A. Unlike unearned receipts such as profits or interest, wages literally ARE labor; There is no meaningful distinction that can be drawn between taking, say, 25% of a worker’s wages in taxes with which to purchase products and services, and forcing that worker into the government factory to produce those products and services for 2 hours out of every 8-hour workday.

B. Not only is the exchange of labor for a wage or salary a common right, the exercise of which cannot be burdened by taxation, but labor (as well as the wages for which it is exchanged) is property. In Butcher Union Co. v. Crescent City Co., 111 U.S. 746 (1883) the Supreme Court clearly recognizes labor and its earnings as both a matter of common right,

“The right to follow any of the common occupations of life is an inalienable right,…” and as personal property, “It has been well said that 'the property which every man has in his own labor, as it is the original foundation of all other property, so it is the most sacred and inviolable. The patrimony of the poor man lies in the strength and dexterity of his own hands, and to hinder his employing this strength and dexterity in what manner he thinks proper, without injury to his neighbor, is a plain violation of this most sacred property.”

In Coppage v. Kansas, 236 U.S. 1 (1915), the court said,

”Included in the right of personal liberty and the right of private property-partaking of the nature of each- is the right to make contracts for the acquisition of property. Chief among such contracts is that of personal employment, by which labor and other services are exchanged for money or other forms of property”.

C. The United States Constitution, in Article 1, Section 9, says.

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

Black’s Law Dictionary, 5th edition, defines a direct tax as,

“One which is demanded from the very persons who it is intended or desired should pay it. Indirect taxes are those which are demanded from one person in the expectation and intention that he should indemnify himself at the expense of another”.

In other words, if the tax is paid out of the resources of the one who is made liable for its remittance, it is direct.

In Pollock v. Farmers Loan & Trust, 158 U.S. 601 (1894) the United States Supreme Court said,

”Ordinarily, all taxes paid primarily by persons who can shift the burden upon some one else, or who are under no legal compulsion to pay them, are considered indirect taxes; but a tax upon property holders in respect of their estates, whether real or personal, or of the income yielded by such estates, and the payment of which cannot be avoided, are direct taxes….” and, “The power to tax real and personal property and the income from both, there being an apportionment, is conceded: that such a tax is a direct tax in the meaning of the Constitution has not been, and, in our judgment, cannot be successfully denied: ..."

(While the 16th amendment may have modified this ruling as to the ‘income’ to which the court herein referred, and that-- per subsequent rulings-- only insofar as that ‘income’ falls into a certain restricted class of receipts, it did not alter the classification of taxes on personal property as direct and requiring apportionment)

Because, therefore, a tax on wages is a direct tax, by subject as well as (under the current form of the ‘income’ tax) by action (and if without apportionment unconstitutional), either wages and income are not the same, or the income tax is unconstitutional in so far as it is extended to such subjects and is administered in such a manner.

Subsequent to the declared adoption of the 16th amendment, the court in Brushaber v. Union Pacific R. Co., 240 U.S. 1 (1916), said,

"We are of opinion, however, that the confusion is not inherent, but rather arises from the conclusion that the 16th Amendment provides for a hitherto unknown power of taxation; that is, a power to levy an income tax which, although direct, should not be subject to the regulation of apportionment applicable to all other direct taxes. And the far-reaching effect of this erroneous assumption will be made clear...".

The court went on to explain that the 16th amendment did not authorize a direct tax without apportionment upon property, which remains unconstitutional, but only precluded any connection between property and the ‘income’ derived from it from being construed such that an indirect tax on the derived income amounted automatically to an actual tax on the property itself. The court did anticipate future malfeasance by government in this regard (such as a fraudulent insistence that individuals can be made, or must make themselves, liable for a tax which they also must personally pay, or one for which the subject is personal property, without apportionment), and restated its declaration from the Pollock ruling that,

“…taxation on income was in its 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 taxation 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”.

