No law continued

Following up on yesterday’s post, it has become apparent that the State of Minnesota erroneously believes that it is my view that “taxation is evil.”  I don’t believe taxation is evil.  I believe—in line with United States Supreme Court precedent—that the federal income tax is a legal and constitutional excise tax that applies to federally taxable activities—federally privileged activities within the scope and authority of federal jurisdiction.  A number of historical events have unfortunately caused the income tax to be applied and enforced beyond its lawful and constitutional limits.  At present, there is no systemic mechanism that would cause the enforcers to awaken to this fact.  Sovereign immunity, lifetime appointment of federal judges, and weak malicious prosecution laws make holding government agents accountable for their errors very difficult.  If there were no sovereign immunity and/or prosecutors and judges could be more easily held financially accountable for wrong decisions (i.e., they actually had “skin in the game”), then this problem (along with things like the killing of Philando Castile) would be remedied more quickly and would soon fade into near non-existence. 

If a state agent can kill or put someone in jail and face no risk when they a mistake, errors and injustices will necessarily persist.  In my experience, the telltale sign of a state agent acting recklessly (because s/he faces no real risk in making an error) is a lack of meaningful dialogue and emotional, angry responses that refuse to acknowledge or address the merits of a position, instead they tend to call the position “frivolous.”  This is what happened to former IRS criminal investigator Joe Banister after he awakened to the fact that he was wrongfully prosecuting people and wrongfully enforcing the income tax.  Instead of being identified as the hero that he is, he was criminally charged and after he won a jury trial riskless and therefore reckless prosecutors continue to pursue him.  It is also what happened to me when I sued the bailout banks and simple asked that, in accordance with 150 years of Minnesota law, prove the validity of their right to foreclose a mortgage in a quiet title action.   You can judge the merits of this position in this video.  

Yesterday’s post showed clearly that every excise tax in the federal Internal Revenue Code, with the exception of the income tax, contains a “persons liable” section that specifically identifies who is responsible for paying the tax.  When courts and prosecutors are presented with this fact, unfortunately they do not respond by politely pointing out the error and identifying the conspicuously absent “persons liable” definition in Subtitle A of the Code.  They instead respond with negative emotion and namecalling.  

A comprehensive review of the method and means of the collection of the federal income must include another relevant “persons liable” withholding provision within the Internal Revenue Code.  The other relevant provision is in Subtitle C which relates to “Employment Taxes.” 

Chapter 24 of Subtitle C is entitled “Collection of Income Tax at Source on Wages.”  Although this title is instructive in how the income tax (Subtitle A) operates in practice, it is likely legally irrelevant because the Code states that “descriptive matter relating to the contents of this title” has no legal effect.   26 U.S.C. § 7806

Section 3402 requires “employers” paying “wages” to deduct and withhold a portion of those wages and pay them to the U.S. Treasurer: 

(1)In general Except as otherwise provided in this section, every employer making payment of wages shall deduct and withhold upon such wages a tax determined in accordance with tables or computational procedures prescribed by the Secretary.

 

26 U.S.C. § 3402.

Section 3403 makes the “employer” who is required to withhold under section 3402 “liable” for withheld amounts and also exonerates the employer from any wrongful withholding claims from any “person” subject to the withholding:

The employer shall be liable for the payment of the tax required to be deducted and withheld under this chapter, and shall not be liable to any person for the amount of any such payment.

26 U.S.C. § 3403.  

The definitions of “employee” and “wages” for purposes of Subtitle C’s employment tax withholding requirement are contained in section 3401 and are limited to include only federal workers and federal instrumentalities: 

Wages For purposes of this chapter, the term “wages” means all remuneration (other than fees paid to a public official) for services performed by an employee for his employer, including the cash value of all remuneration (including benefits) paid in any medium other than cash; except that such term shall not include remuneration paid

 

26 U.S.C. § 3401(a).   Section 3401(a)’s relative broad definition of wages is significantly narrowed by the later definition of “employee,” a definition that falls squarely within federal de jure jurisdiction: 

 

(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.

