Tax Honesty Foundation Law cases.

The Tax Honesty movement is based upon a number of US Supreme court decisions.
There are some, but not all of those cases.

Ever since the income tax was imposed by the Lincoln administration, there has been legal argument over its administration.

When the law was expanded and appeared to include the citizens of the 50 States of the union, the court was beseiged with court cases. The key court cases are listed below, and why the Tax Honesty movement relys on them.


First understand this: To file a tax return or form of any kind, usually requires that a citizen take an oath under penaltes of perjury which can subject them to severe penalties under 26USC7206, which will be discussed in another post.

Therefore we the people have the right to know exactly what we are doing and that it is correct and true to best of our knowedge. This espically in light of the fact that the Court system now allows the burden of proof of liability to be placed on the Citizen rather than on the US treasury collections division.


The cases:

The revenue laws are a code or system in regulation of tax assessment and collection. They relate to taxpayers AND NOT TO NON-TAXPAYERS. The latter are without their scope. No procedure is prescribed for non-taxpayers, and no attempt is made to annul any of their rights and remedies in due course of law. With them Congress does not assume to deal, and THEY ARE NEITHER OF THE SUBJECT NOR OF THE OBJECT OF THE REVENUE LAWS."
Stuart v. Chinese Chamber of Commerce, 168 F.2d 709, 712 (9th Cir.,1948);
Long v. Rasmussen, 281 F. 236, 238).
HERE the Tax Honesy movement uses this case to show that not everyone is a "taxpayer" which is a legaly defined word.


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, at 205 (1920)
The 16th Amendment does not extend the power of taxation to new or excepted subjects... Neither can the tax be sustained on the person, measured by income. Such a tax would be, by nature, a capitation, rather than an excise.
- Peck v. Lowe, 247 U.S. 165
The 16 Amendment conferred no new power of taxation but simply prohibited the income tax from being taken out of the category of indirect taxation to which it inherently belonged...
- Stanton v. Baltic Mining Co., 240 U.S. 103

The Tax Honesty movement uses these 3 cases to show that the 16th amendment did not change the wording of Article 1 section 8 clause 1, nor any other part of the constitution involving taxation. The IRS claims it did modify A1S8C1.

Congress has taxed income, not compensation.
- Connor v. U.S., 303 F.Supp., 1187 (1969)

The Tax honesty movement claims that our pay is comphensation and not income.
It also uses this as proof that not all money that comes in, is income. This fact is one that the courts have upheld in numerous cases.


In the interpretation of statutes levying taxes it is the established rule not to extend their provisions, by implication, beyond the clear import of the language used, or to enlarge their operations so as to embrace matters not specifically pointed out. In case of doubt they are construed most strongly against the Government, and in favor of the citizen.
United States v. Wigglesworth, 2 Story, 369'
American Net & Twine Co. v. Worthington, 141 U.S. 468, 474;
Benziger v. United States, 192 U.S. 38, 55"
Gould v. Gould, 245 U.S. 151, 153.
Tax Honesty uses this, becase of the conflict of the word Includes as used in the IRC. If the statutes mean what they say, and are not to be made expansive unless otherwise clearly done so, then the Tax Honesty movment is correct when it claims that the avarage american worker is not the employee as defined in Subtitle C, chapter 24 (employment taxe and collection of income tax at the source) at section 3401(c).

Title 26 of the U.S. Code, Sub-Title C, Chapter 24,
Sec. 3401. Definitions
Sub paragraph (c) Employee:
"For purposes of this chapter, the term ''employee'' includes an officer,
employee, or elected official of the United States, a State, or any
political subdivision thereof, or the District of Columbia, or any agency or
instrumentality of any one or more of the foregoing. The term ''employee''
also includes an officer of a corporation."

Tax Honesty People use this defintion, as proof that citizens are not subject to withholding under chapter 24, because they are not the employee described, and as such the pay they receive is not a wage as defined by §3401(a).

The Income tax is an excise tax:
The 16th Amendment empowers Congress to lay and collect an income tax (not a direct tax) subject to the explicit rules and requirements of Article I, Section 8, of the Constitution; i.e., the words "income" tax and "excise" tax are synonymous under the 16th Amendment. Brushaber v. Union Pacific R.R., 240 U.S. 1 (1916)
"An income tax is neither a property nor a tax on occupations of common right, but is an excise tax. But the legislature may declare it as a privilege and tax as such for state revenue those pursuits and occupations that are not matters of common right, but has no power to declare as a privilege and tax for revenue purposes, occupations that are of common right." Sims v. Ahrens, 271 S.W. 720.
"Excises are 'taxes laid upon the manufacture, sale or consumption of commodities within the country, upon licenses to pursue ceratin occupations, and upon corporate privileges.'" Cooley, Constitutional Limitations 7th ed. 680." 31 S. Ct. at 349.

Here the tax honesty movement claims that the avarage american worker is involved in acts of common rights. That is to work for a living to provide for ones self, and that doing so is not an excise taxable activity as it involves no government privlege. Working as an hourly worker for say, McDonalds Corporation making hamburgers, or as a warehouse worker for StealCase Inc., or as a welder/dock worker for Bethlehem Ship Building Companies are not privileges but acts of common right. For the tax honesty movement, privileged occupations would be like working for the government (obtaining a paycheck from the government), working in a federal licenced occupation (such as a lawyer or doctor) or that kind of thing.

Congress cannot define income:
". . . (I)t becomes essential to distinguish between what is and what is ot 'income' . . . Congress may not, by any definition it may adopt, conclude the matter, since it cannot by legislation alter the Constitution, from which alone it derives its power to legislate, and within whose limitations alone, that power can be lawfully exercised." Eisner v. Macomber, 252 U.S. 189 (1920), 40 S. Ct. at 193.

Here the tax honesty movement uses this case to show that congress cannot declare that everything that comes in, is income. That income is a specific thing. And that no one has successfully defined or described in any standard way, what that thing is.

U.S. vs. Malinowski, 347 F.Supp. 347, affirmed on Appeal by the 3rd Circuit
472 F.2d 850 and Certiorari Denied May 7, 1973 (USSC).
"THE EMPLOYER IS NOT AUTHORIZED TO ALTER THE (W-4) FORM OR TO DISHONOR THE EMPLOYEE'S CLAIM".

Tax Honesty movement uses that case to justify Filing exempt on a w-4 then raising a stink when the IRS uses an unsigned un jurat letter sent to the company, to change the citizens claim/status. The Citizen had to make his/her claim under penalties of perjury and Tax Honesty believes the IRS has no authority to change that status without a court order.


