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The Personalities of Past and Present “leaders”

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“[T]he superman suffers from a fatal flaw. He has failed to rise to the level of superhuman reason which should match that of his superhuman strength. He requires such reason to put this vast power to solely reasonable and useful ends and not to destructive and murderous ones. Because he lacks it, the conquests of science and technology become a mortal danger to him rather than a blessing.” Albert Schweitzer

Narcissism which comes from Narcissus of Greek mythology is defined as the personality trait of egotism denoting vanity, conceit, or simple selfishness.  Applied to a social group, it is sometimes used to denote elitism or an indifference to the plight of others.

But narcissism in its minor form isn’t a bad thing. Have you ever dreamed big or set high goals for yourself? But taken to its extremes, extreme consequences can result.

Obama like most politicians displays symptoms of narcissism specifically Acquired situational narcissism. Acquired situational narcissism (ASN) is a form of narcissism that usually develops in late adolescence or adulthood, brought on by wealth, fame and the other trappings of celebrity.

From a historical perspective, narcissism has been prevalent in many of the leaders of nations, businesses, militaries, etc…  This is a list composed from the History Channel’s “Ancients Behaving Badly” which originally aired in the fall of 2009.

This list is not intending to compare military/political achievements or lack thereof (certainly Bush has nothing on Alexander The Great).

Julius Caesar: “Goal-Driven Killer.” Not Psychopathic, though. Just a “realist” when it came to empire-building. His conquests were mostly driven by the economic goals of the state. Today, he would have been a fascist.

Cleopatra: Histrionic personality disorder with psychopathic tendencies.

Hannibal: “Goal-Driven Killer” and like Caesar a “realist.”

Caligula: “Full Blown Stone Cold Psychopath.” Had Narcissistic Personality Disorder to the fullest.  He did what he did because he enjoyed it.

Attila The Hun:  Same As Caligula.

Nero: “Goal-Driven Killer” with psychotic tendencies who had Oedipal Mother issues. His main motive for burning Rome wasn’t that he hated Christians per se. They were just a convenient target to cover up for his real desire: a larger palace dedicated to his honor.

Genghis Khan: “Goal-Driven Killer” driven by religious megalomania.

Alexander The Great: “Goal-Driven Killer” who was a realist, but had tendencies of megalomania. His defining trait was his pure, raw ambition to be great.

The same would be true among more recent U.S. presidents:

George W. Bush: Exhibits traits of Paranoid schizophrenia (not a personality disorder per se, but many narcissists display its traits).  But for the most part, he faced the dilmena that many children of the rich and famous have to deal with.  He never was truly his own man.

Dick Cheney: Malignant narcissism. I mention him because he was the real power behind the Bush administration. Bush simply isn’t the ambitious type.   Otto Kernberg described malignant narcissism as a syndrome characterized by a narcissistic personality disorder (NPD), antisocial features, paranoid traits, and ego-syntonic aggression. Other symptoms may include an absence of conscience, a psychological need for power, and a sense of importance (grandiosity).

Bill Clinton: Sexual narcissism. In spite of his outward charisma, this was simply a mask for his insecurities which he made up for by being able to “conquer” the ladies.
George H.W. Bush: Corporate narcissism. He is a Wall Street man and his sole outlook on life was the bottom line.  He makes value judgments almost solely based on cost-benefit analysis.

Written by chrisforliberty

June 30, 2010 at 11:01 pm

Posted in Politics, U.S. History

What is the real deal behind the Obama/McChrystal spat?

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No nation has ever benefited from a prolonged war.” Sun Tzu

Now that it has been about a week since General Stanley McChrystal resigned (and I use that word very loosely), it is perhaps a good time to reflect on exactly what is going on here.  On the surface, it may have been a spat over personalities or tactics. But we may be witnessing is one of those rare moments when a general actually does speak from the heart.  Obama given that he is the Commander-in-Chief is free to name his commanders as he desires. I’m sure at least behind the scenes there have always been some disagreements between the political and military elements on strategy and tactics. The people in the military are trained to follow orders, most often regardless of what the orders are. How often an officer or soldier “mentally” questions policies, strategies or tactics is hard to determine.  For the most part, they will just follow orders.     I mean consider the alternative. But if someone in the military can’t have an honest discussion about strategy and tactics with the Commander-in-Chief without being booted out, then what was all that talk about liberating the Afghans and Iraqis really about?

