About  |  What You Can Do

Attorney at Law 
P.O. Box 9337 
Missoula, MT 59807 
First Printing 1990 
Second Printing 2010 
Copyright © 2010 Jeffrey A. Dickstein 
All rights reserved. No part of this book may be reproduced or used 
in  any  form  or  by  any  means"graphic,  electronic  or  mechanical, 
including  photocopying,  recording,  taping  or  information  storage 
and retrieval systems"without written permission of the author. 
Library of Congress Catalog Card Number: 90-80744 
ISBN 0-9626379-0-4 
Cover art by Art Fisher 
Cover Design Copyright © 2010 Jeffrey A. Dickstein 
To  Peggy  Christensen,  who 
has kept the flame of freedom 
burning,  often  when  there 
wasn’t even a candle. 
This work is the result of the team effort of many. It would not have 
been  possible  without  the  gracious  assistance  I  received  from  the 
following people: Vern Holland for giving me the motivation to start 
the book and ideas for  publishing. Joni  Arashiro  for giving me the 
motivation  to  finish.  Claude  Heiland  for  his  assistance  in 
researching  and  pulling  cases.  Steve  Johnson  for  technical 
assistance  with  the  computer.  Sue  Johnson  for  assistance  with 
materials, production and advertising. Renee Aldrich for assistance 
with typing. Bill Benson for support, encouragement and publishing 
assistance.  Davis  Mauldin  for  input  on  printing  and  production. 
John Sackett for prepublication art. Art Fisher for cover design and 
art.  Peggy  Christensen  for  making  the  entire  thing  possible;  there 
would be no book if not for her. Larry Becraft for Chapter One, who 
graciously allowed me to use his research and writings. James Hall 
and  Carl  Beery  who  allowed  me  to  represent  them.  A  special  lady, 
whose name must for political reasons be protected, for editing and 
proof  reading.  Judy  Huston  and  the  Correspondent  for  publicity. 
And  Rob  Aldrich,  my  special  friend,  for  editing,  proof  reading, 
research,  writing,  styling,  computer  assistance,  and  for  staying  up 
with  me  during  the  many  nights  we  worked  on  the  book.  There 
aren’t words enough to express my thanks. 

Prior Federal Income Tax Legislation 
Direct or Indirect Tax 
Income and the Internal Revenue Code 
The Law and the Courts 
The Law and the Courts 
The Law and the Courts 
The Law and the Courts 
The Law and the Courts 
The Law and the Courts 
The Law and the Courts 
The Law and the Courts 
Cross Examination of 
Special Agent Knutson 
Cross Examination of 
Special Agent Shaffner 

When people began to live in groups to take advantage of the
mutual benefits such associations provide, they determined the use
of “self-help� to protect their lives and property was not in their best
interest, and they voluntarily instituted governments and laws. The
philosophy behind government is that certain functions necessary
for the protection of the life, liberty and property of the people can
be best handled by a centralized organization (government) which
is given sufficient power (lawful right to pass laws and to enforce
them) to accomplish those functions. Numerous types of
governments have emerged under this concept, such as democracy,
socialism, fascism, nazism, communism, and one experimental
form of government known as a “Federal Republic,� now
commencing its third centennial. Some degree of power (force) is
essential to the ability of any government to operate successfully; it
is the manner in which a government obtains the power and how it
uses that power that separates people who are free from those who
are not.
The first government known to each of us is the government
ordained under the Laws of Nature, the parental government under
which we are born. We are thrust into this relationship without any
say whatsoever, and the power exerted over us"which we are
helpless to protest or abridge"is total and absolute. Our only
protection from the abuse of this potentially deadly power is the
divinely inspired parental instinct to protect and nourish (love) the
newborn, which creates the environment for us to live and prosper.
It can thus be clearly seen that this power does not originate with
our parents; but is granted to them from Nature’s God, is made
known to them through God’s will (instinct), is essential for life to
exist, and is held in trust by our parents solely for our benefit and
Nature’s God creates each of us equally and endows us with certain
inalienable rights, chief of which are life, liberty and the pursuit of
happiness. The gift of equality, ironically, is one of inequality; we
are each distinct and have different built-in potential than any other
human being. God’s gift to us is the capacity to develop and exert
our own uniqueness in the world for the purpose of maintaining our
life and liberty and being happy; our respective duty is to develop to
our full potential, thereby giving the benefit of our uniqueness to
the world. This input into the universe results in a division of labor,
and creates the basic foundation of all economics. As we are
basically a society oriented species, a sound economic basis is thus
created, for it is also our nature to improve and modify our
environment in order to improve the quality of our lives. By
exchanging unique services or products with others for their unique
services or products, trade flourishes, the quality of life improves,
we acquire more wealth, prosperity and happiness, and society
blossoms. Under the Laws of Nature, our prosperity is also an
inalienable right.
It is a fundamental principle of our uniqueness that only we can
know it fully among our peers. Our duty to God to achieve
maximum development of our potential necessarily prevents other
people from interfering with the development and free exercise of
our potential. It also creates a corresponding duty on us to resist
any attempt by others to destroy the freedom of our will with
respect to our uniqueness. This concept is embodied within the
single word “Liberty.�
The presence of other members in the family, however, adds yet
another aspect to the parental form of government; the rightful
exercise of the power to place such restraints on our conduct so as
to best conserve the right of each of us to the greatest amount of
personal liberty, taking into account the coequal and coextensive
rights of each of the other family members. This rightful exercise
imposes the corresponding obligation to be so restrained for the
benefit of the rights of all. In order for the power to restrain to be
lawful, it must be exercised so as not to destroy the very liberty it
attempts to protect. The power, delegated in trust and tempered by
love, secures our liberty, as the governed, in the familial society.

There can be no escape from the conclusion that under the Laws of
Nature, government and society were created to benefit us; we were
not created to benefit government and society. The purpose of the
family (society) is to preserve our lives and our liberty; the purpose
of parental power (government) is to preserve the family (society).
When a parent transcends the limitation on the exercise of his or
her delegated power and invades the domain of individual freedom
(gets drunk and beats the kids), the parent usurps an authority
never vested in him or her, and violates the very rights the
protection of which was the only purpose for which the power was
delegated. When a government transcends its limitation, the
usurpation of authority is known as tyranny.
As we mature we learn to infuse our unique mental, moral and
physical endowments with objects existing in Nature’s universe,
and we are thus able to create unique ideas and objects. These
creations contain elements of our very essence, and from the
beginning of time such creations have been referred to as personal
property. The only limitation upon us in this process of acquiring
personal property through our labor is the coexistent and coequal
right of every other person in society to the same process. The
taking of our property, without our consent, is a badge of mastery
over us indicative of slavery, for it is a taking of a cherished
inalienable right, a right essential to our very ability to survive.
When the taking is in the name of the government, either through
direct confiscation or through indirect means, it is a violation of
duty and a usurpation of power akin to the beating of a child by a
drunken parent.1 Self-defense of our life, liberty, property and
happiness from the usurpation of power"revolution if you dare"is
an inalienable right pursuant to the Laws of Nature, and the
exercise of this right formed the basis of our Federal Republic:
We hold these truths to be self-evident, that all men
are created equal, that they are endowed by their
Creator with certain unalienable Rights, that among
these are Life, Liberty and pursuit of Happiness. That
to secure these rights, Governments are instituted
among  Men,  deriving  their  just  powers  from  the 
consent of the  governed.  That whenever any Form of 
Government  becomes  destructive  of  these  ends,  it  is 
the Right of the People to alter or to abolish it, and to 
institute  new  Government,  laying  its  foundation  on 
such  principles  and  organizing  its  powers  in  such 
form, as to them shall seem most likely to effect their 
Safety and Happiness.2 
With the signing of the Declaration of Independence, the subjects of 
the  Monarch,  King  George,  declared  themselves  to  be  a  free  and 
independent people. To the extent they, as a society (political body) 
were  operating under governments  already  in  existence  within the 
territory claimed by the thirteen colonies, an additional result of the 
signing  of  the  document  was  the  emergence  of  thirteen  sovereign 
nations.  Both  under  the  common  law  and/or  the  laws  passed  by 
these  new  nations,  inhabitants  who  were  born  in  the  colonies 
became  citizens  thereof,  and  those  who  were  not  so  born,  could 
either  choose  allegiance  to  the  King  or  allegiance  to  the  new 
political  body.  If  they  chose  allegiance  to  the  new  political  body, 
they  were  also  considered  “citizens.�  These  thirteen  colonies  came 
to  be  known  as  “states,�  and  as  a  result  of  the  Articles  of 
Confederation,  came  to  be  known  in  the  community  of  nations  as 
the  United  States  of  America.  The  Articles  of  Confederation  soon 
proved to be ineffectual, and were replaced with the Constitution of 
the United States of America. 
The  Constitution  created  a  form  of  government  which  expressly 
recognized  the  people  (us)  as  sovereign,  and  limited  the  power  of 
the  federal  government  to  that  expressly  delegated  to  it  in  the 
Constitution. The Constitution also limited the locations where the 
federal  government  could  exercise  its  power.3  This  concept  is 
known as federal territorial and/or exclusive legislative jurisdiction. 
The principle is that while Mr. Jones may have parental power over 
his  children,  he  cannot  exercise  that  power  over  Mr.  Smith’s 
children  in  Mr.  Smith’s  house;  Mr.  Smith’s  house  is  outside  the 
territorial jurisdiction of Mr. Jones’ parental power. Any attempt by 