Silence can only be equated with fraud where there is a legal or moral duty to speak or where an inquiry left unanswered would be intentionally misleading. ... We cannot condone this shocking conduct by the IRS. Our revenue system is based upon the good faith of the taxpayers and the taxpayers should be able to expect the same from government in its inforcement and collection activities ....
This sort of deception will not be tolerated and if this is the "routine" it should be corrected immediately.
[U. S. v. Tweel, 550 F.2d 297, 299 (1977), emphasis added]
[quoting U.S. v. Prudden, 424 F.2d 1021, 1032 (1970)]

Tax Honesty uses this case, US V Tweel, to justify their actions when the IRS failes to answer questions sent to them by citizens. However, this has all changed. In 2007, the 2nd district court ruled against Bob Shultz's We the people, in a landmark lawsuit which covered the governments requirement to respond. The court ruled that under the constitution, the US government has no obilgation to respond to any inquires or petitions set forth befor it.

Stapler v U.S., 21 F Supp 737 AT 739 (1937): "Income within the meaning of the Sixteenth Amendment and the Revenue Act, means 'gain'... and in such connection 'Gain' means profit...proceeding from property, severed from capital, however invested or employed, and coming in, received, or drawn by the taxpayer, for his separate use, benefit and disposal... Income is not a wage or compensation for any type of labor."

Oliver v. Halstead 86 S.E. Rep 2nd 859 (1955): "There is a clear distinction between `profit' and `wages', or a compensation for labor. Compensation for labor (wages) cannot be regarded as profit within the meaning of the law. The word `profit', as ordinarily used, means the gain made upon any business or investment -- a different thing altogether from the mere compensation for labor."

Helvering v Edison Bros. Stores, 133 F2d 575 (1943): "The Treasury cannot by interpretive regulations, make income of that which is not income within the meaning of the revenue acts of Congress, nor can Congress, without apportionment, tax as income that which is not income within the meaning of the 16th Amendment."

Flora v U.S., 362 U.S. 145, (1959) never overruled: "... the government can collect the tax from a district court suitor by exercising it's power of distraint... but we cannot believe that compelling resort to this extraordinary procedure is either wise or in accord with congressional intent. Our system of taxation is based upon VOLUNTARY ASSESSMENT AND PAYMENT , NOT UPON DISTRAINT" [Footnote 43] If the government is forced to use these remedies(distraint) on a large scale, it will affect adversely the taxpayers willingness to perform under our VOLUNTARY assessment system.

Evens v Gore, 253 U.S. 245 (1920): US Supreme court, never overruled "After further consideration, we adhere to that view and accordingly hold that the Sixteenth Amendment does not authorize or support the tax in question. " (A tax on salary)

Edwards v. Keith, 231 F 110,113 (1916): "The phraseology of form 1040 is somewhat obscure .... But it matters little what it does mean; the statute and the statute alone determines what is income to be taxed. It taxes only income "derived" from many different sources; one does not "derive income" by rendering services and charging for them... IRS cannot enlarge the scope of the statute."

McCutchin v Commissioner of IRS, 159 F2d: "The 16th Amendment does not authorize laying of an income tax upon one person for the income derived solely from another."[wages]

Blatt Co. v U.S., 305 U.S. 267, 59 S.Ct. 186 (1938): "Treasury regulations can add nothing to income as defined by Congress."

Olk v. United States, February 18, 1975, Las Vegas, Nevada."Tips are gifts and therefore are not taxable." (yet they are now taxing tips as income becasue the IRS gets away with it).

Commissioner of IRS v Duberstein, 363 U.S. 278, 80 S. Ct. 1190 (1960):
"The exclusion of property acquired by gift from gross income under the federal income tax laws was made in the first income tax statute 4 passed under the authority of the Sixteenth Amendment, and has been a feature of the income tax statutes ever since. The meaning of the term "gift" as applied to particular transfers has always been a matter of contention. 5 Specific and illuminating legislative history on the point does not appear to exist. Analogies and inferences drawn from other revenue provisions, such as the estate and gift taxes, are dubious. See Lockard v. Commissioner, 166 F.2d 409. The meaning of the statutory term has been shaped largely by the decisional law."

Central Illinois Publishing Service v. U.S., 435 U.S. 21 (1978): "Decided cases have made the distinction between wages and income and have refused to equate the two."

Anderson Oldsmobile, Inc. vs Hofferbert, 102 F Supp 902: "Constitutionally the only thing that can be taxed by Congress is "income." And the tax actually imposed by Congress has been on net income as distinct from gross income. THE TAX IS NOT, NEVER HAS BEEN, AND COULD NOT CONSTITUTIONALLY BE UPON "GROSS RECEIPTS" ..."

Conner v US, 303 F Supp 1187 Federal District Court, Houston, never overruled. "..whatever may constitute income, therefore, must have the essential feature of gain to the recipient. This was true at the time of Eisner V Macomber, it was true under section 22(a) of the Internal Revenue Code of 1938, and it is likewise true under Section 61(a) of the IRS code of 1954. If there is not gain, there is not income, CONGRESS HAS TAXED INCOME, NOT COMPENSATION"!!!

Bowers vs Kerbaugh-Empire Co., 271 US 174 (1926): "Income" has been taken to mean the same thing as used in the Corporation Excise Tax Act of 1909, in the Sixteenth Amendment and in the various revenue acts subsequently passed ...."

Brushaber v. Union Pacific R.R. Co., 240 U.S. 1 (1916): "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..."

Simms v. Ahrens, 271 SW 720 (1925): "An income tax is neither a property tax nor a tax on occupations of common right, but is an EXCISE tax...The legislature may declare as 'privileged' and tax as such for state revenue, those pursuits not matters of common right, but it has no power to declare as a 'privilege' and tax for revenue purposes, occupations that are of common right."

Eisner v. Macomber, 252 US 189 (1920), US Supreme court, never overruled: "...the definition of 'income' approved by this court is: The gain derived from capital, from labor, or from both combined, provided it be understood to include profits gained through sale or conversion of capital assets."

Laureldale Cemetery Assoc. v. Matthews, 345 Pa. 239 (1946): "Reasonable compensation for labor or services rendered is not profit"

Schuster v. Helvering, 121 F 2nd 643: "Income is realized gain."

Butchers' Union Co. v. Crescent City Co., 111 U.S. 746 (1883). One of the most eloquent opinions ever delivered by the Court..

"Among these unalienable rights, as proclaimed in the Declaration of Independence is the right of men to pursue their happiness, by which is meant, the right any lawful business or vocation, in any manner not inconsistent with the equal rights of others, which may increase their prosperity or develop their faculties, so as to give them their highest enjoyment...It has been well said that, the property which every man has in his own labor, as it is the original foundation of all other property so it is the most sacred and inviolable..."