One of the best books written on what really goes on in war is “War is a Racket” by Smedley Butler. It is not something you would read about in your standard textbooks. For example, did you know that American troops have been sent overseas at least 200 times since 1800?

But ultimately, I don’t think a difference in policies, strategy or tactics was the real reason McChrystal was “let go”.  Obama simply can’t handle the notion that anyone would even think much less express the slightest tinge of disagreement over him or his policies which are of themselves the same as they have been since the late 19th century.

I can’t help but to notice how everyone or most everyone are or were acting as if Obama was some sort of messiah. That ideal burning brightly just 18 months ago has worn off. Upon Obama taking office, I wrote:

“While it is still early to come to definite conclusions about what he will do, just based on what he proposes to do which is more of the same ole policies coming from Washington and his current nominations for various cabinet positions whom are mostly long-time Washington insiders, I have no reason to believe that things will get any better anytime soon. So it will be More Of The Same. Perhaps when he mentions change, he means change for the worst.”

As if things weren’t bad enough before he first took office. I will leave it at that. As I’ve been pointing out for years: you can come to your own conclusions.

Written by chrisforliberty

June 30, 2010 at 11:03 am

Posted in Politics

Images and Words on the Great Depression

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(Originally published in October, 2008)

The 16th Amendment and the Federal Reserve can be traced to the so-called Progressive movement that was taking place around the turn of the 20th century. While this movement has been portrayed as workers and intellectuals rising up against ruthless corporations, the simple fact of the matter is that it was John D. Rockefeller and J.P. Morgan who supported it. Indeed, much of the political history of the United States from the late nineteenth century until World War II may be interpreted by the closeness of each administration to one of these sometimes cooperating, more often conflicting, financial groupings: Cleveland (Morgan), McKinley (Rockefeller), Theodore Roosevelt (Morgan), Taft (Rockefeller), Wilson (Morgan), Harding (Rockefeller), Coolidge (Morgan), Hoover (Morgan), or Franklin Roosevelt (Harriman–Kuhn–Loeb–Rockefeller).

“All the factors which make for a quick and speedy industrial and economic recovery are present and evident. The Federal Reserve System is operating, serving as a barrier against financial demoralization. Within a few months industrial conditions will become normal, confidence and stabilization in industry and finance will be restored.” William Green, AFL-CIO, November 22, 1929

“We developed cooperation between the federal, state, and municipal governments to increase public works. We persuaded employers to “divide” time among their employees so that as many as possible would have some incomes. We organized the industries to undertake renovation, repair, and, where possible, expand construction.” Herbert Hoover

“The newspapers were full of news about bankclosings, business failing, and people out of work…We were in debt with no way out” Carmen Carter

“There was much hardship. Many people sold pencils on the street for 1 penny. Others were so devastated, they committed suicide by jumping out of windows of a skyscraper in New York City.” Thomas Johnston

“I remember standing in the welfare line somewhere on Michigan Avenue where they were passing out sweaters for children” Richard Waskin

On October 29, 1929, also known as “Black Tuesday,” 16.4 million shares of stock were sold, compared to 4 to 8 million on a normal day.

In 1932 at least 200,000 young people and 25,000 families roamed through the country looking for food, clothing, shelter, and a job.

The unemployment rate was as high as 25% (not including women and minorities which likely would have been closer to 40-50%). Unemployment would remain in double digits until 1943.

