Posted on 08/29/2006 6:38:28 AM PDT by Uncledave
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 one in decades saying that 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 settlement that included compensation for physical injury and emotional distress. The former has always been tax-exempt, just as insurance settlements are. Obviously, it makes no sense to tax as income the payment for a loss that only makes one whole again. One is not being made better off, and therefore there is no income. But under current law, compensation for non-physical injuries are taxed.
Murphy argued that just as compensation for physical injuries only makes one whole after a loss, the same is true of awards for emotional distress, as well. In short, it is not income within the meaning of the 16th Amendment to the Constitution. The appeals court agreed and ruled that her award for emotional distress is not income and therefore not taxable.
Tax experts immediately recognized the far-reaching implications of the Murphy decision for other areas of tax law. Tax protesters have long argued that the 16th Amendment did not grant the federal government the power to tax every single receipt that it deems to be income. Yet in practice, that is what the Internal Revenue Service does.
The problem is that the very concept of income itself has never been defined in the tax law. It is pretty much whatever the IRS says it is. Tax analysts generally use a definition devised by two economists named Robert Haig and Henry Simons, which says that income consists of consumption plus the change in net worth between two points in time.
But the Haig-Simons definition goes far beyond that in the tax law. Most importantly, it includes unrealized capital gains. There is also no place in the Haig-Simons definition for things like 401(k) plans, individual retirement accounts or other retirement savings, nor for lower tax rates on realized capital gains.
Under Haig-Simons, owner-occupied homes would be treated as businesses, with homeowners taxed on the implicit rent they pay to themselves, less depreciation. And if your home's value increased over the course of a year, you should pay tax on that even if you didn't sell your house.
Now, clearly, the IRS is not going to do any of these things, nor would Congress allow it to do so. But because tax analysts implicitly accept the Haig-Simons definition of income, even though it appears nowhere in law, there has been a long-term tendency for the IRS to push the limit of what can be considered taxable income. Now, a federal court has said there is a constitutional limit.
One area where I would like to see the court go further has to do with the question of whether interest constitutes income. To economists, some portion of the interest we receive on our savings is merely compensation for loss -- loss of the immediate enjoyment we would receive if we consumed our income today instead of saving it.
Think of it this way. Would you be satisfied receiving your paycheck a year from now instead of on payday? Of course not. You would be suffering a real loss if you had to wait a year to get paid for your work. But if you were offered, say, 10 percent more in a year, you might say that was OK. Collectively, our willingness to put off consumption today for greater consumption in the future is what determines the pure rate of interest.
But in the view of many great economists, such as John Stuart Mill, the future interest one receives is merely compensation for the loss of immediate satisfaction. Therefore, it is not income, but more like an insurance settlement that simply makes us whole. Now, obviously, market interest rates are more than simply a discount between present and future, as my example implies. A lot represents a return to risk and an adjustment for expected inflation. But in principle, some portion of interest is compensation for loss and therefore not income.
Given the logic of the Murphy decision, it is quite possible that the risk-free, inflation-adjusted rate of interest could also be excluded from taxation on constitutional grounds. Following through that logic consistently would revolutionize taxation and eventually lead to a pure consumption tax, which most economists today favor.
I'm not predicting that the Supreme Court will follow this logic. But it does open an interesting possibility that tax analysts will follow with interest.
Well what did we get as Governor here in Washington State?
And what are the statists proposing now? Abolishing the Electoral College.
Would you like a World Series where the losing team wins six games out of seven but scores one less run overall?
Would you like a country where NYC and LA disctate who will be your Lords and Masters?
We can all vote for change but have it thrown back in our faces by the new 'Aristocracy' because they control the Election Offices and thus the counting.
Did we not witness this in Florida 2000?
And if you are not from Washington State, well the 2004 Governor's election here made Florida 2000 look like a bunch of kid amateurs.
Interesting ruminations, but they do not address anything I have posted.
Put in a different way, the death tax is an insidious crime and the politicians who enacted it, currently control the enforcement of it and who refuse to change it are the criminals. Elections coming, toss the incumbents.