Pollack v. Farmers Loan, 157 U.S. 429, 158 U.S. 601 (1895): The Corporate Excise Tax of 1909 was a 2% tax on PROFITS OF CORPORATIONS. The Supreme Court had, in POLLOCK v. FARMERS LOAN , in 1894, ruled as UNCONSTITUTIONAL the EXACT SAME KIND OF TAX MOST AMERICANS ARE NOW PAYING! [A direct tax without apportionment.] This decision has NEVER been overturned! Both BEFORE and AFTER the sixteenth amendment passed (?), THE COURTS SAID INCOME WAS CORPORATE PROFIT! The Separation of powers doctrine says only CONGRESS can collect a tax!


The Internal revenue code is made up of 7 or more subtitles with the first one being income tax. The chapter is income tax, the 2nd self employment tax, the 3rd tax on nonresident aliens and foriegn corporations. Fact: the first liablity statute found in Subtitle A, (income tax) is found in chapter 3, the tax on Non resident aliens and foriegn corporations. There is no liablity section found it chapters 1 or 2.

Cracking the Code Overview

Opinion By Blogger Ed.

Cracking the Code, by Pete Hendrickson is a book by a Tax Honesty member, which trys to explain how citizens can overcome the built in burden of proof which is imposed on the american people for the income tax which many who have researched the laws, know does not exist.

Basical the book begins with 4 presumptions.
1. That any citizen who files any forms with the IRS, where a jurat is required, does so risking felony conviction. The Jurat is the "under penalties of perjury claus found on 1040 forms and w4 forms, for example.
2. That the IRS is NOT held accountable for the accuracy of its records, and that it is up to us, the people to correct those records. And that the the current tax system is set up to create a legal presumption of liablity.
3. That there must be an administrative procedure to overcome said presumption. And that procedure is to use IRS form 4852.
4. The terms within the IRC (internal revenue code) mean what they say, and that the term includes is inclusive, and not expansive. This legal presumption/argument has been going on for years, without proper clarification, despite the rulings of the US Supreme Court on the subject matter.

The premise of the book, is that the IRS knows there is no liablity for income tax for most Americans. And that most Americans might be liable for social security taxes (presuming that we have volunteered into the system, which we have not.) And that the IRS thinks that everyone who works for any artifical created entity, or "person" as defined by law (see IRC 7701A1 ), which means things like corporations, trusts, companies, trusts, parternships, etc, and who gets paid by said entity is involved the legaly defined "employment" as defined by IRC Subtitle C, Chapter 24, and thus is an employee also defined in the same chapter, who is subject to employment taxes. These employees get paid wages, which are taxable.

The IRS uses chapter 24 to justify withholding of parts of a workers pay check. Notice 3 things are withheld. 2 Social security taxes (medicare/medicade and fica) and income tax. The IRS claims it is the income tax being withheld by authority of chapter 24.

Companies at the end of the year, use form w3 to report social security withholdings to the Secretary of the SocSec Administration, however CTC contends this form (like many of the IRS forms) is incomplete and inaccurate and does not reflect enough specific information.

The w3 is signed under Jurat, that is penalties of perjury. It clearly says that it is a return. This means it is an information return. The IRS uses this information to create a presumption of income tax liablity.
How can they (the IRS) do that?

Simple: the form says amongst other things that the citizen was paid x amount of money in income taxable wages.

Line 1 asks for Wages, tips and Other Comphensation, but does not make it clear which wages are being reported. Are these Chapter 21, 23 or 24 wages? It also asks for comphensation. in 1969, the US Courts ruled that congress has taxed income, not comphensation (Connor v. U.S., 303 F.Supp., 1187) and there have been numerous other related decisions that are simular. So why is the IRS asking for comphensation?

Line 2 then asks for the amount of income tax withheld. If the company withheld any amount, it is shown here.

Line 3 asks specificaly for social security wages, (which are defined in chapter 21) and line 5 asks for Medicare wages (also defined in chapter 21).

Understand this: wages has more than 1 legal meaning within the IRC. There are 3 definitions of the word, each one is applicable only to the chapter (and tax) where it is found. Chapter 21 (social security taxes), Chapter 23 (unemployment taxes), and chapter 24 (employment taxes and collection of income tax at the source).

There are NO chapter 1 (income tax) definitions for wage or wages.

Note: Some people claim that the w3 form has the OMB number 1546-0008 same as 1040 form, so some question its validity as a form, according to Office of Managment and Budget rules.

So the company sends the W3 to the Secretary of the Social security administration claiming you received wages. The IRS takes that information and claims that since you were paid wages, you owe income tax on those wages. The IRS claims wages is a part of gross income as defined in section 61A of the IRC, but you will never find wages listed as an item of gross income in that definition.

The IRS uses the information sent to the Sec of Soc Sec and creates a presumption of liablity for the chapter 1 income tax. So how do you over come that presumption?

CTC author discovered an administrative remedy. Using the avilable IRS for 4852, you correct the presumptive record. That is, you file a claim that the information sent to the IRS by the company is WRONG and that your information is correct. The company has 3rd hand knoweldge, while you have first hand knoweldge.

Can the payroll clerk testify how he/she knows you were paid wages, and that how you meet the definition of employee (found atchapter 24)? No. Most will testify that they filed out the forms as instructed by the IRS or someone else. This makes their testimony (they signed the w3 under penalties of perjury), null and void and worthless.

By correcting the record in this manner, no taxable income is shown on a 1040 form. And this is what the IRS hates, and finds intollerable. \

Yet this is being done all perfectly lawfull.And within their rules and regulations and filing guidelines.

It shifts the burdent of proof back to the IRS who knows cannot show roff of liablity. They cannot show what does not exist.

It all boils down to this: If we the citizens have to risk felony charges (IRC 7206)as a condition to being in compliance with this law, then they have an obligation to present us with proof of liablty when challenged to do so. And for the last 50 years, they have refused to.

Timeline 2000 to 2010

2000 Stuart M. Smith gets a partial victory today against the IRS in Tax Court,
reported at T.C. Memo 2000-43. Mr. Smith, pro se, did not file tax returns and refused to cooperate with the IRS. At trial, he took the 5th when the IRS attorney questioned him about his tax liabilities. The Court ruled that the burden of proof rested on the IRS to prove Smith's receipt of income. The IRS could only substantiate partial proof to support its determination and the Court disallowed the reconstruction of Smith's income citing Senter v. Commissioner, T.C. Memo 1995-311.

2001 June Barry Konicov of Detaxing America is convicted of 1 count of conspiracy and 3 counts of failure to file. During his trial he refused to stand for the judge when asked to, kept trying to give testimony during opening statements, and engaged in pointless debates over the courts jurisdiction.