Mr. Jones to exercise his power over Mr. Smith’s children in Mr.
Smith’s house is illegal, null and void. Of course the power may
nevertheless be exerted, albeit illegally, and various legal remedies
exist to return the status quo and to compensate for any injury
The power of the new federal government to tax was a power
expressly delegated to the Legislative Branch of the federal
government in Article I, Section 8, Clause 1 of the Constitution. This
power to tax has been held by the United States Supreme Court to
be all inclusive, subject to only two requirements: direct taxes must
be apportioned per Article I, Section 2, Clause 3 and Article I,
Section 9, Clause 4, and indirect taxes must be uniform, per Article
I, Section 8, Clause 1.
Commencing with the earliest tax laws enacted by Congress, great
debates have revolved around the issue of whether the enacted tax
was a direct tax or an indirect tax. This is an important legal issue,
for if Congress does not provide for apportionment of the tax and
the tax is declared by the judiciary to be a direct tax, then a whole
class of intended “taxpayers� would not be “taxpayers� as a result of
the unconstitutionality of the tax for lack of apportionment. A law
that is contrary to the Constitution, of course, is no law at all.4
The first income taxes legislated by Congress were enacted during
the Civil War era. The constitutionality of those acts was not
challenged in court. The next income tax was enacted in 1894
during a time of peace, and its constitutionality was challenged in
the Supreme Court. The majority opinion of the Court declared the
income tax to be a direct tax with no provisions for apportionment,
and struck it down as unconstitutional. This court decision is
known as the
“Pollock�  decision  [Pollock v. Farmers’ Loan & Trust 
157 U.S. 429,  aff. reh ., 158 U.S. 601 (1895)]. The decision of the
Supreme Court was by no means unanimous; a strong dissent was
raised by a minority of Supreme Court justices that the tax was an
indirect tax that did not require apportionment. One of these
“dissenting� justices was Associate Justice White.
Pollock   opinion  told  Congress  that  if  it  did  not  like  the  result 
reached by the Court, the Constitution could be amended to change 
the result.5 In 1909, Congress took steps to amend the Constitution 
by proposing the Sixteenth Amendment in the following form: 
Sixteenth 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.
This Amendment was certified as ratified6 in 1913, and Congress
passed an income tax act which was virtually identical to the one
held unconstitutional in
Pollock.   This law was also challenged as
unconstitutional, and ultimately went to the Supreme Court where
Justice White was now sitting as the Chief Justice. The resulting
decision, known as the
“Brushaber�   decision  [ Brushaber  v.  Union 
Pacific  Railroad  Co.,  
240 U.S. 1 (1916)], was written by Chief
Justice White himself, and not surprisingly, the tax was classified as
an indirect tax.7
The income tax was of such a nature that its presence was generally
unknown to the majority of the people from its inception until
World War II. At that time, Congress, claiming the need for
additional revenue, passed the Victory Tax Act, an unapportioned
direct tax on the personal property of United States citizens
residing at home. The Victory Tax, which was collected with the
income tax, was collected through withholding from wages. This
started the erroneous association of the term “wages� with the term
“income.� In law, especially at the time of the proffer of the
Sixteenth Amendment by Congress, the terms were not
synonymous. Income for purposes of federal income taxation has
been defined by the Supreme Court as “the
gain   derived from
capital, from labor or from both combined, provided it include
profit  gained through a sale or conversion of capital assets.� Labor, 
the  contract  to  exchange  labor  for  wages  or  other  compensation, 

and the wages or other compensation itself, have all been declared
by the United States Supreme Court to constitute sacred, inviolable,
personal property. The Sixteenth Amendment only addressed
“income,� and was thus limited to the gain derived from labor or
capital; neither the Sixteenth Amendment nor the federal personal
income tax law provides any authority for the taxation of labor or
the property for which the labor may be exchanged, most frequently
wages, absent apportionment.
As a result of the
Brushaber   decision,  numerous  courts  have  held 
that  wages  constitute income and  a tax on wages does not have to 
be  apportioned.  There  is  no  question  but  that  the  
decision,  holding  the  income  tax  to  be  an  indirect  tax,  is  in 
irreconcilable  conflict  with  the  decision  of  the  Supreme  Court  in 
Pollock  holding that the income tax is a direct tax.
In Chapter I of this book I have provided an analysis of prior federal
income tax legislation. A study of this legislation is fundamental to
an understanding of today’s Internal Revenue Code and exactly who
and what is taxed under the law.
In Chapter II of this book I have provided an in-depth analysis of
Pollock   and   Brushaber   decisions provided for the purpose of
establishing the true purpose behind the Sixteenth Amendment and
the exact power given to Congress by it.
In Chapter III of this book I have provided a statutory analysis of
the Internal Revenue Code as it applies to the personal income tax,
and an explanation of what is and, more importantly, what is not
In Chapters IV through XI of this book I have provided an in depth,
case-by-case analysis of each and every federal court case that holds
wages constitute income, in an effort to show the ignorance or
intentional, treasonous actions of our federal judiciary in subverting
our Constitution and the laws enacted by Congress. The simple fact
is that no decision of the Supreme Court of the United States has
specifically held that wages constitute income, and as a matter of
law, they do not.
With over a hundred cases purportedly holding that wages
constitute income, at first impression one might believe that I
disagree with the law. I do not. I do believe, however, that the law,
for political and financial motives, has been subverted. I have
attempted in this book, by providing a history of the income tax and
an analysis of the Internal Revenue Code, to establish exactly what
the law is, and to show how it has been undermined by our federal
In Appendix A, I have provided a partial transcript from a federal
criminal trial in the United States District Court for the District of
Alaska, in the case of the
United States v. Carl Beery,  case No. A87-
43CR.  The  transcript  contains  my  cross-examination  of  I.R.S. 
Revenue  Agent  Knutson.  The  subject  matter  of  the  cross-
examination  was  Mr.  Beery’s  liability  for  the  income  tax  and 
whether wages constitute income. The transcript fully discloses the 
Court’s  hostility  to  this  line  of  questioning,  but  more  importantly, 
points  out  the  failure  of  the  Internal  Revenue  Service  to  calculate 
“gain� in determining income. 
In  Appendix  B,  I  have  provided  a  partial  transcript  from  another 
federal  criminal  trial  in  the  United  States  District  Court  for  the 
Southern District of Indiana, Evansville Division, in the case of the 
United States v. James I. Hall, case  No.  EV  87-20  CR.  The 
transcript  contains  my  cross-  examination  of  I.R.S.  Special  Agent 
Shaffner.  My  cross-examination  established  through  Ms.  Shaffner, 
who  was  qualified  as  an  expert  witness,  that  no  statute  in  the 
Internal  Revenue  Code  made  Mr.  Hall  liable  for  the  income  tax. 
Although not contained in the portion of the transcript reproduced 
in  Appendix  B,  Federal  District  Court  Judge  Gene  E.  Brooks 
threatened to hit me with his gavel when I attempted to repeat Ms. 
Shaffner’s testimony to the jury, and instructed the jury, contrary to 
the evidence and the law, that Mr. Hall was a taxpayer liable for the 

It was not my intention in writing this book to advise people not to
pay income taxes. In fact, in the conclusion, I caution against taking
steps that will most certainly subject you to tremendous
governmental abuse. On the other hand, the truth is the truth, and
armed with the truth, and fueled with the desire to maintain the
cherished, divinely inspired principles of freedom and liberty, the
people of the United States of America, by joining together and
raising their voices in protest, can once again restore our country to
a government of laws as opposed to a government of men. With this
thought in mind, I have written this book for your consideration.
“It is none the less robbery, because it is done under the forms 
of  law,  and  is  called  taxation�  
Loan  Association  v.  Topeka,   87 
U.S. 655, 664 (1879). 
Declaration of Independence. 
United States Constitution, Article I, Section 8, Clause 17. 
“The  particular  phraseology  of  the  Constitution  of  the  United 
States  confirms  and  strengthens  the  principle,  supposed  to  be 
essential to all written constitutions, that a law repugnant to the 
constitution  is  void,  and  that  courts,  as  well  as  other 
departments,  are  bound  by  that  instrument.�  
Marbury v.
5 U.S. 137, 180 (1803). 
Pollock v. Farmers’ Loan & Trust, 158 U.S. 601, 634- 635 (1895). 
Bill  Benson,  
The  Law That  Never  Was"The  Fraud  of  the  16th 
Amendment  and  Personal  Income  Tax,  
Research Assoc., Box 550, South Holland, IL 60473, 1985). Mr.
Benson documents with certified state archive documents from
each state then in the Union that the Sixteenth Amendment was
never properly ratified as part of the United States Constitution.
Mr. Benson also documents with certified U.S. archive
documents that the non-ratification was specifically noted by
the Solicitor General in his written report to the Secretary of
State, Philander Knox, who nonetheless certified the Sixteenth
Amendment as having been properly ratified. While several of
the federal courts have been made aware of this fraud, they have
refused to remedy the fraud by classifying the ratification
process a “political question� non-reviewable by the Courts.
Even today the debate continues as some of the Federal Courts
of Appeal take the position that the income tax is a direct tax