You say we get what we deserve. I say no we do not.
Here in WA State, we do not deserve the person presently occupying the Governor's office. We deserved the person that the majority voted for.
The new aristocracy is that class of power that will cheat us of what we truly deserve.
The way I see it, everything I posted to you was relevant and informational to what you posted.
Nationwide, the reelection rate of the very people you claim do exactly opposite of what "we" want is 90%.
Are you saying that the whole country has elected officials who weren't really elected legally?
The trend is that key districts and offices are targeted by organized 'get out the vote' groups who are run my individuals that game the system.
Example, there were at least 513 voters here in King County that recorded their address as the King County Department of Elections. They were explained to be homeless people. Now who signed them up?
Amd the list of these incidents is too long to enumerate here.
Start here:
www.soundpolitics.com
That website has performed a forensic vote analysis from actual election office records.
And the tactics employed here are part of a more nationally organized effort. This effort is using the same playbook in key targeted counties across the country.
You need not win certain positions in order to control power. You need only control key offices to maintain power.
The problem is that the People think the federal government affects them outside the original jurisdiction enumerated in the Constitution.
That's strange, so did the authors and founders of the Constitution and the Republic under it.
- ``A CONCURRENT JURISDICTION in the article of taxation was the only admissible substitute for an entire subordination, in respect to this branch of power, of State authority to that of the Union.'' Any separation of the objects of revenue that could have been fallen upon, would have amounted to a sacrifice of the great INTERESTS of the Union to the POWER of the individual States. The convention thought the concurrent jurisdiction preferable to that subordination; and it is evident that it has at least the merit of reconciling an indefinite constitutional power of taxation in the Federal government with an adequate and independent power in the States to provide for their own necessities.
- "The difference between a federal and national government, as it relates to the OPERATION OF THE GOVERNMENT, is supposed to consist in this, that in the former the powers operate on the political bodies composing the Confederacy, in their political capacities; in the latter, on the individual citizens composing the nation, in their individual capacities. On trying the Constitution by this criterion, it falls under the NATIONAL, not the FEDERAL character;"
- "The change relating to taxation may be regarded as the most important; and yet the present [Continental] sic Congress have as complete authority to REQUIRE of the States indefinite supplies of money for the common defense and general welfare, as the future [Constitutional] Congress will have to require them of individual citizens;
Not to mention what its proponents believed about the Constitution:
Anti-Federalist Papers #3 NEW CONSTITUTION CREATES A NATIONAL GOVERNMENT;
- There are but two modes by which men are connected in society, the one which operates on individuals, this always has been, and ought still to be called, national government; the other which binds States and governments together (not corporations, for there is no considerable nation on earth, despotic, monarchical, or republican, that does not contain many subordinate corporations with various constitutions) this last has heretofore been denominated a league or confederacy. The term federalists is therefore improperly applied to themselves, by the friends and supporters of the proposed constitution.
Most of the people who vote get a different person elected than the one they voted for?
By any reasonable interpretation, the simple fact is obvious here that "if you accumulate wealth, WE WILL TARGET YOU", so that the elitist SOCIALISTS can decide, NOT THE FAMILY MEMBER, WHO is entitled to the fruits of your labor....it is truly disgusting how this has evolved and how it is supported by the moonbats when they are told "those rich bastards don't deserve their earnings....YOU DO"
...or, preferably, hire them.
Just doing the job Americans won't do????
If not for FR, I would have never even heard of the "Fair tax."
The IRS is an internal terrorist organization.
"... there has been a long-term tendency for the IRS to push the limit of what can be considered taxable income. Now, a federal court has said there is a constitutional limit."
There has always been a constitutional limit to taxation, it's called the voter controlling the body that makes the tax law that empowers the IRS, (i.e. Congress Critters.)