2002 WTP - Bob Shultz's We The People foundation, a grass roots movement, submits a "petition of redress of grievances" to every member of the US congress and the US president. This petition is demanding answers to questions covering several subjects including the income tax and its application by the IRS.

2003 Larkin Rose promotes the 861 argument and is later convicted of tax evasion.
The 861 argument deals with income from within the US as being non taxable and that only foreign earned income is taxable.

2003 Federal judge in Texas convicts Small business owner Dick Simkanin, of tax crimes, after 7 US grand juries failed to bring charges agianst the man for refusing to collect and withhold Income and social security taxes from his workers pay.

After two failed attempts to indict Dick Simkanin, The Assistant U.S. Attorney, David Jarvis, succeeded in obtaining an indictment from the Grand Jury that was legally insufficient, severely flawed in its construction, and completely devoid of legal facts. The insufficient indictment should have immediately been dismissed by Judge John McBryde.

The U.S. Supreme Court on May 1 2006 denied certiorari to Richard Simkanin,who was convicted in 2004 on multiple counts of willfully failing to collect and remit employment taxes as well as failing to file income tax returns. Simkanin, a Texas business owner, was sentenced to serve 84 months in prison and pay $302,000 in restitution to the IRS.

The Fifth Circuit upheld Simkanin's 2004 conviction, dismissing his challenges to the lower court's jury instructions, sentencing, and admissibility of evidence. The appellate court found that any errors the lower court committed were harmless and that its sentencing was reasonable. Simkanin petitioned the Supreme Court, asserting the jury instructions were flawed. The Court declined granting certiorari.

Blog Editors Note: Wrongfull jury instructions are now common practice. Is it no wonder people think the court system is corrupt?


In June 2003, Judge McBryde imprisoned Dick Simkanin (in isolation) based on unsubstantiated, hearsay information from an IRS agent who said he received information from an “informant” that Simkanin was a threat to society. Note: The “informant” was a disbarred attorney who was apparently under pressure from the IRS for lying on his tax returns. The “informant” never appeared in court and never submitted a sworn affidavit. On the other hand, Judge McBryde did have direct, sworn testimony from two other people - evidence that contradicted the IRS’ hearsay evidence. However, ignoring the direct evidence, McBryde imprisoned Simkanin based on the IRS’ hearsay evidence. Simkanin was denied his Constitutional Right to confront the witnesses and evidence against him. He then had to prepare for his trial and try to keep his business running while caged in a federal prison cell.

The Grand Jury was misled and manipulated by Assistant U.S. Attorney, David Jarvis, in its secret proceedings. The indictment of Dick Simkanin contained no specific charging statute/s (the actual law that he allegedly violated). The indictment contained only penalty statutes, for which Simkanin could not possibly be lawfully indicted, until found guilty of violating the underlying law upon which the penalty statutes were applied. The indictment of Dick Simkanin was a blatant act of government conspiracy and fraud.

This was the test case. Does a busness have an obligation to be a tax collector for the government? Apparently the answer is: "you will do what we say or you will be beat up."

2004. FED EX pilot Vernese Kulgan is charged with tax evasion. Despite her acquittal of criminal charges, on September 12, 2004, Kuglin entered a settlement with the IRS in the Tax Court in which she agreed to pay more than half a million dollars in back taxes and penalties. Kuglin v. Commissioner, Docket No. 21743-03


2004 Irwin Schiff is convicted of tax evasion a 2nd time and sentanced to 13 years in prison, with the government claiming he owes over 2 million in back taxes.

2005 Jan National Taxpayer Advocate Releases 2004 Report to Congress; Cites Tax Law Complexity as Most Serious Problem Facing Taxpayers.

National Taxpayer Advocate Nina E. Olson today released a report to Congress that identifies the complexity of the Internal Revenue Code as the most serious problem facing taxpayers and the IRS alike.

“Without a doubt, the largest source of compliance burdens for taxpayers and the IRS alike is the overwhelming complexity of the tax code, and without a doubt, the only meaningful way to reduce these compliance burdens is to simplify the tax code enormously,” Olson writes. The report cites the alternative minimum tax (AMT), the earned income tax credit (EITC), and the large number of provisions designed to encourage taxpayers to save for education and for retirement as key illustrations of the problems of complexity wrought by the 1.4 million-plus word tax code.




2005 U.S. Court of Appeals Rules IRS Cannot Apply Force Against A Tax Payer Without A Court Order in case brought by We The People founder Bob Shultz.

2005 Friday, April 22, 2005 WASHINGTON, April 14 - The Internal Revenue Service is illegally withholding information about its operations, claiming without substantiation that some of the unclassified information would compromise homeland security if released to the public, according to a federal lawsuit filed today by the Public Citizen Litigation Group on behalf of open-government scholars.

The lawsuit is part of an ongoing effort by the Transactional Records Access Clearinghouse (TRAC) to obtain statistical information from the IRS about enforcement actions. Reversing 30 years of policy, the IRS under the Bush administration has stonewalled requests for public disclosure of such information.

2005 May The Justice Department today asked a federal court to bar John Baptist Kotmair, Jr., of Westminster, Maryland, and his organization,
"Save-a-Patriot Fellowship," from selling alleged tax-fraud schemes. The
civil injunction suit, filed in Baltimore, also seeks an order directing
Kotmair and Save-a-Patriot to give the Justice Department their customers'
names, mailing and e-mail addresses, and telephone and Social Security
numbers.

It is now standard procedure for the IRS to sue people and demand acccess to their membership records. The IRS seeks the names, social security numbers, addresses, phone numbers of people buying into what the IRS calls illegal taxprotester scams.

2006. Louisana Lawyer Tom Cryer is charged with 2 counts of tax evasion for a trust he was incharge of, for his mother. Cryer asserted that since the trust had no income for the years in question, (and the IRS records agreed) that there was no obligation to file.
As part of the procedings, this 20 year vetran lawyer filed a memorandum of law, which today remains unchallenged, showing every tax liability found in the Internal Revenue Code. Only 1 was found in Subtitle A, the income tax, and that was found in chapter 3, which is the tax on non resident aliens and foriegn corporations.
The prosecution dropped its allegations of tax evasion (on which the law provides a maximum prison term of five years)[7] against Cryer on July 9, 2007. Cryer was then tried on two counts of willful failure to file tax returns, for which the maximum jail sentence is one year in prison.

Cryer was found not guilty by a jury of his peers. Although the jury was not convinced of Cryer's willfulness to avoid filing the tax returns, the theories he raised in his motions for dismissal have been repeatedly rejected by the courts.

