______________, Aggrieved Lodgment
File on Demand
FOR THE RECORD:
In the UNITED STATES DISTRICT COURT
FOR THE WESTERN
In the matter referred to as: __________________________ Judge _______________________
This Judicial Notice is in the nature of a MEMORANDUM OF LAW
This document is a chronology of applicable references and citations that deal with the nature of the so-called federal income tax. Sixteen cases are from the United States Supreme Court, six are from lower court or state court cases, one is a Tax Court case and five of the citations reference acts of Congress. Without exception, all support this fundamental theme: labor is property, property is a right, and a right cannot be taxed. Income is gain from corporate activities, and the tax laws tax Income separated from the source (the property). In sum, Income is not the same thing as ‘receipts’ or ‘what comes in’ or ‘money’ or ‘wages’ or ‘salary’, etc. Rather, “income” is ‘gain’ or ‘profit’ from corporate activities. The natural man is NOT a corporation and therefore he does not make a ‘profit’. He exchanges his property in labor for receipt of other property such as Federal Reserve debt notes. A Corporation, on the other hand, processes its receipts through a Profit & Loss or Income Statement, which is the evidence of Income received
1884 – Butchers’ Union Co. v. Crescent City Co., 111U.S. 746 at page 757. Labor is property.
Mr. Justice Miller speaks for the Court: “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. The patrimony of the poor man lies in the strength and dexterity of his own hands, and to hinder his employing the strength and dexterity in what manner he thinks proper, without injury to his neighbor, is a plain violation of this most sacred property….”
1894 – Congress passed a 2% tax on income.
1895 – Pollock v. Farmers’ Loan and Trust, 158
Fuller said: “…the Constitution divided federal taxation into two great
classes, the class of direct taxes, and the class of duties, imposts, and
excises; and prescribed two rules which qualified the grant of power as to each
class.” “The power to lay direct taxes
apportioned among the several states in proportion to their representation in
the popular branch in Congress, a representation based on population as
ascertained by the census, was plenary and absolute; but to lay direct taxes
without apportionment was forbidden.
The power to lay duties, imposts and excises was subject to the qualification
that the imposition must be uniform throughout the
1907 – Adair v.
Referring to the 5th Amendment, Mr. Justice Harlan speaks for the Court saying: “…an invasion of the personal liberty, as well as of the right of property, guaranteed by that Amendment. Such liberty and right embraces the right to make contracts for the purchase of the labor of others and equally the right to make contracts for the sale of one’s labor….”
1909 – Congress passes the Corporation Excise Tax Act to tax corporate income (profit).
1909 – Congress passed SJR 40 – the Sixteenth Amendment to the Constitution.
“The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several States, and without regard to any census or enumeration.”
1913 – The States were recorded as having ratified the Sixteenth Amendment. Congress passes An Act to Reduce Tariff Duties and Provide Revenue for the Government, and for Other Purposes. Section II assessed the new income tax.
1913 – Stratton’s Independence v. Howbert, 231
The Court said: “…‘income’ may be defined as the gain derived from capital, from labor, or from both combined, and here we have combined operations of capital and labor….”
1915 – Brushaber v. Union Pacific, 240
Chief Justice Edward Douglas White said: “… the Amendment contains nothing repudiating or challenging the ruling in the Pollock Case that the word ‘direct’ had a broader significance, … that the purpose was not to change the existing interpretation except to the extent necessary to accomplish the result intended; that is, the prevention of the resort to the sources from which a taxed income was derived in order to cause a direct tax on the income to be a direct tax on the source itself, and thereby to take an income tax out of the class of excises, duties and imposts (where it belongs), and place it in the class of direct taxes.”
1915 – Coppage v. State of Kansas, 236
Mr. Justice Pitney speaks: “The right of a person to sell his labor upon such terms as he deems proper is, in its essence the same as the right of the purchaser of labor to prescribe the conditions upon which he will accept such labor from the person offering to sell it….”
1916 – Stanton v. Baltic Mining, 240
Chief Justice White said: “…by the previous ruling it was settled that the provisions of the 16th 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 and being placed in the category of direct taxation subject to apportionment by a consideration of the sources from which the income was derived….”
1917 – Southern Pacific v. Lowe, 238 Fed. R. 850. The district court defines income.
District Judge Manton said: “I do not think that ‘income’, as used in the statute, should be given a meaning so as to include everything that cones in. The true function of the words ‘gains’ and ‘profits’ is to limit the meaning of the word ‘income’ and to show its use only in the sense of receipts which constituted an accretion to capital. So the function of the word ‘income’ should be to limit the meaning of the words ‘gains ‘ and ‘profits’. The increased value of capital as such constitutes in one sense a gain or profit, but not income. Hence such gain or profit is not taxable, but only such profits and gains as constitute income are taxable….”