 

26 U.S.C. § 3401(c).  Section 3401’s later definition of employer makes clear that responsibility for determining, paying, and reporting federally taxable gross income lies with the person or entity that is the actual “source” that controls payment of federally taxable gross income:

 

(d)Employer  For purposes of this chapter, the term “employer” means the person for whom an individual performs or performed any service, of whatever nature, as the employee of such person, except that— (1)

if the person for whom the individual performs or performed the services does not have control of the payment of the wages for such services, the term “employer” (except for purposes of subsection (a)) means the person having control of the payment of such wages…

 

26 U.S.C. § 3401 (d).

 

These expressly narrow definitions are significant because, the United States Supreme Court has held that taxing statutes must be narrowly construed in favor of the taxpayer and only their literal meaning can be applied in determining the scope of any tax.  United States v. Merriam, 263 U.S. 179, 187-88 (1923) (“…in statutes levying taxes the literal meaning of the words employed is most important, for such statutes are not to be extended by implication beyond the clear import of the language used.  If the words are doubtful, the doubt must be resolved against the Government and in favor of the taxpayer.”  Accord, Gould v. Gould, 245 U.S. 151, 153 (1917).  https://supreme.justia.com/cases/federal/us/245/151/

The FICA/FUTA section of the Code (Subtitle C, chapter 21) contains a much broader definition of employee that includes all common law employment relationships.  26 U.S.C. § 3121(d).   This definition, however, is limited to the FICA/FUTA chapter and is also limited to employment “within the United States.”  26 U.S.C. § 3121(b).   Like section 3401 above, these relatively broad FICA/FUTA definitions are later narrowed by a definition of “United States” and “state” that expressly includes only geographical areas within the Constitutional de jure jurisdiction of the federal government:  Washington, D.C. the Commonwealth of Puerto Rico, the Virgin Islands, Guam and American Samoa.  26 U.S.C. 3121(e). 

So there are three income-tax and income-tax-related rabbit trails in the Code that all lead to similarly narrowly-defined rabbit holes that include only people and territories expressly within clear federal Constitutional jurisdiction. 

A recap. 

First, Subtitle A purports to contain the entire “income tax” and has only one section, section 1461, that references any person liable or responsible for the tax.  Section 1461 identifies all persons responsible for withholding income paid to include exclusively non-resident aliens and foreign corporations.  26 U.S.C. § 1441-46.

Second, Subtitle C relates to “employment taxes” and chapter 24 of Subtitle C relates to “collection of income at the source” with respect to wages.  This set of definitions starts with section 3402 which requires all “employers” paying “wages” to an “employee” to withhold a portion of the wages paid.  Section 3403 says that employers are liable for paying withheld tax.  All of these definitions end, however, with the definition of “employee” contained in section 3401(c) which includes only federal employees. 

Third, chapter 21 of Subtitle C relates to the “Federal Insurance Contributions Act,” specifically FICA and FUTA taxes and contains its own independent definitions of employee and wages.   Chapter 21 identifies no “persons liable” or person or entity required to withhold FICA and FUTA taxes.  This chapter’s definitions begin with section 3121(b) which defines “employment” to mean any service “within the United States” or outside the United States by an “American Employer.”  These definitions lead to sections 3121(e) which define “state” and the “United States” to include only:  Washington, D.C., the Commonwealth of Puerto Rico, the Virgin Islands, Guam and American Samoa.  Although the definition of “employee” contained in section 3121(d) includes all employees, including common law employees, because of the way the previous statutes are constructed—application is based on the geographic location of the employer, not the nature of the employment relationship—this broader definition does not impact the scope of the FICA/FUTA chapter and limits it to employers located within federal geographic territories. 

Because every other federal excise tax in the Internal Revenue Code contains clear definitions regarding “person’s liable” for the tax and also relatively clearly define what activities or transactions trigger the tax, it is reasonable to conclude that the definitions above are purposefully limited to fit within the scope of federal power and jurisdiction.  

More tomorrow…