“Until the 1960s, historians had established the myth that Progressivism was a virtual uprising of workers and farmers who, guided by a new generation of
altruistic experts and intellectuals, surmounted fierce big business opposition in order to curb, regulate, and control what had been a system of accelerating monopoly in the late nineteenth century. A generation of research and scholarship, however, has now exploded that myth for all parts of the American polity, and it has become all too clear that the truth is the reverse of this well-worn fable. In contrast, what actually happened was that business became increasingly competitive during the late nineteenth century, and that various big-business interests, led by the powerful financial house of J.P. Morgan and Company, tried desperately to establish successful cartels on the free market. The first wave of such cartels was in the first large-scale business—railroads.” Murray Rothbard, The Quarterly Journal of Austrian Economics

“From 1926 to 1929 the attention of the world was chiefly focused upon the question of American prosperity. As in all previous booms brought about by expansion of credit, it was then believed that the prosperity would last forever, and the warnings of the economists were disregarded. The turn of the tide in 1929 and the subsequent severe economic crisis were not a surprise for economists; they had foreseen them, even if they had not been able to predict the exact date of their occurrence. The remarkable thing in the present situation is not the fact that we have just passed through a period of credit expansion that has been followed by a period of depression, but the way in which governments have been and are reacting to these circumstances. The universal endeavor has been made, in the midst of the general fall of prices, to ward off the fall in money wages, and to employ public resources on the one hand to bolster up undertakings that would otherwise have succumbed to the crisis, and on the other hand to give an artificial stimulus to economic life by public works schemes. This has had the consequence of eliminating just those forces which in previous times of depression have eventually effected the adjustment of prices and wages to the existing circumstances and so paved the way for recovery. The unwelcome truth has been ignored that stabilization of wages must mean increasing unemployment and the perpetuation of the disproportion between prices and costs and between outputs and sales which is the symptom of a crisis.” Ludwig von Mises, The Theory of Money and Credit

“The reasoning of the authorities involved was as follows: if the Federal Reserve pumped excessive paper reserves into American banks, interest rates in the United States would fall to a level comparable with those in Great Britain; this would act to stop Britain’s gold loss and avoid the political embarrassment of having to raise interest rates. The “Fed” succeeded; it stopped the gold loss, but it nearly destroyed the economies of the world, in the process. The excess credit which the Fed pumped into the economy spilled over into the stock market, triggering a fantastic speculative boom. Belatedly, Federal Reserve officials attempted to sop up the excess reserves and finally succeeded in braking the boom. But it was too late: by 1929 the speculative imbalances had become so overwhelming that the attempt precipitated a sharp retrenching and a consequent demoralizing of business confidence. As a result, the American economy collapsed. Great Britain fared even worse, and rather than absorb the full consequences of her previous folly, she abandoned the gold standard completely in 1931, tearing asunder what remained of the fabric of confidence and inducing a world-wide series of bank failures. The world economies plunged into the Great Depression of the 1930’s.”
Alan Greenspan, Gold and Economic Freedom, 1966

Written by chrisforliberty

June 29, 2010 at 11:48 am

The Root of Our Financial Problems

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(Originally published in July, 2008)

If you have been listening to Treasury Secretary Henry Paulson lately (although hopefully not believing what he says), you would think that the housing problem is the root of our financial crisis. He is either wrong or lying.

The root of the problem can be traced to one simple fact: Most Americans simply do not know what a dollar is. Or to put it another way, they do not know what is not a dollar.

If you want to check this basic fact out for yourself, you might experiment with people with whom you do business, such as cashiers in restaurants and grocery stores. Here is the way I do it. When it is time to pay the bill, I ask if they accept Federal Reserve Notes. I tell them that all I have to pay the bill with are Federal Reserve Notes. They will pause, think for a few seconds and then tell me that they only accept various charge cards, checks or cash. I ask them if they are sure, and they assure me that they are. I then suggest that they check with their manager. (If you like a large audience, you can do this on a Friday evening in a busy supermarket). When the manager arrives, I almost always insist that the clerk ask the manager the same question. The clerk often forgets what it was I said I could pay with. When the manager is finally asked the same question, he or she will almost always give me the same negative answer: We do not accept Federal Reserve Notes. I then pull out a folded $20 bill (or any other denomination) from my shirt pocket and ask them to read the words at the top of the bill. The words clearly read: Federal Reserve Note.