and some take the position that the income tax in an indirect
Compare,  Ficalora   v.   C.I.R.,   751  F.2d  85  (2nd  Cir.  1984) 
[holding the income tax is an indirect excise tax] with 
v. C.I.R.,
661 F.2d 71 (5th Cir. 1981) [holding the income tax is a 
direct tax]. 
Before  the  adoption  of  the  U.S.  Constitution,  the  original  thirteen 
States  were  leagued  together  under  the  Articles  of  Confederation, 
the Congress of which had no power of taxation. The States, under 
the Articles of Confederation, possessed all powers of taxation and 
had  surrendered  none  to  the  Articles’  Congress,  the  revenue  of 
which  was  derived  solely  through  requisitions  for  money  made  by 
that  Congress  on  the States. This system proved  itself  to  be  highly 
When  the  Philadelphia  Constitutional  Convention  met  in  1787,  it 
was  quickly  determined  that  Congress  should  have  a  power  of 
taxation,  one  which  was  not  broad  and  general  but  one  somewhat 
restrictive.  At  that  time,  the  States  imposed  two  types  of  taxes, 
those  which  were  direct  in  their  operation,  and  those  which  were 
indirect.  The  great  question  in  reference  to  taxation  before  the 
Constitutional  Convention  was  whether  power  would  be  given  to 
Congress  to  impose  only  one  or  both  types  of  taxes,  and  it  was 
eventually  decided  to  give  Congress  authority  to  impose  both  of 
these classes of taxes, under certain restrictions. The States felt that 
Congress  should  rely  primarily  upon  indirect  taxes  for  its  revenue 
and  that  they  would  reserve  for  themselves  direct  taxes  for  their 
revenue. To insure this scheme, Congress was permitted to impose 
indirect taxes, known as duties, imposts and excises, by the rule of 
uniformity, a rule which Congress could easily meet. But, to protect 
the  revenue  of  the  States,  Congress  was  required  to  impose  all 
direct  taxes  by  the  regulation  of  apportionment,  a  very  rigorous 
The agreement of the Convention manifests itself in the body of the 
Constitution. In Article I, Section 8, Clause 1, a power of taxation is 
granted to Congress in this manner: 
Article I, Section 8, Clause 1: 
The Congress shall have power to lay and collect
taxes, duties, imposts and excise ...; but all duties,
imposts and excises shall be uniform throughout the
United States.
This clause clearly shows the rule of uniformity for indirect taxes.
The regulation of apportionment for direct taxes is found in the
Constitution at Article I, Section 2, Clause 3 and Article I, Section 9,
Clause 4:
Article I, Section 2, Clause 3: 
Representatives and direct taxes shall be apportioned 
among the several states. 
Article I, Section 9, Clause 4: 
No capitation, or other direct, tax shall be laid, unless
in proportion to the census or enumeration herein
before directed to be taken.
Few direct tax acts were intentionally imposed by Congress; one
was laid in 1798,8 two were laid during the War of 1812 in 18139 and
1815,10 and several were laid during and immediately following the
Civil War.11 To further finance the Civil War, Congress passed three
income tax acts. The constitutionality of these acts was never
challenged in court, no doubt because they were wartime measures.
The next income tax was not passed by Congress until 1894, and
was passed in a time of peace. The constitutionality of this tax was
challenged in court; in the case of
Pollock v. Farmers’ Loan & Trust 
157 U.S. 429, 15 S.Ct. 673,  aff. reh.,  158 U.S. 601, 15 S.Ct. 912
(1895), the United States Supreme Court struck down the entire tax
because the tax was found to be a direct, but unapportioned, tax. A
review of these former taxes is important to obtain a clear
understanding of the income taxes imposed by law today.

In 1861, Congress adopted an act which imposed both a direct tax
and an income tax.12 This income tax act was repealed the following
year and replaced by another in “An Act to provide Internal
Revenue to support the Government and to pay Interest on the
Public Debt,� approved July 1, 1862, 12 Stat. 432, ch. 119. Section
86 of this Act, 12 Stat. 472, imposed a salary tax upon people in the
employment or service of the United States. Section 90 of this Act,
12 Stat. 473, imposed an “income duty� as follows:
That there shall be levied, collected and paid annually,
upon the annual gains, profits or income of every
person residing in the United States ... a duty of three
per centum ... ; and upon the annual gains, profits, or
income ... by any citizen of the United States residing
abroad ... there shall be levied, collected and paid a
duty of five per centum.
These Acts taxed the salary of people working for the United States
government, every “person� residing in the United States, and
“citizens� of the United States residing abroad. This Act was
replaced by another Act in 1864, 13 Stat. 223, ch. 173, which was
amended in 1865 by an Act at 13 Stat. 469, ch. 78, and amended
again in 1866 by an Act at 14 Stat. 137, ch. 184. This 1864 Act, as
amended through the 1866 Act, read as follows:
Sec. 116. And be it further enacted, That there shall be
levied, collected, and paid annually upon the annual
gains, profits and income of every person residing in
the United States, or of any citizen of the United
States residing abroad ... a duty of five per centum ...
And a like tax shall be levied, collected, and paid
annually upon the gains, profits, and income of every
business, trade or profession carried on in the United
States by persons residing without the United States
not citizens thereof.
This Act, as amended, taxed every “person� residing in the United
States, United States “citizens� residing abroad, nonresident non-
citizens on income derived from business, trades or professions
carried on in the United States, and in Sec. 123, the salary of people
employed by the United States government.
The 1894 income tax act, “An Act to reduce taxation, to provide
revenue for the Government, and for other purposes,� approved
August 27, 1894, 28 Stat. 509, ch. 349, at Section 27 [28 Stat. 553]
read as follows:
That ... there shall be assessed, levied, collected, and
paid annually upon the gains, profits, and income
received in the preceding calendar year by every
citizen of the United States, whether residing at home
or abroad, and every person residing therein ... a tax
of two per centum ... and a like tax shall be levied,
collected and paid annually upon the gains, profits,
and income from all property owned and of every
business, trade, or profession carried on in the United
States by persons residing without the United States.
This Act taxed every United States “citizen� whether residing at
home or abroad, every “person� residing in the United States, and
non-residents on income derived from business, trades or
professions carried on in the United States.
It becomes clear that a distinction was made between the terms
“citizens� and “persons� in these early income tax acts. The Act of
1894 specifically taxed “citizens of the United States� residing at
home [in the United States] or abroad and persons� residing in the
United States; there could be no reason for the statute to separately
mention citizens and persons if they were in fact the same. The fact
is, they are different. A “person� “residing in the United States�
“who is not a citizen� would be either a resident alien (in the United
States on a visa) or a resident National (an immigrant).

Mr. Pollock, identified by the Supreme Court as “a citizen of the
State of Massachusetts,�13 was a shareholder of a corporation. He
sought an injunction against the corporation from paying the
corporate income tax14 on the grounds that as to the tax on the real
estate held and owned by the corporation, the tax was a direct tax
by virtue of it being imposed upon the rents, issues, and profits of
the real estate, that the tax was a direct tax as to personal property
held by the corporation, and the taxes not being apportioned, the
tax was unconstitutional. Similar claims were made with respect to
the taxes imposed upon Mr. Pollock’s income, and income derived
from the stocks and bonds of the States of the United States which
he held. The
Pollock  decisions held that a tax on the whole income 
of property was a direct tax in the constitutional sense. In speaking 
of  the purpose  of  the  
Pollock   Court  in  defining  what  a  “direct  tax� 
was, the Supreme Court said in 
Concluding  that  the  classification  of  direct  was 
adopted for the purpose of rendering it impossible to 
burden by taxation accumulations of property, real or 
personal,  except  subject  to  the  regulation  of 
apportionment,  it  was  held  the  duty  existed  to  fix 
what was a direct tax in the constitutional sense so as 
to  accomplish  this  purpose  contemplated  by  the 
Constitution.� (157 U.S. 581.) 
Brushaber,  240 U.S. at 15. 
Pollock   Court,  in  its  first  decision,  defined  “direct  taxes�  as 
Ordinarily,  all  taxes  paid  primarily  by  persons  who 
can  shift  the  burden  upon  someone  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 
or of the income yielded by such
estates,   and  the  payment  of  which  cannot  be 
avoided, are direct taxes. [Emphasis added.] 
Pollock,  157 U.S. at 558. 
This  definition,  however,  was  applied  only  in  consideration  of  the 
validity of the tax on the income from real estate and income from 
invested personal  property,  as  the  issue  before  the  Supreme  Court 
in  the  first  
Pollock   decision was quite limited. The decision of the
Court rendered after rehearing, however, was more extensive:
We are now permitted to broaden the field of inquiry,
and to determine to which of the two great classes a
tax upon a person’s
entire income,  whether derived 
from rents, or products, or otherwise, of real estate, or 
from  bonds,  stocks,  or  other  forms  of  personal 
property, belongs; and 
we are unable to conclude 
that the enforced subtraction from the yield of 
all  the  owner’s  real  or  personal  property,  in 
the  manner  prescribed,  is  so  different  from  a 
tax  upon  the  property  itself,  that  it  is  not 
direct,  but  an  indirect  tax,  in  the  meaning  of 
the Constitution. 
[Emphasis added.] 
Pollock,  158 U.S. at 618. 
Pollock   Court  found  there  was  no  substantial  difference 
between a tax on property, which was a direct tax, and a tax on the 
income  derived  from  the  property.  The  
Pollock   Court overturned
the income tax act of 1894 by concluding that income taxes were
direct taxes, direct taxes were required by the Constitution to be
apportioned; the tax Congress imposed at 28 Stat. 509, c. 349,
Section 27, p. 553, was not apportioned, and hence contrary to
Article I, Section 2, Clause 3, and Article I, Section 9, Clause 4, of
the United States Constitution. That statute read:

Sec. 27. That from and after the first day of January,
eighteen hundred and ninety-five, and until the first
day of January, nineteen hundred, there shall be
assessed, levied, collected, and paid annually upon the
gains, profits, and income received in the preceding
calendar year by every citizen of the United States,
whether residing at home or abroad, and every person
residing therein, whether said gains, profits, or
income be derived from any kind of property rents,
interest, dividends, or salaries, or from any
profession, trade, employment, or vocation carried on
in the United States or elsewhere, or from any other
source whatever, a tax of two per centum on the
amount so derived over and above four thousand
dollars, and a like tax shall be levied, collected, and
paid annually upon the gains, profits, and income
from all property owned and of every business, trade,
or profession carried on in the United States. And the
tax herein provided for shall be assessed, by the
Commissioner of Internal Revenue and collected, and
paid upon the gains, profits and income for the year
ending the thirty-first day of December next
preceding the time for levying, collecting, and paying
said Tax.�
In rendering this decision, the
Pollock  Court also stated that: 
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.  
But  this  is  not  such 
an act; and the scheme must be considered as 
a whole.15 
[Emphasis added.] 
Pollock,  158 U.S. at 637. 
Pollock  Court clearly found that a tax on the entire income of a 
United States  citizen was  a  direct tax  that required apportionment 
to withstand constitutional validity. 
To  overcome  the  opinion  of  the  
Pollock   Court  that  an  income  tax 
was a direct tax which must be apportioned, Congress proposed the 
Sixteenth Amendment. 
After  the  adoption  of  the  Sixteenth  Amendment  in  1913,  Congress 
passed an income tax act; see “An Act to reduce tariff duties and to 
provide  revenue  for  the  Government,  and  for  other  purposes,� 
approved October 3, 1913, 38 Stat. 114, ch. 16. Section II of this act, 
38 Stat. 166, imposed the following tax: 
A. Subdivision  1. That there shall  be levied, assessed, 
collected  and  paid  annually  upon  the  entire  net 
income  arising  or  accruing  from  all  sources  in  the 
preceding calendar year to every citizen of the United 
States,  whether  residing  at  home  or  abroad,  and  to 
every person residing in the United States, though not 
a citizen thereof, a tax of 1 per centum ... and a like tax 
shall be assessed, levied, collected, and paid annually 
upon  the  entire  net  income  from  all  property  owned 
and of every business, trade, or profession carried on 
in the United States by persons residing elsewhere. 
The Act also taxed the income from corporations at the rate of 1 per 
centum,  and  it  was  the  tax  on  the  corporations16  that  was 
challenged as unconstitutional in 
Suit was instituted by Mr. Brushaber who was a stockholder of
Union Pacific Railroad. The Supreme Court in
Brushaber  was of the 
opinion  that  the  
Pollock   Court  was  wrong  in  classifying  income 
taxes  as  direct  taxes,  and  ruled  as  erroneous  Mr.  Brushaber’s 
contention  that  the  Sixteenth  Amendment  authorized  only  a 
particular character of direct tax without apportionment. The Court 
Indeed in the light of the history which we have given 
and of the decision in the 
Pollock  case and the ground
upon which the ruling in that case was based, there is
no escape from the conclusion that the Amendment
was drawn for the purpose of doing away for the
future with the principle upon which the
Pollock case
was decided, that is, of determining whether a tax on
income was direct not by a consideration of the
burden placed on the taxed income upon which it
directly operated, but by taking into view the burden
which resulted on the property from which the income
was derived, since in express terms the Amendment
provides that income taxes, from whatever source the
income may be derived, shall not be subject to the
regulation of apportionment. From this in substance
it indisputably arises, first, that all the contentions
which we have previously noticed concerning the
assumed limitations to be implied from the language
of the Amendment as to the nature and character of
the income taxes which it authorizes find no support
in the text and are in irreconcilable conflict with the
very purpose which the Amendment was adopted to
accomplish. Second, that the contention that the
Amendment treats a tax on income as a direct tax
although it is relieved from apportionment and is
necessarily therefore not subject to the rule of
uniformity as such rule only applies to taxes which are
classifications which have been recognized and
enforced from the beginning, is also wholly without
foundation since the command of the Amendment
that all income taxes shall not be subject to
apportionment by a consideration of the sources from
which the taxed income may be derived forbids the
application to such taxes of the rule applied in the
Pollock  case by which alone such taxes were removed 
from  the  great  class  of  excises,  duties  and  imposts 
subject  to  the  rule  of  uniformity  and  were  placed 
under the other or direct class. 
Brushaber,  240 U.S. at 18-19. 
This  position  was  reiterated  in  the  opinion  in  
Stanton  v.  Baltic 
Mining Co., 
240 U.S. 103 (1916), which was also written by Justice 
White at the same time he wrote the opinion in the 
Brushaber  case: 
[T]he Sixteenth 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. 
Stanton,  240 U.S. at 112. 
Brushaber  case also stated: 
Moreover  in  addition  the  conclusion  reached  in  the 
Pollock  case did not in any degree involve 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 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. Nothing could serve to make this
clearer than to recall that in the
Pollock  case in so far
as the law taxed incomes from other classes of

property than real estate and invested personal
property, that is, income from “professions, trades,
employments, or vocations� (158 U.S. 637), its validity
was recognized; indeed it was expressly declared that
no dispute was made upon that subject and attention
was called to the fact that taxes on such income had
been sustained as excise taxes in the past.
Id.,  p. 635. 
Brushaber,  240 U.S. at 16-17. 
Justice  White’s  opinion  in  
Brushaber   upheld the constitutional
validity of the 1913 Act, and without expressly overruling the
Pollock  decision, held, contrary to  Pollock,  that the income tax was 
an  indirect  tax.  The  conflict  between  the  
Pollock   Court  and  the 
Brushaber   Court is the subject of the next chapter and is fully
addressed therein.
Brushaber  Court was thus of the opinion that in order for the
tax imposed by Congress to withstand constitutional scrutiny, the
tax could not be administered as a direct tax within the States;17
such a tax would continue to require apportionment even under the
Sixteenth Amendment.18
On September 8, 1916, Congress adopted another federal income
tax.19 The income tax in this act was imposed by Section l(a), which
read as follows:
That there shall be levied, assessed, collected, and
paid annually upon the entire net income received in
the preceding calendar year from all sources by every
individual, a citizen or resident of the United States, a
tax of two per centum upon such income
The 1916 Act, in Section 24, 39 Stat. 776, repealed the 1913 income
tax act. On October 3, 1917, Congress passed an Act which amended
the 1916 income tax act primarily by increasing the graduated rates
of the additional tax.20
On February 24, 1919, the Revenue Act of 1918 was adopted by
Congress.21 This Act was different from both the 1913 and 1916 Acts
in that it imposed a “lieu� tax, or a tax merely in substitution of one
previously imposed. This is demonstrated by the plain language of
Section 210, 40 Stat. 1062, which read as follows:
That, in lieu of the taxes imposed by subdivision (a) of
Section 1 of the Revenue Act of 1916 and by Section 1
of the Revenue Act of 1917, there shall be levied,
collected and paid for each taxable year upon the net
income of every individual a normal tax at the
following rates ....
The Revenue Act of 1918 did contain provisions to repeal prior acts.
In Section 1400 of this Act, the income tax title of the 1916 revenue
act was repealed, subject to certain limitations. At Section 1400 (b),
40 Stat. 1150, the last sentence in this Section read as follows:
In the case of any tax imposed by any part of an Act
herein repealed, if there is a tax imposed by this Act in
lieu thereof, the provision imposing such tax shall
remain in force until the corresponding tax under this
Act takes effect under the provisions of this Act.
There can be but one construction given to this provision which can
sustain the tax. If the entire income tax provisions in the 1916 Act
were entirely repealed, then no tax under the 1916 Act would be
imposed, and thus nothing would be imposed by the 1918 Act, the
tax being simply “in lieu of� the 1916 tax. To sustain the tax itself,
Section 210 of the 1916 Act must have continued in effect, only
amended or modified by the 1918 Act.
The Revenue Act of 1921 was adopted by Congress on November 23,
1921.22 This Act closely followed the Revenue Act of 1918 in that it
also imposed a “lieu� tax. In Section 210 of this Act, 42 Stat. 233,
the section imposing the tax read as follows:

That, in lieu of the tax imposed by Section 210 of the
Revenue Act of 1918, there shall be levied, collected,
and paid for each taxable year upon the net income of
every individual a normal tax ....
Thus, the 1921 Act was in lieu of the 1918 tax, which was in lieu of
the 1916 tax. Like the similar repeal provision in the 1918 Act, the
1921 act had a Section 1400 which repealed the 1918 income tax act
conditioned as follows at 42 Stat. 321:
In the case of any tax imposed by any part of the
Revenue Act of 1918 repealed by this Act, if there is a
tax imposed by this Act in lieu thereof, the provision
imposing such tax shall remain in force until the
corresponding tax under this Act takes effect under
the provisions of this Act.
The Revenue Act of 1924 was adopted by Congress on June 2,
1924.23 Like its predecessors, this Act imposed a tax in Section 210,
43 Stat. 264, which read as follows:
In lieu of the tax imposed by Section 210 of the
Revenue Act of 1921, there shall be levied, collected,
and paid for each taxable year upon the net income of
every individual (except as provided in subdivision (b)
of this Section) a normal tax ....
Thus, this Act imposed a tax in lieu of the 1921 tax, which was in
lieu of the 1918 tax, which was in lieu of the 1916 tax. Like the prior
acts, the repeal provisions in Section 1100, 43 Stat. 352, repealed
the 1921 income tax provisions subject to this condition:
In the case of any tax imposed by any part of the
Revenue Act of 1921 repealed by this Act, if there is a
tax imposed by this Act in lieu thereof, the provision
imposing such tax shall remain in force until the
corresponding tax under this Act takes effect under
the provisions of this Act.
Some two years later, Congress enacted the Revenue Act of 1926.24
Section 210 of this Act read almost identically with former acts
imposing the tax:
In lieu of the tax imposed by Section 210 of the
Revenue Act of 1924, there shall be levied, collected
and paid for each taxable year upon the net income of
every individual (except as provided in subdivision (b)
of this section) a normal tax ...
Thus, this Act imposed a tax in lieu of the 1924 tax, which was in
lieu of the 1921 tax, which was in lieu of the 1918 tax, which was in
lieu of the 1916 tax. The repeal provisions in this Act were found in
Section 1200, 44 Stat. 125, which repealed the 1924 income tax act,
subject to this limitation:
In the case of any tax imposed by any part of the
Revenue Act of 1924 repealed by this Act, if there is a
tax imposed by this Act in lieu thereof, the provision
imposing such tax shall remain in force until the
corresponding tax under this Act takes effect under
the provisions of this Act.
Again, two years later, Congress enacted another act called the
Revenue Act of 1928.25 By this time, Congress had been enacting
similar legislation for about fifteen years, and it obviously chose to
change the format of the income tax acts as an attempt at
improvement. The format of this Act was decidedly different from
the previous acts, and this format was ultimately used for the 1939
Internal Revenue Code. In this new style, the tax became imposed
under Section 11:

Normal Tax on Individuals. There shall be levied,
collected, and paid for each taxable year upon the net
income of every individual a normal tax ....
It must be noted that, whereas previously the “in lieu of� feature of
the tax appeared directly in the section imposing the tax, this
Section 11 made no reference to the same, although the act itself
did. Congress took the “in lieu of� feature out of the section
imposing the tax and placed it in Section 63 of the Act:
Taxes in Lieu of Taxes Under 1926 Act. The taxes
imposed by this title shall be in lieu of the
corresponding taxes imposed by Title II of the
Revenue Act of 1926, in accordance with the following
Taxes under this Title
Taxes under 1926 Act
Secs. 11 and 211
in lieu of
sec. 210
Sec. 12
in lieu of
sec. 211
Thus, this Act imposed an income tax in lieu of the 1926 tax, which
was in lieu of the 1924 tax, which was in lieu of the 1921 tax, which
was in lieu of the 1918 tax, which was in lieu of the 1916 tax.
The repeal provision in this Act was somewhat different from the
previous ones in that there was no section which specifically
defined what was repealed. Instead, Section 714 of this Act, 45 Stat.
882, stated:
The parts of the Revenue Act of 1926 which are
repealed by this Act shall remain in force for the
assessment and collection of all taxes imposed
thereby, and for the assessment, imposition, and
collection of all interest, penalties, or forfeitures
which have accrued or may accrue in relation to any
such taxes.
Due to the fact that this Act made the 1926 Act temporary and of no
effect for tax years 1928 and afterward, the repeal provision meant
Congress did not enact after 1928 another major tax law for four
years; on June 6, 1932, it did enact, however, the Revenue Act of
1932.26 This Act was patterned upon its predecessor, the 1928 Act,
and it thus had a Section 11 which imposed the tax, and a Section 63
providing the “in lieu of� feature:
Sec. 11. Normal Tax on Individuals. There shall be
levied, collected, and paid for each taxable year upon
the entire net income of every individual a normal tax
Sec. 63. Taxes In Lieu of Taxes Under 1928 Act. The
taxes imposed by this title shall be in lieu of the
corresponding taxes imposed by the sections of the
Revenue Act of 1928 bearing the same numbers.
Since this Act was applicable for tax years 1932 and those
subsequent, the prior acts were thus made temporary, and there
was no need for repeal provisions, which this Act did not contain.
Two years later, Congress enacted the Revenue Act of 1934.27 Like
the 1928 and 1932 Acts, this Act contained a Section 11 and a
Section 63 which read as follows:
Sec. 11. Normal Tax on Individuals. There shall be
levied, collected, and paid for each taxable year upon
the net income of every individual a normal tax ....
Sec. 63. Taxes In Lieu of Taxes Under 1932 Act. The
taxes imposed by this title shall be in lieu of the
corresponding taxes imposed by the Revenue Act of

Since this Act was applicable for tax years after December 31, 1933,
the 1932 Act was thus made temporary and this Act contained no
repeal provisions.
The next major income tax act of Congress was the Revenue Act of
1936.28 Here, Congress continued the same scheme first established
in 1928, with Sections 11 and 63:
Sec. 11. Normal Tax on Individuals. There shall be
levied, collected, and paid for each taxable year upon
the net income of every individual a normal tax ....
Sec. 63. Taxes In Lieu of Taxes Under 1934 Act. The
taxes imposed by this title and Title IA shall be in lieu
of the taxes imposed by Titles I and IA of the Revenue
Act of 1934, as amended.
This Act made the 1934 Act, as amended in 1935, temporary, and
thus there were no repeal provisions.
Finally, on May 28, 1938, Congress enacted the Revenue Act of
1938.29 This Act followed the format of the similar income tax Acts
adopted in 1928, 1932, 1934, and 1936, and this Act established
most of the format of the 1939 Internal Revenue Code. Here again,
there was a Section 11 and a Section 63 which read as follows:
Sec. 11. Normal Tax on Individuals. There shall be
levied, collected, and paid for each taxable year upon
the net income of every individual a normal tax ....
Sec. 63. Taxes In Lieu of Taxes Under 1936 Act. The
taxes imposed by this title and Title IA shall be in lieu
of the taxes imposed by Titles I and IA of the Revenue
Act of 1936, as amended.
Since this Act became effective for years after December 31, 1937,
the 1936 Act became temporary and this Act contained no repeal
On December 31, 1938, there was in existence a federal income tax
which was imposed by the Revenue Act of 1938. But this Act simply
imposed a tax which was in lieu of the 1936 tax, which was in lieu of
the 1934 tax, which was in lieu of the 1932 tax, which was in lieu of
the 1928 tax, which was in lieu of the 1926 tax, which was in lieu of
the 1924 tax, which was in lieu of the 1921 tax, which was in lieu of
the 1918 tax, which was in lieu of the 1916 tax.
At the same time, many other taxes were scattered throughout
various Congressional tax acts, and there appeared to Congress a
need to consolidate these laws all into one book or act. Hence the
effort to enact the 1939 Internal Revenue Code.
On February 10, 1939, the 1939 Internal Revenue Code was
approved and became a law.30 In essence, those various internal
revenue laws then valid, existing and in force on January 2, 1939,
were placed into this one Act which created the Code. Section 4 of
the enacting clause of this Code provided that any prior law codified
in this act was thereby repealed; but, Section 4 did not operate to
repeal any law not so codified. Most of the income tax provisions in
the 1939 Code were from the 1938 Revenue Act, and Section 11 of
the 1938 Act became Section 11 in the 1939 Code. But, while
Sections 1 through 62 of the 1938 Act were placed into the Code,
Section 63, which provided for the lieu tax feature, was not
incorporated into that Code, and therefore was not repealed. Thus,
the 1939 Code was nothing more than an incorporation of the 1938
Act into its provisions, and the unrepealed Section 63 in the 1938
Act operated to make the 1939 Code’s income tax laws an act which
was in lieu of the 1936 tax.
The unrepealed Section 63 in the 1938 Act operated to make that
Code nothing more than a substitute for the 1938 Act. And of
course, the 1954 Internal Revenue Code simply replaced the 1939

Internal Revenue Code. Today, the 1986 Code is merely a
replacement or substitute for the 1954 Code.
Act of July 14, 1798, 1 Stat. 597, ch. 75.
Act of Aug. 2, 1813, 3 Stat. 63, ch. 37.
Act of Jan. 9, 1815, 3 Stat. 164, ch. 21.
Act of August 6, 1861; Act of July 1, 1862; Act of March 3, 1863;
Act of June 30, 1864; Act of March 3, 1865; Act of March 10,
1866; Act of July 13, 1866, Act of March 2, 1867; and Act of July
14, 1870.
See Act of Aug. 5, 1861, 12 Stat. 292, 309, ch. 45.
Pollock,  157 U.S. at 674.
A tax of two percent was imposed upon the net profits of
corporations, companies or associations in the 1894 act at
Section 32.
So, too, the income tax contained in Subtitle A is not such an
act; one need only compare the wording of Section 27 of the
1894 Act with the wording of Section 61 (a) of the 1954 Act to
ascertain that the tax imposed in Subtitle A is not an excise tax
on business, trades or professions.
Brushaber , 240 U.S. at 9.
Attorney General W. M. Evarts concluded as follows in 1871:
“We are of the opinion that a tax on the gross income of an
individual is embraced by the words “capitation, or other direct
tax,� in the Constitution, and should be assessed and collected
on the principle of apportionment and not of uniformity, and
that the several sections of the Internal Revenue act imposing
such tax are therefore unconstitutional. We are further of
opinion that no decision of the Supreme Court of the United
States precludes this view or discourages the expectation that it 
will receive the sanction of the court. On the contrary, there are 
dicta  and  suggestions  in  the  only  decisions  bearing  upon  the 
subject  which  tend  to confirm  the  opinion  we  have  expressed.� 
13 Internal Revenue Record 76. 
Relying  upon  this  proposition,  Attorney  Lowell  Becraft  of 
Huntsville, Alabama, has made a powerful territorial/legislative 
jurisdictional argument that under the Supreme Court’s holding 
in  Brushaber,  the  income  tax  cannot  be  imposed  anywhere 
except within those limited areas within the states in which the 
Federal  government  has  exclusive  legislative  authority  under 
Article I, Section 8, Clause 17, of the United States Constitution, 
such  as  on  military  bases,  national  forests,  etc.,  and  within 
United  States  territories,  such  as  Puerto  Rico,  etc.  Indeed, 
Treasury  Department  delegation  orders  and  the  language  of 
Treasury Regulation 26 C.F.R. Section 1.1-l(c) fully supports Mr. 
Becraft’s  scholarly  analysis.  Thus,  whether  one  relies  upon  the 
Supreme Court’s opinion in Pollock or its opinion in Brushaber, 
a  tax  upon  a  States  citizen’s  wages  (personal  property)  falls 
without constitutional authority. 
See “An Act To Increase The Revenue, And For Other Purposes,� 
39 Stat. 756, ch. 463. 
See “An Act To Provide Revenue To Defray War Expenses, And 
For Other Purposes�, 40 Stat. 300, ch. 63. 
See “An Act To Provide Revenue, And For Other Purposes�, 40 
Stat. 1057, ch. 18. 
See  “An  Act  To  Reduce  And  Equalize  Taxation,  To  Provide 
Revenue, And For Other Purposes,� 42 Stat. 227, ch. 136. 
See  “An  Act  To  Reduce  And  Equalize  Taxation,  To  Provide 
Revenue, And For Other Purposes,� 43 Stat. 253, ch. 234. 
See “An Act To Reduce And Equalize Taxation, To Provide
Revenue, And For Other Purposes,� 44 Stat. 9, ch. 27.
See “An Act To Reduce And Equalize Taxation, Provide
Revenue, And For Other Purposes,� 45 Stat. 791, ch. 852.
See “An Act To Provide Revenue, Equalize Taxation, And For
Other Purposes,� 47 Stat. 169, ch. 209.
See “An Act To Provide Revenue, Equalize Taxation, And For
Other Purposes,� 48 Stat. 680, ch. 227.
See “An Act To Provide Revenue, Equalize Taxation, And For
Other Purposes,� 49 Stat. 1648, ch. 690.
See “An Act To Provide Revenue, Equalize Taxation, And For
Other Purposes,� 52 Stat. 447, ch. 289.
See 53 Stat., part 1.

