nclusion that the federal government was unlawfully forcing her to withhold taxes from her employees' paychecks. Once she determined that a wrong was being foisted upon unsuspecting Americans, both employer and employee alike, she decided to fight back way back in 1948!

While the federal government went after Ms. Kellems, assuming she was just another female out of her element in the business world and therefore easy pickings, it soon found out the error of its ways. This woman not only fought back with the paper war that comes with standing up for what's right and what the law actually says, Kellems began an all-out, high profile, highly public campaign and took the issue to the people.

Daring the President of the United States of America to make her a paid tax collector, she spared no elected public servant in her quest to see the truth exposed. She dared the government to come after her. The outcome of Toil, Taxes and Trouble will surprise and delight you. Toil, Taxes and Trouble is a book that must be read by every American in order to understand one of the greatest scams being perpetrated by the United States government against her people.

Employees:

Are you tired of having your paycheck raided regularly under false pretenses?

“Many people lack an understanding of the real meaning of patriotism. They confuse love of government with love of country. The true patriot may love his country and utterly despise his government. The men who founded this country were true patriots. They loved this country, its very soil, but they hated the despotic tyranny of George III and his Parliament which clamped one oppressive law after another down upon them.

“Today millions of Americans love their country but hate the rotten, deceitful Government which maintains itself in power by confiscating the wealth and earnings of the American people, and uses this vast treasure to buy votes with promises of false security to people who do not understand that their Government cannot promise security as it has no security to give. The only security in this world is the security which each person has within himself, the ability to cope with the problems of life as they are presented. The only security our country possesses is a strong, virile, self-reliant people, and as a matter of fact, that is the only real security for the whole world, since we are trying to carry most of the world on our backs. Let us note well and preserve our greatest asset — the character of the American people.” — Vivien Kellems, Chapter 6, Toil, Taxes and Trouble, 1952

Are you going along just to get along? Are you willing to take a stand for your future and that of your children? The People have the power to end the deceit!

Chapter 1: That All the World Should Be Taxed

My action in breaking the law forcing employers to collect withholding taxes from their employees was the culmination of long pent-up resentment at Federal usurpation of the taxing power, rebellion against the destruction of the Federal Tax System, so carefully designed and perfected by the brilliant men who wrote our Constitution, and realization that something must be done to make the people understand the ultimate end of the primrose tax path we are treading. The announcement of my intention to break the law was made in a speech before the Los Angeles Rotary Club, on February 13, 1948, and the first time this tax money was left in our employees’ pay envelopes was on the following Friday, February 20, 1948. However, due to the reluctance of the Federal Government to face the issue, it was not until January 23, 1951, three years, eleven months, and seventeen days later that I finally sat on the witness stand in the Federal District Court, in New Haven, Connecticut, and heard my lawyer, Frank McGuire , say: “Miss Kellems, will you read Exhibit A?”

I picked up the papers with trembling hands, and in a low voice began to read:1 “And it came to pass in those days that there went out a decree from Caesar Augustus, that all the world should be taxed. And all went to be taxed, everyone into his own city.”

It has frequently been said that history repeats itself, and today, we are witnessing a repetition of the act of Caesar Augustus two thousand years ago. It all began in 1913, when we issued a decree “that all the world should be taxed,” every man in his own city. For in that year we adopted the Sixteenth Amendment to our Constitution:

“The Congress shall have power to lay and collect taxes on income from whatever source derived, without apportionment among the several States, and without regard to any census or enumeration.”

And when we adopted this income tax amendment, we departed from our constitutional method of taxation. For one hundred and twenty-five years, the Federal Government had levied taxes and they were always apportioned among the several States. Why do you suppose the Constitution is so specific and so explicit that Federal taxes shall be uniform and apportioned among the States? For one reason only. Our forefathers were determined to build a republic with equal opportunity and equal responsibility for each and everyone of us. They knew that the power to tax is the power to destroy, and they did not wish to have one group of citizens, or one part of the country penalized for the unfair advantage of another.

How wise and farsighted they were! For one hundred and twenty-five years this was our traditional, constitutional system of taxation, and under it we built the richest, most powerful nation in the world. We developed and maintained for the majority or our people, a standard of living, undreamed of in any other country, the hope and the envy or all the world.

And then what happened? We chucked our proven system of taxation out the window, and we passed the income tax. Gone was our uniformity, gone was our apportionment among the States. And with uniformity and apportionment went a great deal more—our fundamental American rights. At first, we started with a tiny little one per cent on all incomes. That being more or less painless, we raised it to 2 per cent. And then 5 per cent, and then 10 per cent, and then 20 per cent, and then 50 per cent, and up and up and up to 90 per cent and in 1943, due to that clever so-called 75 per cent forgiveness trick, some citizens in this country were taxed more than 100 per cent of their incomes.

Is it a tax or is it confiscation? But that isn’t all. Being so intrigued with the income tax, we decided that if one tax is good, two are better and we proceeded to pass the capital gains tax which slapped business right in the face and sent it reeling into the corner. And to salt it down, we added the idiotic capital stock tax. And still not satisfied, we made sure that every dividend should pay two taxes—one by the corporation and another by the stockholder, if and when he got it. And right in the middle of this tax orgy, we elected an Administration that made a wonderful discovery: The world was its little oyster to open. Up to this point we thought we had done pretty well, but we soon realized we were just pikers. Taxes? We didn’t know the meaning of the word, but we soon found out that the New Dealers did. Taxes? A new one every day or two! They rained upon us as the gentle dew from Heaven. “Tax and tax, spend and spend, elect and elect,” quoth the delighted Harry Hopkins.

Soak the rich in Illinois, or New York, or Connecticut and buy some votes in Oregon or Nevada or wherever they are needed. The formula worked like magic for political purposes but it threw our country into the deepest and most tragic depression of our history. The depression of the 1930’s was a tax depression. Business simply could not function. It took a world-wide war, billions of dollars, and the precious lives of thousands of our boys to pull us out of it.

But with the adoption of the income tax, we lost something more precious than uniformity and apportionment among the States. Let us go back to our Fourth and Fifth Amendments: “The right of the people to be secure in their persons, houses, papers and effects against unreasonable searches and seizures shall not be violated…” and “…no person shall be compelled to be a witness against himself, nor be deprived of life, liberty or property without due process of law.”