What experiments as this will reveal is that most Americans do not even know what they are using for money.

But this is not all that one should know about those pieces of paper people think are dollars. Each piece of paper claims to be a note at the top, and claims to be a certain number of dollars at the bottom. Obviously, a note for a thing cannot be the thing. If a person had a note for one banana, he would not try to eat the paper. He would want to exchange the piece of paper for the real thing.

It gets even worse. The “notes” are not even legal notes. To be a legal note, the instrument must have a promise to pay by the signer (the payer), a payee, a definite sum of money and a due date. Prior to 1964, the Federal Reserve Notes (one-dollar bills and other denominations) contained all these elements. For example, at the bottom of the note, (just above the amount), the note read:

WILL PAY TO THE BEARER ON DEMAND

This phrase contained the promise (Will Pay), the payee (the Bearer) and the due date (On Demand).

In the upper left hand portion of the bill, it also read: THIS NOTE IS LEGAL TENDER FOR ALL DEBTS PUBLIC AND PRIVATE, AND IS REDEEMABLE IN LAWFUL MONEY AT THE UNITED STATES TREASURY, OR AT ANY FEDERAL RESERVE BANK.

Today’s paper currency contains no promise to pay, no payee, and no due date. It also no longer states that it is redeemable in lawful money. The lawful money of the United States is gold and silver coin. (Real money by definition is metallic money with intrinsic value.) Prior to 1964, a person could take a one-dollar note to Federal Reserve Bank and receive one silver coin know as the silver dollar. Or he could take a ten-dollar note and receive ten silver dollars.

However, if you take a Federal Reserve Note to a Federal Reserve Bank for redemption today, all they will give you is more of the same kind of paper. According to 12 U.S.C. 411, the law still requires redemption in lawful money. But just because the words redeemable in lawful money were removed, the note for a dollar did not magically become the dollar, just like no change of wording could change the note for a banana into the banana. Congress has also never declared Federal Reserve Notes to be dollars.

But what is a dollar? We all use the term dollar whenever we discuss the price of things we buy or sell and when we discuss debts. Yet, few people can properly define the term. When trying to guess what a dollar is, some people suggest it is a unit of measure. But that is not a sufficient answer. A unit of measure is constant and certain. An inch measures a certain distance. A pound constantly measures a certain weight. A quart measures a certain volume. In response to the suggestion that a dollar is a unit of measure, I respond by asking, If a dollar is a unit of measure, what does it measure? To this question, they have no answer.

The law states that United States money is expressed in dollars:

31 U.S.C. 5101: Decimal system

United States money is expressed in dollars, dimes or tenths, cents or hundredths, and mills or thousandths. A dime is a tenth of a dollar, a cent is a hundredth of a dollar, and a mill is a thousandth of a dollar. ”hundredths,”

But who determines what a dollar is? Can Congress determine what a dollar is? No, they don’t have the authority to do so. What a dollar is today is what it was at the time the United States Constitution was written. The term dollar is used in the United States Constitution twice: once in Article 1, Sec. 9, cl. 1 and once in the Seventh Amendment. The United States Constitution is a document of limited powers. Congress doesn’t have the authority to redefine terms used in the document to suit its own desires.

“Congress cannot by any definition it may adopt conclude the matter, since it cannot by legislation alter the Constitution, from which alone it derives its power to legislate, and within whose limitations alone that power can be lawfully exercised.” Eisner v. Macomber, 252 U.S. 189 (1920)

The President of the United States means today what it meant then. It does not mean longest serving senator from Tennessee. Congress could define ‘Firearms’, ‘Gross Income’, or even ‘Federal Reserve Note’, but it doesn’t have the authority to define ‘Arms’, ‘income’, ‘dollars’, or even ‘excise’. Instead what the courts have done is use the general dictionaries.  I certainly found that to be true when the courts dealt with the matter of taxation.

The founding fathers would have not used the term ‘dollar’ if they didn’t know what a dollar was and what its fixed value was. The Spanish milled dollar was the standard coin used in trade and business transaction in the colonies. This coin contained a certain amount of pure silver, minus any wear and tear the coin might have had. The Constitution states that: Congress shall have the power ‘to coin money, regulate the value thereof, and of foreign coin, and fix the standard of weights and measures’; Article 1, Sec. 8, cl. 5.

