Free Republic

After several courtroom battles, Marrita Murphy lost. Her case attracted widespread interest because it involved an important question -- and also because she initially won a major round in court. The issue: Should Ms. Murphy have to pay federal income tax on a $70,000 award she received from a former employer for emotional distress and loss of reputation? She argued the award wasn't taxable. She paid the tax -- more than $20,000 -- and later sought a refund. In 2006, a three-judge panel of the U.S. Court of Appeals for the District of Columbia Circuit ruled in her favor. The...

August 30, 2006, 9:17 a.m. What Can the Government Tax?The answer, never set in stone, may be changing. By Bruce Bartlett Last week, a federal appeals court in Washington handed down an important decision relating to the definition of income for tax purposes. What is important about the decision is that it is the first in decades to say the Constitution itself limits what the government may tax. If upheld by the Supreme Court, it could significantly alter tax policy and possibly open the door to radical reform. In the case, a woman named Marrita Murphy was awarded a legal...