SUPPORTING BRIEF #1: THE PERVERSION OF THE INCOME TAX LAWS, Page 1

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perverted. 1. Pathol. changed to or being of an unnatural or abnormal kind; a perverted appetite. 2. turned from what is right; wicked; misguided; misapplied; distorted. 3. affected with or due to perversion. American College Dictionary.

The first income tax laws came into being in 1913. An article by congressman Benton McMillin entitled "The Income Tax" appeared in the May 17, 1913 issue of The Saturday Evening Postexplaining in detail the income tax. (see: Exhibit A) Congressman McMillin was a ten term congressman from Tennessee and was the very congressman that introduced the resolution in the House for the 16th Amendment. In reading this article, we can see that anyone having a net income of $4000 or more was liable to the income tax. The opening statement of Mr. McMillin's article states:

"The income-tax is one that will not down. For the best of reasons this is true. Way down in the hearts of the masses of mankind there lurks a strong sense of justice, on which is founded the opinion that vast accumulations of wealth in the hands of individuals and corporations should help to support the Government under which they are acquired, by which they are protected and without which they would vanish.

"And why not? Why tax the widows mite and the orphan's bread, and not tax these accumulations? Why lay tribute on what we eat and wear, and leave untaxed millions in the hands of those who can never personally consume it, and with whom it is surplus?" ibid., pg. 6.

It is therefore clear that the income tax laws were in no way intended to tax labor when they began. What "surplus wealth" is there in the labor of a human being?

Let us now examine the incomes of that period in history. In the June 21, 1913 issue of The Saturday Evening Post, we find in the editorial section an article under the heading of "Guessing at Incomes". In this editorial, we can see the incomes of the common people at this period in our history.

Guessing at Incomes

"Since Washington statistics estimated that some four hundred thousand persons, with yearly receipts aggregating about six billion dollars, would be subject to the income tax, guessing at incomes in the United States has been a popular diversion. Up to a certain point the guessing is fairly easy. Over thirty million persons above sixteen years of age are gainfully employed. Six and a half millions of them are wage earners in manufactories, whose average pay is five hundred and eighteen dollars a year. Four and a half millions are agricultural laborers, with an average income, no doubt below that sum. Five and a half millions are engaged in personal and domestic service- cooks, hired girls, waiters, laundresses, barbers, and so on- among whom thousand dollar incomes are the exception. Bookkeepers, clerks and salesmen number more that a million and a half and are generally far removed from any fear of the income-tax collector. Steam and electric railroad employees, draymen and hackmen, stenographers, telegraph and telephone operators make up another million and a half. It is easy to count up twenty million breadwinners whose share in the national prosperity consists mostly of a meal ticket. After that the guessing becomes more difficult. There are nearly six and a half million farms the average income from which has been estimated at six hundred and odd dollars; but the variation in farm incomes is so wide that- unlike the case of the factory wage earners- an average means nothing. Indeed, if you rely altogether on averages you can divide the total national income by the number of inhabitants and prove that Mr. Rockefeller has only enough to live on. You are perfectly safe in guessing that the national income is inequitably divided; but when it comes to finer distinctions difficulties arise." ibid., pg. 22.

The first income tax laws in 1913 had an exemption rate of $4000. This meant that if you did not have a net income over $4000, you owed no income tax. The first income tax laws of 1913 also did not require anyone who had a net income under $3000 to file a return. Thus, we can see that in no way was Congress attempting to tax labor with the first income tax laws because, as the editorial pointed out, the average laborer only had an earned income of about $500/yr.

Think of this fact. The exemption rate was around 8 times the earned income (labor) of the common citizen in 1913. The income tax has been perverted into something it was never intended to be.

Today, in my experience of over twenty years in providing my labor, I would estimate that $10/hr is the average wage in America. This would equate to an earned income of approximately $20,000/yr. To be consistent with the first income tax laws of 1913, this would mean there would have to be an exemption rate of 8 times this amount, or $160,000! This would also mean that anyone who had an net income of less than $120,000 would not be required to file a return!

There are many other ways in which we can see the perversion of the income tax laws in comparison to the first income tax laws of 1913. The income tax laws of 1913 can be found in the United States Statutes at Large in any government library.

In Section II, B of the 1913 income tax laws, we find what the definition of the net income of a taxable person is.

"That, subject only to such exemptions and deductions as are hereinafter allowed, the net income of a taxable person shall include gains, profits, and income derived from salaries, wages, or compensation for personal service of whatever kind and in whatever form paid, or from professions, vocations, businesses, trade, commerce, or sales, or dealings in property, whether real or personal, growing out of the ownership or use of or interest in real or personal property, also from interest, rent, dividends, securities, or the transaction of any lawful business carried on for gain or profit, or gains or profits and income derived from any source whatever, including the income from but not the value of property acquired by gift, bequest, devise, or decent..." U.S. Stat. at Large, 1913 at pg. 167.