Champion v. Ames(1903), 186 U.S. 321
- 'But if what Congress does is within the limits of its power, and is simply unwise or injurious, the remedy is that suggested by Chief Justice Marshall in Gibbons v. Ogden [21 US 1, 9 Wheat. 1, 6 L. ed. 23], when [195 U.S. 27, 56] he said: 'The wisdom and the discretion of Congress, their identity with the people, and the influence which their constituents possess at elections, are, in this, as in many other instances, as that, for example, of declaring war, the sole restraints on which they have relied, to secure them from its abuse. They are the restraints on which the people must often rely solely, in all representative governments."
Of course the alternative is not to tax income in the first place and concentrate on taxing consumption as a measure of one's benefit from society instead of taxing one's contributions to society by taxing income, a measure of one's productive contribution to society.
As envisioned by the founders of our nation:
Patrick Henry, Virginia Ratifying Convention June 12, 1788:
- "the oppression arising from taxation, is not from the amount but, from the mode -- a thorough acquaintance with the condition of the people, is necessary to a just distribution of taxes. The whole wisdom of the science of Government, with respect to taxation, consists in selecting the mode of collection which will best accommodate to the convenience of the people."
- "A nation cannot long exist without revenues. Destitute of this essential support, it must resign its independence, and sink into the degraded condition of a province. This is an extremity to which no government will of choice accede. Revenue, therefore, must be had at all events. In this country, if the principal part be not drawn from commerce, it must fall with oppressive weight upon land."
- "The ability of a country to pay taxes must always be proportioned, in a great degree, to the quantity of money in circulation, and to the celerity with which it circulates. Commerce, contributing to both these objects, must of necessity render the payment of taxes easier, and facilitate the requisite supplies to the treasury."
- "Imposts, excises, and, in general, all duties upon articles of consumption, may be compared to a fluid, which will, in time, find its level with the means of paying them. The amount to be contributed by each citizen will in a degree be at his own option, and can be regulated by an attention to his resources. The rich may be extravagant, the poor can be frugal; and private oppression may always be avoided by a judicious selection of objects proper for such impositions. "
- "It is a signal advantage of taxes on articles of consumption that they contain in their own nature a security against excess.
They prescribe their own limit, which cannot be exceeded without defeating the end proposed - that is, an extension of the revenue."
- "If duties are too high, they lessen the consumption; the collection is eluded; and the product to the treasury is not so great as when they are confined within proper and moderate bounds.
This forms a complete barrier against any material oppression of the citizens by taxes of this class, and is itself a natural limitation of the power of imposing them. "
The Records of the Federal Convention of 1787
(Farrand's Records)
James Mchenry before the Maryland House of Delegates.
Maryland Novr. 29th 1787--
Appendix A, CXLVIa, page 149, S9."Convention have also provided against any direct or Capitation Tax but according to an equal proportion among the respective States: This was thought a necessary precaution though it was the idea of every one that government would seldom have recourse to direct Taxation, and that the objects of Commerce would be more than Sufficient to answer the common exigencies of State and should further supplies be necessary, the power of Congress would not be exercised while the respective States would raise those supplies in any other manner more suitable to their own inclinations --"
(sigh)
Try comprehending the words of the Founders before you try to fit them to your agenda.
Federalist #34
Suppose, then, the convention had been inclined to proceed upon the principle of a repartition of the objects of revenue, between the Union and its members
WHO are the members of the Union? The STATES
----
Federalist #39
that in the former the powers operate on the political bodies composing the Confederacy
WHO are the "political bodies composing the Confederacy"? The STATES
***Here's the rest of Federalst 39 that you so noticably failed to mention:
In the latter, the local or municipal authorities form distinct and independent portions of the supremacy, no more subject, within their respective spheres, to the general authority, than the general authority is subject to them, within its own sphere. In this relation, then, the proposed government cannot be deemed a national one; since its jurisdiction extends to certain enumerated objects only, and leaves to the several States a residuary and inviolable sovereignty over all other objects.
-----
Federalist #45
Congress have as complete authority to REQUIRE of the States
-----
Your 3rd link doesn't work, but I found it anyway.