Blog editors note. How can someone be found guilty of failing to file for a liablity that does not exist? The court rejects this common sense question. Such actions by the courts, cause the common citizens to believe the court system is corrupt and cannot be fixed.

2006 The word INCOME looked at closely. August 22, 2006, the United States Court of Appeals for the District of Columbia decided the appeal of Ms. Marrita Murphy in her case against the IRS. For the first time in a long time the court took a serious look at the definition of the word “income” as it is used in the Sixteenth Amendment. The case centered on whether or not an award of $70,000 received by Murphy for damages she experienced was taxable. Murphy had been retaliated against because she had been a whistleblower, and the award was to “make her whole.” An administrative law judge awarded the monies for "compensatory damages..., of which $45,000 was for 'emotional distress or mental anguish', and $25,000 was for 'injury to professional reputation'".

Murphy had reported some environmental problems at the New York Air National Guard. Her whistleblower actions got her not only fired, but blacklisted too. The entire ordeal was stressful for Murphy and she sued her former employer. The National Whistleblower Center lawyers successfully prosecuted the case, as they are an organization specializing in whistleblower cases.

The IRS wanted a cut of the award, but Murphy believed the award was nontaxable. Murphy, who must have developed faith in her whistleblower lawyers, retained them to litigate the tax case against the IRS, even though, as a firm, they had no experience in tax litigation. What was at issue was whether or not the $70,000 Murphy received for these damages was taxable. The federal District Court said, “yes,” but the Appeals Court said, “no.” The Appeals Court remanded the case back to the District Court "instructing that the Government refund the taxes Murphy paid on her award plus applicable interest."

The Appellate Court ruled that the monies received by Murphy were taxable under 26 USC 104 (a), but that this section of the United States Code was unconstitutional on the grounds that the monies received by Murphy were not "income" within the meaning of the Sixteenth Amendment.

Section 104(a) of title 26, the Internal Revenue Code provides that "gross income does not include the amount of any damages received... on account of personal physical injuries or physical sickness." The Government claimed that because the administrative law judge did not specifically identify any physical injury of Murphy, none of the monies awarded Murphy were exempt from taxation.

Murphy’s lawyers put their legal training to good use: they questioned everything including the meaning of the word "income" as it was used in the Sixteenth Amendment. Not only did her lawyers do so, but so did the panel of three appellate judges. Since these judges normally don’t handle tax cases, they were likely more open minded and not biased by the tax mantra of today.

What does the word "income" mean as it is used in the Sixteenth Amendment? Let us start with what the District of Columbia Appeals Court said; as for this narrow decision, they got it right.

The Court started at the beginning by determining what the framers of the Sixteenth Amendment intended the word "income" to mean. The Appeals Court quoted the Supreme Court, "in defining 'incomes,' we should rely upon 'the commonly understood meaning of the term which must have been in the minds of the people when they adopted the Sixteenth Amendment.’ Merchants' Loan and Trust, Co. v. Smietanka, 255 U.S. 509, 519 (1921).” The Appeals Court also said "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.’ Burk-Waggoner Oil Ass'n v. Hopkins, 269 U.S. 110, 114 (1925).”

The Appeals Court was correct on all fronts. Congress derives its powers from the Constitution, as authorized by We the People. If Congress could change the meaning of words in the Constitution, then the whole principle of "limited government" would fly out the window. The Appeals Court got it right too when they stated "The Government of the United States is a government of limited powers: 'Every law enacted by Congress must be based on one or more powers enumerated in the Constitution.' United States v. Morrison, 529 U.S. 598, 607 (2000)."

Of the definition of the word "income" the Supreme Court said long ago, "Congress cannot by any definition it may adopt conclude the matter, since it cannot by legislation alter the Constitution, from which alone it derives its power to legislate and within whose limitations alone that power can be lawfully exercised." Eisner v. Macomber, 252 U.S. 189, 206 (1919). And the Appeals Court said, "...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."

The lawyers for Murphy also started at the beginning. They researched the legislative history of 26 USC 104 (a) and the meaning of the word "income" as it was used by the framers of the Sixteenth Amendment.

They discovered that back in the 1913 period, when the Sixteenth Amendment was purportedly ratified, awards for personal injury type damages were considered a "return of capital" and an attempt to make the injured party "whole." In making the injured party "whole," such an award was thought to only be returning something that was earlier lost. Murphy's lawyers discovered that the history of this area of law was rich with examples of both state and federal cases.

The analogy was made that the injury depleted Murphy's "human capital" just as an injury to say a building (by fire, lighting strike or some act of negligence) would diminish the building's value. The cost of bringing the building back up to its condition before the injury would be restoring the building's capital in the same way as Murphy's award was restoring her human capital. The Appeals Court agreed.

The entire case turned on whether or not Murphy's award represented a return of diminished capital, or an economic gain? The entire Murphy Case was about setting the boundary line between direct taxes and indirect taxes. Direct taxes are taxes on capital, indirect taxes are taxes on gains. This lack of experience of Murphy’s lawyers and the three-judge panel allowed them to do their legal research and analysis with an open mind. And these open minds, aided by their legal training, caused them to arrive at the correct interpretation of the intent of the Sixteenth Amendment as it relates to this narrow issue.

The odd man out was the government. This is not surprising when one realizes that the main source of all the confusion over the Sixteenth Amendment is the government, aided by Congress, who writes these confusing taxing statutes. The more confusing the tax code is, the more money that can be collected. That this is the source of the confusion is confirmed by the "follow the money" principle.

The Sixteenth Amendment provided for an income tax that was to be an "excise tax," a species of an "indirect tax." In an 1895 decision that angered the American People, the Supreme Court called an income tax on the net income from investment a direct tax in the Pollock Case. The genesis of the Sixteenth Amendment was to nullify the theory upon which the Pollock Court declared the income tax to be a direct tax; that being the idea that an income tax on net income was the same as a tax on the underlying source of the income. In other words, it was a tax on the underlying asset; so said the Pollock Court. With the ratification of the Sixteenth Amendment, the Pollock Theory died.

With the Pollock Theory gone, the Sixteenth Amendment returned us to the criteria for determining what constitutes a direct tax and an indirect tax as laid down by the man who gave us those terms, Adam Smith. Adam Smith's book, Wealth of Nations, was the economic bible in the hands of every one of the framers of the Constitution. The meaning of these terms can be found in a 1909 quote from Utah Senator Sutherland as he debated the Sixteenth Amendment.

“The most generally received opinion, however, is that by direct taxes in the Constitution are those meant which are raised on the capital or revenue of the people; by indirect, such as are raised on their expense... it will not be improper to corroborate it by quoting the author from whom the idea seems to have been borrowed. (Naming Doctor Smith's Wealth of Nations)" 44 Congressional Record 2094 (1909).

