Court ruling shakes ground under IRS

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.

And what did the Constitution replace the Confederacy with?

A federal government with specific, enumerated national powers.

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Your post on Federalist #39 comes while the author is in the middle of the explanation, not at the conclusion-

The proposed Constitution, therefore, is, in strictness, neither a national nor a federal Constitution, but a composition of both.

It's a hybrid.

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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

Only within it's specifically enumerated areas.

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Federalist #45- have as complete authority to REQUIRE of the States

Of the STATES. If it had meant the People, it would have said so.

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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.

Hate to be the one to inform you of this, but I wasn't the one trying to use the Anti-Federalist Papers to bolster my argument, YOU were.

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Strange that you overlook the implicit recognition of the "Concurrent" character of the national jurisdiction over the individual that statement requires to have meaning.

Strange you keep thinking they're talking about NATIONAL character when Federalist #43 very plainly uses the word FEDERAL- The extent of this federal district

Do you not know the difference?

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Hylton v. United States(1796), 3 U.S. 171

Your lovely bold & red quotes come from the part of the decisions where the judge was reading from another source.

Indirect taxes are circuitous modes of reaching the revenue of individuals, who generally live according to their income. In many cases of this nature the individual may be said to tax himself. I shall close the discourse with reading a passage or two from Smith's Wealth of Nations.

'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, endeavours to tax it indirectly by taxing their expense, which it is supposed in most cases will be neatly in proportion to their revenue. Their expense is taxed by taxing the consumable commodities upon which it is laid out. 3 Vol. page 331.'

Such an arbitrary method of taxing different states differently, is a suggestion altogether new, and would lead, if practised, to such dangerous consequences, that it will require very powerful arguments to show, that that method of taxing would be in any manner compatible with the Constitution, with which at present I deem it utterly irreconcilable, it being altogether destructive of the notion of a common interest, upon which the very principles of the Constitution are founded, so far as the condition of the United States will admit.

Hylton was prosecuted for failing to pay a duty on imported carriages.

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The POWER to lay Duties, imposts and excises are given by the Constitution, but the EXTENT of those powers is limited to the original jurisdiction. PORTS are specifically designated areas of original jurisdiction belonging to the federal/national government.

Can't see where that decision bolsters you 'wholly national government' at all.

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its geographichal area of concurrent power is a jurisdiction over all individuals in all the states.

ROFLMAO!

If that's the case, why did the States keep their Constitutions? If all we have is a wholly national government, why did the Founders agonize over enumeration of powers?

They could have just said "We hereby create the United States"...and gone home.

No, the Constitution has nothing to do with geographical locations outside the areas of original jurisdiction.

As George Tucker put it in his treatise 'A View of the Constitution', The federal/national government is "an ADMINISTRATIVE organ" exercising its national powers on the political entities known as States. The centralized government was created mainly to keep the States from squabbling amongst themselves.

To have it any other way would nullify the entire purpose of the Founders in creating a 'limited' government, because that would leave the United States government as THE sole authority to dictate the extent of its own powers.

Not to mention how ludicrous the concept is that the Founders pledged their lives, fortunes and sacred honor to fight a War based partly on OVER-taxation just to create a national government with the unlimited authority to tax!

Geesh!

And what did the Constitution replace the Confederacy with?

A federal government with specific, enumerated national powers.

Sorry, it was a national republic as guaranteed expressly under the language of the constitution, not a Federation was you would imply.

Any "Federal" powers were noticibly few, in most cases expressed as prohibitions on the states such as coining of gold money under Article I section 9 for instance.

The proposed Constitution, therefore, is, in strictness, neither a national nor a federal Constitution, but a composition of both.
It's a hybrid.

A hybrid which happens to be predominately National in character as it intersects with the individual and taxation thereof. Which is the central point to the this thread in the first place.

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;"

Federalist #34:

``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.

Hylton was prosecuted for failing to pay a duty on imported carriages.

Hardly, Hylton was prosecuted for failing to pay a duty on any carriage he owned, the particular legislation was a an annual tax on imposed on any personal carriage, imposed on the owners thereof, having nothing to do with items in commercial use at all.

If that's the case, why did the States keep their Constitutions? If all we have is a wholly national government, why did the Founders agonize over enumeration of powers?

The founders agaonized over enumerations of powers to assure the States power over their local matters retained under a Republican form of govenment. With a clear delimination of those powers exercisible by the national government, with remainder of power exercised as provided by the people in their state and local governments.

