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As unbelievable as it might sound, some tax protesters simply think that the income tax doesn't apply to wages.

Section 61(a) of the Internal Revenue Code says that "gross income" (which is the starting point for determining "taxable income") means "gross income from whatever source derived, including (but not limited to) the following items: (1) Compensation for services, including fees, commissions, fringe benefits, and similar items...."

Sometimes the claim is that "compensation for services" is not the same as "wages." Sometimes the claim is that "wages" are not the same as "gain" or "profit." (See the discussion below on the claim that wages represent an equal, nontaxable exchange of labor for money.) Sometimes the claim is something else. Regardless of the rationale, the result is always the same: Wages are income.

"[T]he earnings of the human brain and hand when unaided by capital ... are commonly dealt with as income in legislation." Stratton's Independence, Ltd. v. Howbert, 231 U.S. 399, 415 (1913).

"Every court which has ever considered the issue has unequivocally rejected the argument that wages are not income." United States v. Connor, 898 F.2d 942, 943-944 (3rd Cir. 1990).

"In our view, petitioner's wages are taxable as gross income..." Beard v. Commissioner, 793 F.2d 139, 140 (6th Cir. 1986), aff'g 82 T.C. 766 (1984);

"Wages are taxable income." Perkins v. Commissioner of Internal Revenue, 746 F. 2d 1187, 1188 (6th Cir. 1984); Beerbower v. Commissioner of Internal Revenue, 787 F.2d 588 (6th Cir. 1986).

"Wages are income, and the tax on wages is constitutional." Coleman v. Commissioner, 791 F.2d 68 (7th Cir. 1986), citing United States v. Thomas, 788 F.2d 1250 (7th Cir. 1986); Lovell v. United States, 755 F.2d 517 (7th Cir. 1984); Granzow v. Commissioner, 739 F.2d 265, 267 (7th Cir. 1984);

"Although not raised in his brief on appeal, the defendant's entire case at trial rested on his claim that he in good faith believed that wages are not income for taxation purposes. Whatever his mental state, he, of course, was wrong, as all of us are already aware. Nontheless, the defendant still insists that no case holds that wages are income. Let us now put that to rest: WAGES ARE INCOME. Any reading of tax cases by would-be tax protesters now should preclude a claim of good-faith belief that wages--or salaries--are not taxable." United States v. Koliboski, 732 F.2d 1328, 1329 n.1 (7th Cir. 1984), (emphasis in original; convictions for criminal failures to file affirmed).

"[W]e have [repeatedly] held that wages are within the definition of income under the Internal Revenue Code and the Sixteenth Amendment, and are subject to taxation. Denison v. Commissioner, 751 F.2d 241, 242 (8th Cir.1984) (per curiam), cert. denied, 471 U.S. 1069, 105 S.Ct. 2149, 85 L.Ed.2d 505 (1985)." United States v. Gerads, 999 F.2d 1255 (8th Cir. 1993).

"Section 61 of the Internal Revenue Code imposes a tax on income, and under the Tax Code, wages are income." Grimes v. Commissioner, 806 F.2d 1451, 1453 (9th Cir. 1986).

"Compensation for labor or services, paid in the form of wages or salary, has been universally held by the courts of this republic to be income, subject to the income tax laws currently applicable." United States v. Romero, 640 F.2d 1014, 1016 (9th Cir. 1981).

"Irrefutably, wages earned in compensation for services are "income" pursuant to the federal tax laws." Boubel v. United States, 86 AFTR2d ¸2000-5123, No. 1:99-cv-380 (U.S.D.C. E.D.Tenn. 6/22/2000).

"[I]f anything in our tax law is clear, it is that: 'WAGES ARE INCOME.' ... [A]ny contention to the contrary is patently frivolous...."" Hill v. United States, 599 F. Supp. 118, 120-22 (M.D. Tenn. 1984), (emphasis in original), (quoting United States v. Koliboski, 732 F.2d 1328, 1329 n.1 (7th Cir. 1984)).

"As the cited cases, as well as many others, have made abundantly clear, the following arguments alluded to by the Lonsdales are completely lacking in legal merit and patently frivolous: ... (5) wages are not income...." Lonsdale v. United States, 919 F.2d 1440, 1448 (10th Cir. 1990).

See also, Wilson v. United States, 412 F.2d 694, 695 (1st Cir. 1969); Schiff v. Commissioner, 751 F.2d 116, 117 (2d Cir. 1984); Commissioner v. Mendel, 351 F.2d 580, 582 (4th Cir. 1965); Simmons v. United States, 308 F.2d (4th Cir. 1962); Lonsdale v. Commissioner, 661 F.2d 71, 72 (5th Cir. 1981); United States v. Burton, 737 F.2d 439 (5th Cir. 1984); Capps v. Eggers, 782 F.2d 1341 (5th Cir. 1986); Funk v. Commissioner, 687 F.2d 264, 265 (8th Cir. 1982); United States v. Ware, 608 F.2d 400 (10th Cir. 1979); United States v. Woodall, 255 F.2d 370, 372 (10th Cir. 1958), cert. den. 358 U.S. 824 (1958); Simanonok v. Commissioner, 731 F.2d 743, 744 (11th Cir. 1984); Ledford v. United States, 2002 TNT 153-6, NO. 02-5027 (Fed. Cir. 8/6/2002).

So where do tax protesters get the idea that wages might not be income? Often from a series of incomplete and misleading quotations from irrelevant cases.

"There is a clear distinction between 'profit' and 'wages' or compensation for labor. 'Compensation for labor' can not be regarded as profit within the meaning of the law. The word 'profit' as ordinarily used, means the gain made upon any business or investment--a different thing altogether from mere compensation for labor." Oliver v. Halstead, 196 Va. 992, 86 S.E.2d 859 (1955).

This is not a federal decision, but a decision of the Virginia Supreme Court. It is also not a tax decision, but a decision interpreting Virginia's nonprofit corporation law. Specifically, the issue before the court was whether compensation paid to an employee of the corporation was a private "profit" prohibited by the nonprofit corporation law. The court held that a payment of compensation for labor is not the same as a "profit" from the corporation. This is completely different from the question of whether the payment is taxable income to the employee. (Another decision sometimes cited by tax protesters is Lauderdale Cemetery Assoc. v. Mathews, 345 Pa. 239 (1946), which is a similar decision under Pennsylvania's nonprofit corporation laws.)

"One does not 'derive' income by rendering services and charging for them." Edwards v. Keith, 231 F. 110, 113.

The quotation is deceptive, because it omits a critical sentence appearing earlier in the same paragraph:

"But no instructions of the Treasury Department can enlarge the scope of this statute so as to impose the income tax upon unpaid charges for services rendered and which, for aught any one can tell, may never be paid."

Notice the word "unpaid"? The taxpayer had not yet received any payment for the services rendered. The issue before the court was not whether payment for services rendered was income, but whether the IRS could impose a tax on income that had not yet been received (which it couldn't under the tax law as it then existed).

"Congress has taxed income, not compensation." Connor v. United States, 803 F.Supp. 1187, 1191 (S.D. Tex. 1969), aff'd on this issue, 439 F.2d 974 (5th Cir. 1971).

The above "quotation" is a fabrication, because the court never wrote those words. And the issue in that case was whether insurance proceeds received by the taxpayer after the destruction of his home should be considered taxable income. That case has nothing to do with wages or compensation for labor.