Does anyone see in the above statement that "net income" is in any way the compensation the citizen receives for labor? Recall that the average citizen who labored only earned around $500/yr in 1913. Note also that the words gains and profits are used in association with the term "income".

Noscitur a sociis. It is known from its associates. The meaning of a word may be ascertained by reference to the meaning of words associated with it. Broom, Max. 588; 9 East. 267; 6 Taunt. 294; 1 B. & C. 644; 18 C.B. 102, 893; 5 M. & G. 	639, 667; 3 C.B. 437; 5 id. 380; 4 Exch. 511, 519; 5 id. 294; 11 id. 113; 3 Term 87; 12 Allen 17; 105 Mass. 433; 1 N.Y. 47, 69; 11 Barb.43, 63; 20 id. 644; 38 Minn. 366; 166 U.S. 1; 67 Ill. App. 665.

We must have a clear understanding of what "gains or profits and income derived from any source whatever" means. Bearing in mind that the exemption rate in 1913 was around 8 times the earned income (labor) of the common citizen, it is clear that the income tax was being imposed upon business activity. There was absolutely no way that a person in 1913 could have a net income of $4000 or more that did not function in a corporate or quasi-corporate capacity. Persons engaged in business activity must use labor and capital to function. Thus, the investment of capital combined with the labor of human beings results in gains or profits and income for the business activity. This is the type of income subject to federal taxation, not the earned income (labor) of the citizen.

Going back to Mr. McMillin's article entitled "The Income Tax" found in the May 17, 1913 issue of The Saturday Evening Post, we read the following under the sub-heading entitled "Approbation from Elihu Root".

"I do not consider that the amendment in any degree whatever will enlarge the taxing power of the National Government, or will have any effect except to relieve the exercise of that taxing power from the requirement that the tax shall be apportioned among the several states. The effect of the amendment will be, in my view, the same as if it said: 'The United States may lay a tax on incomes without apportioning the tax, and this shall be applicable whatever the source of the income subjected to the tax'; leaving the question, What incomes are subjected to national taxation? to be determined by the same principles and rules which are now applicable to the determination of that question." ibid., pg. 52

And:

"The laborer and farmer began to say: 'If all this money is to be raised by taxes on consumption, and none on incomes, what is my fate to be?'" ibid., pg. 52.

It should be clear that Congress had absolutely no intention to tax earned income (labor) when the income tax was implemented in 1913. Any argument to the contrary fails pursuant to the maxim reductio ad absurdum.

According to the 1994 1040 instruction booklet provided by the I.R.S., a single person that is living alone (head of household) must file a return if their gross income is $8050 or more. They are allowed an exemption of $2450. This means that if you have an income over $2450/yr it is the position of the federal government that you must pay income tax! What person in America today could live in this amount of money? Note too that in 1913 the requirement to file was based on net income, while in 1994 it is based on gross income.

Let us now compare these figures with the first income tax laws of 1913. The exemption rate in 1913, as we have seen, was about 8 times the earned income (labor) of the average citizen. Hence, an exemption rate of $2450 today would equate to an exemption rate of about $300 in 1913. If such an exemption rate was imposed in 1913, the citizenry of the time would have been enraged at Congress, for they were petitioning Congress to give them relief from taxation, not further burden them with taxation. Another example of the perversion of the income tax laws.

Let us now turn our attention to the privacy of the individual regarding the information provided on income tax forms in 1913. In Section 3167 of the income tax laws of 1913 we find the following.

"...and it shall be unlawful for any person to print or publish in any manner whatever not provided by law any income return or any part thereof or the amount or source of income, profits, losses, or expenditures appearing in any income return; and any offence against the foregoing provision shall be a misdemeanor and be punished by a fine not exceeding $1000 or by imprisonment not exceeding one year, or both, at the discretion of the court; and if the offender be an officer or employee of the Unites States he shall be dismissed from office and be incapable thereafter of holding any office under the Government." U.S. Stat. at Large, 1913 at pages 177-178.

As we can see, Congress took a firm stand to protect the privacy of the individual with the first income tax laws of 1913. What about today? Are your income tax returns private? Consider the following from page 3 of the 1990 1040A instruction booklet regarding the Privacy Act and Paperwork Reduction Act.

"We may give the information to the Department of Justice and to other Federal agencies, as provided by law. We may also give it to certain cities, states, the District of Colombia, U.S. commonwealths or possessions, and certain foreign governments to carry out their tax laws."