You are forgetting the individual is subject to both state and federal governments, States have Constitutions to enumerate and restrict the powers of State government over the individual, just as the National government has a Constitution to restrict the exercise of its powers in respect to states and the individual within those states.

They could have just said "We hereby create the United States"...and gone home.

They could have. OTOH they choose instead to create a republican form of government allowing specific powers to the states and the people, other powers to the national government, and even some powers exercised concurrently by States and the national government over the individual such as the powers of taxation.

No, the Constitution has nothing to do with geographical locations outside the areas of original jurisdiction.

LOL, what a non-sequiter that one is.

The Constitution provided clearly enumerated powers with regards to individual citizens of the States, concurrent with jurisdictions of the States over those same individuals.

To have it any other way would nullify the entire purpose of the Founders in creating a 'limited' government, because that would leave the United States government as THE sole authority to dictate the extent of its own powers.

The limitation of the government laid down by the Constitution of the United States are those limiting powers to an enumerated few, reserving others remaining to the States and the People respectively.

Hate to break the new to you, but in exercise of the powers enumerated within the Constitution, the national government is limited only by the sense of the electorate in selecting those who make the statutes in Congress.

Those enumerated powers of government may be execised to their full extent answerable to the people only in their capacity as an electorate to remove those officials who would exceed practical bounds.

Gibbons v. Ogden (1824) [21 US 1, 9 Wheat. 1, 6 L. ed. 23],

'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."

Lane Co. v. Oregon (1868), 74 U.S. [7 Wall.] 71:

[T]he people, through the constitution of the United States, 'established a more perfect union by substituting a national government, acting, with ample power, directly upon the citizens, instead of the confederate government, which acted with powers, greatly restricted, only upon the states.' In no other way can the supremacy of that constitution be maintained. It creates a government in fact as well as in name, because its constitution is the supreme law of the land, 'anything in the constitution or laws of any state to the contrary notwithstanding;' and its authority is enforced by its power to regulate and govern the conduct of individuals, even where its prohibitions are laid only upon the states themselves.

Springer v. United States(1880), 102 U.S. 586

"The central and controlling question in this case is whether the tax which was levied on the income, gains, and profits of the plaintiff in error, as set forth in the record, and by pretended virtue of the acts of Congress and parts of acts therein mentioned, is a direct tax."

"Our conclusions are, that direct taxes, within the meaning of the Constitution, are only capitation taxes, as expressed in that instrument, and taxes on real estate; and that the tax of which the plaintiff in error complains is within the category of an excise or duty."

"[W]henever the government has imposed a tax which it recognized as a direct tax, it has never been applied to any objects but real estate and slaves."

"If the laws here in question involved any wrong or unnecessary harshness, it was for Congress, or the people who make congresses, to see that the evil was corrected.
The remedy does not lie with the judicial branch of the government."

With the provisio that the Supreme Courts may weigh in under very restricted conditions regarding the destruction of unalianable rights guaranteed under the Constitution to the People. Where the government has crossed the boundry of oppression with a clear purpose to deny individual rights as opposed to merely exercise of enumerated power for proper functioning of the nation.

MCCRAY v. U S, 195 U.S. 27 (1904)

"'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 [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."

"Let us concede that if a case was presented where the abuse of the taxing power was so extreme as to be beyond the principles which we have previously stated, and where it was plain to the judicial mind that the power had been called into play, not for revenue, but solely for the purpose of destroying rights which could not be rightfully destroyed consistently with the principles of freedom and justice upon which the Constitution rests, that it would be the duty of the courts to say that such an arbitrary act was not merely an abuse of a delegated power, but was the exercise of an authority not conferred. "

Not to mention how ludicrous the concept is that the Founders pledged their lives, fortunes and sacred honor to fight a War based partly on OVER-taxation just to create a national government with the unlimited authority to tax!

Ahem I would suggest you take aother look history and the reasons for the Revolution.

