Definitions

16th amendment

Tax protester Sixteenth Amendment arguments

Tax protester Sixteenth Amendment arguments are assertions that the imposition of the federal income tax is illegal because the Sixteenth Amendment was never properly ratified, or that the amendment provides no power to tax income. Proper ratification of the Sixteenth Amendment is disputed by tax protesters who argue that the quoted text of the Amendment differed from the text proposed by Congress, or that Ohio was not a State during ratification. Sixteenth Amendment ratification arguments have been rejected in every court case where they have been raised and identified as legally frivolous.

Some protesters have argued that because the Sixteenth Amendment does not contain the words "repeal" or "repealed", the Amendment is ineffective to change the law. Others argue that due to language in Stanton v. Baltic Mining Co., the income tax is an unconstitutional direct tax that should be apportioned (divided equally amongst the population of the various states). Several tax protesters assert that the Congress has no constitutional power to tax labor or income from labor, citing a variety of court cases. These arguments include claims that the word "income" as used in the Sixteenth Amendment cannot be interpreted as applying to wages; that wages are not income because labor is exchanged for them; that taxing wages violates individuals' right to property, and several others. Another argument raised is that because the federal income tax is progressive, the discriminations and inequalities created by the tax should render the tax unconstitutional. These kinds of arguments have been ruled without merit.

Sixteenth Amendment ratification

Some tax protesters contend that the Sixteenth Amendment to the United States Constitution was never properly ratified (see, e.g., Devvy Kidd). Two lines of court cases address these contentions. The first group of cases deals with the claims of William J. Benson, co-author of the book The Law That Never Was (1985). The second line of cases involves the contention that Ohio was not a state in 1913 at the time of the ratification.

Benson contentions

The William J. Benson contention is essentially that the legislatures of various states passed ratifying resolutions in which the quoted text of the Amendment differed from the text proposed by Congress in terms of capitalization, spelling of words, or punctuation marks (e.g. semi-colons instead of commas), and that these differences made the ratification invalid. Benson makes other assertions including claims that one or more states rejected the Amendment and that the state or states were falsely reported as having ratified the Amendment. As explained below, the Benson arguments have been rejected in every court case where they have been raised, and were explicitly ruled to be fraudulent in 2007.

Although a Sixteenth Amendment argument was mentioned in passing in a federal court case in May of 1977, some sixty-four years after the ratification, the earliest reported court case where the Benson arguments were actually raised appears to be United States v. House,. Benson testified in the House case to no avail. The Benson contention was comprehensively addressed by the Seventh Circuit Court of Appeals in United States v. Thomas:

Benson was unsuccessful with his Sixteenth Amendment argument when he had his own legal problems. He was prosecuted for tax evasion and willful failure to file tax returns. The court rejected his Sixteenth Amendment "non-ratification" argument in United States v. Benson. William J. Benson was convicted of tax evasion and willful failure to file tax returns in connection with over $100,000 of unreported income, and his conviction was upheld on appeal. He was sentenced to four years in prison and five years of probation.

On December 17, 2007, the United States District Court for the Northern District of Illinois ruled that Benson's non-ratification argument constituted a "fraud perpetrated by Benson" that had "caused needless confusion and a waste of the customers' and the IRS' time and resources. The court stated: "Benson has failed to point to evidence that would create a genuinely disputed fact regarding whether the Sixteenth Amendment was properly ratified or whether United States Citizens are legally obligated to pay federal taxes. The court ruled that "Benson's position has no merit and he has used his fraudulent tax advice to deceive other citizens and profit from it" in violation of . The court granted an injunction under prohibiting Benson from promoting the theories in Benson's "Reliance Defense Package" (containing the non-ratification argument), which the court referred to as "false and fraudulent advice concerning the payment of federal taxes.

Similar Sixteenth Amendment arguments have been uniformly rejected by other United States Circuit courts in other cases including Ficalora v. Commissioner; Sisk v. Commissioner; United States v. Sitka; and United States v. Stahl. The non-ratification argument has been specifically deemed legally frivolous in Brown v. Commissioner; Lysiak v. Commissioner; and Miller v. United States.