Anti Federalist # 3 concludes:
The balance of power has long engaged the attention of all the European world, in order to avoid the horrid evils of a general government. The same government pervading a vast extent of territory, terrifies the minds of individuals into meanness and submission. All human authority, however organized, must have confined limits, or insolence and oppression will prove the offspring of its grandeur, and the difficulty or rather impossibility of escape prevents resistance.
-----
I also noticed you skipped Federalist #43:
The extent of this federal district is sufficiently circumscribed to satisfy every jealousy of an opposite nature And as it is to be appropriated to this use with the consent of the State ceding it; as the State will no doubt provide in the compact for the rights and the consent of the citizens inhabiting it; as the inhabitants will find sufficient inducements of interest to become willing parties to the cession; as they will have had their voice in the election of the government which is to exercise authority over them; as a municipal legislature for local purposes
--------------------------
I see nothing in your post to negate my original contention.
If you believe the Founders created either a wholly national OR a wholly federal government, you are incorrect. It is a hybrid government operation in each jurisdiction (federal/national) only in certain enumerated areas.
operation = operating
Hopefully, this will start the end of the Alternative Minimum Tax (AMT) nightmare. AMT is truly an abomination.
Apparently, in the same place it says the BATFE, DEA, DOT, EPA, BLM, Forrest Service, etc., and all the other alphabet agencies, derive their power to issue "regulations" with the force and penalties of "Law".
It seems to me that congress is specifically prohibited from delegating the authority to make "Law" to any other agency.
But if that prohibition were actually enforced congress would not have time to impose all the unconstitutional, mundane, and minute, daily "regulations" we are inundated with.
The resulting lack of federal and state oversight over every possible fraction of our lives would terrify the timid unthinking fools who apparently now make up the majority of our citizenry.
Freedom requires thought and responsibility, it is apparently just too much effort for most people to bother with, now that they are so conditioned to being coddled and directed every minute of their lives.
Reducing Gov. Org. back to only what it is allowed to do under the limits set by our constitution would redeem America, eliminating most "agencies" and "Tax's".
It would force most of our political parasites to find legitimate work.
It will not be allowed to happen, ever, short of a major revolution, no matter who is elected.
As long as they can vote in Chicago and St Louis, I say they should pay taxes too.
WHO are the "political bodies composing the Confederacy"? The STATES
And what did the Constitution replace the Confederacy with?
It was replaced by a Republic and national govenment operating with concurrent jurisdiction on the individual within the states, not a Federation operating on the the States as was the case of the Confederation under the Articles of Confederation.
James Madison, Federalist #39:
The operation of the constitution changed the form of government from a confederation to that of a Republic.
Here's the rest of Federalst 39 that you so noticably failed to mention
A description of what was replaced by the Constitution, (i.e. the confederacy operating with respect to States under the Articles of Confederation,) not applicable to what exists today as a Republican form of government operating with respect to individuals concurrent with the States. One must point out that with is applicable now, not what was being replaced by the Constitution.
For it is to be distinctly noted that taxation under the Constitution is what exists today, with a concurrent jurisdiction over the individual as regards taxation.
- "The change relating to taxation may be regarded as the most important; and yet the present [Continental] sic Congress have as complete authority to REQUIRE of the States indefinite supplies of money for the common defense and general welfare, as the future [Constitutional] Congress will have to require them of individual citizens;
Your 3rd link doesn't work, but I found it anyway.
Google, does have an occassional function. With updated link we look again.
Anti Federalist # 3 concludes:
The balance of power has long engaged the attention of all the European world, in order to avoid the horrid evils of a general government. The same government pervading a vast extent of territory, terrifies the minds of individuals into meanness and submission. All human authority, however organized, must have confined limits, or insolence and oppression will prove the offspring of its grandeur, and the difficulty or rather impossibility of escape prevents resistance.
Hate to be the one to inform you of this, the Anti-Federalists were the opposition to the Constitution, and lost the argument over whether or not we would continue with the Articles of Confederation.