These two Amendments insured to the citizens of the United States the right of privacy. It was ours in every sense, until the passage of the Sixteenth Amendment, but with the income tax, we lost this precious right. If I say, “No,” you cannot come into my house without a search warrant, and before you can secure such a warrant, you must advance good and sufficient cause for searching my house. But the Income Tax Inspector can come into my home or yours. In the name of the Income Tax, the Federal Government can search and seize every paper you own, it can force you into court, to be a witness against yourself, and if you are not able to pay the tax, it can sell you out, lock, stock and barrel. The Income Tax is the strongest weapon ever placed in the hands of an unscrupulous government, and as long as that Amendment is a part of our Constitution, our freedom is in jeopardy. Our right to privacy, so carefully insured to us by the Fourth and Fifth Amendments, has vanished.

But taxes are like strong drink. They grow upon you. If income taxes are good for some of us, they must be good for all of us. If one citizen is to pay an income tax then every person who has an income should also pay his proportionate share. With which conclusion I agree. But I disagree with the premise—I don’t think an income tax is good for anyone, the taxpayer or the Government. But this time we really did a job. Under the hypnosis of war hysteria, with a pusillanimous Congress rubber-stamping every whim of the White House, we passed the withholding tax. We appointed ourselves so many policemen and with this club in our hands, we set out to collect a tax from every

hapless individual who received wages from us. We became our “brother’s keeper.”

From time immemorial the tax collector has been feared and hated. The baron of old used to farm out his tax collections, paying his agent a percentage of what he was able to wrest from his impoverished subjects. It is not accidental that this job was placed upon the employer. A crafty Administration which thrived upon class hatred “planned it that way.” Here was another wedge to drive between the employer and the employee, another opportunity to cause misunderstanding and dissension. The employee did not blame his government, he blamed his employer, and even today thousands of workers in this country still think it is a dirty trick of the wicked capitalists. But we weren’t as clever as the barons’ tax collectors. We didn’t pay ourselves for collecting taxes, we didn’t even reimburse ourselves for our expense in collecting taxes, we made ourselves responsible for other people’s taxes and we penalized ourselves for not collecting them. Let us read the law:

“Every person required to deduct and withhold the tax… from the wages of an employee is liable for the payment of such tax whether or not it is collected from the employee. If, for example, the employer deducts less than the correct amount of tax or if he fails to deduct any part of the tax, he is nevertheless liable for the correct amount of the tax. However, if the employer… fails to deduct and withhold the tax and thereafter the income tax… is paid, the tax shall not be collected from the employer.”

In other words, the Government won’t collect it twice — isn’t that big-hearted? But there is more. “Such payment does not, however… relieve the employer from liability for penalties or for failure to deduct and withhold within the time prescribed by law.”

So, if your employee does not pay his tax, you have to pay it, and if he does pay it but you do not deduct and withhold it, you can be fined and sent to prison. This is in free America! — Vivien Kellems, Toil, Taxes and Trouble.

The Purpose of the Sixteenth Amendment

Constitutional Income: Part 1 of 4, The Purpose of the Sixteenth Amendment

By Phil Hart © Permission is granted to republish when credit is given.

"We condemn the Dingley tariff law as a trust-breeding measure, skillfully devised to give the few favors which they do not deserve and to place upon the many burdens which they should not bear." Democrat Presidential Platform, 1900.

"We favor an income tax as part of our revenue system, and we urge the submission of a constitutional amendment specifically authorizing Congress to levy and collect a tax upon individual and corporate incomes, to the end that wealth may bear its proportionate share of the burdens of the Federal Government." Democrat Presidential Platform, 1908.

Prior to the income tax system of revenue generation for our national government, most of the monies collected in taxes for the support of government came from tariffs on imported goods. At the national level, there was no tax on property. In 1894 Congress had attempted to tax property by way of an income tax. But this tax was declared unconstitutional by the Supreme Court in the Pollock Case one year later. The Court said that a tax on the net income from investment was the same as a tax on the underlying investment and was therefore an unapportioned direct tax. Such a tax is not allowed by the Constitution.

In the year 1910, the budget for the national government was $1,042,000,000. That's right, one billion dollars. Remember this was before the private Federal Reserve System (which isn't federal and has no reserves) when the dollar was backed by gold, and mortal man had yet to figure out how to inflate a gold-backed currency. Also at this time there had been little success in breaking up the business monopolies that controlled much of American industry, and America was involved in a class struggle between the super rich and those who toiled for a living. Others will remember this time for the struggle between capital and labor.

Labor thought it was going to level the playing field with an income tax which would tax only the accumulated wealth of the nation. The purpose of the Income Tax Amendment (the 16th Amendment) was to bring tax relief to wage-earners. That was the plan, but the income tax has not worked out this way. This is evidenced by the fact that today large corporations, family trusts and foundations pay little or no tax while the middle class is drowning in taxation. Nothing has changed. The reality was in 1909 the very rich, with help of Republican Senator Aldrich of Rhode Island, gave in to the pressure to approve an income tax amendment to the Constitution. But the Republicans did so in such a way that the entire income tax issue could later be manipulated to protect the wealth which was supposed to be taxed. First they added wages to the mix while at the same time exempted them out. Incrementally they inflated our money while lowering the exemption amount. By WWII almost everyone was paying an income tax on their wages and salaries. It was never intended to be this way.

The Protective Tariff

The purported purpose of the "protective tariff" was to protect American jobs from cheap foreign imports. The theory went that if we charged a tariff on imported goods, then American companies could more easily compete, would sell more domestically made goods, and thereby be able to employ more people and pay them a higher wage. This was the theory. But the reality was far different.

The following is a quote from the Congressional Record. Being debated by the United States Senate was the income tax issue.

Mr. HEFLIN. "The great body of consumers struggling for the "wherewith" to buy the simple necessities of life are taxed, and heavily taxed, by this Aldrich bill, not only to raise revenues to meet the extravagant expenditures of the Republican party, but taxed for the benefit of those who profit by the Republican policy of high protection - those who furnish the Republicans with campaign funds with which to corrupt the ballot and debauch American manhood. (Applause on Democratic side.)