Insofar as taxes were concerned the revolution was fought as regards "taxation without representation" clearly summarised as:

http://www.let.rug.nl/usa/H/1994/ch3_p3.htm
The issue thus drawn centered on the question of representation. From the colonies' point of view, it was impossible to consider themselves represented in Parliament unless they actually elected members to the House of Commons. But this idea conflicted with the English principle of "virtual representation," according to which each member of Parliament represented the interests of the whole country, even the empire, despite the fact that his electoral base consisted of only a tiny minority of property owners from a given district. The rest of the community was seen to be "represented" on the ground that all inhabitants shared the same interests as the property owners who elected members of Parliament.
Most British officials held that Parliament was an imperial body representing and exercising the same authority over the colonies as over the homeland. The American leaders argued that no "imperial" Parliament existed; their only legal relations were with the Crown. It was the king who had agreed to establish colonies beyond the sea and the king who provided them with governments. They argued that the king was equally a king of England and a king of the colonies, but they insisted that the English Parliament had no more right to pass laws for the colonies than any colonial legislature had the right to pass laws for England.
The British Parliament was unwilling to accept the colonial contentions. British merchants, however, feeling the effects of the American boycott, threw their weight behind a repeal movement, and in 1766 Parliament yielded, repealing the Stamp Act and modifying the Sugar Act. However, to mollify the supporters of central control over the colonies, Parliament followed these actions with passage of the Declaratory Act. This act asserted the authority of Parliament to make laws binding the colonies "in all cases whatsoever."

not the amount of the tax levied per-se.

Geesh! INDEED!!!

Federalist #45- have as complete authority to REQUIRE of the States
Of the STATES.

The remark is regards to the Continental Congress being able to require a requisition on the States under the Articles of Confederation. A problem in that in practice such could not be enforced, hence the establishment of a Republic under the Constitution replacing the Articles of Confederation with powers to lay indirect taxes upon the individual as opposed to requisitions on the States.

If it had meant the People, it would have said so.

It did in refering to the proposed powers of Congress under the Constitution:

Federalist #45:

"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;

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.
Hate to be the one to inform you of this, but I wasn't the one trying to use the Anti-Federalist Papers to bolster my argument, YOU were.

LOL, when both the proponents and the opponents to the Constitution agree the Constitution is national in its scope, that is a clear statement on all sides that it does indeed operate on the individual citizen.

That leaves only you, in a contrary personal opinion, that it be otherwise. Sorry I stick with what the folks of the times had to say about the issue.

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.

LOL, what a non-sequiter that one is.

In January 1800, the entire House went to the state legislature of Virginia. Both Virginia and Kentucky had petitioned the new federal government that the recent Alien and Sedition Act was unconstitutional. Madison wrote the report: James Madison, Report on the Virginia Resolutions

It is indeed true that the term "states" is sometimes used in a vague sense, and sometimes in different senses, according to the subject to which it is applied. Thus it sometimes means the separate sections of territory occupied by the political societies within each; sometimes the particular governments established by those societies; sometimes those societies as organized into those particular governments; and lastly, it means the people composing those political societies, in their highest sovereign capacity. Although it might be wished that the perfection of language admitted less diversity in the signification of the same words, yet little inconvenience is produced by it, where the true sense can be collected with certainty from the different applications. In the present instance, whatever different construction of the term "states," in the resolution, may have been entertained, all will at least concur in that last mentioned; because in that sense the Constitution was submitted to the "states;" in that sense the "states" ratified it; and in that sense of the term "states," they are consequently parties to the compact from which the powers of the federal government result.

In conclusion, Madison wrote:

There is one other, however, which may be of too much importance not to be added. It cannot be forgotten that, among the arguments addressed to those who apprehended danger to liberty from the establishment of the general government over so great a country, the appeal was emphatically made to the intermediate existence of the state governments between the people and that government, to the vigilance with which they would descry the first symptoms of usurpation, and to the promptitude with which they would sound the alarm to the public. This argument was probably not without its effect; and if it was a proper one then to recommend the establishment of a constitution, it must be a proper one now to assist in its interpretation.

The People created the colonies and the colonies became States. The States created the centralized government. The States were used as a buffer between the People and the newly created government.

This could only be achieved if the States and federal government had defined areas of operation.

Nationwide taxation of the People is NOT an authority of the federal government because it's national powers can only operate on the States.

Your premise that once someone is elected they may pass whatever 'laws' they like is contradictory to a Republican form of government.

No one, no matter their office, has the legal authority to legislate money out of someone else's pocket. That's nothing more than legalized theft.

The People created the colonies and the colonies became States. The States created the centralized government. The States were used as a buffer between the People and the newly created government.

Under the articles of Confederation.

When looking from the purview of the current Constitution, the view changes in significant ways placing a Concurrent jurisdiction in taxation over the individual citizen.

Your desire to have it some other way is nothing more than your wish that it be so.

The reality dejure and infact is otherwise.

Nationwide taxation of the People is NOT an authority of the federal government because it's national powers can only operate on the States.

By definition of the term, a "national" power operates only on individuals.