1918 - Doyle v. Mitchell Brothers Co., 247
Mr. Justice Pitney writes: “…What ever difficulty there may be about a precise and scientific definition of ‘income’, it imports, as used here, something entirely distinct from principal or capital either as a subject of taxation or as a measure of the tax; conveying rather the idea of gain or increase arising from corporate activities….”
1918 – Southern Pacific v. Lowe, 247
Mr. Justice Pitney writes: “We must reject in this case, as we have rejected in cases arising under the Corporation Excise Tax of 1909 (Doyle v. Mitchell Brothers Co., ante, 179, and Hays v. Gauley Mountain Coal Co., ante, 189) the broad contention submitted in behalf of the Government that all receipts – everything that comes in – are income within the proper definition of the term ‘gross income’….”
1920 – Eisner v. Macomber, 252
Mr. Justice Pitney writes: “Income is the gain, come to fruition, from capital, from labor, or from both combined. This is sound doctrine both in law and in economics….” “Congress cannot by any definition it may adopt conclude the matter, since it cannot by legislation alter the Constitution.” “After examining dictionaries in common use (Bouv. L.D.; Standard Dict.; Webster’s Internat. Dict.; Century Dict.), we find little to add to the succinct definition adopted in two cases arising under the Corporation Tax Act of 1909 (Stratton’s Independence v. Howbert, 231 U.S. 399, 415; Doyle v. Mitchell Bros. Co., 247 U.S. 179,185) – ‘Income may be defined as the gain derived from capital, from labor, or from both combined’, provided it be understood to include profit gained through a sale or conversion of capital assets, to which it was applied in the Doyle Case (pp. 183, 185).”
1921 – Merchant’s Loan
& Trust Co. v. Smietanka, 255
Mr. Justice Clarke speaks for the Court: “…there would seem to be no room for doubt that the word must be given the same meaning in all of the Income Tax Acts of Congress that was given to it in the Corporation Excise Tax Act and that what that meaning is has now become definitely settled by decisions of this court.”
1923 – Adair v. Children’s Hospital, 261
Mr. Justice Sutherland writes: “… moral requirement implicit in every contract of employment, viz., that the amount to be paid and the service to be rendered shall bear to each other some relation of just equivalence….In principle, there can be no difference between the case of selling labor and the case of selling goods….”
1926 – Bowers v. Kerbaugh-Empire Co., 271
Justice Butler writing for the Court said: “…’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….”
1936 – Grosjean v. American Press Co., 297
The Court ruled that a state is forbidden to impose an excise tax upon a right secured by the Constitution.
1941 – Champlin Refining
The court said: “Where property is given in exchange for other property, the cost of the property acquired is the value of the property given in exchange therefore….”
1943 – Murdock v.
The Court ruled that a state is forbidden to impose an excise tax upon a right secured by the Constitution.
Justice Patterson reports: “Reasonable compensation for labor or services rendered is not profit.”
1954 – Clark v.
Circuit Judge Johnson stated: “Of course, gross income and not gross receipts is the foundation of income-tax liability, for it is only earnings, profits and gains which the statue subjects to tax….”
1955 – Oliver v. Halstead, 86 S.E. Rep. 2d. 858 at page 859. Compensation for labor v. profit.
speaks for the court: “…There is a
clear distinction between ‘profit’ and ‘wages’ or compensation for labor. ‘Compensation for labor can not 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 mere compensation for labor,’ Commercial League Association of America v.
People ex rel. Needles, Auditor, 90
1959 – Penn Mutual Indemnity Co. v. Commissioner, 32 Tax Court pg 660. Nothing is changed.
“…the authority of Congress to impose a tax is plenary, except that direct taxes must be apportioned among the States according to population…. “…If the tax is a duty, impost or excise, the rule of apportionment does not apply; only if it is ‘direct’ does that rule come into play.”
1960 – Flora v.
Chief Justice Earl Warren speaks for the court: “…Our system of taxation is based upon voluntary assessment and payment, not upon distraint….”
1969 – Conner v.
District Judge Singleton explained: “…the meaning of income in its everyday sense is ‘a gain or recurrent benefit usually measured in money that derives from capital or labor; also: the amount of such gain recovered by an individual in a given period of time.’ Webster’s Seventh New Collegiate Dictionary, p. 425.
On page 1190 of
the Singleton ruling above is a footnote, which refers to a Senate Finance
Committee Report. That Report is No.
1622, 83rd Congress, 2nd Session, 168 (1954); which can
be found in
In other words, “’income’ is still what it was in the revenue law of 1862; still what it was in Pollock; still what it is in the Sixteenth Amendment; still what it was in Brushaber – and still what it was in the Internal Revenue Code of 1939. Income is profit or gain.”
On this Ninth day of March, anno Domini Two Thousand and Six –
All Rights Reserved Without Recourse.
Affirmed by: ________________________
Henry Dale Goltz