D. The courts have repeatedly held that as used in the 16th amendment and subsequent law, the term ‘income’ has a limited and specialized meaning from which many types of receipts must be excluded, particularly receipts amounting to compensation for value exchanged, and those proceeding from other than corporate activity…

In So. Pacific v. Lowe, 238 F. 847 (US Dist. Ct. S.D. N.Y., 1917); 247 U.S. 330 (1918) the court said:

"…’income’, as used in the statute should be given a meaning so as not to include everything that comes in. The true function of the words ‘gains’ and ‘profits’ is to limit the meaning of the word ‘income’." (The statute, the Revenue Act of 1913, uses the following language, "…gain, profits, and income derived from…"); and, "The provisions of the Sixteenth Amendment conferred no new power of taxation but simply prohibited the 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 . . ."

In Stratton's Independence v. Howbert, 231 U.S. 399 (1913), the Court

said,

“The act of 1909 avoided this difficulty by imposing not an income tax, but an excise tax upon the conduct of business in a corporate capacity, measuring, however, the amount of tax by the income of the corporation, . . ."

And in Flint vs Stone Tracy Co. 220 U.S. 107 (1911):

"Excises are taxes laid upon the manufacture, sale or consumption of commodities within the country, upon licenses to pursue certain (licensed) occupations and upon corporate privileges; the requirement to pay such taxes involves the exercise of privilege."

Further, in Merchants' Loan & Trust Co. v. Smietanka, 255 U.S. 509 (1921):

"It is obvious that these decisions in principle rule the case at bar if the word "income" has the same meaning in the Income Tax Act of 1913 that it had in the Corporation Excise Tax Act of 1909, and that it has the same scope of meaning was in effect decided in Southern Pacific Co. v. Lowe, 247 U.S. 330, 335, where it was assumed for the purposes of decision that there was no difference in its meaning as used in the act of 1909 and in the Income Tax Act of 1913. There can be no doubt that the word must be given the same meaning and content in the Income Tax Acts of 1916 and 1917 that it had in the act of 1913. When to this we add that in Eisner v. Macomber, supra, a case arising under the same Income Tax Act of 1916 which is here involved, the definition of "income" which was applied was adopted from Strattons' Independence v. Howbert, arising under the Corporation Excise Tax Act of 1909, with the addition that it should include "profit gained through sale or conversion of capital assets," there would seem to be no room to doubt that the word must be given the same meaning in all the Income 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 decisions of this Court."

In Eisner v. Macomber, 252 US 189 (1920), the court said:

“The government, although basing its argument upon the definition as quoted, placed chief emphasis upon the word 'gain,' which was extended to include a variety of meanings; while the significance of the next three words was either overlooked or misconceived. 'Derived-from- capital'; 'the gain-derived-from-capital,' etc. Here we have the essential matter: not a gain accruing to capital; not a growth or increment of value in the investment; but a gain, a profit, something of exchangeable value, proceeding from the property, severed from the capital, however invested or employed, and coming in, being 'derived'-that is, received or drawn by the recipient (the taxpayer) for his separate use, benefit and disposal- that is income derived from property. Nothing else answers the description.

The same fundamental conception is clearly set forth in the Sixteenth Amendment-'incomes, from whatever source derived'-the essential thought being expressed with a conciseness and lucidity entirely in harmony with the form and style of the Constitution”.

Additional rulings by the Supreme Court and others include:

"it is true when the 16th Amendment became effective, it was true at the time of Eisner vs. Revenue Code of 1938, and it is likewise true under sec. 61(a) of the Internal Revenue Code of 1954. If there is no gain there is no income . . . Congress has taxed income, not compensation."