Murphy’s attorneys argued that her award constituted only monies that “made her whole.” The award was a return of her “human capital.” Murphy’s attorney, David K. Colapinto, who successfully argued the case, said of the government’s position, “The government had the audacity to argue that non-wage compensatory damages for emotional distress and loss of reputation can be taxed as income because the economic value of human life is zero. The taxing of non-wage damages is highly destructive and punishes whistleblowers and other civil rights plaintiffs for prevailing in their cases. Hopefully, today’s ruling will stop this arcane and regressive policy.” See, www.whistleblowers.org

Colapinto’s position is further buttressed by what some of the leading supporters of the Sixteenth Amendment had to say, in 1909, about the income tax while it was being debated in Congress. Senator Bailey of Texas said,

“I believe that in earning an income by personal service every man consumes a part of his principal, and that fact ought always to be taken in to consideration. The man who has his fortune invested in securities may find in a hundred years, if he spent his income, that fortune still intact, but the lawyer or the physician or the man engaged in other personal employment is spending his principal in earning his income. That fact ought under every just system of income taxation to be recognized and provided against.” 44 Congressional Record, 4007 (1909).

Senator Bailey also said,

“I have no hesitation in declaring that a tax on any useful occupation can not be defended in any forum of conscience or of common sense. To tax a man for trying to make a living for his family is such a patent and gross injustice that it should deter any legislature from perpetrating it.” 44 Congressional Record, 1702 (1909).

The author of the Sixteenth Amendment, Senator Brown from Nebraska, had this to say about the object of the income tax: “It is the theory of the friends of the of the income-tax proposition that [income from] property should be taxed and not individuals.” 44 Congressional Record 1570 (1909).

The three-judge panel was correct it its determination that it was not the framers of the Sixteenth Amendment intent to tax “human capital.” Such a tax on the “human capital” of Murphy would be a direct tax. The Supreme Court has already ruled that the Sixteenth Amendment only authorizes an excise tax, a species of an indirect tax.

In the first modern tax case to be litigated after the Sixteenth Amendment was purportedly ratified, the Supreme Court ruled in Brushaber v. Union Pacific Railroad Co., 240 U.S. 1 (1916) that the income tax was an excise tax even though both the government and Burshaber argued that it was a direct tax exempted from apportionment.

In Brushaber v. Union Pac. R.R. Co., Mr. Chief Justice White, upholding the income tax imposed by the Tariff Act of 1913, construed the Amendment as a declaration that an income tax is indirect, rather than as making an exception to the rule that direct taxes must be apportioned. The Income Tax and the Sixteenth Amendment, 29 Harvard Law Review 536 (1915-6).

Cornell Law Quarterly also weighed in on the Brushaber Case.

The contention of the appellant was as follows:

(1) The Sixteenth Amendment provided for a new kind of a direct tax, a tax on incomes from whatever source derived.

The court, through Chief Justice White, held that the tax [in Brushaber] was constitutional. The major proposition of the appellant's argument is not true. Hence, the conclusion does not follow. The sixteenth amendment [sic] does not permit a direct tax, (in fact as it will later be shown, the court does not think that the amendment treated the tax as a direct tax at all), carrying with it the distinguishing characteristic of a hitherto unrecognized uniformity.

The amendment, the court said, judged by the purpose for which it was passed, does not treat income taxes as direct taxes but simply removed the ground which led to their being considered as such in the Pollock case, namely, the source of the income. Therefore, they are again to be classified in the class of indirect taxes to which they by nature belong. Ramon Siaca, The Federal Income Tax Law of 1913: Construction of the Sixteenth Amendment, 1 Cornell Law Quarterly 298, 299 and 301 (1916).

Years later we have Congress reaffirming in a couple of reports that the income tax is an excise tax. Reporting on AThe Revenue Bill of 1941," the House's Committee on Ways and Means prepared House Report No. 1040 dated July 24, 1941. On page 17 of this report, in the section called Constitutionality of Proposal, the Committee on Ways and Means stated:

It seems clear that Congress has the constitutional power to enact this proposed amendment. Generically an income tax is classed as an excise (Brushaber v. Union Pac. R.R. Co., 240 U.S. 1). The only express constitutional limitation upon such taxes is that they be geographically uniform. H. Rep. No. 1040, at 17 (1941).

And finally, appearing in the Congressional Record in 1943 we find a reprinting of a report by,

“Mr. F. Morse Hubberd, formerly of the legislative drafting research fund of Columbia University, and a former legislative draftsman in the Treasury Department.

…The sixteenth amendment authorizes the taxation of income ‘from whatever source derived’…. So the amendment made it possible to bring investment income within the scope of a general income-tax law, but did not change the character of the tax. It is still fundamentally an excise or duty with respect to the privilege of carrying on any activity or owning any property which produces income.
The income tax is, therefore, not a tax on income as such. It is an excise tax with respect to certain activities and privileges which is measured by reference to the income which they produce. The income is not the subject of the tax: it is the basis for determining the amount of tax.” 89 Congressional Record 2579-80 (1943).


2007 Sherry Peel Jackson, former IRS agent turned Tax Honesty advocate (after leaving the IRS service with award winning performance reviews) is charged with 4 counts of failure to file income tax returns.

2007 9th Circut. For what it's worth, the 9th circuit panel of San Francisco has been reversed. The Internal Revenue service had ruled that Valerie and Robert McKee (or McKey?) had owed the government $31,000 in unpaid taxes until Valerie and Robert demonstrated in court that the tax law was so complex that nobody could understand it. And the court had to agree. The law was so complex that nobody could understand it and the court reversed itself and the IRS gets the bill. The government sought and got a stipulation that this verdict would not be made public.


2007 DOJ Obtains injunction against Pete Hendrickson (Cracking the code) LostHorizonsdotcom.

2008 IRS brings charges against Pete Hendrickson (Cracking the code) despite the fact that they agreed that he owed no taxes for the years they were charging him with evasion for.
The IRS itself had sent Pete several "no tax due" notices after adjusting his account per the tax returns he filed, but these admissions of "everything's cool" by the IRS were ignored by the prosecution, and the Hendricksons' many certificates of assessment issued by the IRS -- stating $0 due -- were never shown to the jury.
The charge against Pete is that he didn't believe what he wrote on his tax returns filed between 2002 and 2007. This is a matter of philosophy -- did he or didn't he?
During the trial, the judge ordered Hendrickson to commit a Felony, that is to lie on his 1040 forms, to commit perjury.