In Article 1, Sec. 10, cl. 1, it states that No State shall among other things, make anything but gold and silver coin a tender for payment of debt.

It would not be possible to build a house if a foot was not a set standard of measure just as it would be impossible to measure the weight of apples if a pound was 16 ounces one day and 12 ounces another day.

Since the dollar had been accepted as the official money unit of the United States, exact accuracy was needed in determining the value (the amount of pure silver) in a dollar (money unit). After some determinations, Congress defined the dollar as being 371.25 grains of silver. It then regulated the value of gold coins at 24.75 grains. This means you could exchange 15 grains of silver for every grain of gold. The Coinage Act of 1792 gave the new nation three gold coins (the Eagle or $10 gold piece, Half Eagle and Quarter Eagle); five silver coins (the Dollar, Half Dollar, Quarter, Dime (originally spelled Disme), Nickel (or half Disme); and two copper coins (the Cent and Half Cent). This is Constitutional money. Moreover, the Act provided all citizens access at the Mint to coin their gold, silver, and copper (free coinage) and established any debasement of the coinage as a capital offense! One complaint about gold and silver coin is that it is burdensome to carry around. It is entirely possible to use legal notes issued by a bank which are fully redeemable in lawful money.

Money based on gold and silver prevents arbitrary inflation and deflation. Today’s money is not based on gold and silver. It is simply fiat money. When you hear about the Federal Reserve increasing the money supply, that doesn’t mean that bankers are mining for gold and silver. They operate on fractional reserve banking. Think of it like creating money out of thin air. This is where the national debt comes from. It is also important to know that the Federal Reserve Banks “are not federal instrumentalities for purpose of the FTCA, but are independent, privately owned and locally controlled corporations.” Lewis v. United States, 680 F.2d 1239 (1982)

I remember when I was a kid, my grandfather said at one time he could have bought a car for $1,500, a house for $10,000 and feed a family of five on about $50 a month. I wondered why it seemed so cheap then. Only when I started to understand the money issue a few years ago that it all started to make sense. Alan Greenspan summed up the situation quite nicely: “Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights.”

Written by chrisforliberty

June 28, 2010 at 6:39 pm

Posted in Banking/Money

Do You Have A ‘Right’ to Social Security?

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If an employer thinks the employee is subject to withholding taxes, the burden of proof is on the employer.  The U.S. Supreme Court has also already ruled that you can’t be taxed for simply existing or exercising your right to work.  “A state may not impose a charge for the enjoyment of a right granted by the Federal Constitution.” Murdock v Pennsylvania, 319 U.S. 105, pg 113 (1943).  In other words, such events must be taxable for revenue purposes and a law must have been enacted that imposes a tax on that activity or event. If it is law, it would be in the books. When the employer says you are required to submit a social security number or fill out a withholding form as a condition for being hired, is it based on a federal law or statute or just an employer making it up? I have a letter from the Social Security Administration that says “The Social Security Act does not require a person to have a Social Security Number to live and work in the United States, nor does it require a Social Security number simply for the purpose of having one.”

On the IRS website, there is a paragraph that reads “Social Security and Medicare taxes pay for benefits workers and their families receive under the Federal Insurance Contributions Act (FICA). Social security taxes pay for benefits under the old age, survivors, and disability insurance part of FICA. Medicare taxes pay for hospital benefits.” What this paragraph does is confuse the tax itself with the spending power. Taxes, regardless of their name are just that, taxes. They are not earmarked to any program regardless of the revenue act in which it is collected under. There is no such thing as a Social Security Trust Fund, nor is it anything related to paying insurance premiums. All these taxes, being uniform are taxes on certain activities and privileges and thus go into the general fund at the Treasury Department.