When you, by tariff taxation, lay heavy burdens upon the things that this man needs and must have to make his wife and children comfortable and happy, you are working injury to this man and his family - you are standing between them and a worthy existence, and you are committing a crime against the American home.

Mr. Speaker, I want some one on that side of the House [Republican] to tell me the difference between the bold robber who holds you up on the highway and robs you of your money, and the government that does the bidding of a band of robbers who prescribes the conditions by which you shall come and surrender your money? I will tell you the difference: One takes his chances and runs the risk of losing his own life in his efforts to rob others, while the other gang uses the governmental machinery to hold up and plunder the citizen and in the name of law commits its crime against humanity.

The Republican party regards the presence of a few money kings as evidence of American's prosperity; but not so. These are the product of governmental favoritism, the creatures of unjust tariff taxation. The laws that made them millionaires have robbed millions of people of the necessities of life." 44 Cong. Rec. 4421 (1909).

What had happened with the protective tariff was that the tariffs were set much higher than what was needed to protect American jobs. Instead the tariff was used to keep out foreign competition and keep the cost of American goods high such that those who owned the manufacturing companies could receive a windfall profit. Those American businessmen, who managed to benefit financially from the high tariff, were positioned to buy up any smaller competitors within their industries, thus stifling domestic competition. Great business monopolies were being created and American society was being transformed into a class society of the super rich and everybody else. This sad state of affairs was no secret to anyone at that time.

With monopolies in place and a high protective tariff to keep foreign competition out, the wealth class of businessmen, who didn't work but lived off of "incomes," were in effect placing a tax on the goods they sold payable by the American people. The tax was on consumption. It was a tax on the necessities of life. Quoting again from the Congressional Record:

Mr. BYRD. "Its very name (protective tariff) means inequality of tax burden. It means a tax upon consumption and not upon wealth, upon what one eats and wears and not upon his property; it means that the citizen who can scarcely provide food and raiment for his wife and children contributes as much or more to the support of the Government as does the multimillionaire, and it means that the consumer is not only taxed for the support of his country, but is compelled to contribute five times more to swell the fortunes of millionaire manufacturers and trust manipulators." 44 Cong. Rec. 4415-6 (1909).

The tariff was so high that the percentage of foreign goods sold in America represented only 5%, or one twentieth, of the total goods sold. With such a low level of imports, the government would not be collecting much in the way of imposts (custom fees), and the tariff was therefore not maximizing the amount of revenue the government was collecting. The people realized the purpose of the tariff was not to raise revenue for the government, but to make the friends of the Republican members of Congress rich. The founding fathers and We The People gave Congress the power of taxation to run the government and to protect life, liberty and property. Instead, Congress was using the tariff to insure that their businessmen friends got rich and had ample money left over to help them get re-elected. Sound familiar? Congress can do such things only because the people let them.

At this time there were few barriers to the monopolization of American industry. The Sherman Anti-Trust act was passed in 1890 but had yet to take its full effect. Great combinations of companies were organized into trusts or holding corporations. These represented the monopolization of individual industries. With high tariffs to keep out foreign competition and with the ability to control an entire industry, domestic prices could be set much higher than that necessary to return a reasonable profit. American businessman were getting extremely rich and the American people knew it.

According to Senator Borah of Idaho, himself a Republican, "Mr. Carnegie told us time out of mind that he could not run his mills or manufacturing plants without the protection which he demanded. In view of the fact that he did run his mills after the protection was given, and accumulated wealth which he will not live long enough to distribute, it seems to me that the Republican party did make Mr. Carnegie."

Mr. JAMES. "Who is prepared to defend a system of taxation that requires a hod carrier, who for eight long hours each day winds his way to the dizzy heights of a lofty building with his load of mortar or brick, to pay as much to support this great Republic as John D. Rockefeller, whose fortune is so great that it staggers the imagination to contemplate it and whose property is in everycity and state in the Republic and upon every sea protected by our flag..... How men can defend a system of taxation in a republic which requires of the poor all of its taxes and exempts the rich absolutely I am totally unable to see. In the everyday alks of life we expect more for church, for charity, for the uplifting of society, and education from those who are more prosperous, most wealthy, most able to give. Yet the system of taxation advocated by the Republican party drives the taxgatherer to the tenement house and makes him skip the mansion, drives him to the poorhouse and lets him pass the palace...

Mr. Speaker, no tax was ever more unjust, in my opinion, than a tax upon consumption, for all must eat to live, all must wear clothes, and when you place a tax upon what it takes to sustain one(self), you announce the doctrine that all men share alike in the blessings of government, that all men prosper equally. But we have only to look about us to see how false this doctrine of taxation is. A tax upon what some people eat and what they wear would deny them the necessities of life, while others, rolling in opulence and accumulation their wealth into the millions, would not feel such a tax." 44 Conc. Rec. 4398 (1909).

Because the protective tariff tax was a tax on consumption, most people in America paid about the same amount of tax each year. Whether you are rich or poor, you can only eat so much food and wear out so many clothes in a year's time. But those who labored for a living had a larger appetite than those who clipped interest coupons off their bonds and did nothing else productive during the day. In a sense, the working man paid as much or morefor the support of government than the rich man.

The Pollock Rule and Apportionment

"The effect of the decision of the Pollock Case in 1895 was that taxes on income, if that income flowed from real or personal property, would be direct, and would, therefore, have to be apportioned among the states according to population. The necessity for apportionment seemed to render such taxes impracticable, and as there was an increasing public sentient calling for the collection of revenue from such a source, [Consequently] the Sixteenth Amendment was proposed...." W. C. J., Constitutional Law: Income Tax: Sixteenth Amendment, 4 California Law Journal 333, 334-5 (1915-6).

The decision of the Pollock Court created the rule whereby anytime an income tax was levied on the net income from investment (otherwise known as personal property) that the tax was actually determined to be imposed on the underlying investment and was therefore a direct tax. As a direct tax, the tax was required to be apportioned by the Constitution. In my opinion, this ruling went too far as the financial impact on the underlying investment is minimal and barely measurable.

