Taxability and apportionment

There is some confusion about what "apportionment" means or originally meant. To be apportioned any tax would have to be adjusted so that the amount collected in any political jurisdiction would be proportional to the number of people who live in that jurisdiction, such as a "head" tax of an equal amount on every individual, collected and paid directly to the IRS, not to the states or other political subdivisions. It should be clear that such a tax on merely being alive is unfair to the poor, so a way was sought to collect more from those better able to pay to offset what would otherwise be a burden on the poor, but still keep the total collected proportionate to the populations of states and other subdivisions. That is not easy to do, because the calculation of the tax can't be done at the level of the individual taxpayer until it is done for all taxpayers in the subdivision. It would have to be done in two phases: first to generate an estimate of the now unequal assessment on each and every individual, and second to adjust all assessments so that the total for the subdivision comes out proportional to population for that subdivision.

The power to tax in Art. I Sec. 8 Cl. 1 does not define what are and what are not proper objects of taxation, and it is a mistake to interpret that to mean that any conceivable object is taxable. The Framers presumed an understanding of what objects are and are not taxable, but left the boundaries to be found by historical investigation.

Generally speaking, the exercise of fundamental rights were not deemed properly taxable, except in an incidental way that did not impose an undue burden. Constitutionally, it would not be permissible to tax people for merely breathing, which calls into question anything like a head tax unless it were extremely small. That would also exclude taxes on things like speaking, publishing, religious devotion, petition, assembly, etc. This principle was recognized in the Militia Act of 1792 when it exempted the tools of militia from being taxed or claimed for debts, not as a change in their taxability but as a recognition they were already untaxable under the common law understanding of taxability.

So what were taxable objects? Generally, they were only money-making activities such as sales or purchases for money or earnings on investments in land or capital. Taxes were payable in money so there had to be some money in the transaction from which taxes could be taken. Equal exchanges were generally excluded, which would include barter, with no monetary consideration.

The term "income" is not used in the Constitution, and not defined in the income tax amendment, so as Brushaber points out, by implication it could only mean "income" as of 1787. In 1787 "income" would not have included wages or other compensation for labor. Only earnings on land or capital, such as crop sales, rents, interest, dividends, or capital gains. Compensation for labor would have been considered an equal exchange, like barter. If an employer doesn't pay an employee right away, but lends himself the money for a time, then later pays with interest added, the interest would be "income" on the labor, but not the wages that are the principal on which the interest is calculated.

The usurpation involved here is the redefinition of "income" to include revenues generally, rather than just earnings on land or capital. That meaning is now so familiar to most people that they have trouble understanding it didn't always mean that.

The appropriate common law rule of construction for legal terms is expressed in the maxims:

Potestas stricte interpretatur. A power is strictly interpreted.
In dubiis, non præsumitur pro potentia. In cases of doubt, the presumption is not in favor of a power.

They mean that if there is any doubt whether a power has been delegated, it must be presumed not to have been delegated. If there is any doubt about whether something is "income", it must be presumed not to be "income".

Government by indirection

Many people naively believe that if government officials exceed their authority, there is always a judicial remedy that might be sought in court, to find that usurpation has occurred and refuse to support it. However, officials in general, and legislators in particular, have learned ways to use government power to achieve their ends without providing victims with points of legal attack. We may call this, for lack of a better term, government by indirection.

This technique may perhaps have been inspired by Henry II, who got rid of Thomas Becket by remarking to aides, "Will no one rid me of this turbulent priest?" (some accounts say "meddlesome" instead of "turbulent"), who took it as an order to kill Becket, but leaving Henry with deniability that he had intended that result. History tells us Henry wore sackcloth as penance for his negligence, but that he did not prosecute the assassins, who escaped with little consequence.

The technique is essentially to issue only vague guidance to underlings, expecting them to go further than the actual words written or spoken, providing deniability and avoiding legal attack to the issuer of the words, yet also failing to act against the underlings, allowing their usurpations to stand. When the victim seeks redress, he finds the underlings shielded by official immunity and no laws or directives on which a legal challenge in court might be based.

This was done for the government killers in the incidents at Ruby Ridge and Waco.

The recently discussed "holes in the health care bill" are examples of this. This kind of thing has also been done with the rest of the tax code: Write it with holes that avoid judicial attack, but then encourage logic-challenged IRS agents to use the code, holes and all, to browbeat citizens with their own interpretations, knowing the courts won't stop them. Now the other holes in the tax code (26 USC and CFR) are just omissions, such as omissions of any definition of "income" or "taxpayer" on which a legal challenge might be pinned, but that has not prevented IRS agents from writing their own rules in the instruction booklets or making their "assessments" that have little or no connection to law or the Constitution.

We have an interesting example of a case in which "government by indirection" was pled:

328 F.2d 165
PORTLAND GENERAL ELECTRIC COMPANY and Publishers' Paper Company, Petitioners,
v.
FEDERAL POWER COMMISSION, Respondent.
CROWN ZELLERBACH CORPORATION, Petitioner,
v.
FEDERAL POWER COMMISSION, Respondent.
No. 18427.
No. 18432.
United States Court of Appeals Ninth Circuit.

February 7, 1964.

Petitioners argue that, by requiring the licensee to accept a license with the Article 9 provision for the giving of property free of cost for navigation, the Government by indirection is taking property without due process of law, resulting in confiscation.

