, not because the tax of which he complained was outside his special direct tax (there was no such special direct tax), but rather because it was an indirect tax for which the 16th Amendment again allowed collection since it had superseded the holding against such collection in Pollock.
Commentary I guess I’m missing something. Frank Brushaber (a non-resident alien from Belgium) appears in court with a claim that “the 16th 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.” The Court then goes on to amplify the contents of his contentions and then says that they are erroneous—that the 16th Amendment did no such thing (“...the far-reaching effect of this erroneous assumption...”). The Brushaber Court then goes on to quote Pollock, validating the application of the original taxing clauses to the Brushaber case:
 'In the matter of taxation, the Constitution recognizes the two great classes of direct and indirect taxes, and lays down two rules by which their imposition must be governed, namely: The rule of apportionment as to direct taxes, and the rule of uniformity as to duties, imposts, and excises.'—240 U.S. at 13, quoting Pollock
What I seem to be missing is any shred of proof that the Constitution somehow allows the federal government to collect an unapportioned direct tax within the States, regardless of what it is named. The Brushaber case construed the 16th Amendment as a declaration that an income tax must be indirect to harmonize the tax with Article 1. It did this rather than declare the tax to be direct and thereby have the 16th Amendment become a mechanism to destroy the two great classifications by making an exception to the rule that all direct taxes must be apportioned.
The income tax One point that people seem to miss is that there is not “the income tax.” A tax imposed by a single statute can be either direct or indirect (a distinct tax in either one of two distinct classes) depending on what is being taxed and the effect on the one who pays it. All the 16th amendment did was to prevent a tax on income, which is inherently an indirect tax, from being declared a direct tax (which the Supreme Court itself did in Pollock) due to a consideration of the source from which the income came (the Amendment did so when it superseded their holding in Pollock.) The 16th Amendment had nothing to do with allowing an unapportioned direct tax on personal property. It forever placed taxes on incomes within the classification of indirect taxes, but only for those that are inherently indirect from the outset. It did not turn direct taxes into indirect taxes for the convenience of the federal government or allow the collection of unapportioned direct taxes from individuals within the States whatsoever. Income taxes that are inherently in the direct class are outside the scope of the 16th Amendment and fall within the limitations of Article 1. If one diligently searches the Supreme Court decisions on taxation from the late teens and early twenties, the court confirms this claim six ways from Sunday by how it defines income (essentially, the results of the exercise of a privilege). Although I quoted the following case far above, it bears repeating because it summarizes 75 years of tax law in a single sentence:
”The legislative history merely shows that the words "from whatever source derived" of the Sixteenth Amendment were not affirmatively intended to authorize Congress to tax state bond interest or to have any other effect on which incomes were subject to federal taxation, and that the sole purpose of the Sixteenth Amendment was to remove the apportionment requirement for whichever incomes were otherwise taxable. 45 Cong. Rec. 2245-2246 (1910); id., at 2539; see also Brushaber v. Union Pacific R. Co., 240 U.S. 1, 17-18 (1916).”—South Carolina v. Baker, 485 U.S. 505, n.13 (1988) (Emphasis added.)
Once again, the Supreme Court confirms my statement above that the 16th Amendment removed the apportion requirement for incomes that were taxable as indirect taxes under Article 1 (those that were “otherwise taxable”) but which Pollock had held to be direct because of their perceived effect on the underlying source. Again, the “otherwise” above refers to income taxes which are allowed under Article 1 (those that are indirect and therefore are allowed to be laid and collected within the States). Furthermore, the Court above confirms that their conclusion on this point was taken right from the Brushaber decision as well as from the submission debates. As Famspear pointed out somewhere above, a statement such as this could be considered as being dicta, but I would claim it as being accurate dicta, and in any event it certainly gives an indication as to the leanings of the Court.
Direct and Indirect One other point of explanation. The term “indirect” refers to the effect which a tax would have on the source of the thing being taxed. For capital earning interest, a tax on the interest is considered an indirect tax on the source which produced the interest, because the source (the capital) is not diminished. On the other hand, a tax on the source itself (the capital) would be considered a direct tax because it would diminish the amount of capital remaining to earn interest. Confusion results from the fact that the tax on the interest is a direct tax on the earnings, which many also consider to be an unapportioned direct tax. However, when the whole picture is taken into account, the tax on earnings is lawfully considered to be only an indirect tax on the underlying source rather than a direct tax on the proceeds.