Apportionment among the states would require any income tax under The Pollock Rule to be geared to what the average person in Mississippi could afford, while the great incomes were actually located in New York. Under the apportionment rule, the tax collected from each state would be allocated among the states according to the population of each state. As such each person would be responsible for the same dollar amount of tax, on the average that is. If in 1909, all that could be reasonably afforded by the people of Mississippi was an income tax of say $50 per person annually, then this is the same amount a person in New York would pay, on the average. Such a condition made the levying and collection of such a tax impractical, especially since the tax sought to reach unearned income, gain and profit, not wages. There were not many people in Mississippi who had the former.

The people of America understood the word "income" to mean unearned income, gain and profit. A tax on unearned income, gain and profit would inherently be an indirect tax subject only to the rule of uniformity as such a tax is avoidable. An indirect tax would not have to be apportioned. But this was impossible because the Supreme Court had determined that there was a linkage between an income tax on net income and the source of the income. Unless this linkage could be severed, what was inherently an indirect income tax would have to be apportioned. The Pollock Decision needed to be overturned by way of constitutional amendment to accomplish this end. At that time, only a minority of Americans had an "income" as most people worked for wages.

We need to realize that the American people understood the purpose of any income tax amendment to the Constitution was to reach the gains, profits and unearned income of the country. It was not the intention of the American people to tax the wages and salaries of the working man. The American people were frustrated by the Supreme Court's Pollock Decision where taxes on income from real estate and personal property (mostly stocks and bonds) were ruled to be direct taxes and required by the Constitution to be apportioned among the several States. This made it practically impossible to levy an income tax on the income from these sources since the wealth of the country had become so concentrated in New York and the New England states.

Mr. BARTLETT of Georgia. "Therefore the decision, [Pollock] in effect, puts the dollar of the millionaire beyond the pale of being equitably taxed according to his wealth, unless a constitutional amendment be invoked.... However, there should be some method by which the untold wealth and riches of this Republic may be compelled to bear their just burdens of government and contribute an equitable share of their incomes to supply the Treasury with needed taxes.

As I see it, the fairest of all taxes is of this nature [a tax on gains, profits and unearned income], laid according to wealth, and its universal adoption would be a benign blessing to mankind. The door is shut against it, and the people must continue to groan beneath the burdens of tariff taxes and robbery under the guise of law." 44 Cong. Rec. 4414 (1909).

Election of Senators

During the time the income tax amendment was being debated, the American people had two constitutional remedies in mind to level the taxation playing field. One was a constitutional amendment to overturn the obnoxious part of the Supreme Court's Pollock Decision regarding income taxes, and the other was direct election of U.S. Senators by the people. Both amendments were endorsed by the Democrat Party platform in 1908. The ultimate purpose of both amendments was to reduce the protective tariff and to place an income tax upon accumulated wealth. At the time the perception was that the United States Senate was a club for millionaires and was responsible for the injustices of the high protective tariff.

If you remember your high school civics, you will recall that the framers of the Constitution had the states legislatures elect the members of the United States Senate. The idea was to have the states represented in the U.S. Senate as the national government was really just a federation of states with only 17 enumerated powers. The People were represented in the lower house of Congress and the states were represented in the upper house of Congress. But please realize, that those state legislators who choose the senators, were also elected representatives and were closer to the People than the members of the national House of Representatives. Thus originally, U.S. Senators were selected by those elected representatives who should have had the closest contact with the People.

At the time of the income tax debates, the people did not think they were being represented in the U.S. Senate. Since wealth is always organized, and the rest of us generally mind our own business, individuals who represented powerful financial interests were regularly appointed to the U.S. Senate. The People of America had lost a measure of control of their own government. These powerful financial interests, most of whom were Republicans, while claiming to be protecting the American working man, would engineer the protective tariff in such a way that their businessmen friends, who controlled the business monopolies, would rake in the profits.

Mr. ADAIR. "The action of the Senate in dealing with the tariff emphasizes the fact that we have too many millionaires in that body and that a few high-priced funerals would be a good thing for the country. As I am informed, there are now in the United States Senate 38 millionaires representing over $140,000,000. What can the people expect at their hands but legislation designed to aid the special-privileged class. I surely hope, Mr. Speaker, that the day will soon come when Senators will be elected by a popular vote of the people, and that the United States Senate will no longer be the dumping ground for millionaires, who have nothing in common with the plain people...

I hope the day will soon come when the United States Senate will be composed entirely of men who will represent more loyalty and less wealth, more patriotism and less plutocracy; men who love their country more than their money. When that body is so made up, such tariff bills as the one we are now considering will never emanate from that end of the Capitol." 44 Conc. Rec. 4435 (1909).

There is a belief among those who are a part of the freedom movement in America that there was some sinister motive in the purposes of the 17th Amendment (direct election of U.S. Senators by the People). The allegation is that when the state legislatures selected the members of the Senate, that this gave the states representation in Congress making us a constitutional republic. The fear is that now we no longer have the states represented at the federal level, but instead we have degenerated from a constitutional republic into a democracy. Remember a democracy is two foxes and a chicken voting on what's for dinner.

I disagree. The purposes of the 17th Amendment was to remedy a problem. The Senate had become a plutocracy and was exploiting the people. It was a "House of Lords." It legalized plunder on behalf of the upper class of society through the protective tariff. What may have been a good design on the part of the framers had become perverted by the love of money. The 17th Amendment was the Peoples' attempt to bring fairness back into the running of government.

The Purpose of the Sixteenth Amendment

Nowhere in American society, in government, nor in our Constitution were one class of citizens given the right to place a tax on another class of citizens. But this is the effect of what was happening with the protective tariff. This situation was similar to that of the feudal system of medireview England, where the king would grant an exclusive license to one of his friends to operate a particular business in a protected geographical area. Such an exclusive license allowed this friend of the king to charge an excessive price for his product or service and thereby earn excessive profits. In effect, the king's friend was taxing the subjects of the king with the king's permission. King Solomon said "There is nothing new under the sun."

