This is not a protest of taxation, this is a positive inquiry into our 16Th Amendment and the related implementation of the "Income Tax" System.

Congress possesses the authority, by the inherent nature of Government, to lay and collect taxes for the purpose of supplying the necessary revenue upon which it operates.  Our Country, by ratifying the 16th Amendment, empowered the Federal Government with the ability to tax, without apportionment, all forms of "income" from whatever source derived.  The 16Th Amendment says:

The Congress shall have the power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several States, and without regard to any census or enumeration.

Our research spans several years, with many hours devoted to public law libraries.  We have included an index of the published materials used and cites to the many resources quoted from.  It is our goal that through shared information we may be better able to understand our Constitution and out Government.
 

It is admitted by our Government that there are only 2 methods of taxation recognized by our Federal Constitution.   Those qualifying  as "Direct Taxes" under Article 1 Section 2 clause 3 and Article 1 Section 9 clause 4; and those qualifying as "Indirect Taxes" under Article 1 Section 8.  These taxes are not classified by the method of their application, but rather, their classification dictates the method of their application: that is, all "Direct Taxes" ( those that directly effect people or property) must be apportioned, while all "Indirect Taxes" ( those that primarily effect commerce, commodities and privileges) must be uniform throughout the United States.

This admission clearly indicates that the 16Th Amendment did not change the existing methods of taxation , nor did it create or authorize a new method of taxation, but simply reaffirmed the existing all inclusive power to lay and collect taxes upon "income", so long as it complied with the existing classifications.  The Amendment did not create a "Direct Tax" upon persons or property, not subject to apportionment, nor did it allow an "Indirect Tax" to be levied upon persons or property.  The tax is upon the specific thing called "Income", that which is derived from ( separated from) property both real and personal.

Taxes upon Businesses, Trades, Professions, Occupations and employment’s, prior to the 16Th Amendment, had always been regarded as "Indirect Taxes" levied upon the use of property or the privilege of use, and the doing of Business for profit.  Such taxes being "Indirect" were measured by the amount of "Income" derived from the operation of the business, trade, profession, occupation or employment.  After the implementation of the Amendment and because both taxes were in their nature "excise" taxes, that is , both taxes were levied upon the use of property or the privilege of use measured by the amount of "income" derived, they were combined into one system.  Our system today is broken into 2 sections, one dealing with "individuals" which include businesses, trades, occupations and employment’s and the other which deals with "corporations".

In a study of taxation, one must to a certain degree, understand our Constitutional form of Government.   We do not pretend to accomplish this nor do we fully understand its mysteries, however, the following is our understanding of it.
 

The Declaration of Independence is the foundation from which our Constitutional form of Government derives it’s powers.  It is the association of a free society where by it’s people have chosen to be governed, and have within themselves agreed to be governed, by a prescribed set of rules.   Primary to this end it was declared and established that all men were created equal, not granted equality, but created equal.  That they possessed certain inalienable rights which were not dependent upon the grace of government , but that forms of government were instituted among men for the protection of those Rights.  Among which are the Right to Life, Liberty and the Pursuit of Happiness.  The State Constitutions are the binding agreement between the State and its sovereign citizens and sets forth and establishes the rules by which it’s citizens agree to be governed.  So also is the Federal Constitution, it establishes the rules by which the sovereign citizens of the several States, and the sovereign States agree to be governed by a central authority having legislative authority over them.   Our Constitution guarantees to us those "inalienable" Rights, subject only to those rules by which we agreed to be governed.

For our study of taxation we are only concerned with the "inalienable" Right to Pursuit of Happiness, and it’s control and effect upon the subject "Income Taxes"

Direct Taxes primarily effect people, they are levied for the mere consequence of life as a tribute to our government for the protection it provides to us.  This tax has taken several forms ; either as a "head" tax or a "poll" tax, it is referred to as a "Capitation" tax, but in any since, it is a tax levied without regard to property, profession or circumstance.

Inalienable Rights are those Rights which cannot be bartered away or given away or taken away except in punishment of a crime.  Butcher’s Union Case 111US746  (1883)