2009 IRS gets conviction. Guilty is the verdict against Pete Hendrickson of Cracking the Code.



2010 April. Pete Hendrickson, Author of Cracking the Code, sentanced to prison for 2 years and 9 months. Pete contends the Judge in his case gave the jury wrong instructions, intentionaly misleading them on the legal defintion of wages, employee, employer. Judge also dismissed 2 jurors who asked to see the law in his case.

2010 May US V Springer, Lindsey Springer is challenging the OMB/PRA requirement of the 1040 tax form. Lindsey appeals on the 19th. More on that in another post.

Timeline 1950 to 2000

During this time frame, a large number of court cases related to the income tax, have come to light. Both sides of the issue use these cases to argue their points.

Also during this time, many people file EXEMPT on the IRS W-4 form, believing they are not taxable. The IRS responds with a letter to the company that the citizen works for telling the company to change the man/womans status from exempt to claiming zero exemptions, WITHOUT A COURT ORDER, and in disregard to the Perjury statement on the w-4 form. Many citizens find themselves in trouble as they have no way to respond to the IRS's letter. Some try suing the companies they work for with the result of being fired from their jobs, or the courts protecting the companies from suit.

Some argue about the Code of Federal Regulations or CFR for short.
A similar argument is made about the Parallel Table of Authorities and Rules, which you can use to see what regulation(s) apply to what statute. It has been said if there's no regulation listed in the Parallel Table that means there is no regulation, but that's not true - it just hasn't been listed there yet, for whatever reason.

For example, look up 26 U.S.C. 7433 in the Parallel Table - it's not listed & obviously there's no regulation for it listed either. But there is a section 7433 & there is a regulation, at 26 CFR 301.7433-1. Then look up 26 U.S.C. 6001 & you'll find several Parts listed in both Title 26 & 27 of the CFR. The Parallel Table is just a finding aid & it is handy - but - it is not "definitive" & if you make the argument (as many have) that since it's not in the Parallel Table it doesn't exist you will lose. It may be intentional.

You can bet it's intentional. For Titles other than 26 & 27, finding implementing regulations for statutes is pretty straightforward, but it's a nightmare for 26 & 27. Also, not all statutes have accompanying regulations nor are they required to, but regarding 26 & 27, there are more regulations than there are statutes - often in places where you'd never think to look.

As to the Titles 26 and 27, it appears that al the enforcement regulations for the BATF are within 26 CFR and 26USC. And, in some of the regulations, the enforcement procedure in 26CFR relate to Title 27 only.



1954 the Internal Revenue code of 1939 is revised.

1977 Irwin Schiff, starts promoting his Zero return method.Writes book "how the goverment is screwing you"
1984 Irwin Schiff is charged with tax fraud.
1985 Irwin Schiff is convicted and sentanced to jail for 4 years

1991 Pete Hendrickson Found guilty of 1 count of tax evasion and using an incendary device in a US postal Mail box.

1992 Dallas Texas. EEOC V ISC. This unpublished case, settled by the court, is used by citizens to show that there is no law requiring a citizen to have a Social security Account number as a condition to being hired and/or paid by a company within the states of the union.
EEOC is a case brough on by the Equal Opportunity Comission against company Information Systems Consultants who hired Bruce Hanson, a christian man who refused to particpate in Social security due to his relegious convictins. ISC believed they were obilgated by law to obtain a SSN from Hansen. Failing that they believed they had a duty to terminate his employment.
The court ruled that the law requires a company to ask for the SSN. And that the law provides relief to the company if they do not obtain a SSN, by allowing the company to send a letter of transmittal to the IRS showing that they had asked for the number, but was not given one by the future worker (employee).
The court also said, that not having a SSN does not relieve the company (employer) nor the worker (employee) from any employment tax liablity and noted that without a SSN, it would be difficult if not imposible for the worker (employee) to obtain any refund of over withheld funds.

While Hansen won this case, it still does not address the issue of how one can be held reponsible for employment taxes for social security if one does not have a Social Secuirty number nor an account with the Social security Administration.

There has been one other case, dealing with Taco Bell for the same reason. However, in general, and in todays practice, a company will not consider anyone for hire, if they do not provide a SSN when they apply for work, even though there is no law that requires it. This is in fact, a form of discrimination that the courts are allowing.


1994 Barry Konicov, runs for US Congress as an independant and as a taxprotester, introduces america to his "Detaxing America" package, a package designed to set up a paper trail to be used as a reliable defense incase one is charged with tax evasion, and to stop withholding. And Publishes his book, The Great snow Job.

1995. The Internal Revenue Service did not comply with federal laws and failed to
follow its own internal guidelines when issuing lien notices based on an
audit of federal tax liens analyzed between September 2005 and February
2006, the Treasury Inspector General for Tax Administration concluded in a
report released June 30.

TIGTA said it reviewed a statistically valid sample of 150 notices of
federal tax liens and determined IRS correctly mailed the lien notices to
taxpayers in only seven cases, or 4.7 percent of the time.

Additionally, IRS did not inform representatives of taxpayers that liens
were filed against their clients in 75 percent of the sampled cases, the
audit said. In addition, undelivered lien notices were not timely controlled
by IRS's automated lien system, the TIGTA's report, dated June 21, said.

1995 Ninth Circuit Court of Appeals ruled in support of the Fifth Amendment.

A California man, Loren C. Troescher, stood up to the IRS, and refused to become a witness against himself in a tax case. When the IRS served him with a summons, he refused to supply information.

Representing himself in court, Loren Troescher argued that he had a Fifth Amendment right to not incriminate himself. The IRS argued that there was a "Tax Crime Exemption" to the Fifth Amendment. The district court agreed with the government, so Troesher appealed -- this time using an attorney.

Judge Stephen Reinhardt's opinion for the Ninth Circuit Court of Appeals states in part: "Troescher argues that the district court erred in rejecting his assertion of the Fifth Amendment's privilege against self-incrimination. We agree, and therefore vacate the order and remand to the district court for reconsideration in light of this opinion." (U.S. v. Troescher, No. 95-55609)

1996. State of Illinois files suit against Whitey Harrel for failure to file.
Jury forman asks to see the law. Judge respons the jury has everything they need. By refusing to show the jury the law, the jury found Harrel Not Guilty on all 3 counts.
Tax Patriots celebrate a victory for the little guy. 3 years later the state goes after Harrel again, for the next 3 years worth of returns and refuses to allow him to present evidence used in his previous case, nor to use the case as evidence in his defense. Some see this as further proof of judicial corruption.

1997. Loydd Long found not guilty of failure to file, due to discovery of MFR-01 code on his IRS Individual Master File. MFR-01 means filing not required. This case lead many tax patriots to demand MFR-01 status and to start looking at the IRS's master file program.