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;"

In the case of taxation under the Constitution it operates a concurrent jursidiction in parallel with the states that the States may gather the resources necessary to their functioning independant of the national government just as the national government may gather the necessary resourses for its function without interference from the States.

Federalist #34:

``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.

Your premise that once someone is elected they may pass whatever 'laws' they like is contradictory to a Republican form of government.

You really like constructing strawman arguments don't you.

The Constitution clearly enumerates the powers that the national government may exercises and is thus limited to them. The tenth amendment being a clear summation of that principle.

No one, no matter their office, has the legal authority to legislate money out of someone else's pocket. That's nothing more than legalized theft.

Emotional hyperbole is hardly a useful debating tactic. The facts are that the national powers of taxatation enumerated in the Constitution are clear and unabiguous, and the means selected by the founders as the manner in which the nation's governmental functions are to be financed:

Constitution for the United States of America:

Article VI: "This Constitution, and the laws of the United States which shall be made in pursuance thereof; and all treaties made, or which shall be made, under the authority of the United States, shall be the supreme law of the land; and the judges in every state shall be bound thereby, anything in the Constitution or laws of any State to the contrary notwithstanding."

Article I Section 8: "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; "

Article I Section 8: "To make all laws which shall be necessary and proper for carrying into execution the foregoing powers, and all other powers vested by this Constitution in the government of the United States, or in any department or officer thereof."

The very earliest Supreme Court tax case underscoring the very nature of indirect taxation as being imposed upon the individual.

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,"

"[T]he DIRECT TAXES contemplated by the Constitution, are only two, to wit, A CAPITATION OR POLL TAX, simply, without regard to property, profession, or any other circumstance; and a tax on LAND."

With a clear statements of the proponents of the constituton as well as its opponents as to the scope of those tax laws:

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.

Not to mention, the facts on the ground as regards the acts of the "Nation's" (not "Federation's") first President in regards such indirect taxes laid upon the individual uniformly throughout the United States.

George Washington's Proclamation Whiskey Rebellion August 7, 1794:
http://www.yale.edu/lawweb/avalon/presiden/proclamations/gwproc03.htm
George Washington's address on October 20 1794
to General Lee at Bedford, PA

Washington called up and led states militias into Western Pennsylvania enforcing the Federal tax on private stills owned by individual citizens and farmers in Western Pennsylvania.

United States Statutes at Large, 1st Congress, 3rd Session Ch 15, 1791,
page 202, 204 Sec 21-24;

Sec. 21. And be it further enacted, That upon stills which after the last day of June Next, shall be employed in distilling spirits from materials of the growth or production of the United States, in any other place than a city, taown or village, there shall be paid for the use of the United States, the yearly duty of sixty cents for every gallon, English wine-measure, of the capacity or content of each and every such still, including the head thereof.
Sec. 22. And be it further encted, That the evidence of the employment of the said stills shall be, their being erected in stone, brick or some other manner whereby they shall be in a condition to be worked.
Sec. 23. And be it futher enacted, That the said duties o stills shall be collected under the management of the supervisor in each district, who shall appoint and assing proper officers for the surveys of the said stills and the admeasurement thereof, and the collectio of the duties thereupon; and the said duties shall be paid half yearly wihtin the firest fifteen days of January and July, upon demand of the proprietor or proprietors of each still, at his, her or their dwelling, by the proper officer charged with the survey thereof: And in case of refusal or neglect, to pay , the amount of the duties so refused or neglected to be paid may either be recovered with costs of suit in an actoin of debt in the name of the supervisor of the district, within which such refusal shall happen, for the use of the United States, or may be levied by distress and sale of goods of the person or persons refusing or neglecting to pay, rendering the overplus(if any there be after payment of the said amount and the charges of distress and sale) the the said person or persons.

Under the articles of Confederation

Madison wrote his report in 1800, well after the Confederation ceased to exist.

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By definition of the term, a "national" power operates only on individuals.

You really should read a bit further down.

Federalist #39

On trying the Constitution by this criterion, it falls under the NATIONAL, not the FEDERAL character; though perhaps not so completely as has been understood. In several cases, and particularly in the trial of controversies to which States may be parties, they must be viewed and proceeded against in their collective and political capacities only. So far the national countenance of the government on this side seems to be disfigured by a few federal features. But this blemish is perhaps unavoidable in any plan; and the operation of the government on the people, in their individual capacities, in its ordinary and most essential proceedings, may, on the whole, designate it, in this relation, a NATIONAL government.