It seems we have come a long way in protecting the privacy of the individual regarding information on income tax forms. Notice that "as provided by law" the information you provide the government on income tax forms can even be given to foreign governments! Another example of the perversion of the income tax laws.

What about imposing an income tax upon the salaries of the justices of the supreme court and all other federal judges? Article III, § 1 of the Constitution is specific about judges having a compensation that shall not be diminished to secure their independence from the other two branches of government. What did the 1913 income tax laws have to say about this?

"That in computing net income under this section there shall be excluded the interest upon obligations of a State or any political subdivision thereof, and upon the obligations of the United States or its possessions; also the compensation of the President of the Unites States during the term for which he has been elected, and the judges of the supreme and inferior courts of the United States now in office..." U.S. Stat. at Large, 1913 at pg. 168.

Thus, it is clear that Congress in no way was attempting to impose an income tax upon the salaries of both the President or the federal judges in 1913. What about today? In 1939, the supreme court ruled in the case of O'Malley v. Woodrough, 307 U.S. 277, that the justices of the supreme court as well as all other federal judges will pay income tax on their salaries. This ruling abandoned 150 years of judicial thinking on the matter. Just six years earlier the supreme court ruled in the case of O'Donoghue v. U.S., 289 U.S. 516, that no laws could effect the diminution of the compensation paid to federal judges. The imposition of an income tax upon the compensation of federal judges opened the door for income taxation to be imposed upon every citizen, and, if income taxation is used to forcibly despoil an individual of their labor, then their citizen status has been denied. Another example of the perversion of the income tax laws.

How did this perversion of the income tax laws come about? What future Congress saw fit to pervert the income tax laws and use them to deprive the common people of their hard earned labor? The answer to this is found in the era known as the "New Deal" in the 1930's. In examining this period of our history, we will see that it was the Executive branch of government, aided by a docile Congress, that perverted the income tax laws.

The election of November, 1932 saw the democratic party take over the federal government. This researcher cares not about party affiliation as long as the spirit and letter of the Constitution is adhered to. However, as we will see, the oath to uphold the Constitution was violated in mass by both Congress and the Executive during this period of our history.

This period of our history is critical to understanding why the income tax laws are applied in the manner that they are today. The radical departure from the constitutional methods of making laws and the view the courts took towards the Liberty of the citizen all had its beginnings in the 1930's during the implementation of the "New Deal". The "trickle down" effects are with us today.

It is one thing to study the older supreme court cases and read the words contained in them. It is entirely another to read the history of the period as reported by the free press. The right to freedom of the press is guaranteed in the Constitution by virtue of the 1st Amendment. It has just as much merit as a supreme court decision and the benefits of the free press should not be ignored in legal arguments.

During the presidential campaign leading up to the 1932 election, part of Franklin Roosevelt's platform is outlined in The Saturday Evening Post editorial of December 22, 1934 by George Horace Lorimer. Mr Lorimer was the editor of The Saturday Evening Post from 1899 through 1936 and was a staunch defender of the Constitution. In this editorial, we read the following excerpts from Mr. Roosevelt's campaign speeches while running for president in 1932.

1. "There are offices provided for in the Constitution and laws of some of the states that have an honorable history, but are no longer necessary for the conduct of government. We have too many taxing districts. The taxpayers literally groan under layer upon layer of tax units. Relief can come only through resolute, courageous cutting."

2. "I shall use this position (as President) of high responsibility to discuss up and down the country, in all seasons, at all times, the duty of reducing taxes, of increasing the efficiency of government, of cutting out the underbrush around our governmental structure, of getting the most public service for every dollar paid by taxation. This I pledge you, and nothing I have said in the campaign transcends in importance this covenant with the taxpayers of this country."

3. "I accuse the present administration of being the greatest spending administration in peacetime in all our history- one which has piled bureau on bureau, commission on commission, and has failed to anticipate the dire needs or reduced earning 	power of the people. Bureaus and bureaucrats have been retained at the expense of the taxpayer."

4. "Let me make it perfectly clear, however, that if men or women or children are starving in the United States, I regard it as a positive duty of Government to raise by taxes whatever sum may be necessary to keep them from starvation."

5. "Let us have the courage to stop borrowing to meet continued deficits. Stop the deficits and let us also have the courage to reverse the policies of the Republican leaders and insist upon a sound currency."

6. "Of course, that means a complete realignment of the unprecedented bureaucracy that has assembled in Washington in the last four years."

7. "Every man has a right to his own property; which means a right to be assured to the fullest extent attainable in the safety of his savings." (source: ibid., pp. 22-23, 55)

These are but a few excerpts from Mr. Roosevelt's campaign speeches, but it will give the reader the gist of his platform. We shall now see that this platform was abandoned after Mr. Roosevelt took office in 1933.