1998. CSPAN. US Senate holds IRS reform hearings for 5 days. Covered live on C-Span, the show still ranks in the top 5 requested copies of dvd sales from C-span.
During this week long hearing, testimony about IRS agent abuse and corruption within the system itself was heard constantly. IRS's first and only historian Shelly Waxman testified that the IRS routienly destroyed records and historical documents to cover up its potential criminal actions.



1999 Pete Hendrickson Publishes "Cracking the Code" A book to show the american people how the IRS is using a constructive fraud to create a legal presumption that the american citizen has to overcome.
Cracking The Code is based on 4 principals of law.
1. The law means what it says and says what it means.
2. The irs is intentionaly twisting the law to create a legal presumption that the non Tax payer must overcome.
3. That the IRS has provided a form for correcting the presumption.
4. That since congress requires citizens to risk felony conviction when we sign our names under penalties of perjury, as shuch we have a right to correct the IRS's incorrect records by using the forms made available by the IRS. And that form is the IRS form 4852.

Timeline 1900 to 1950

1948 Stuart v. Chinese Chamber of Commerce, 168 F.2d 709, 712 (9th Cir.,1948)
This case holds a signficant point of arugment.
"The revenue laws are a code or system in regulation of tax assessment
and collection. They relate to taxpayers AND NOT TO NON-TAXPAYERS. The
latter are without their scope. No procedure is prescribed for non-
taxpayers, and no attempt is made to annul any of their rights and
remedies in due course of law. With them Congress does not assume to
deal, and THEY ARE NEITHER OF THE SUBJECT NOR OF THE OBJECT OF THE
REVENUE LAWS."
This was later confirmed in the case Long V Rasmussen, 281 F. 236, 238

Today people who believe they are non-taxapayers are trying to use taxpayer methods to get their property returned to them, which was taken in case of a tax liablity, and many claim they have no choice as the courts have told them to file a 1040 to get the property back. Using a 1040 is a taxpayer method.

Under this case, it is clear that one can be a taxpayer for one tax imposed and a non taxpayer for another tax imposed.




1939. Internal Revenue code, the first tax law, is not law, it is code. It does not defined the word income, but does define gross income - 2 facts many people still argue are flaws in the system.

CORRECTION: (Thanks to Al for this info).
This is a very common misconception. The Internal Revenue Code of 1939 was merely a codification of Volume 53, Part 1, of the U.S. Statutes At Large - done to make it easier to find internal revenue statutes.

In 1919, a committee was formed to codify the Statutes At Large into categories - there were so many statutes on the books that it was very difficult to find them & very easy to miss something important. In 1926 the 1st codification came out & that work continues to this day. New laws passed you may not find in the U.S. Code for quite some time, but that doesn't mean they don't exist, it means you have to look thru the Statutes At Large, until they are sorted into one of the 50 Titles of the U.S. Code.

Today the Internal Revenue Code is found primarily in U.S.C. Title 26, but also in Title 27, Alcohol, Tobacco & Firearms. And the Regulations are found primarily in Titles 26 & 27 of the Code of Federal Regulations. And while neither the Internal Revenue Code purchased as a book separately, nor the corresponding sections of the U.S.C. & CFR are "positive law", they are codification of Statutes At Large & Treasury Regulations which are.


1916. The Supreme Court in Brushaber v. Union Pacific Railroad, 240 U.S. 1 (1916), indicated that the amendment did not expand the federal government's existing power to tax income (meaning profit or gain from any source) but rather removed the possibility of classifying an income tax as a direct tax on the basis of the source of the income. The Amendment removed the need for the income tax to be apportioned among the states on the basis of population. Income taxes are required, however, to abide by the law of geographical uniformity. In other words, the tax is an Excise tax, that does not require apportionment.

1913 Secretary of State Knox declares the 16th amendment ratified. Numberous challenges to his declaration result all the way to present day, due to the process being seen by some people as being flawed due to the way some states changed the words in the original amendment proposed. Lawsuits over this amendment began and the arguing about of the proper application of the income tax has never stopped.

Due to the political difficulties of taxing individual wages without taxing income from property, a federal income tax was impractical from the time of the Pollock decision until the time of ratification of the Sixteenth Amendment.


In 1913, the top tax rate was 7% on incomes above $500,000 ($10 million 2007 dollars).

During World War I, the top rate rose to 77% and the income threshold to be in this top bracket increased to $1,000,000 ($16 million 2007 dollars); after the war, the top rate was scaled down to a low of 24% and the income threshold for paying this rate fell to a low of $100,000 ($1 million 2007 dollars).

During the Great Depression and World War II, the top income tax rate rose from pre-war levels. In 1939, the top rate was 75% applied to incomes above $5,000,000 ($75 million 2007 dollars). During 1944 and 1945, the top rate was its all-time high at 94% applied to income above $200,000.

Editors Note: Title 26, is the 26th title of the United States Federal Statutes at large. A listing of all 50 Titles, shown on the first pages of every Title, shows that Title 26 is Non-postivie law, that it is "prima facia". Meaning at first glance. While other titles reflect that actual laws as passed by the congress, Title 26 is one of the few that still remain "non positive law" and that fact has led to a lot of citizens arguing that the law can only apply to specific people, and not be broadly applied to the American public in general.

Timeline Civil war to 1900

1861. The first United States income tax was imposed in July 1861, at 3% of all incomes over 800 dollars in order to help pay for the war effort in the American Civil War.[4][5] This tax was repealed and replaced by another income tax in 1862.

1894. In 1894, Democrats in Congress passed the Wilson-Gorman tariff, which imposed the first peacetime income tax. The rate was 2% on income over $4000, which meant fewer than 10% of households would pay any. The purpose of the income tax was to make up for revenue that would be lost by tariff reductions.[10] Also, the Panic of 1893 is said to have something to do with the passage of Wilson-Gorman.

1895. In 1895 the United States Supreme Court, in its ruling in Pollock v. Farmers' Loan & Trust Co., held a tax based on receipts from the use of property to be unconstitutional. The Court held that taxes on rents from real estate, on interest income from personal property and other income from personal property (which includes dividend income) were treated as direct taxes on property, and therefore had to be apportioned. Since apportionment of income taxes is impractical, this had the effect of prohibiting a federal tax on income from property. However, the Court affirmed that the Constitution did not deny Congress the power to impose a tax on real and personal property, and it affirmed that such would be a direct tax.

Lincoln starts it all during the civil war.

Civil War era. President Lincoln Starts the first income taxes. They are placed on the profits made by businesses, to help pay for the war. The taxes are imposed as excise taxes, on the profits of the companies. The amount of profit, determines the amount of the tax owed. No tax is imposed on individual people.