The Courts of our Country have on many occasions ruled upon the meaning of Pursuit of Happiness.  In the 1825 U.S. case "The Antelope" 23US66  we found this on page 117  " That every man has a natural Right to the fruits of his own labor, is generally admitted; and that no other person can rightfully deprive him of those fruits, and appropriate them against his will, seems to be the necessary result of this admission".   United States v. Morris 125F2d322, citing Cornfield v. Coryell 4 Wash (C.C.) 371, Federal Cases #32030 (1823), The Slaughterhouse Cases 16 Wall 75  21Led394, Butcher’s Union case 111US746, Blake v. McClung 172US239, Allgeyer v. Louisiana 165US578 and the Peonage Cases (D.C.) 123F2d671, come to this conclusion; on page 326  "can there be any doubt that the right to purchase, lease and cultivate land or to perform honest labor for wages with which to support himself and family, is among these Rights thus declared to be  "inherent and inalienable". and 0n page 331 " That the Right to lease lands and to accept employment as a laborer for hire are fundamental Rights inherent in every free citizen is indisputable".  The Federal Appeals court in 1941 makes this statement  [11] " The Right to labor, to pursue any lawful employment in a lawful manner, and to make lawful contracts are Rights enjoyed  by the citizen under the protection of the Constitution of the United States", Whitcomb v. Emerson 115P2d892, citing 16 C.J.S., Constitutional Law  sec 473, Lochner v. New York 198US45, Ex Parte Hutchenson, C.C. 137F949, The Stockton Laundry Case C.C. 26F611, Meyer v. Nebraska 262US390-398.
 

"Excise Taxes" indirectly effect people by being a cost added to the price of commodities, such as sale taxes or luxury taxes, or as a charge, or license fee,  for the privilege of using property or doing "business" for profit.
 
In the case Jack Cole Co. v. MacFarland 337S2d453, citing Lonas v. State 50 Tenn 287 @ 307 the Court gives us an idea of what a privilege is; " Privileges are special rights belonging to the individual or class, and not to the mass; properly, an exemption from some general burden, obligation or duty; a right peculiar to some individual or body.  Under footnote [1] Jack Cole Supra. " it can not be denied that the Legislature can name any privilege a taxable privilege and tax it by the means other than an income tax, but the Legislature cannot name something to be a taxable privilege unless it is first a privilege" [3] "Realizing and receiving income or earnings is not a privilege that can be taxed".  " A  privilege is whatever business pursuit, occupation or vocation, affecting the public the Legislature chooses to declare and tax as such".  In Redfield v. Fisher 292Pac813, the court says " The individual unlike the corporation cannot be taxed for the mere privilege of existing…: But the individuals Right to live and own property are natural Rights for the enjoyment of which an excise cannot be imposed" 26R.C.L. Taxation s 209 page 236, Cooley Taxation (4th ed.) s 1676, In RE opinion of the Justice 193 Mass 67 84NE499.  In State v. Gillespie 168nw38 (1918) cited by John MacArthur Maguire, Taxing The Exercise Of Natural Rights, Harvard Legal Essays (1934) page 288  "Excepting the limited Poll Tax, the Legislature has no right to levy a head tax or an occupation tax.  Every person is entitled to acquire and posses and protect property and to pursue and to obtain safety and happiness, and for that purpose to follow any honest occupation without paying a tax for the privilege of doing it".  See also Burch v. Mayor 42 Ga 596 600-601 and Mayer v. McWilliams  52 GA 251 269-270.