Can’t get more simple than that. If a particular tax is a direct tax—that is, if its burden cannot be shifted (such as with a property tax, real or personal) thereby diminishing the source (the amount of capital or of the resource remaining to produce more of the thing taxed) it is prohibited by Article 1 within the States. If that same tax is indirect—that is, if its burden can be shifted, such as a tax on manufacturing beer being shifted to a customer of the business which has produced the beer, it does not diminish the source (the resources of the beer manufacturer) and is permitted by Article 1 within the States. Its name is irrelevant.
Back two centuries ago (!) (in the 1800s), the Supreme Court gave an excellent explanation of the way these direct and indirect taxes operate, which remains true yet today:
“The ordinary test of the difference between direct and indirect taxes is whether the tax falls ultimately on the tax-payer [the one responsible for remitting it to the government], or whether, through the tax-payer, it falls ultimately on the consumer [customer]. If it falls ultimately on the tax-payer, then it is direct in its nature, as in the case of poll taxes and land taxes [and personal property taxes]. If, on the contrary, it falls ultimately on the consumer [if the business doesn’t absorb it—the customer does], then it is an indirect tax [on the business]. Such is the test, as laid down by all writers on the subject. Adam Smith, who was the great and universally received authority on political economy, in the day when the Federal Constitution was framed, sets forth a tax on a person's revenue to be a direct tax.”—Pacific Ins. Co. v. Soule, 74 U.S. 433, 437 (1868) (Emphasis added) 
The 16th Amendment changed nothing in the above statement nor did it authorize a tax on a person's revenue.
Web References One last note: On this one subject (Article 1 prohibiting a direct tax within the States) I make two observations: (1) On the IRS website at http://www.irs.gov/pub/irs-utl/friv_tax.pdf, their denigration of this argument is pitifully weak. Look at Contention 6 under Constitutional Amendment Claims (page 30) about a non-apportioned direct tax. First, they attempt to divert attention from the main issue at the outset by making two assertions, one true and one untrue. They first state that “the Sixteenth Amendment does not authorize a direct non-apportioned income tax”. (True. It cannot do so because of the limitations in Article 1). They then go on to add “and thus, U.S. citizens and residents are not subject to federal income tax laws”. (Completely untrue, and completely irrelevant to the initial claim. If U.S. citizens and residents have anything taxable under the authority granted by Article 1 to the federal government to collect it, they certainly are subject to the applicable income tax laws.) This second assertion has nothing to do with the initial claim regarding direct taxes within the States but is an attempt to taint the whole subject by inference. Clever, at least in relation to the casual reader. Second, they admit that the personal income tax is a non-apportioned direct tax. So much for having to prove that. (This makes the Law of the Circuit in several Circuits that the income tax is an indirect tax somewhat suspect, at least according to the IRS, although this position is legally correct.) Second, everything they quote is from appellate cases. They do attempt to make it look “official” by showing that the Supreme Court denied cert. (under “The Law”), but that’s useless as an affirmative position, especially when there is so much countervailing case law exactly on point. (cf. Brushaber quoting Pollock on the two great classes immediately above). (2) The Wikipedia entry on tax protester constitutional arguments at http://en.wikipedia.org/wiki/Tax_protestor_constitutional_arguments wisely omits the argument entirely, presumably because it is the one argument which has enough traction (potential for debate) that it doesn’t belong in an encyclopedia. The huge amount of exchange above should confirm that contention.
Conclusion So there we have it. I won’t comment further on the inaccuracies in Famspear’s response to my earlier posts and will leave that to those who might have more time and inclination to do so. The whole federal tax scheme is pretty much summarized in my paragraphs immediately above (at least my view of them), so my conclusions speak for themselves. Thanks for this brief opportunity to at least become involved in the debate, albeit not in the proper forum.Wixpositor 23:46, 5 January 2007 (UTC)
thread_title: Further Response and Discussion