Ohio's statehood

Another argument made by some tax protesters is that because the United States Congress did not pass an official proclamation (Pub. L. 204) recognizing the date of Ohio's 1803 admission to statehood until 1953 (see Ohio Constitution), Ohio was not a state until 1953 and therefore the Sixteenth Amendment was not properly ratified. The earliest reported court case where this argument was raised appears to be Ivey v. United States, some sixty-three years after the ratification and 173 years after Ohio's admission as a state. This argument was rejected in the Ivey case, and has been uniformly rejected by the courts. See also McMullen v. United States, McCoy v. Alexander, Lorre v. Alexander, McKenney v. Blumenthal and Knoblauch v. Commissioner.

In Baker v. Commissioner, the court stated:

Petitioner's theory [that Ohio was not a state until 1953 and that the Sixteenth Amendment was not properly ratified] is based on the enactment of Pub. L. 204, ch. 337, 67 Stat. 407 (1953) relating to Ohio's Admission into the Union. As the legislative history of this Act makes clear, its purpose was to settle a burning debate as to the precise date upon which Ohio became one of the United States. S. Rept. No. 720 to accompany H.J. Res. 121 (Pub. L. 204), 82d Cong. 2d Sess. (1953). We have been cited to no authorities which indicate that Ohio became a state later than March 1, 1803, irrespective of Pub. L. 204.

The argument that the Sixteenth Amendment was not ratified and variations of this argument have been officially identified as legally frivolous federal tax return positions for purposes of the $5,000 frivolous tax return penalty imposed under Internal Revenue Code section 6702(a).

Sixteenth Amendment effectiveness

Repeal clause

Some protesters have argued that because the Sixteenth Amendment does not contain the words "repeal" or "repealed", the Amendment is ineffective to change the law. According to legal commentator Daniel B. Evans:

In Buchbinder v. Commissioner, the taxpayers cited the case of Eisner v. Macomber and argued that "the Sixteenth Amendment must be interpreted so as not to 'repeal or modify' the original Articles of the Constitution. The United States Tax Court rejected that and all other arguments by Bruce and Elaine Buchbinder (the taxpayer-petitioners), stating: "We will not dress petitioners' frivolous tax-protester ramblings with a cloak of respectability [. . . . ] We find that petitioners in this case have pursued a frivolous cause of action. We find that they are liable for a penalty in the amount of $250.00 under the provisions of [Internal Revenue Code] section 6673. The actual statement by the United States Supreme Court in Eisner v. Macomber is that the Sixteenth Amendment "shall not be extended by loose construction, so as to repeal or modify, except as applied to income, those provisions of the Constitution that require an apportionment according to population for direct taxes upon property, real and personal [. . .] In order, therefore, that the clauses cited from Article I of the Constitution may have proper force and effect, save only as modified by the Amendment [. . . ] it becomes essential to distinguish between what is and what is not 'income' [. . . ]".

Stanton v. Baltic Mining Co.

In Parker v. Commissioner, tax protester Alton M. Parker, Sr., challenged the levying of tax upon individual income, based on language in the U.S. Supreme Court decision in Stanton v. Baltic Mining Co., to the effect that the Sixteenth Amendment "conferred no new power of taxation, but simply prohibited the previous complete and plenary power of income taxation possessed by Congress from the beginning from being taken out of the category of indirect taxation to which it inherently belonged [. . . .] The United States Court of Appeals for the Fifth Circuit rejected Parker's argument, and stated that Parker's proposition is "only partially correct, and in its critical aspect, is incorrect. The Court of Appeals re-affirmed that the Congress has the power to impose the income tax, and stated that the Sixteenth Amendment "merely eliminates the requirement that the direct income tax be apportioned among the states. The court ruled that Parker had raised a "frivolous" appeal.

Tax protesters argue that in light of this language, the income tax is unconstitutional in that it is a direct tax and that the tax should be apportioned (divided equally amongst the population of the various states).

The above quoted language in Stanton v. Baltic Mining Co. is not a holding of law in the case. (Compare Ratio decidendi, Precedent, Stare decisis and Obiter dictum for a fuller explanation.)