Mr. BORAH. "Mr. President, to illustrate further, our system of taxation had its origin in the period of feudalism, when the tax was laid upon those, and those only, who could not resist the payment of it. That was the first tax under our present taxing system. The plan then was, as stated by a noted writer - and it was earnestly argued in those days - that it was a proper distribution of the burdens of government that the clergy should pray for the government, the nobles fight for it, and the common people should pay the taxes. The first fruits of that system, and the first modification of that system, were had during that economic and moral convulsion which shook the moral universe from center to circumference - the French revolution. Historians dispute today as to the cause of the French revolution. If you would know the cause, you will not find it in the days transpiring with the fall of the Bastile; you will not find it in the days when Robespierre, drunk with human blood, leaned against the pillars of the assembly, as he listened to his own doom. It is back of that. It is in those immediate years preceding, when the burden of government had become intolerable, when the stipends paid to the miserable satellites of royalty had become criminal; when bureaucracy reached out into every part of the nation and bore down upon the energies and the industries of the common man; and when, Mr. President, 85 percent of that fearful burden was collected from the peasantry of France, which forced them from their little homes and farms into the sinks and dives of Paris, where the French revolution was born.

The history of taxation is well worthy of the attention of those who believe that in order to maintain a republic, we must always have at the base of our civilization an intelligent, free, and, to some extent, an unburdened citizenship..." 44 Conc. Rec. 3988-9 (1909).

At the time the income tax amendment was being debated (1909), most of the wealth of the country was located in New York City and the New England states. Back then it was the Democrat Party that stood for principle. When the Republicans would mouth their desire to protect the American worker with the protective tariff, the Democrats would call a spade a spade. In 1892, the Republican party platform stated:

"We reaffirm the American doctrine of protection. We call attention to its growth abroad. We maintain that the prosperous condition of our country is largely due to the wise revenue legislation of the last Republican Congress. We believe that all articles which can not be produced in the United States, except luxuries, should be admitted free of duty, and that on all imports coming into competition with the products of American labor, there should be levied duties equal to the difference between wages abroad and at home."

Also in 1892, the platform for the Democrat Party was more honest and had this to say:

"We denounce Republican protection as a fraud - a robbery of the great majority of the American people for the benefit of the few. We declare it to be a fundamental principle of the Democrat Party that the Federal Government has no constitutional power to impose and collect tariff duties except for the purposes of revenue only, and we demand that the collection of such taxes shall be limited to the necessities of the Government when honestly and economically administered.

We denounce the McKinley tariff law enacted by the Fifty-first Congress as the culminating atrocity of class legislation..."

In 1896 the Democrat Party platform voiced a similar objection to the protective tariff. The 1900 Democrat Party platform was more direct:

"We condemn the Dingley tariff law as a trust-breeding measure, skillfully devised to give the few favors which they do not deserve and to place upon the many burdens which they should not bear.

Private monopolies are indefensible and intolerable. They destroy competition, control the price of all material and of the finished product, thus robbing both producer and consumer.... They are the most efficient means yet devised for appropriating the fruits of industry to the benefit of the few at the expense of the many, and unless their insatiate greed is checked, all wealth will be aggregated in a few hands and the Republic destroyed.

The dishonest paltering with the trust evil by the Republican party in state and national platforms is conclusive proof of the truth of the charge that trusts are the illegitimate product of Republican policies; that they are fostered by Republican laws; and that they are protected by Republican administration for campaign subscriptions and political support."

As a case in point we can quote again from the Congressional Record to determine what effect the protective tariff had on a specific industry.

Mr. BYRD. "Well, does my friend know that every time a dollar of tax is voted upon any article imported into this country that the domestic producer of such article adds the same as an extra profit on his product? This was once denied by the advocates of protection, but it was conceded by the most stalwart Republican Senators in the recent great tariff debate. I would like for him to tell the country wherein is to be found equality of taxation under such a system. One man is not only taxed for the support of the Government, but for the benefit of his fellow-man. While he pays $1 to the Government, he is compelled to pay from five to seven times this amount to his neighbor who is engaged in a manufacturing enterprise. For instance, the American farmer consumes $25,000,000 worth of agricultural implements annually. The tax thereon is 20 per cent. The Government in 1907 collected only $3,600 in revenue (tariff collected on imported agricultural implements), but according to admissions of Republican Senators the 20 per cent Dingley rate was levied in favor of the manufacturer on the $25,000,000 consumed at home, amounted to a tax of $5,000,000. So the American farmer, while he paid $3,600 to his Government, was compelled to donate $5,000,000 to the agricultural-implement trust." 44 Cong. Rec. 4416 (1909).

Congressman Byrd testified on July 12, 1909 that if Congress cut the tariff in half, that imports would increase four fold thereby doubling the amount of money the government collected in tariff revenue. This would have resulted on an aggregate decrease of $7,000,000,000 in the cost of all consumer goods. Obviously the greater goal was not to generate revenue for the government, but to increase the wealth of those who supported the Republican Party.

Mr. BYRD. "If the rich are to be taxed by these measures to run the Government, and the poor are to be taxed by high protection to enrich the manufacturers and trusts, then, in the name of reason, what good can you expect from this legislation? The income tax is right, and it is the only fair means to raise revenue to run the Government, and when it is adopted, it is to be hoped that the American people will raise in rebellion against your infamous protective system which is designed for no other purpose than to enrich the rich." 44 Cong. Rec. 4417 (1909).

"There is no occasion for surprise in the fact that Senator Daniel and Senator Bailey propose as a substitute for this [legislation] impost taxes that would not compel the people to pay $6.50 to the protected manufacturers for every dollar collected at the Custom House." Mr. Aldrich's Surprise, (editorial), N.Y. Times, page 8, April 21, 1909.

At this time in history, our government's primary function was the protection of life, wealth and property. Mr. Johnson of North Dakota said:

"The largest expenditures of government are for the protection of life and property." 44 Cong. Rec. 4960 (1909). In talking about whether or not the American People would give the Congress the power to tax incomes, Congressman Cox, from Indiana said, "But the people, if treated fairly, with uniform taxation, readily yield this power to the Government for the protection which the Government gives in return to the people." 44 Cong. Rec. 4421 (1909).

Adam Smith, in his famous book entitled "The Wealth of Nations," upon which our founders heavily relied when they wrote the Declaration of Independence and our Constitution, espoused this same general concept of government. Smith states, "The first duty of the sovereign, that of protecting the society from the violence and invasion of other independent societies....The second duty of the sovereign, that of protecting, as far as possible, every member of the society from the injustice or oppression of every other member of it...." Adam Smith, The Wealth of Nations, book V, 468-73, 1776 (Prometheus Books, Amherst, New York, 1991).