While the setiments may be of some value in recognition of concern for the rights of the individual, With the ratification of the Constitution, the controlling document and its express guarantee of a republican government today, your sentiment was tossed into the dustbin of history as description of a form of government that was replaced 2010 years ago.
A sentiment of why there should be no change from the Articles of Confederation, loses to the established fact that the Constitution was ratified and replaced that prior form of government with a National form, not a Federal form of government nor a loose confederation of states as existed under the Articles.
For in Regards the Constitution which is the charter of national government in effect today,
James Madison, Federalist #39:
- "The difference between a federal and national government, as it relates to the OPERATION OF THE GOVERNMENT, is supposed to consist in this, that in the former the powers operate on the political bodies composing the Confederacy, in their political capacities; in the latter, on the individual citizens composing the nation, in their individual capacities. On trying the Constitution by this criterion, it falls under the NATIONAL, not the FEDERAL character;"
Anti-Federalist Papers #3 NEW CONSTITUTION CREATES A NATIONAL GOVERNMENT;
- There are but two modes by which men are connected in society, the one which operates on individuals, this always has been, and ought still to be called, national government; the other which binds States and governments together (not corporations, for there is no considerable nation on earth, despotic, monarchical, or republican, that does not contain many subordinate corporations with various constitutions) this last has heretofore been denominated a league or confederacy. The term federalists is therefore improperly applied to themselves, by the friends and supporters of the proposed constitution.
I also noticed you skipped Federalist #43:
The extent of this federal district is sufficiently circumscribed to satisfy every jealousy of an opposite nature And as it is to be appropriated to this use with the consent of the State ceding it; as the State will no doubt provide in the compact for the rights and the consent of the citizens inhabiting it; as the inhabitants will find sufficient inducements of interest to become willing parties to the cession; as they will have had their voice in the election of the government which is to exercise authority over them; as a municipal legislature for local purposes
Strange that you overlook the implicit recognition of the "Concurrent" character of the national jurisdiction over the individual that statement requires to have meaning.
The national government is not local, it has national purpose and a concurrent jurisdiction as regards taxation and all powers expessly enumerated in the Constitution,
Such is denied to the states and the people respectively as is clearly under scored in the 10th amendment.
- Amendment X
The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.
That amendment is a sword that swings two ways, powers being expressly given to the National government or that are prohibited by the constitution to the states are not within the perview of the states nor the people, out side their capacity to amend the constitution under Article V.
I see nothing in your post to negate my original contention.
Other than the fact the Constitution was ratifie, replacing the Articles of Confederation by a national Republic guaranteed under that Constitution.
IF you believe the Founders created either a wholly national OR a wholly federal government, you are incorrect. It is a hybrid government operation in each jurisdiction (federal/national) only in certain enumerated areas.
LOL, enumerated "powers", its geographichal area of concurrent power is a jurisdiction over all individuals in all the states.
A jurisdiction clearly supported from the earliest Supreme Court decisions of judges who were also delegates and participants in the creation of the National constitution that established those powers.
Hylton v. United States(1796), 3 U.S. 171
This was a writ of Error directed to the Circuit Court for the District of Virginia; and upon the return of the record, the following proceedings appeared. An action of debt had been instituted to May Term, 1795, by the attorney of the district, in the name of the United States, against Daniel Hylton, to recover the penalty imposed by the act of Congress, of the 5th of June, 1794, for not entering, and paying the duty on, a number of carriages, for the conveyance of persons, which he kept for his own use. ... is not a direct tax in the sense of the Constitution, "A general power is given to Congress, to lay and collect taxes, of every kind or nature, without any restraint, except only on exports; but two rules are prescribed for their government, namely, uniformity and apportionment: Three kinds of taxes, to wit, duties, imposts, and excises by the first rule, and capitation, or other direct taxes, by the second rule. " "the present Constitution was particularly intended to affect individuals, and not states, except in particular cases specified: And this is the leading distinction between the articles of Confederation and the present Constitution." "Uniformity is an instant operation on individuals, without the intervention of assessments, or any regard to states,"
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