The distinction between direct and indirect taxation is fundamental 
to the federal  government’s  constitutional power to  lay  and  collect 
taxes  from  the  citizens  of  the  several  states  which  comprise  the 
United  States  of  America.  However,  some  200  years  after  the 
ratification  of  the  United  States  Constitution,  it  remains  unsettled 
whether the federal income tax is a direct or an indirect tax. 
Pollock   case  is  the  leading  decision  from  the  United  States 
Supreme  Court  which  supports  the  proposition  that  the  federal 
income  tax  is  a  direct  tax.  The  
Brushaber   case is the leading
decision from the Supreme Court which supports the proposition
that the federal income tax is an indirect tax.
By virtue of the legislative history regarding the proffer of the
Sixteenth Amendment, it cannot be denied that Congress intended
to tax incomes. The question thus becomes, is the income tax a
direct tax that is relieved from the requirement of apportionment by
ratification of the Sixteenth Amendment or did the Amendment
serve to define a tax on income as an indirect, excise tax? This
analysis answers that question.
In 1894, Congress passed an income tax, and its constitutional
validity was challenged. In
Pollock,   the United States Supreme
Court held the income tax, as enacted and administered, was an
unapportioned direct tax, and struck it down as repugnant to
Article I, Section 2, Clause 3, and Article I, Section 9, Clause 4, of
the Constitution.
In 1909, during a special session of Congress called by President
Taft, the Sixteenth Amendment was proposed and sent to the
States for ratification; it was certified as ratified in 1913.
Congress then enacted the Tariff Act of October 3, 1913, which
contained income tax provisions, and those provisions were
challenged as unconstitutional. In
Brushaber,   the United States
Supreme Court upheld the income tax provisions as
constitutional. In the process, however, it held the income tax to
be an indirect tax by virtue of the operation of the Sixteenth
Pollock   Court  used  the  following  language  in  defining  a 
direct tax: 
Ordinarily,  all  taxes  paid  primarily  by  persons  who 
can  shift  the  burden  upon  someone  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 
or  of  the  income  yielded  by  such 
and  the  payment  of  which  cannot  be 
avoided, are direct taxes. [Emphasis added.] 
Pollock,  157 U.S. at 558. 
On rehearing, however, the Supreme Court enlarged the definition 
of a direct tax: 
We are now permitted to broaden the field of inquiry, 
and  to  determine  to  which  of  the  two  great  classes  a 
tax  upon  a  person’s  entire  income,  whether  derived 
from rents, or products, or otherwise, of real estate, or 
from  bonds,  stocks,  or  other  forms  of  personal 
property, belongs; and 
we are unable to conclude 
that the enforced subtraction from the yield of 
all  the  owner’s  real  or  personal  property,  in 
the  manner  prescribed,  is  so  different  from  a 
tax  upon
the property itself, that it is not
direct, but an indirect tax, in the meaning of
the Constitution.
 [Emphasis added.] 
Pollock,  158 U.S. at 618. 
In direct contravention to the 
Pollock  opinion that income taxes are 
direct within the meaning of the Constitution, the 
Brushaber  Court 
(T)he  conclusion  reached  in  the  
Pollock   case  did  not 
in  any  degree  involve  holding  that  income  taxes 
generically  and  necessarily  came  within  the  class  of 
direct taxes on property .... 
Brushaber,  240 U.S. at 16-17.
It is interesting to note that this alleged conclusion of the
Court is not in  quotes,  nor is there a page reference to the   Pollock 
decision. The absence of such a page reference is because the
Pollock  Court never stated such a conclusion. 
Brushaber   Court was of the opinion that Mr. Brushaber was
raising the issue that the Sixteenth Amendment provided for a
power to tax not previously in existence:
We are of the opinion, however, that the confusion is
not inherent, but rather arises from the conclusion
that the Sixteenth 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.
Brushaber,  240 U.S. at 10-11.
The Court then listed the several contentions made by Mr.
Brushaber, and said:
But it clearly results that the proposition and the
contentions under it, if acceded to, would cause one
provision of the Constitution to destroy another; that
is, they would result in bringing the provisions of the 