Since those Americans who had accumulated great wealth, benefitted more from government that those who had little, it was logical to assume that the wealthy should pay more for government than the poor as the former enjoyed a greater benefit.

Mr. COX. "It is not my intention to belittle wealth, but, on the other hand, I believe it should be the duty of all to uphold it where it is honestly procured. The idea that men like Carnegie, now the holder of more that $300,000,000 worth of the bonds of the United States steel trust, escape federal taxation is indeed absurd.... and then, to realize that all of these enormous fortunes are escaping their just and proportionate share of taxation while the people themselves are staggering under our present system of indirect taxation, it is no wonder to me they cry for relief. If it be the determination of the so-called "business interests" in this country to maintain an enormous navy at a cost of hundreds of millions of dollars annually, as well as an army, to protect and defend their various business interests, I insist that this part of the wealth of the country ought to stand its proportionate share of taxation, and I know of no way to compel them to do it as justly and equitably as an income tax. (Loud applause)" 44 Cong. Rec. 4424 (1909).

It would be impossible to accumulate a lot of wealth if it were not for the institution of civil government. What if we lived in anarchy? How much would your stocks and bonds be worth? How much would your vacation home be worth that was hundreds of miles away from where you live? These things would be worth nothing. And what about your overseas investments in oil wells in Africa? If there were no United States navy, air force, or army to protect them, these investments would also be worthless.

So those who have accumulated a level of wealth beyond what they can personally protect have received an extra benefit from civil government. In this case, the amount of benefit can be measured by the amount of property that has been accumulated. A tax on the income of this property would fairly accurately coincide with the degree of the benefit received. This was the purpose of the income tax, to tax income of property such that the property paid for the support of government in proportion to the benefit that property received from the existence of civil government. Sound reasonable?

There is also an element of charity inherent in an income tax system that seeks to make property pay for the support of government. The charity involves property that is not productive and not producing an income. This would be the family farm that was just inherited by beneficiaries who where unable to work it for whatever reason. The farm would pay no tax as it earned no income, thus allowing the new owners to keep the farm and not loose it to the tax man.

Anything within the exterior boundaries of a country, whether it be a person or property, benefits from the protection offered by civil government. The amount of protection property received was directly proportional to the value of the property. A rich man who owned $10,000,000 in real estate received a greater benefit than a poor man who owned none. Prior to the income tax, there was no national system of taxation that taxed the rich man for the benefit his property received from government.

The People of America sought to remedy this situation by adding to the revenue collection system of government an income tax. The argument was, since wealth benefitted from the existence of government, wealth should pay for this benefit. It was the intent of the American People to impose an income tax on the net income from accumulated wealth.

At the time, the American people understood the word "income" to mean what we call today "unearned income" and gains and profits from business. The common use of the word "income" did not include the wages of a working man. The argument was at the time that the poor and middle classes were carrying the burden of government under the protective tariff system, which taxed consumption, while the great wealth of the country, which was currently untaxed, ought to be taxed by an income tax. An income tax on the wages and salaries of the American worker was the farthest thing from their minds. The latter never even entered the debate, as the entire purpose of the income tax amendment was to bring tax relief to wage earners.

"The poor man does not regard his wages or salary as 'an income'." Governor A.E. Wilson (Kentucky) on the Income Tax Amendment, N.Y. Times, part 5, page 13, February 26, 1911.

Mr. HEFLIN. "An income tax seeks to reach the unearned wealth of the country and to make it pay its share." 44 Cong. Rec. 4420 (1909).

Mr. HEFLIN. "But sir, when you tax a man on his income, it is because his property is productive. He pays out of his abundance because he has got the abundance. If to pay his income tax is a misfortune, it is because he has the misfortune to have the income upon which it is paid." 44 Cong. Rec. 4423 (1909).

"It will doubtless be argued that the adoption of this amendment will open a way to the curbing of swollen and ill-gotten fortunes, or at least will compel the owners to pay a larger share of the expenses of government then they now do, and that the poor will be relieved of taxes in the same proportion." Raleigh C. Minor, The Proposed Income Tax Amendment to the Federal Constitution, 15 Virginia Law Register 737, 751 (1910).

When the cries of the people got so great, to the point that some were talking of revolution, the Republicans finally yielded and entertained the idea of an income tax. Mr. Byrd, "You are compelled, in order to save your political scalps, to make his [Democratic presidential candidate Bryan, 1898] favorite theory the law. It is indeed, a bitter pill, but you know that something must be done to assuage the increasing wrath of the people on account of the grievous wrong that is now being perpetrated by the tariff..." ibid. 4416.

Conclusion

Gearing a national income tax to the lowest common denominator is impractical. There would have been three alternatives for Congress at this time. The first would be to do nothing, which is what the Republicans preferred, they liked the high protective tariff system. The second would be to modify the direct taxation clauses of the Constitution to provide for a "direct" tax on incomes freed from apportionment. And the third would be to provide for an income tax of an "indirect" nature subject only to the rule of uniformity. What was done was the latter as the American People sought only to overturn the offensive parts of Pollock through the constitutional amendment process.

Thus it is well settled by the historical record that the purpose of the 16th Amendment was to overturn the Pollock Decision by way of a constitutional amendment. The purpose of this Amendment was not broader nor narrower than that. The Pollock Decision dealt with net income from real estate and personal property. The Pollock Decision did not deal with taxes on the gross revenue of a natural person. Having read all the Congressional debates on the income tax amendment, I can say that the intent of the Congress in presenting the several States with the 16th Amendment was only to overturn Pollock. As the Stanton Court 240 U.S. 103 (1916) said, "We are here dealing solely with the restriction imposed by the 16th Amendment .... from taking the income tax out of the class of indirect [taxes], to which it generically belongs, and putting it in the class of direct [taxes], to which it would not otherwise belong..." Taxes on net income are inherently indirect, taxes on gross income are inherently direct.