According to the Social Security Administration, “Conceptually, the old-age insurance program was a social insurance program with an obvious connection between the taxes collected in Title VIII of the Act and the benefits paid in Title II of the Act. The taxing and spending provisions of the Act were placed in separate titles in the vain hope of convincing the courts that what was obvious was not the case–that is, so that the argument could be made that the taxing and spending provisions had nothing to do with each other.”

The proceeds of both taxes are to be paid into the Treasury like internal revenue taxes generally, and are not ear-marked in any way. Section 807(a), 42 U.S.C.A. 1007(a).
Helvering v. Davis, 301 U.S. 619 (1937)

(a) The proceeds of the tax in controversy are not earmarked for a special group.
Steward Mach. Co. v. Davis, 301 U.S. 548 (1937)

We must conclude that a person covered by the Act has not such a right in benefit payments as would make every defeasance of “accrued” interests violative of the Due Process Clause of the Fifth Amendment.                 Flemming v. Nestor, 363 U.S. 603 (1960)

Once again, with the exception of taxing exports, the States gave the federal government full taxing power, but could not have given the federal government any power they themselves did not possess according to Article 1, Section 8.

Simply put, what revenue law, if any, imposes a tax on your particular activity? The Internal Revenue Code only relates to those who are already liable i.e. “taxpayers” because the activities they are engaged in such as importers of tobacco products or distillers. See Sections 5703 and 5005 of the Internal Revenue Code.  A person who files when they are not a taxpayer as defined is like a 90 year old woman filing for exemption from military service when the laws never subjected her to serve in the military in the first place. “FN3 The term “taxpayer” in this opinion is used in the strict or narrow sense contemplated by the Internal Revenue Code and means a person who pays, overpays, or is subject to pay his own personal income tax. (See Section 7701(a)(14) of the Internal Revenue Code of 1954.) A “nontaxpayer” is a person who does not possess the foregoing requisites of a taxpayer.” Economy Plumbing and Heating Co. v. U.S., 470 F.2d 585 (1972)

It is the duty of the Congress to name the events which are taxable, and who is liable for it.

Written by chrisforliberty

June 28, 2010 at 12:49 am

Posted in Politics, Taxes

Does The IRS Exist?

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NOTE: Please check out Rules of Statutory Construction (first published in 2001 and updated over the years)

In 1861, Congress enacted the Revenue Act of 1861.

This particular income tax was in its nature a direct tax. Direct taxes are taxes on real and personal property via means of ownership. “Taxes on real estate being indisputably direct taxes, taxes on the rents or income of real estate are equally direct taxes.” Pollock v. Farmers’ Loan & Trust Co., 158 U.S. 601 (1895)

On the other hand, “Duties and imposts are terms commonly applied to levies made by governments on the importation or exportation of commodities. Excises are ‘taxes laid upon the manufacture, sale, or consumption of commodities within the country, upon licenses to pursue certain occupations, and upon corporate privileges.’ Cooley, Const. Lim. 7th ed. 680.” Flint v. Stone Tracy Co., 220 U.S. 107 (1911)

The Revenue Act of 1862 was enacted the following year and within it, created the office of the Commissioner of Internal Revenue. This is the official name of this particular revenue collecting agency. Likewise, any official actions brought against this agency such as a lawsuit would be against the “Commissioner of Internal Revenue“. For example, see Penn Mutual Indemnity Co. v. Commissioner of Internal Revenue, 32 T.C. 653 (1959)

Among other duties, the Commissioner can “recommend to the President a candidate for appointment as Chief Counsel for the Internal Revenue Service when a vacancy occurs, and recommend to the President the removal of such Chief Counsel.”

Supposedly, in 1953, in Treasury Decision 6038, the name was changed to “Internal Revenue Service”. This raises the question “Who made the final decision on this?” and “Did Congress authorize this particular tax collection agency to operate under this name”. If this particular mystery individual, presumably an undersecretary in the Treasury Department changed the name, did he or she have such authority? Several letters to the “IRS” about these questions have yielded insufficient answers. Therefore, unless legal documentation can be provided, it is presumed that “Internal Revenue Service”, “IRS” or any derivative are aliases. This is akin to a person claiming to be a police officer when they are not (perhaps they are just a desk clerk at one of the precincts) or someone going around claiming to have been “in Vietnam” when they weren’t even born until 1963.