But if the government be national with regard to the OPERATION of its powers, it changes its aspect again when we contemplate it in relation to the EXTENT of its powers. The idea of a national government involves in it, not only an authority over the individual citizens, but an indefinite supremacy over all persons and things, so far as they are objects of lawful government. Among a people consolidated into one nation, this supremacy is completely vested in the national legislature. Among communities united for particular purposes, it is vested partly in the general and partly in the municipal legislatures. In the former case, all local authorities are subordinate to the supreme; and may be controlled, directed, or abolished by it at pleasure. 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.

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The Constitution clearly enumerates the powers that the national government may exercises and is thus limited to them.

Good.

Webster's Dictionary 1828
DUTY
7. Tax, toll, impost, or customs; excise; any sum of money required by government to be paid on the importation, exportation, or consumption of goods. An impost on land or other real estate, and on the stock of farmers, is not called a duty, but a direct tax.

EXCISE
An inland duty or impost, laid on commodities consumed, or on the retail, which is the last state before consumption

DIRECT
Direct tax, is a tax assess on real estate, as houses and lands.

INDIRECT
5. Indirect tax, is a tax or duty on articles of consumption, as an excise, customs

The Constitution granted the authority to collect taxes on THINGS, such as items imported or exported from the ports of entry, or on consumables UP TO the point of consumption. 'Real property', or what we call 'real estate', is also Constitutional taxation.

Correct me if I'm wrong (and I know you will),The taxation of these items is collected by the State with a portion to the Federal city for the purposes of general government. That being the case, where did the power to tax the fruits of our labor come from?

The Constitution says direct taxes must be apportioned via the census, and indirect taxes must be uniform.

POLLOCK v. FARMERS' LOAN & TRUST CO., 157 U.S. 429 (1895) held the whole 1894 federal income tax void.

Are you saying the power was there all along, but no one bothered to exercise it until the 16th Amendment came along?

Logic and reason would dictate a closer examination of that concept. Government could easily decide to bestow a power on itself. That's the danger of letting government be the sole definition of its own limits.

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Washington called up and led states militias into Western Pennsylvania enforcing the Federal tax on private stills owned by individual citizens and farmers in Western Pennsylvania.

True...but AFTER he was forced into getting permission to enter the State from its Governor.

Thomas Mifflin

Western Pennsylvania rebelled against the Federal excise tax on whiskey in 1794. Never having fully trusted George Washington, Mifflin refused, when asked by President Washington to call out the Pennsylvania militia to enforce this Federal law. Mifflin asserted that a United States president had no authority to order a state governor to use state militia for any purpose during peacetime and in the absence of any local request for assistance.

Mifflin's point was established, setting a precedent that is still honored.

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The FEDERAL government cannot exercise a NATIONAL power...even a power enumerated in the Constitution, WITHOUT the cooperation of the State itself.

Concurrent jurisdiction is a sword that cuts both ways

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Let me ask you a two part question-

Of the three different types of 'authority' in play; 1)The Federal government, 2)the States and 3)the People....

Which one do you think is superior, and why?

Correct me if I'm wrong (and I know you will),The taxation of these items is collected by the State with a portion to the Federal city for the purposes of general government. That being the case, where did the power to tax the fruits of our labor come from?

Hmm looks to me you left out the definion of "tax" as the generic power that is enumerated in Article I Section 8,

Article I Section 8: "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;

with the express requirement that "all duties, imposts and excises shall be uniform throughout the United States; "

While in Article I Section 9 clause 4 that expressly required capitations (i.e. head and poll taxes) and direct (i.e. Real Estate) taxes be apportion in accord with state census and assessed and collected on a state to state basis by whatever mechanism Congress found appropriate.

No Capitation, or other direct, Tax shall be laid, unless in Proportion to the Census or Enumeration herein before directed to be taken.

Example the early statutes governing the administration of such a direct tax provides good example it applied to Real Estate and the collection of some specific internal duties:

Statutes at Large: Thirteenth Congress Session. I. Ch. 16. 1813

Chapter XVI. An Act for the assesment and collection of direct taxes and internal duties.(a)

Which provided for direct tax collection districts administered by national tax surveyors, responsible for accurate assessment and collection of taxes from individual property owners.

That pretty much leaves any other tax that fits within the general class "taxes" to be allocated according to the nature of the tax, whether or not it be amenable to be assigned as a fixed amount per person (as a capitation is) or as a tax on some other factor best expressed as a percentage of an the revenues of an activity, privilege, exchange, transfer or other transaction amenable to valuation which is more applicable to application by rule of uniformity.