The People's intention in supporting the 16th Amendment was honorable and justified. Unfortunately, its ambiguous terms would have offended a man like Thomas Jefferson who believed that government should be "bound with the chains of the Constitution." We are blessed in that the Supreme Court did not construe the 16th Amendment in such a way as its critics had feared and as Senator Aldrich must have hoped. Both in the Brushaber Case and in the Stanton Case the Supreme Court held that the 16th Amendment created no new class of taxes, and that income taxes (on unearned income, gain or profit from business activity) were inherently indirect taxes. Whereas income taxes on wages and salaries are direct and required by the Constitution to be apportioned. Thus, the 16th Amendment did not give Congress any new power, nor did it create a new class of taxation, nor did it grant to Congress power to impose any type of direct tax without apportionment.

“We the People are the rightful masters,

both of Congress and the Courts,

not to overthrow the Constitution,

but to overthrow the men who pervert the Constitution.”

Abraham Lincoln

### End of Part 1 ###

Mr. Hart is also the author of a 428 page book entitled "Constitutional Income: Do You Have Any?" In this book, author Hart defines the term "constitutional income" and in the process proves that wages and salaries are without this definition. Mr. Hart also has a Petition for Writ of Certiorari before the Supreme Court on the "are wages income" question. A complete copy of the Petition and its Appendix can be purchased for $35. A copy of the book may be purchased for $25. Prices include shipping. As a combo the price is $55, shipping is included. To order by credit card visit www.constitutionalincome.com. If ordering by check or money order, send payment to:

Alpine Press

1324 N. Liberty Lake Road

PMB 145

Liberty Lake, Washington 99019.

If you think Mr. Hart's argument has merit, please write a letter to the Justices of the Supreme Court and tell them so. Insist that they hear the case. Remember, they work for you. (Supreme Court of the United States, #1 First Street NE, Washington, DC 20543) Your financial help is also needed in pursuing this litigation. Finally, Mr. Hart is a 2002 candidate for the Idaho Legislature. Donations to the litigation or to his campaign can be sent to Phil Hart care of Alpine Press.

Taxes on Wages and Salaries are Direct

Constitutional Income: Part 2 of 4

Taxes on Wages and Salaries are Direct

By Phil Hart © Permission is granted to republish when credit is given.

When government takes a bit out of the paycheck of a wage earner or that of a salaried person, that tax is known as a direct tax according to the Constitution. There is actually some debate on this issue, but that debate can only be attributed to the lack of scholarship and the corresponding lack of viligence of the American People in understanding our own Constitution. Unfortunately, there are federal district court and appellate court opinions all over the map in this point. One would think with all the recent explosion in knowledge and information, that we would have the wisdom to settle the question.

The issue is actually quite simple. A direct tax is direct. The tax falls directly on the person or the thing taxed. The one who is obligated to pay such a tax is not in a position to shift it to another.

On the contrary, an indirect tax may either be avoided or shifted to another. A trucking company shifts the excise tax on fuel to the customer who ships his product by way of the trucking company. The excise tax on cigarette is avoided by choosing not to smoke. How is the wage earner going to shift the taxes deducted out of his paycheck to another? He can't. Therefore the tax imposed directly by the government on the wage earner is a direct tax. A direct tax is direct.

The remainder of this article is actually a segment out of a Petition for Writ of Certiorari filed with the Supreme Court on June 21, 2002. This section covers pages 3 thru 12 of the Petition. The case is, Philip Lewis Hart v. Commissioner of Internal Revenue. As of this date, the case has not been given a docket number. The Petition was limited to 30 pages, which is extremely short when considering that the Internal Revenue Code and supporting regulations are approximately some 20,000 pages. One can not do justice to such a complex subject in only 30 pages. The following section is excerpted from the Petition:

I. Income taxes on wages and salaries are direct taxes.

a. Direct vs. Indirect. On the issue of income taxes in general, there exists among the circuit courts every conceivable interpretation as to whether or not the constitutional classification of the income tax is direct, indirect, neither, both or irrelevant. For example, in the First Circuit it is difficult to discover if that circuit determined if the tax was direct or indirect because in United States v. Turano, 802 F.2d 10, 12 (1st Cir. 1986), that court held that the "Sixteenth Amendment eliminated the indirect/direct distinction as applied to taxes on income."

Next door in the Second Circuit, there is uncertainty revealed by three completely inconsistent cases. In Jandorf's Estate v. Commissioner, 171 F.2d 464, 465 (2nd Cir. 1948), that court declared, "It should be noted that estate or inheritance taxes are excises * * * while surtaxes, excess profits and war-profits taxes are direct property taxes." Surtaxes are the graduated taxes of the income tax, so this court holds the personal income tax is a direct tax. But in Ficalora v. Commissioner, 751 F.2d 85, 87 (2nd Cir. 1984), that court stated the personal income tax was an indirect tax. But compare United States v. Sitka, 845 F.2d 43, 46 (2nd Cir. 1988) citing Parker, infra, for the proposition that the income tax is direct.

In the Third Circuit, it has been held in one case that all income taxes are direct, but in another that only some are direct; see Keasbey & Mattison Co. v. Rothensies, 133 F.2d 894, 897 (3rd Cir. 1943)("[A]n income tax is a direct tax upon income therein defined"); and Penn Mutual Indemnity Co. v. Commissioner, 277 F.2d 16, 19 (3rd Cir. 1960)("Pollock *** only held that a tax on the income derived from real or personal property was so close to a tax on that property that it could not be imposed without apportionment. The Sixteenth Amendment removed that barrier").

In the remainder of the Circuits, the difference of opinion as to whether the federal income tax is a direct or indirect tax is likewise as profound and confusing. In the Fourth and Sixth Circuits, the income tax has been held to be an excise tax; see White Packing Co. v. Robertson, 89 F.2d 775, 779 (4th Cir. 1937)("The tax is, of course, an excise tax, as are all taxes on income * * * "); and United States v. Gaumer, 972 F.2d 723, 725 (6th Cir. 1992) "Brushaber and the Congressional Record excerpt do indeed state that for constitutional purposes, the income tax is an excise tax."

However, in the Fifth, Seventh, Eighth and Tenth Circuits, arguments that this tax is an excise tax have been squarely rejected and determined to be frivolous. The Ninth Circuit claims it is irrelevant whether or not the tax is direct or indirect, while the Eleventh Circuit appears to have not yet decided the question.

b. Income taxes on wages and salaries are direct taxes. In our attempt to discover the meaning of the terms "direct tax" and "indirect tax" we must look back in time to the period of the framing of the Constitution in order to discover what the framers understood these terms to mean. And whatever we discover those terms to mean, we are bound to that discovery.