Excise taxes have been used from the beginning of our Country as a method of producing revenue for the operation of government.  Many cases exist challenging the levying of such taxes upon businesses and property both before and after the passage of the 16Th Amendment.  The Courts have repeatedly affirmed that such taxes are not "Direct Taxes" levied upon the business or property, either real or personal, but were upon the use of the business or property or the privilege afforded by such use.  In 1895 the practice of levying excise taxes upon the gains derived from real estate and invested personal property was challenged in Pollock v. Farmers Loan and Trust 157US427, rehearing 158US601.  In these cases extensive research was presented by and to the Court illuminating the existing tax system used for the previous 100 years.  The Court in a 5 to 4 split reversed the previous tax decisions regarding "income derived from real estate and invested personal property.  Holding, on the grounds that to tax the income derived from property, either real or personal, so closely impacted the property itself that it was in effect a "Direct Tax" upon that property from which the income came.  With the "Income" tax portion of the Tax Act void for want of apportionment the "Excise Tax" (on business, trades, professions and occupations) , even though it was not the subject of the challenge, was also declared void because the one could not stand without the other.  The Supreme Court makes this statement concerning the tax levied upon businesses, privileges, or employment’s ; 158 U. S. 601 at 635,  " 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, privilege, or employment’s, in view of the instances in which taxation on business, privilege, or employment’s, has assumed the guise of an excise tax and been sustained as such."
This Court decision made it impossible to levy taxes upon the accumulated wealth of our Country. Large estates were acquiring vast amounts of tax free wealth, while those involved in business, trades, professions, occupations and employment’s as well as the common laborer were staggering under the heavy load of tariff taxes.  The 16Th Amendment was the outcome of this inequity, it was proposed for the specific purpose of balancing the tax load and shifting some of the heavy cost of government to those more able to bear it.  The ability to levy and assess taxes upon "Income" derived from both real and personal property by other than a "Direct Tax" was critical.  To institute a "Direct Tax’ upon such accumulated wealth, then apportion it among the States according to population, would not accomplish the desired goal.  Wealth would only pay their proportional share based upon population, not upon wealth.  Congress debated several proposals as recorded in the Congressional Record of 1909, many discussions followed until a reasonable solution was agreed upon.  If Congress possessed the power to levy an excise tax upon the "Income" derived from real and personal property, as in the past had been done, the balance would be achieved. However, the Courts were not likely to reverse the decision made in the Pollock Case.  The only other way was to pass an amendment that would allow a tax to be levied without the requirement of apportionment.  This could be done in two ways; either by repealing the existing requirement of apportionment of Direct Taxes or by removing the requirement of apportionment for taxes laid upon "Incomes".  The desire of Congress was not to effect the existing safeguard against direct taxes as they pertained to people or property, but to allow what was normally considered to be an excise tax exist in the place of  what the Court considered a direct tax on property.  Income taxes could be either a direct tax upon persons or property, or they could be an indirect income tax upon persons or property, depending upon what was taxed.  Certainly , to tax the person or the property based upon gross revenue or assessed value would be a direct tax, or to tax the same subject for the mere privilege of existing would be a direct tax.   However, to assess an excise tax for the privilege of using property in the production of income, and then measuring that privilege by the amount of gain, profit or income ( Income being that which is left after recouping the initial investment and all related expenses)  is certainly well within the meaning of indirect.  The 16TH Amendment therefore appears to be an indirect excise tax levied upon the use of property measured by the amount of gain derived.
The Amendment, by not repealing the requirement for apportionment of direct taxes, makes it clear that if or when the tax exceed the bounds of "Income" and trespasses upon the territory reserved for "Direct Taxes" that the Courts are obligated to disregard form and consider substance alone.  In Brushaber v. Union Pacific 240 U. S. 1 (1916) page 17 Chief Justice White makes this statement:  "Moreover in addition the conclusions reached in the Pollock case did not in any degree involve the holding that income taxes generically and necessarily came within the class of "Direct Taxes" on property, but on the contrary recognized the fact that taxation on income was in it’s nature an excise entitled to be enforced as such unless and until it was concluded that to enforce it would amount to accomplishing the result which the requirement as to apportionment of "Direct Taxes" was adopted to prevent, in which case the duty would arise to disregard form and consider substance alone and hence subject the tax to the regulation as to apportionment which otherwise as an excise would not apply to it.

What then, is the meaning of the term "Income" as it pertains to the 16TH amendment.   The I. R. S. Tax Code 26 U.S.C.A. does not give a definition, it merely states that ; sec. 61 (a) Gross income defined:  Except as otherwise provided in this subtitle, gross income means all income from whatever source derived, including (but not limited to) the following items: then it list 15 items as examples but does not say if these are Incomes or sources.  By definition it seems to say that gross Income is the sum of the incomes derived from these various sources, if so what is Income?  Is Income 100 % of the items listed or is it something derived from those items.  On this subject the Courts have not been silent.
Pollock v. Farmers Supra. establishes that such taxes have always, except for a few specific instances, fallen upon gains and profits, the difference between what comes in and what goes out.  In Stratton’s Independence v. Howbert 231 U.S. 399 on page 415 the Court states that the employing of capital or the employing of labor or the employing of both combined, the equivalent of the manufacturing process is indubitably business, and that Income is the gain derived from capital, from labor. or from both combined. Eisner v. Macomber  252 U.S. 189 @ 207 expands this definition by saying; "… not an increase in value but a gain, a profit, something of exchangeable value proceeding from the property, severed from capital."  Merchant’s Loan and Trust v. Smietanka  252 U.S. 509 @519 " There would seem to be no room for doubt that the word must be given the same meaning in all the Tax Acts of Congress that was given to it in the Corporation Excise Tax Act and that what that meaning is has now become definitely settled by the decision of this Court….to be the commonly understood meaning of the term which must have been in the minds of the people when they adopted the 16TH Amendment to the Constitution.  That it was a gain or profit produced by or derived from that investment and proceeded and was severed or made severable from it by sale for cash and therefore became realized gain which has been repeatedly declared to be taxable Income within the meaning of the Constitutional Amendment and the Acts of Congress".
Congress in proposing the 16TH Amendment also discussed the meaning of this term, the Congressional Record of June 30, 1909 page 3969 by Mr. Cummins,  "Senators, I can not conceive how there can be objections to the justice of an income tax law.  It places the burdens where they belong; it discards unproductive property and unprofitable labor, and exacts but a small percentage of gains and profits and earnings actually received.  It is impossible to conceive of any injustice in taking a little part of a surplus in hand over and above a most liberal allowance for the maintenance of a family.  It exacts not a penny that is in fact needed for either the necessities, the comforts, or the luxuries of life."  Mr. Hulls statement of April 26 1913 page 505  " In any event the proposed tax is measured by net profits or gains and is not imposed upon gross income nor capital nor other property.  If a citizen has not been successful in his effort to accumulate profits he is not required to pay the tax, but if he has prospered he is required to contribute to his government,"  Mr. Murray, May 6, 1913 page1252;  "They forget the principle upon which this tax is founded and that is that every man who is making no more than a living should not be taxed upon living earnings, but should be taxed upon the surplus that he makes over and above that amount necessary for a good living.".." The purpose of this tax is nothing more than to levy a tribute upon the surplus wealth which requires extra expense"   MR> Logue  May 6, 1913 page 1262  " the act provides for a tax upon the annual incomes, therefore it is presumed to be a tax upon annual profits or increases or gains"  Mr. Chilton offers this perspective:  August 28, 1913 page 3845  "well so far as the Senator has gone.  Let me offer this suggestion, on page 107 beginning in line 3 it is provided that the "Income" derived from salaries or wages and so forth shall be included.  It has to be Income before it can be taxed no matter how it is derived.
From the Congressional Record of October 16, 1913 just prior to the implementation of the 16Th Amendment "Income Tax" this synopsis of the Bill was prepared by Judge Hull and entered into the record by Mr. Simms; page 5679,  The Treasury Regulations soon to be prepared will make clear to every taxpayer the requirements of the law and it’s application to the Income derived from various kinds of Business.   To any person who keeps familiar with his Business affairs during the year to the extent that at the end he knows with reasonable accuracy the amount of his aggregate annual profits, the matter of executing his tax return would be simple and convenient."