The Constitution says direct taxes must be apportioned via the census, and indirect taxes must be uniform.

Yep as point out above.

Are you saying the power was there all along, but no one bothered to exercise it until the 16th Amendment came along?

Actually, the Courts recognized the power to tax such long before the 16th Amendment came along in its findings concerning the income tax of 1863.

Springer v. United States(1880), 102 U.S. 586

"The central and controlling question in this case is whether the tax which was levied on the income, gains, and profits of the plaintiff in error, as set forth in the record, and by pretended virtue of the acts of Congress and parts of acts therein mentioned, is a direct tax."

"Our conclusions are, that direct taxes, within the meaning of the Constitution, are only capitation taxes, as expressed in that instrument, and taxes on real estate; and that the tax of which the plaintiff in error complains is within the category of an excise or duty."

"[W]henever the government has imposed a tax which it recognized as a direct tax, it has never been applied to any objects but real estate and slaves."

Underscored in Pollock as regards taxation of businesses, privileges, and employments, and vocations as excises.

POLLOCK v. FARMERS' LOAN & TRUST CO., 158 U.S. 601 (1895):

"We have considered the act only in respect of the tax on income derived from real estate, and from invested personal property, and have not commented on so much of it as bears on gains or profits from business, privileges, or employments, in view of the instances in which taxation on business, privileges, or employments has assumed the guise of an excise tax and been sustained as such."

"If that[rents from land] be stricken out, and also the income from all invested personal property, bonds, stocks, investments of all kinds, it is obvious that by a r the largest part of the anticipated revenue would be eliminated, and this would leave the burden of the tax to be borne by professions, trades, employments, or vocations; and in that way what was intended as a tax on capital would remain, in substance, a tax on occupations and labor. We cannot believe that such was the intention of congress."

"We do not mean to say that an act laying by apportionment a direct tax on all real estate and personal property, or the income thereof, might not also lay excise taxes on business, privileges, employments, and vocations. "

Our conclusions may therefore be summed up as follows:
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.
Mr. Justice WHITE, dissenting.

16. The injustice of the conclusion points to the error of adopting it. It takes invested wealth, and reads it into the constitution as a favored and protected class of property, which cannot be taxed without apportionment, while it leaves the occupation of the minister, the doctor, the professor, the lawyer, the inventor, the author, the merchant, the mechanic, and all other forms of industry upon which the prosperity of a people must depend, subject to taxation without that condition.

And by stating that very principle in:

Stanton v. Baltic Mining Co.(1916), 240 U.S. 103:

"the provisions of the 16th Amendment conferred no new power of taxation, but simply prohibited the previous complete and plenary power of income taxation possessed by Congress from the beginning from being taken out of the category of indirect taxation to which it inherently belonged, and being placed in the category of direct taxation subject to apportionment"

The FEDERAL government cannot exercise a NATIONAL power...even a power enumerated in the Constitution, WITHOUT the cooperation of the State itself.

LOL,

Constitution for the United States of America:

Article VI: "This Constitution, and the laws of the United States which shall be made in pursuance thereof; and all treaties made, or which shall be made, under the authority of the United States, shall be the supreme law of the land; and the judges in every state shall be bound thereby, anything in the Constitution or laws of any State to the contrary notwithstanding."

Statutes at Large: Thirteenth Congress Session. I. Ch. 16. 1813

Chapter XVI. An Act for the assesment and collection of direct taxes and internal duties.(a)

Let me ask you a two part question-
Of the three different types of 'authority' in play; 1)The Federal government, 2)the States and 3)the People....
Which one do you think is superior,and why?

The National government has complementary powers operating in concurrent jurisdiction over the individual within the constraints of enumerate constitutional boundries set for each. Where powers have not been assigned to either state or national government, the personal freedoms and rights of the individual are supreme.

The ultimate point being the way you, I, the People of the United States are going to change the laws and powers of Congress as they are exercised today, will only be through exercise of our vote in selecting our repesentation in exercise of the ballot box and through the Article V amendment process provided under the Constitution.

The alternative in extremis is revolution and the overthrow of the government at hand as was effected by the founders of this nation in throwing of the yoke of the British crown. However replacing it with a Republic as characterised by the Constitution of the United States may be abit problematic under current political conditions, one takes thier chances in such revolutions, few survive the tumult and choas they engender most lead to tyranny and dictatorships for lack of principled leaders willing to give up the reigns of power once they are in hand.

We were lucky in George Washington as our first example of a chief executive, any other and we would have very likey devolved into a monarchy or worse.

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