apportionment  into  irreconcilable  conflict  with  the 
general  requirement  that  all  direct  taxes  be 
apportioned.  Moreover,  the  tax  authorized  by  the 
Amendment, being direct, would not  come under the 
rule  of  uniformity  applicable  under  the  Constitution 
to other than direct taxes, and thus it would come ‘ to 
pass  that  the  result  of  the  Amendment  would  be  to 
authorize  a  particular  direct  tax  not  subject  either  to 
apportionment  or  to  the  rule  of  geographical 
uniformity,  thus  giving  power  to  impose  a  different 
tax  in  one  State  or  States  than  was  levied  in  another 
State or States. 
Brushaber,  240 U.S. at 11-12. 
The Court was, however, aware of the fact that the requirement as 
to apportionment of a direct tax was regulatory: 
In  fact  the  two  great  subdivisions  embracing  the 
complete  and  perfect  delegation  of  the  power  to  tax 
and  the  two  correlated  limitations  as  to  such  power 
were  thus  aptly  stated  by  Mr.  Chief  Justice  Fuller  in 
Pollock v. Farmers’ Loan & Trust Company, supra,  at
page 557: “In the matter of taxation, the Constitution
recognizes the two great classes of direct and indirect
taxation, and lays down two rules by which their
imposition must be governed, namely: The rule of
apportionment as to direct taxes, and the rule of
uniformity as to duties, imposts and excises.� It is to
be observed, however, as long ago pointed out in
Veazie  Bank  v.  Fenno,  8   Wall 533, 541, that the
requirement of apportionment as to one of the great
classes and of uniformity as to the other class were
not so much a limitation upon the complete and all
embracing authority to tax,
but  in  their  essence 
were  simply  regulations  concerning  the  mode 
in which the plenary power was to be exerted. 
[Emphasis added.] 
Brushaber,  240 U.S. at 13. 
Recognizing  that  the  two  requirements  were  but  regulations 
prescribed  in  the  Constitution,  nothing  prevented  Congress  from 
amending the Constitution to change one or both of the regulations. 
In fact, this is exactly what the 
Pollock  Court specifically suggested 
as the proper course for Congress to take if it did not like the result 
of the 
Pollock  decision:
In these cases our province is to determine whether
this income tax on the revenue from property does or
does not belong to the class of direct taxes. If it does,
it is, being unapportioned, in violation of the
Constitution, and we must so declare.
Differences have often occurred in this court"
differences exist now"but there has never been a time
in its history when there has been a difference of
opinion as to its duty to announce its deliberate
pertaining to the case in hand.
If it be true that the Constitution should have
been so framed that a tax of this kind
[a direct 
income tax] 
could be laid  [without apportionment], 
the  instrument  defines  the  way  for  its 
 [Emphasis added.] 
Pollock,  158 U.S. at 634-635. 
At pages 14 and 15 of its opinion, the 
Brushaber  Court discussed the 
case  of  
Hylton   v.   United  States,  2   U.S.  171  (1796),  wherein  the 
Supreme Court found that the carriage tax was valid because it was 
an excise tax. The two 
Pollock  decisions discussed this case in great 
detail.  Some  interesting  and  extremely  important  points  are 
It  will  be  perceived  that  each  of  the  justices,  while 
suggesting doubt whether anything but a capitation or 
a  land tax was  a direct tax within the  meaning  of  the 
constitution, distinctly avoided expressing an opinion 
upon  that  question  or  laying  down  a  comprehensive 
definition, but confined his opinion to the case before 
the court. 
The  general  line  of  observation  was  obviously 
influenced  by  Mr.  Hamilton’s  brief  for  the 
government,  in  which  he  said:  “The  following  are 
presumed  to  be  the  only  direct  taxes:  Capitation  or 
poll  taxes,  taxes  on  lands  and  buildings,  general 
assessments,  whether  on  the  whole  property  of 
individuals, or on their whole real or personal estate. 
All  else  must,  of  necessity,  be  considered  as  indirect 
taxes.� 7 Hamilton’s Works (Lodge’s Ed.) 332. 
Mr.  Hamilton  also  argued:  “If  the  meaning  of  the 
word “excise� is to be sought in a British statute, it will 
be  found  to  include  the  duty  on  carriages,  which  is 
there  considered  as  an  “excise�.  *  *  *  An  argument 
results  from  this,  though  not  perhaps  a  conclusive 
one,  yet,  where  so  important  a  distinction  in  the 
constitution  is  to  be  realized,  it  is  fair  to  seek  the 
meaning  of  terms  in  the  statutory  language  of  that 
country  from  which  our  jurisprudence  is  derived.�  7 
Hamilton’s Works (Lodge’s Ed.) 333. 
If  the  question  had  related  to  an  income  tax,  the 
reference  would  have  been  fatal,  as  such  taxes  have 
been  always  classed  by  the  law  of  Great  Britain  as 
direct taxes. 
Pollock,  157 U.S. at 571-572.
After discussing the direct tax acts of Congress (Act of July 9, 1798;
Act of July 14, 1798; Act of July 22, 1813; Act of August 2, 1813; Act
of January 9, 1815) attributable to the War of 1812, and the direct
tax acts of Congress (Act of August 6, 1861; Act of July 1, 1862; Act
of March 3, 1863; Act of June 30, 1864; Act of March 3, 1865; Act of
March 10, 1866; Act of July 13, 1866, Act of March 2, 1867; Act of
July 14, 1870) attributable to the Civil War, the Court said:
The differences between the latter acts and that of
August 15, 1894, call for no remark of this connection.
These acts grew out of the war of the Rebellion, and
were, to use the language of Mr. Justice Miller, “part
of the system of taxing incomes, earnings, and profits
adopted during the late war, and abandoned as soon
after that war was ended as it could be done safely.�
Railroad Co. v. Collector,  100 U.S. 595, 598. 
Pollock,  157 U.S. at 573. 
The Court then went on to say: 
From  the  foregoing  it  is  apparent  (1)  that  the 
distinction  between  the  direct  and  indirect  taxation 
was well understood by the framers of the constitution 
and  those  who  adopted  it;  (2)  that,  under  the  state 
systems of taxation, all taxes on real estate or personal 
property or the rents or income thereof were regarded 
as  direct  taxes;  (3)  that  the  rules  of  apportionment 
and  of  uniformity  were  adopted  in  view  of  that 
distinction  and  those  systems;  (4)  that  whether  the 
tax  on  carriages  was  direct  or  indirect  was  disputed, 
but the tax was sustained as a tax on the use and as an 
excise;  (5)  that  the  original  expectation  was  that  the 
power  of  direct  taxation  would  be  exercised  only  in 
extraordinary  exigencies;  and  down  to  August  15, 
1894,  this  expectation  has  been  realized.  The  act  of 
that date was passed in a time of profound peace, and 
if  we  assume  that  no  special  exigency  called  for 
unusual  legislation,  and  that  resort  to  this  mode  of 
taxation is to become an ordinary and usual means of 
supply,  that  fact  furnishes  an  additional  reason  for 
circumspection and care in disposing of the case. 
Pollock,  157 U.S. at 573-574. 
On rehearing, the 
Pollock  Court had this to say regarding  Hylton:
In this connection it may be useful, though at the risk
of repetition, to refer to the views of Hamilton and
Madison as thrown into relief in the pages of the
Federalist, and in respect of the enactment of the
carriage tax act, and again to briefly consider the
Hylton   case ,   3 Dall. 171, so much dwelt on in
The Act of June 5, 1794, c. 45, 1 Stat. 373, laying
duties upon carriages for the conveyance of persons,
was enacted in a time of threatened war.
The bill passed the House on the twenty-ninth of May,
apparently after a very short debate. Mr. Madison and
Mr. Ames are the only speakers on that day reported
in the Annals. “Mr. Madison objected to this tax on
carriages as an unconstitutional tax; and, as an
unconstitutional measure, he would vote against it.�
Mr. Ames said: “It was not to be wondered at if he,
coming from so different a part of the country, should
have a different idea of this tax from the gentleman
who spoke last. In Massachusetts, this tax had been
long known; and there it was called an excise. It was
difficult to define whether a tax is direct or not. He
had satisfied himself that this was not so.� Annals, 3d 
Cong. 730. 
On the first of June, 1794, Mr. Madison wrote to Mr. 
Jefferson: “The carriage tax,  which only struck at  the 
Representatives.�  3  Madison’s  Writings,  18.  The  bill 
then  went  to  the  Senate,  where,  on  the  third  day  of 
June,  it  “was  considered  and  adopted,�  Annals,  3d 
Cong.  119,  and  on  the  following  day  it  received  the 
signature of President Washington... 
It  appears  then  that  Mr.  Madison  regarded  the 
carriage  tax  bill  as  unconstitutional,  and  accordingly 
gave  his  vote  against  it,  although  it  was  to  a  large 
extent, if not altogether, a war measure. 
Where  did  Mr.  Hamilton  stand?  At  that  time  he  was 
Secretary  of  the  Treasury,  and  it  may  therefore  be 
assumed,  without  proof,  that  he  favored  the 
legislation.  But  upon  what  ground?  He  must,  of 
course, have come to the conclusion that it was not a 
direct  tax.  Did  he  agree  with  Fisher  Ames,  his 
personal  and  political  friend,  that  the  tax  was  an 
excise? The evidence is overwhelming that he did. 
In  the  thirtieth  number  of  the  Federalist,  after 
depicting  the  helpless  and  hopeless  condition  of  the 
country  growing  out  of  the  inability  of  the 
confederation  to  obtain  from  the  States  the  moneys 
assigned  to  its  expenses,  he  says:  “The  more 
intelligent  adversaries  of  the  new  Constitution  admit 
the  force  of  this  reasoning;  but  they  qualify  their 
admission,  by  a  distinction  between  what  they  call 
internal   and   external   taxation.  The  former  they 
would  reserve  to  the  state  governments;  the  latter, 
which they explain into commercial imposts, or rather 
duties  on  imported  articles,  they  declare  themselves 
willing to concede to the Federal Head.� In the thirty-
sixth  number,  while  still  adopting  the  division  of  his 
opponents,  he  says:  “The  taxes  intended  to  be 
comprised under the general denomination of internal 
taxes, may be subdivided into those of the 
direct  and
those of the
indirect   kind. ... As to the latter, by 
which  must  be  understood  duties  and  excises 
on  articles  of  consumption,  
one  is  at  a  loss  to 
conceive,  what  can  be  the  nature  of  the  difficulties 
apprehended.�  Thus  we  find  Mr.  Hamilton,  while 
writing  to  induce  the  adoption  of  the  Constitution, 
first, dividing the power of taxation into 
external  and 
internal,   putting  into  the  former  the  power  of 
imposing  duties  on  imported  articles  and  into  the 
latter all remaining powers; and, 
second  dividing the
latter into
direct   and   indirect,   putting  into  the 
latter, duties and excises on articles of consumption. “ 
It  seems  to  us  to  inevitably  follow  that  in  Mr. 
Hamilton’s  judgment  at  that  time  all  internal  taxes, 
except duties  and  excises  on  articles  of  consumption, 
fell into the category of direct taxes. 
Did he, in supporting the carriage tax bill, change his 
views in this respect? His argument in the 
Hylton  case  
in support of the law enables us to answer this
question. It was not reported by Dallas, but was
published in 1851 by his son in the edition of all
Hamilton’s writings except the Federalist. After saying
that we shall seek in vain for any legal meaning of the
respective terms “direct and indirect taxes,� and after
forcibly stating the impossibility of collecting the tax if
it is to be considered a direct tax, he says, doubtingly:
“The following are presumed to be the only direct
taxes. Capitation or poll taxes. Taxes on lands and
buildings. General assessments, whether on the whole
property  of  individuals,  or  on  their  whole  real  or 
personal  estate;  all  else  must  of  necessity  be 
considered as indirect taxes.� 
“Duties, imposts and 
appear  to  be  contradistinguished  from 
taxes.�   “If the meaning of the word excise   is to be
sought in the British statutes, it will be found to
include the duty on carriages, which is there
considered as an
excise.�   “Where  so  important  a 
distinction  in  the  Constitution  is  to  be  realized,  it  is 
fair  to  seek  the  meaning  of  terms  in  the  statutory 
jurisprudence  is  derived.�  7  Hamilton’s  Works,  848. 
Mr.  Hamilton  therefore  clearly  supported  the  law 
which Mr. Madison opposed, for the same reason that 
his  friend  Fisher  Ames  did,  because  it  was  an  excise, 
and  as  such  was  specifically  comprehended  by  the 
Constitution.  Any  loose  expressions  in  definition  of 
the  word  “direct,�  so  far  as  conflicting  with  his  well-
considered  views  in  the  Federalist,  must  be  regarded 
as  the  liberty  which  the  advocate  usually  thinks 
himself  entitled  to  take  with  his  subject.31  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  that  property,  and  is  a  direct  tax,  in  the 