If you go to Title 31 under “Chapter 3 – Department of the Treasury“, it lists a Federal Financing Bank, Fiscal Service, Financial Crimes Enforcement Network among others. No “Internal Revenue Service” is listed, yet letterhead received from this agency claims it is an agency in the Department of the Treasury.

So what happens if someone comes to your door, flashes a badge and claims to be from the “Internal Revenue Service” (as opposed to the Office of the Commissioner of Internal Revenue)? They would be operating without proper authority. Likewise, if you are harassed, threatened or your property is damaged, you would sue the particular individual in civil court or perhaps have charges pressed. You would not sue the Commissioner in U.S. District Court because this individual was not operating within the scope of employment.

This is why you need to keep the horse before the cart. The issue of how taxes are levied and how they are accessed is one issue. Only Congress has this authority. The issue of tax collection and who has the authority to collect those taxes is another issue.

 

Written by chrisforliberty

June 27, 2010 at 12:55 am

Posted in Politics, Taxes

What Exactly Did The 16th Amendment Do?

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Edward Douglass White, Chief Justice of the U.S. Supreme Court from 1912-1921. He was the grandson of James White who served as representative for the Territory South of the River Ohio before Tennessee statehood

“In dealing with the scope of the taxing power, the question has sometimes been framed in terms of whether something can be taxed as income under the Sixteenth Amendment. This is an inaccurate formulation of the question and has led to much loose thinking on the subject. The source of the taxing power is not the Sixteenth Amendment; it is Article I, section 8 of the Constitution. It is important that these provisions be clearly understood; what is required is an understanding of fundamental principles. The familiar statement that at this time we need education in the obvious more than investigation into the obscure (Holmes, Collective Legal Papers, pp. 292-293), although made in a different context, is peculiarly applicable here.”
Penn Mutual Indemnity Co. v. Commissioner of Internal Revenue, 32 T.C. 653 at 5659 (1959)

What does Article 1, Section 8 say? With regard to the taxing power, it says in Clause 1:

The Congress shall have power to lay and collect taxes, duties, imposts and excises, to pay the debts and provide for the common defense and general welfare of the United States; but all duties, imposts and excises shall be uniform throughout the United States;

The court explains what duties and imposts and excises are: “Duties and imposts are terms commonly applied to levies made by governments on the importation or exportation of commodities. Excises are ‘taxes laid upon the manufacture, sale, or consumption of commodities within the country, upon licenses to pursue certain occupations, and upon corporate privileges.’ Cooley, Const. Lim. 7th ed. 680.” Flint v. Stone Tracy Co., 220 U.S. 107 (1911)

The other taxing clauses are as follows:

Article 1, Section 2, Clause 3: Representatives and direct taxes shall be apportioned among the several states which may be included within this union, according to their respective numbers, which shall be determined by adding to the whole number of free persons, including those bound to service for a term of years, (and excluding Indians not taxed, three fifths of all other Persons-changed by Sec 2 of 14th amendment).

Article 1, Section 9, Clause 4: No capitation, or other direct, tax shall be laid, unless in proportion to the census or enumeration herein before directed to be taken.

Article 1, Section 9, Clause 5: No Tax or Duty shall be laid on Articles exported from any State.

Did the Supreme Court actually rule on whether the “income” tax was a direct or indirect tax BEFORE it was authorized by the 16th amendment? Yes!

In Pollock v. Farmers’ Loan & Trust Co., 158 U.S. 601 (1895), the court ruled that:

First. We adhere to the opinion already announced, that, taxes on real estate being indisputably direct taxes, taxes on the rents or income of real estate are equally direct taxes.

Second. We are of opinion that taxes on personal property, or on the income of personal property, are likewise direct taxes.

Third. The tax imposed by sections 27 to 37, inclusive, of the act of 1894, so far as it falls on the income of real estate, and of personal property, being a direct tax, within the meaning of the constitution, and therefore unconstitutional and void, because not apportioned according to representation, all those sections, constituting one entire scheme of taxation, are necessarily invalid.