Conner v. U.S., 303 F Supp. 1187 (1969)

"Constitutionally the only thing that can be taxed by Congress is "income." And the tax actually imposed by Congress has been on net income as distinct from gross income. The tax is not, never has been, and could not constitutionally be upon “gross receipts”… "

Anderson Oldsmobile, Inc. vs Hofferbert, 102 F Supp 902 (1952)

“The claim that salaries, wages, and compensation for personal services are to be taxed as an entirety and therefore must be returned by the individual who has performed the services which produce the gain is without support, either in the language of the Act or in the decisions of the courts construing it. Not only this, but it is directly opposed to provisions of the Act and to regulations of the U.S. Treasury Department, which either prescribed or permits that compensations for personal services not be taxed as a entirety and not be returned by the individual performing the services. It is to be noted that, by the language of the Act, it is not salaries, wages, or compensation for personal services that are to be included in gains, profits, and income derived from salaries, wages, or compensation for personal services."

Lucas v. Earl, 281 U.S. 111 (1930)

"...the definition of 'income' approved by this court is: The gain derived from capital, from labor, or from both combined, provided it be understood to include profits gained through sale or conversion of capital assets."

Eisner v. Macomber, 252 US 189 (1920)

"The phraseology of form 1040 is somewhat obscure .... But it matters little what it does mean; the statute and the statute alone determines what is income to be taxed. It taxes only income "derived" from many different sources; one does not "derive income" by rendering services and charging for them... IRS cannot enlarge the scope of the statute."

Edwards v. Keith, 231 F 110,113 (1916)

"Decided cases have made the distinction between wages and income and have refused to equate the two."

Central Illinois Public Service Co. v. U.S., 435 U.S. 21 (1978)

"There is a clear distinction between `profit' and `wages', or a compensation for labor. Compensation for labor (wages) cannot 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 the mere compensation for labor."

Oliver v. Halstead, 86 S.E. Rep 2nd 85e9 (1955)

"The 16th Amendment does not authorize laying of an income tax upon one person for the income derived solely from another."

McCutchin v Commissioner of IRS, 159 F2d (1947)

"Income within the meaning of the Sixteenth Amendment and the Revenue Act, means 'gain'... and in such connection 'Gain' means profit...proceeding from property, severed from capital, however invested or employed, and coming in, received, or drawn by the taxpayer, for his separate use, benefit and disposal... Income is not a wage or compensation for any type of labor."

Stapler v U.S., 21 F Supp 737 AT 739 (1937)

"The Sixteenth Amendment, although referred to in argument, has no real bearing and may be put out of view. As pointed out in recent decisions, it does not extend the taxing power to new or excepted subjects."

Eisner v. Macomber, 252 U.S. 189 (1920)

"Income excludes wages, salaries, and tips"

Graves vs. People of N.Y. exrel O'Keefe 59 S.Ct 595 (1939)

"Treasury regulations can add nothing to income as defined by Congress." Blatt Co. v U.S., 305 US 267 59 S.Ct. 186. (1938)

"The Treasury cannot by interpretive regulations, make income of that which is not income within the meaning of the revenue acts of Congress, nor can Congress, without apportionment, tax as income that which is not income within the meaning of the 16th Amendment."

Helvering v Edison Bros. Stores, 133 F2d 575. (1943)

"An income tax is neither a property tax nor a tax on occupations of common right, but is an exise tax...The legislature may declare as 'privileged' and tax as such for state revenue, those pursuits not matters of common right, but it has no power to declare as a 'privilege' and tax for revenue purposes, occupations that are of common right."

Simms v. Ahrens, 271 SW 720 (1925)

“The general term "income" is not defined in the Internal Revenue Code”

US v Ballard, 535 F2d 400, 404 (1976)

E. Congress has acknowledged that the ‘income’ tax is not a tax on ‘income’, regardless of the definition of the word, but rather is a tax on an ‘income’ producing activity, the amount of which exaction is measured by the income which the activity produces.

For instance:

"The income tax is, therefore, not a tax on income as such. It is an excise tax with respect to certain activities and privileges which is measured by reference to the income which they produce. The income is not the subject of the tax: it is the basis for determining the amount of tax."

Again, not only is the activity referred to clearly confined by the fundamental, statutory and case law cited above to the profitable exercise of corporate privilege, but the exercise of the right to pursue common occupations cannot be the subject of taxation.