The quoted language regarding the "complete and plenary power of income taxation possessed by Congress from the beginning" is a reference to the power granted to Congress by the original text of Article I of the U.S. Constitution. The reference to "being taken out of the category of indirect taxation to which it [the income tax] belonged" is a reference to the effect of the 1895 Court decision in Pollock v. Farmers' Loan & Trust Co., where taxes on income from property (such as interest income and dividend income) — which, like taxes on income from labor, had always been considered indirect taxes (and therefore not subject to the apportionment rule) — were, beginning in 1895, treated as direct taxes. The Sixteenth Amendment overruled the effect of Pollock, making the source of the income irrelevant with respect to the apportionment rule, and thereby placing taxes on income from property back into the category of indirect taxes such as income from labor (the Sixteenth Amendment expressly stating that Congress has power to impose income taxes regardless of the source of the income, without apportionment among the states, and without regard to any census or enumeration).

The Court noted that the case "was commenced by the appellant [John R. Stanton] as a stockholder of the Baltic Mining Company, the appellee, to enjoin [i.e., prevent] the voluntary payment by the corporation and its officers of the tax assessed against it under the income tax section of the tariff act of October 3, 1913." On a direct appeal from the trial court, the U.S. Supreme Court affirmed the lower court's decision, which had dismissed Stanton's motion (i.e., had rejected Stanton's request) for a court order to prevent Baltic Mining Company from paying the income tax.

Stanton argued that the tax law was unconstitutional and void under the Fifth Amendment to the United States Constitution in that the law denied "to mining companies and their stockholders equal protection of the laws and deprive[d] them of their property without due process of law." The Court rejected that argument. Stanton also argued that the Sixteenth Amendment "authorizes only an exceptional direct income tax without apportionment, to which the tax in question does not conform" and that therefore the income tax was "not within the authority of that Amendment." The Court also rejected this argument. Thus, the U.S. Supreme Court, in upholding the constitutionality of the income tax under the 1913 Act, contradicts those tax protesters arguments that the income tax is unconstitutional under either the Fifth Amendment or the Sixteenth Amendment.

Summary

Tax lawyer Alan O. Dixler has written:

Each year some misguided souls refuse to pay their federal income tax liability on the theory that the 16th Amendment was never properly ratified, or on the theory that the 16th Amendment lacks an enabling clause. Not surprisingly, neither the IRS nor the courts have exhibited much patience for that sort of thing. If, strictly for the purposes of this discussion, the 16th Amendment could be disregarded, the taxpayers making those frivolous claims would still be subject to the income tax. In the first place, income from personal services is taxable without apportionment in the absence of the 16th Amendment. Pollock specifically endorsed Springer's holding that such income could be taxed without apportionment. The second Pollock decision invalidated the entire 1894 income tax act, including its tax on personal services income, due to inseverability; but, unlike the 1894 act, the current code contains a severability provision. Also, given the teaching of Graves [i.e., Graves v. New York ex rel. O'Keefe, 306 U.S. 466 (1939)] -- that the theory that taxing income from a particular source is, in effect, taxing the source itself is untenable -- the holding in Pollock that taxing income from property is the same thing as taxing the property as such cannot be viewed as good law.

In Abrams v. Commissioner, the United States Tax Court stated: "Since the ratification of the Sixteenth Amendment, it is immaterial with respect to income taxes, whether the tax is a direct or indirect tax. The whole purpose of the Sixteenth Amendment was to relieve all income taxes when imposed from [the requirement of] apportionment and from [the requirement of] a consideration of the source whence the income was derived.

Notes

References

  • The Truth About Frivolous Tax Arguments. Internal Revenue Service. Retrieved on 2008-03-04..
  • Sussman, Bernard J. Idiot Legal Arguments. Anti Defamation League. Retrieved on 2008-03-04..
  • Tax Protesters. Quatloos. Retrieved on 2008-03-04..
  • Evans, Dan Tax Protester FAQ. Retrieved on 2008-03-04..
  • Danshera Cords, Tax Protestors and Penalties: Ensuring Perceived Fairness and Mitigating Systemic Costs, 2005 B.Y.U.L. Rev. 1515 (2005).
  • Kenneth H. Ryesky, Of Taxes and Duties: Taxing the System with Public Employees' Tax Obligations, 31 Akron L. Rev. 349 (1998).
  • Christopher S. Jackson, "The Inane Gospel of Tax Protest: Resist Rendering Unto Caesar - Whatever His Demands", 32 Gonzaga Law Review 291-329 (1996-97).

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