36

This is not true because petitioners are not required to accept the tendered license. Any license rights which petitioners ever had to construct and maintain these project works expired in 1954. See note 3. In applying for a major license effective as of 1955, petitioners seek rights they do not now have. In order to gain those rights they must accept the license upon such terms as Congress has determined should be imposed in the public interest. See United States v. Appalachian Elec. Power Co., 311 U.S. 377, 427-428, 61 S.Ct. 291, 85 L.Ed. 243; Fox River Paper Co. v. Railroad Comm. of Wisconsin, 274 U.S. 651, 656-657, 47 S.Ct. 669, 71 L.Ed. 1279. It is not a taking for the Government to withhold a benefit it is not contractually or constitutionally obliged to confer. Nor is it a taking for the Government to impose financial obligations upon the recipient of a benefit if, as here, the benefit may be declined.

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Except, of course, that the "economic activity" being regulated is not getting health care, but running the risk of needing it and getting "insurance" for it, which must be paid regardless or whether one ever needs or seeks health care, or perhaps even be forced to accept health care without one's consent.

And of course every potential health care beneficiary is going to need a national ID card he will need to carry around with him at all times, and which, if the government finds he is critical of government, can, with a few keystrokes, designate him a "terrorist", "unlawful combatant", or perhaps a "fugitive child-molester cop killer", without conviction by a jury in a court of law.

A leading architect of such government by indirection, which he calls "libertarian paternalism" and some call "soft paternalism", is Cass Sunstein, recently appointed Director of the newly created Office of Information and Regulatory Affairs, popularly referred to as the "regulatory czar". His classic book on that is Nudge: Improving Decisions about Health, Wealth, and Happiness, with Richard Thaler (Yale University Press, 2008), in which he advocates "steering" people's decisions, not by direct coercion, but indirectly by coercing others in ways that create incentives to decide differently. The people "steered" can't challenge the constitutionality of the official acts coercing others, and those others will usually not incur sufficient personal injury for them to have standing to challenge those acts. The result is to achieve indirectly what could not be directly done constitutionally.

When one goes to vote and finds he is required to present this national ID card to be allowed to vote, and the balloting computers can track and report who voted and how, even though the votes are supposed to be "secret", then the last best remedy for tyranny will have been lost.

Thus does a constitutional republic get overthrown from within.

Holes in the Health Care Bill

Much of the opposition to the recently adopted Health Care Bill focuses on the alleged "mandate" for people to purchase health insurance or pay a tax collectible by the IRS, with the implication that it is a fine for nonpurchase enforceable by seizure of assets or imprisonment. The attorneys general of several states have sued to get that provision overturned, and several states are debating legislation to forbid the collection of such fines on their territories, among other measures related to it.

The problem with most of these efforts is they haven't read the Bill closely. It is indeed unconstitutional, but mainly for other reasons, reasons that apply equally to Medicare, Medicaid, Social Security, and the "Income Tax" on compensation for labor.

Let's examine what the language of the statute says:

“‘(2) INCLUSION WITH RETURN.—Any penalty imposed by this section with respect to any month shall be included with a taxpayer’s return under chapter 1 for the taxable year which includes such month.”

and further--

“(2) SPECIAL RULES.—Notwithstanding any other provision of law—

(A) WAIVER OF CRIMINAL PENALTIES.—In the case of any failure by a taxpayer to timely pay any penalty imposed by this section, such taxpayer shall not be subject to any criminal prosecution or penalty with respect to such failure.

(B) LIMITATIONS ON LIENS AND LEVIES.— The Secretary shall not—(i) file notice of lien with respect to any property of a taxpayer by reason of any failure to pay the penalty imposed by this section, or (ii) levy on any such property with respect to such failure.’’

--seems exclude characterizing it as a fine, but only a tax on self-insuring.

Consider those words carefully, and how they could or would be applied, and how the tax might be avoided.

It is a longstanding principle of law that if there is no penalty for noncompliance with a law, it is a nullity, merely aspirational or rhetorical.

The above words essentially mean the only way the IRS could collect would be by withholding money from a refund or benefit. But there is no withholding for true income, as from rents, interest, dividends, or capital gains, and one can reduce the withholding from compensation for labor by adjusting the number of exemptions claimed on one's W-4 form, or checking no withholding, leaving one to pay a "tax" at the end of the year, but leaving the IRS no way to collect the penalty for not purchasing health insurance. Even if the IRS takes one to court and gets a judgment, such judgment will be effectively unenforceable under the above language.

In other words, the proponents of the Bill were so concerned about avoiding grounds for a constitutional challenge that they gutted their own bill, making the entire scheme fiscally untenable, as though it weren't untenable enough already.

I see this leading to many good jokes on the late night talk and comedy shows.

However, it will also be a joke on the above mentioned efforts by state AGs and legislatures, who may offer some political theater but no legal results, and probably look silly in the process. Their efforts are misconceived. What might work is my proposed Nullification Commission in each state. See http://constitution.org/reform/us/tx/nullification/nullcomm.htm . Lawsuits and state legislative resolutions won't work. Indeed, they are likely to make the situation even worse when they fail. This undertaking requires more strategic subtlety than has been exhibited so far.