This information led us to believe that Income is the gain, profit, or surplus derived from every possible operation of Business whether from dealings in Real Estate, Personal Property or from activities in Businesses, Trades, Professions, Occupations and Employment’s.  The Courts of our Country have unanimously agreed.  In 1961 the Federal Court of Appeals reveals this insight;  Trent v. Commissioner of Internal Revenue 291 F2d 669 page 671;  "the Courts have properly assumed that the term (trade or business) includes all means of gaining a livelihood, even those which would scarcely be so characterized in common speech" on page 673 the Court cited 230 F2d 907;  The phrase "trade or business" has a common and well understood connotation as referring to the activity or activities in which a person engages for the purpose of earning a livelihood"  and from Norland v. C.I.R. 269 F2d 108 page 111 1959;  " Every person who works for a compensation is engaged in the business of earning his pay".  This Court went on to say, concerning Section 62 (1)  "…would have overcome any possible doubt that the performance of service as an employee is a trade or business".

At this point we are confused. It seems that the Courts are saying that the Right to labor, the condition of being employed for wages, is the Inalienable Right to Pursuit of Happiness.  Yet, on the other hand that the ability to perform labor for wages, the act of being an employee, is a privilege taxable by an excise.  We can see no similarities between the two.

As though the foregoing is not enough confusion the following are added to this equation.  Labor is held to be Property, it is the Right to engage in contracts where by labor is exchanged for money or other property.  "Labor is the primary foundation of all wealth.  The property which each one has in his own labor is the common heritage and is incident to the right of acquiring property" Low v. Rees Printing 59 N.W. 362.  Also,  "Neither Federal Recovery Act nor Rules or Regulations adopted in administration there of may foster Nation-wide Confederation of workers any more than Nation-wide confederation of Capitalist who engage in industries wherein workers are employed, since labor and capital are property and both must be equally safe-guarded" National Industrial Recovery Act s.7 (a) (1), 15 U.S.C.A. s.707 (a) (1).   Bouviors Dictionary defines Labor as  "Work requiring exertion or effort, either physical or mental; toil.  Labor and business are not synonymous:  Labor may be business but it is not necessarily so, and business is not always labor.  The labor and skill of one man are frequently used in a partnership, and valued as equal to the capital of another.   Under the 16Th Amendment, the gain derived from property is taxable in the same context that the gain derived from capital is, but the recovery of invested capital is specifically excluded from gross income.

This brings us to our final inquiry; What are the exemptions and deductions allowed by the tax code for?   Are they plain gifts given to us by Congress or do they serve a specific purpose in the application of taxes.

