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I am writing this to clarify my most recent post, Brushing Up On Brushaber -How IRS Misstatement Fueled “Tax Protesters”. In that post I was critical of the IRS for threatening sanctions for people who contradicted their statement that “the Sixteenth Amendment authorizes a non-apportioned direct income tax”.  The problem with that statement is that the 1916 Supreme Court opinion that it is ultimately derived from, Brushaber v. Union Pacific Railroad Company, does not actually say that.  What it does say is that Congress always had the power to tax incomes. What the Sixteenth Amendment did was to allow it to not consider the source of the income, which, according to an earlier decision, would have made the tax direct.  A direct tax needs to be apportioned and the Sixteenth Amendment explicitly says that the income tax does not have to be apportioned.

What the Constitution says is that direct taxes have to be apportioned according to population, which would be utterly impractical for an income tax. Duties, imposts and excises have to be uniform.  Brushaber holds that those two categories include any conceivable tax and that you can’t have something that does not fall in one bucket or the other. What the language of the Sixteenth Amendment did was overturn the Pollock decision which had held that the income tax to the extent it was on income from property was a direct tax requiring apportionment.  Here is the text of the Amendment

“The Congress shall have 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.”

The Brushaber court did not read that, as I might, as creating something that does not fall into one of the two buckets.  It read it as eliminating looking at the source of the income which puts it in the “excises. duties and imposts”.  The recent Moore decision explicitly stated that the income tax is indirect.

Where The “Protesters” Go With This But I Don’t

I prefer the term “not conventionally tax compliant” NCTC to “tax protester” and I call the people who promote the theories “alternative tax thinkers” (ATT),  The ATT I engage with the most is Peter Hendrickson who maintains the Lost Horizons website.  One of his big sources of evidence for the correctness of his theory is a large number of documented refunds to people who have filed claims using them. I take those refunds as evidence that a lot of stuff slips by.  He adamantly disagrees with that.

Anyway Hendrickson has railed against how wrong it has been for the IRS and lower courts to be endorsing the idea that the 16th Amendment allows the income tax as an unportioned direct tax, when Brushaber and now Moore clearly state that the tax is indirect.

In my mind, the misreading of Brusahber is not that significant in that there is still a very clear statement that Congress has the power to lay and collect taxes from whatever source derived.  Hendrickson thinks differently. He argues here, that because the income tax is an excise it can only be levied on “privileged activities”.  It can’t be on all income from whatever source derived, which to my simple mind is exactly what the 16th Amendment says it is.  I gave you the link to his argument, if you find sense there let me know.

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