Since these sections of the act levied a direct tax without regard to apportionment, the court threw out the whole act and all the revenue collected under the act had to be refunded. This is what brought about the 16th amendment, which stated that Congress could collect taxes on incomes without apportionment. The Sixteenth Amendment did not define the taxes on income as direct or indirect. So it appeared that the constitution was in conflict with itself. It allowed for a tax on income, but the clause requiring direct taxes to be apportioned was not repealed. The United States Supreme Court in Brushaber v. Union Pacific R.R., 240 U.S. 1 (1916) settled the issue when it said “Moreover, in addition, the conclusion reached in the Pollock Case did not in any degree involve holding that income taxes generically and necessarily came within the class of direct taxes on property, but, on the contrary, recognized the fact that taxation on income was in its nature an excise entitled to be enforced as such…”

The Sixteenth Amendment reads as follows: 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.

It is the without apportionment language and without regard to census or enumeration that restricts taxation on incomes to the class of excises. Did the 16th amendment authorize a new kind of tax called the ‘income’ tax? No it did not. “This result, instead of simplifying the situation and making clear the limitations on the taxing power, which obviously the Amendment must have been intended to accomplish, would create radical and destructive changes in our constitutional system and multiply confusion.” The court went on to say “It is clear on the face of this text that it does not purport to confer power to levy income taxes in a generic sense, an authority already possessed and never questioned,…” [240 U.S. 1, 18] Chief Justice Edward Douglass White delivered the opinion in both cases.

The 3rd Circuit Court of Appeals clarifies: “It did not take a constitutional amendment to entitle the United States to impose an income tax. Pollock v. Farmers’ Loan & Trust Co.(citations omitted) 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. Indeed, the requirement for apportionment is pretty strictly limited to taxes on real and personal property and capitation taxes.” Penn Mutual Indemnity Co. v. C.I.R., 277 F.2d 16 (1960)

The court also said “It is not necessary to uphold the validity of the tax imposed by the United States that the tax itself bear an accurate label.” Congress is free to name the tax whatever it desires. The question still remains: Is it a direct tax? Capitation? Or is it a duty, impost, or excise?

The barrier refers to the consideration of the source of income. The United States Supreme Court in the Brushaber case said “Indeed, from another point of view, the Amendment demonstrates that no such purpose was intended, and on the contrary shows that it was drawn with the object of maintaining the limitations of the Constitution and harmonizing their operation.” What was the problem? Was an amendment really necessary to make clear the taxing power that Congress always had?

There are three things to look for: The Rule, the Ruling and the Principle. The Rule applied relates to the rule of apportionment to all direct taxes before and after the Sixteenth Amendment.

The Ruling relates to the court’s decision in Pollock that taxes on real estate and personal property and the rents and incomes derived from real and personal property are direct taxes.

The principle relates to the duty of the courts to disregard the form (name of tax) and consider the substance (subject of the tax). The 16th Amendment was to prevent the courts from treating the so-called ‘income’ tax as anything other than an excise tax. The courts can no longer void a statute in regard to income taxation because it was not imposed by the rule of apportionment like it had done in the Pollock case. The courts can’t legally enforce the income tax as if it were a direct tax. The income tax can only be enforced as a tax on certain activities, privileges, events, etc… In my copy of “Frequently Asked Questions Concerning the Federal Income Tax” updated May 7, 2001, John R. Luckey, Legislative Attorney for the American Law Division writes on page four that “[T]he Court found that the Sixteenth Amendment sought to restrain the Court from viewing an income tax, because of its close effect on the underlying property as a direct tax.”

It is true that various personnel in the Office of the Commissioner of Internal Revenue claim that the Sixteenth Amendment gave Congress some new power of taxation. But the courts have settled the issue as to what the Sixteenth Amendment did and didn’t do. The problem is not the Sixteenth Amendment; it is the disinformation regarding it.

Written by chrisforliberty

June 27, 2010 at 12:54 am

Posted in Politics