The 16Th Amendment did not repeal the requirement to apportion all "Direct Taxes" according to population.  The Supreme Court in the case Hylton v. United States 3 U.S. 3 Dall. 171 established that the only "Direct Taxes" referred to in the Federal Constitution were those of "Capitation" taxes and taxes on land.  We are only concerned with "Capitation" taxes, taxes that effect people directly.  Congress has always had the power to tax almost everything indirectly, although they could not indirectly tax something the were required to tax directly.   This is evidently the findings in the case of Pollock v. Farmers supra. at 158 U.S. 601 page 625;  Quoting from 3 Hamilton’s Works,34  " he gives, however, it appears to us, a definition which covers the question before us.  A tax upon one’s whole income is a tax upon the annual receipts from his whole property, and as such falls within the same class as a tax upon the property, and is a direct tax, in the meaning of the Constitution. … "This principle, which seems critically correct, *would exempt as well the income as the capital of the property.  It protects the use as effectual as the thing.   What , in fact, is property, but a fiction without the beneficial use of it?  In many cases indeed, the income or annuity is the property itself".   This is the principle upon which the court apparently decided the Pollock case,  that to tax income derived from property was, in effect, to tax the property itself.  But, see Justice Whites’ dissenting opinion in 157 U.S. 427 at 645;  "It is said that a tax on the rentals is a tax on the land, as if the Act here under consideration imposed an immediate tax on the rentals.  This statement, I submit, is a misconception of the issue.  The point involved is whether a tax on net income, when such income is made up by aggregating all sources of revenue and deducting repairs, insurance, losses in business, exemptions, etc., becomes, to the extent to which real estate revenues may have entered into the gross income, a direct tax on the land itself.  In other words, does that which reaches an income, and thereby reaches rentals indirectly, and reaches the land by a double indirection, amount to a direct levy on the land itself?  This clarifies the difference between a "direct" income tax and an "indirect" income tax: "Direct" being the rentals themselves, without allowing for expenses, "indirect" being the rental’s net income after the allowance of all expenses.
 What does he mean by a "double indirection"?   The first indirection appears to be the recovery of expenses incurred in the business of renting  property.  It includes repairs, insurance, losses sustained, exemptions, etc., a separation between the revenue (rentals) and net income.  Gross Income, as defined, is the aggregate or sum of these various net incomes which then becomes the basis of the tax imposed.  Allowed from net income are exemptions and deductions, over which Congress has control, in order to reach the taxable part of the income.  The "Income" tax is not a tax upon people, but, is a tax paid by people.   How do you separate the person from his "Income" so that the "indirect" tax on "Income" remains an "indirect" tax upon the person paying it?
Justice Harland in his dissenting opinion 158 U.S. 601 at page 676 explains;  "The basis upon which such exemption rest is that the *general welfare requires that in taxing incomes, such exemptions should be made as will fairly cover the annual expenses of the average family, and thus prevent the members of such families becoming a charge upon the public.  The statute allows corporations, when making returns of their net profits and income, to deduct actual operating and business expenses.  Upon like grounds, as I suppose Congress exempted incomes under $4,000.    In the initial case 157 supra., Edward B. Whitley Assistant Atty. General and Richard Olney Atty. General of the United States explains the exemption in this way;  page 778  "In the present case there is no lack of uniformity as between corporations and individuals.  The exemption of $4,000 a year in the case of individuals or families, as will be shown, is intended as a compensation for the necessarily excessive burden of consumption taxes upon small and moderate incomes.  There is no such situation in the case of a business corporation.  Every cent which it expends is allowed it.  It is taxed only on its net profits, deducting the wages account; which corresponds to the living expenses of the individual."   The Courts have answered the question; the exemption is the separation between "income" and the Person paying the tax.

Our conclusions, which are drawn from the research of these documents, are presented as questions.
1)  Is there another meaning to the term "income" other than "gains, profits, surplus, or increase ?
2)  Is there a 3rd tax method somewhere between "direct" and "Indirect" ?
3)  Is "labor for hire" really a business, if so, what does it have in common with other businesses ?
4)  If wages are "Income" under the 16TH Amendment, What source are they derived from?
5)  If "Capital" and "Labor" are "property" and "Capital" is not taxable, why is "labor"?
6)  Are the items listed under sec. 61 (a)  sources or "Incomes"?
7)  Can the term "income" have two distinct meanings when use in the same sentence, ie. is the meaning  of gains and profits something completely different than that of "Income"
8)   What is the underlying basis for which Labor pays taxes upon wages?
9)  Are "wages" an equal exchange for labor, thus establishing the value of the "Property" Labor?
10)  In the sale of the "property" Labor, how is it’s "cost basis" established?