At the time of the writing of the Constitution there were two authors well known to the framers who used the terms "direct" and "indirect" taxes. These were Adam Smith, who wrote Wealth of Nations, and the physiocrat Jacques Turgot from France. Adam Smith published his work Wealth of Nations in 1776, eleven years before the writing of the Constitution.

"If the term 'direct taxes' had been used for the first time in the Constitution, and we could not, therefore, trace its source, much might be left to doubt and to surmise. A large majority of the Constitutional Convention were scholars, 35 of its members were college graduates, and the eight leaders of the great debate were all college men. Were they likely to use terms they did not understand? Had they never seen the term direct tax before; and, if so, where? In the books that were in every man's hand. Many had studied Turgot in the original or in translations of particular passages, and they knew his clear definition of 'Les impôts directs.' Turgot today is still the great work put in the hands of French students of the science of finance and government. Every member of that Convention was familiar with the handbook of statesmen of that age - Adam Smith's Wealth of Nations... Macaulay tells us that Pitt studied only one work on political economy, which guided him through his whole brilliant career in the financial administration of the British Empire, and that was Smith's Wealth of Nations. If we had only these two works, known to almost every educated man in those days, could we refuse to follow their definitions and explanations in the absence of any other evidence?" Opening argument of Appellant at 7-8, Pollock v. Farmers' Loan and Trust Co., 158 U.S. 601 (1895).

"Mr. CUMMINS. I had referred to the fact that at the time of the Constitutional Convention, so far as I can now recall, this term had been mentioned by but two economic writers - one, Adam Smith, in the Wealth of Nations, and the other a French writer by the name of Turgot. Their general idea was that a direct tax was a tax upon property or [gross] revenue and an indirect tax was a tax upon consumption or expense." 44 Cong. Rec. 3972 (1909)

Although Turgot was from France, he did not fully accept the older taxation doctrines of the French Physiocrats. In Turgot's work, Plan d'un mémoire sur les impositions, 1764, he wrote:

"The tax which the proprietor pays immediately on his revenue is called direct tax. The tax which is not assessed directly on the revenue of the proprietor, but which falls on the cost of production of the revenue, or on the expenditure of the revenue, is called indirect tax." Teachings of Political Economists defining Direct and Indirect Taxes, at 3, by Max West, Pollock v. Farmers' Loan and Trust Co., 157 U.S. 629 (1894).

When these writers, Smith and Turgot, used the word "revenue" it was gross revenue to which they were referring. In the This Court's Decision for the Hylton Case, 3 U.S. (3 Dall.) 171 (1796), the following quote from Adam Smith's Wealth of Nations was used authoritatively:

"The impossibility of taxing people in proportion to their revenue, by any capitation, seems to have given occasion to the invention of taxes upon consumable commodities; the State, not knowing how to tax directly and proportionably the revenue of its subjects, endeavors to tax it indirectly by taxing their expense, which it is supposed, in most cases, will be nearly in proportion to their revenue. Their expense is taxed by taxing the consumable commodities upon which it is laid out." Adam Smith, Wealth of Nations, Book V, 541 (Prometheus Books, Amherst, New York, 1991) (1776).

If we back up two paragraphs from the paragraph of Adam Smith's Wealth of Nations quoted authoritatively by this Court in the Hylton Case, we read:

"Capitation taxes, so far as they are levied upon the lower ranks of people, are direct taxes upon the wages of labour, and are attended with all the inconveniences of such taxes." id. at 540.

In Book V of Adam Smith's Wealth of Nations, Smith has a four-page section entitled, "Taxes upon the Wages of Labour." Five times in this section Smith states that a tax on wages is a direct tax. And as we saw above, Smith says it is a species of a capitation tax. id. at 534-38.

In the 1909 congressional debates over the Sixteenth Amendment, Adam Smith was quoted far more than any other authority and was always quoted with approval. Adam Smith was quoted 18 times, Albert Gallatin four times and Jacques Turgot, three times. There were numerous other political economists quoted, but these three dominated the debate. Just as Adam Smith greatly influenced the framers of the Constitution, he was also the respected and undisputed authority on taxation among those members of Congress who debated the Sixteenth Amendment.

"There is every reason to believe that the framers of the Constitution followed the usage of Adam Smith, who eleven years before the convention met had refuted the Physiocratic doctrine as to the incidence of taxes. Albert Gallatin, writing in 1796, stated emphatically his belief that the distinction in the minds of the framers of the Constitution was that of Adam Smith. Gallatin was born and bred a Frenchman, and would have been as likely as any American of the time to accept the Physiocratic view; and in the absence of any evidence to the contrary the testimony of such an authority as Gallatin should be considered conclusive in any question of finance." Max West, The Income Tax and National Revenues, 8 The Journal of Political Economy 433, 435 (1900).

Albert Gallatin, in his Sketch of the Finances of the United States, wrote:

"The most generally received opinion, however, is, that by direct taxes in the Constitution, those are meant which are raised on the capital or revenue of the people; by indirect, such as are raised on their expense.

The taxes which it is intended should fall indifferently upon every different species of revenue are capitation taxes...These must be paid indifferently from whatever revenue the contributors may posses." Rehearing Brief of Appellant at 112, Pollock v. Farmers' Loan and Trust Co., 158 U.S. 601 (1895).

Quoting the Congressional Record on May 17, 1909 as the Senate continued to debate the issue of an income tax amendment to the Constitution, Senator Sutherland of Utah said:

"This view is confirmed by the comments of Albert Gallatin in his Sketch of the Finances of the United States, written a year or two after the decision [of the Hylton case]. He says:

'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 Cong. Rec. 2094 (1909)

Senator Sutherland then quotes from Smith the same statements contained in Justice Paterson's opinion given on the Hylton Case , and continues:

"The remarkable coincidence of the clause of the Constitution with this passage in using the word 'capitation' as a generic statement, including the different species of direct taxes, an acceptation of the word peculiar, it is believed, to Doctor Smith, leaves little doubt that the framers of the one had the other in view at the time, and that they, as well as he, by direct taxes meant those pai