meaning of the Constitution. And Mr. Hamilton in his 
report  on  the  public  credit,  in  referring  to  contracts 
with  citizens  of  a  foreign  country,  said:  “This 
principle,  which  seems  critically  correct,  would 
exempt  as  well  the  income  as  the  capital  of  the 
property.  It  protects  the  use,  as  effectually  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.�  
Hamilton’s Works,  34.  
We think there is nothing in the
Hylton   case in 
conflict with the foregoing. The case is badly reported. 
[Emphasis in original.] 
Pollock,  158 U.S. at 623-626. 
Commencing  on  page  15,  the  
Brushaber   Court discussed the tax
acts passed from 1861 and continuing through the Civil War period,
and erroneously stated that these were excise taxes. As quoted
above, the
Pollock   Court  considered  these  taxes  in  detail,  found 
there  was  no  substantial  difference  between  these  taxes  and  the 
income  tax  of  1894,  held  that  because  an  income  tax  was  now 
attempted to be levied in times of profound peace the issue had to 
be  examined  carefully,  and  held  the  tax  to  be  an  unapportioned 
direct tax and therefore unconstitutional. 
Brushaber   Court  then  stated  that  the  act  of  1894  was 
assumed32  to  come  within  the  classification  of  excises,  duties  and 
imposts which were subject to the rule of uniformity but not to the 
rule  of  apportionment;  that  the  constitutional  validity  of  the  law 
was challenged as levying a tax that was direct in the constitutional 
sense, and the 
Pollock  Court was obliged to determine whether the 
tax was direct or indirect. The 
Brushaber  Court stated:
Coming to consider the validity of the tax from this
point of view,
while not questioning at all that in 
common  understanding  IT  WAS  DIRECT 
merely  on  income  and  only  indirect  on 
it was held that considering the substance 
of  things,  it  was  direct  on  property  in  the 
constitutional  sense  since  to  burden  an  income  by  a 
tax  was  from  the  point  of  substance  to  burden  the 
property from which the income was derived and thus 
accomplished the very thing which the provision as to 
apportionment of direct taxes was adopted to prevent. 
[Emphasis added.] 
Brushaber,  240 U.S. at 16. 
This quote shows that the 
Brushaber  Court completely ignored the 
reasoning behind 
Pollock. Pollock  held that there was no distinction
between a tax on property and a tax on the income yielded
therefrom; the tax on property was a direct tax, and the tax on
income was a direct tax. The question of “source� was raised by the
parties to the
Pollock   case in their legal briefs, and disposed of by
the Court as follows:
But if, as contended, the interest when received has
become merely money in the recipient’s pocket, and
taxable as such without reference to the source from
which it came, the question is immaterial whether it
could have been originally taxed at all or not. This was
admitted by the Attorney General with characteristic
candor; and it follows that, if the revenue derived
from municipal bonds cannot be taxed because the
source cannot be, the same rule applies to revenue
from any other source not subject to the tax; and the
lack of power to levy any but an apportioned tax on
real and personal property equally exists as to the
revenue therefrom.
Admitting  that  this  act  taxes  the  income  of 
property  irrespective  of  its  source  
still we
cannot doubt that such a tax is necessarily a direct tax
in the meaning of the Constitution.
In England, we do not understand that an income tax
has ever been regarded as other than a direct tax. In
Dowell’s History of Taxation and Taxes in England,
admitted to be the leading authority, the evolution of
taxation in that country is given, and an income tax is
invariably classified as a direct tax. 3 Dowell, (1884),
103, 126. The author refers to the grant of a fifteenth
and tenth and a graduated income tax in 1435, and to
many  subsequent  comparatively  ancient  statutes  as 
income tax laws. 1 Dowell, 121. It is objected that the 
taxes  imposed  by  these  acts  were  not,  scientifically 
speaking, income taxes at all, and that although there 
was a partial income tax in 1758, there was no general 
income  tax  until  Pitt’s  of  1799.  Nevertheless,  the 
income  taxes  levied  by  these  modern  acts,  Pitt’s, 
Addington’s,  Petty’s,  Peel’s  and  by  existing  laws,  are 
all classified as direct taxes; and, so far as the income 
tax  we  are  considering  is  concerned,  that  view  is 
concurred in by the cyclopaedists, the lexicographers, 
and  the  political  economists,  and  generally  by  the 
classification  of  European  governments  wherever  an 
income tax obtains. [Emphasis added.] 
Pollock,  158 U.S. at 630-631.
In addition, Justice White accidentally admitted the falsity of his
position that an income tax is an excise when he said that the
income tax of 1894 was indirect on property, but “direct on
income,� thereby admitting an income tax is a direct tax.
Brushaber  Court continued:
As this conclusion but enforced a regulation as to the
circumstances, it did not in any way dispute the all
embracing taxing authority possessed by Congress,
including necessarily therein the power to impose
income taxes if only they conformed to the
constitutional regulations which were applicable to
Brushaber,  240 U.S. at 16. 
Here  the  
Brushaber   Court  recognized  that  income  taxes  must  be 
apportioned, a result that requires the conclusion that income taxes 
are direct taxes. 
Brushaber   Court  then  made  another  erroneous  finding  about 
what the 
Pollock  Court held: 
Moreover  in  addition  the  conclusion  reached  in  the 
Pollock  case did not in any degree involve 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 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. Nothing could serve to make this
clearer than to recall that in the
Pollock  case in so far 
as the law taxed income from other classes of property 
than  real  estate  and  invested  personal  property,  that 
is, income from “professions, trades, employments, or 
vocations� (158 U.S. 637), its validity was recognized; 
indeed  it  was  expressly  declared  that  no  dispute  was 
made  upon  that  subject  and  attention  was  called  to 
the fact that taxes on such income had been sustained 
as excise taxes in the past. 
Id.,  p. 635 
Brushaber,  240 U.S., at 16-17. 
This  statement  by  the  
Brushaber   Court  attributed  to  the   Pollock 
Court  is  false.  What  the   Pollock   Court  actually  stated  at  page  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, 
privileges, or employments, in view of the instances in 
employments has assumed the guise33 of an excise tax 
and been sustained as such. [Emphasis added.] 
Pollock,  158 U.S. at 635. 
Pollock  Court was acutely aware that the facts before it did not
allow the Court to decide the issue of whether the statute, as it
applied to the taxation of income from professions, trades,
employments or vocations was constitutional,34 and avoided
making a finding. But the Court had to consider whether it should
declare the entire law unconstitutional or leave those sections not in
issue in the case to stand:
[I]t is evident that the income from realty formed a
vital part of the scheme for taxation embodied
therein. If that be stricken out, and also the income
from all invested personal property, bonds, stocks,
investments of all kinds, it is obvious that by far 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 as a tax on
occupations and labors. 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.
But this is
not such an act;
and  the  scheme  must  be 
considered as a whole. [Emphasis added.] 
Pollock,  158 U.S. at 636-637.
This quote raises an interesting point. No more tax would be
collected from those engaged in business, vocations, occupations or
employments than if the other provisions were not struck down in
that the amount of revenue that could be collected from business,
privileges, employments and vocations was specifically set by the
statute. The government would only collect less revenue. Thus the
Pollock   Court must have had an ulterior motive in making its
statement, and I submit it did not want to see occupations and labor
burdened with a tax disguised as an excise when it knew full well
that such taxes were direct, and would be levied without
apportionment. The
Pollock  Court was precluded from coming right
out and saying the statute imposing such taxes was unconstitutional
because the case did not involve that issue, so it said instead that
such taxes had been sustained in the past having
assumed  the 
of an excise tax, and ruled the entire law unconstitutional,
thus prohibiting the levying and collection of the tax on business,
privileges, employments and vocations due to its inherent
unconstitutionality. I submit the language “assumed the guise� of
an excise tax does not support the conclusion attributable to it by
Brushaber   that a tax on the income derived from business, trades
and professions is to be legally classified as an excise tax.
Brushaber   Court, after quoting the Sixteenth Amendment,
It is clear on the face of this text that it does not
purport to confer power to levy income taxes in a
generic sense"an authority already possessed and
never questioned"or to limit and distinguish between
one kind of income taxes and another, but that the
whole purpose of the Amendment was
to relieve all 
income  taxes  
when  imposed  from  apportionment 
from a consideration of the source whence the income 
was derived. [Emphasis added.] 
Brushaber,  240 U.S. at 17-18. 
Brushaber   Court  stated  that  the  Sixteenth  Amendment 
required all income to be treated alike without any distinction to be 
made between one kind of income tax and another. The 
Court recognized income taxes as direct taxes, but held that if the
source is not considered, which it could no longer be because of the
Sixteenth Amendment, then the income tax would once again be
considered an indirect tax which would not have to be apportioned.
The Court continued:
Indeed, in the light of the history which we have given
and of the decision in the
Pollock  case and the ground
upon which the ruling in that case was based, there is
no escape from the conclusion that the Amendment
was drawn for the purpose of doing away for the
future with the principle upon which the
Pollock  case  
was decided, that is, of determining whether a tax on
income was direct not by a consideration of a burden
placed on the taxed income upon which it directly
operated, but by taking into view of the burden which
resulted on the property from which the income was
derived, since in express terms the Amendment
provides that income taxes, from whatever source the
income may be derived, shall not be subject to the
regulation of apportionment.
Brushaber,  240 U.S. at 18.
This sentence needs careful analysis. It states the purpose of the
Amendment was to do away with a principle allegedly laid down in
Pollock  decision by Chief Justice Fuller in determining if the tax
on income was a direct tax, thereby precluding the resort to that
principle in the future. The next part of the sentence identifies the
principle in two parts:
1. NOT CONSIDERING the  burden  placed  on  the 
taxed income, but; 
2. CONSIDERING the burden which resulted on
the property from which the income was derived.
In other words, the purpose of the amendment was to direct the
Supreme and lower courts to only consider the burden on the
income itself in determining if a subsequent income tax act imposed
a direct or an indirect tax. Having determined this to be the purpose
of the Sixteenth Amendment, the Court reached its ultimate
conclusion that the income tax is not a direct tax which is relieved
from the requirement of apportionment:
From this in substance it indisputably arises ... that
the contention that the Amendment treats a tax on
income as a direct tax although it is relieved from
apportionment and is necessarily therefore not
subject to the rule of uniformity as such rule only
applies to taxes which are not direct, thus destroying
the two great classifications which have been
recognized and enforced from the beginning, is also
wholly without foundation since the command of the
Amendment that all income taxes shall not be subject
to apportionment by a consideration of the sources
from which the taxed income may be derived, forbids
the application to such taxes on the rule applied in the
Pollock  case by which alone such taxes were removed 
from  the  great  class  of  excises,  duties  and  imposts 
subject  to  the  rule  of  uniformity  and  were  placed 
under the other or direct class. 
Brushaber,  240 U.S. at 18-19. 
Thus the 
Brushaber  Court thought that in holding income taxes to 
be direct taxes, the 
Pollock  Court used the principle of “considering 
the source from which the taxed income was derived� as the key in 
its analysis, and that by removing this key, the income tax would be 
classified as an indirect tax. However, in using the language pattern 
“not by... but by...,� it suggested that the determination be made by 
considering the burden imposed on the income, and that is exactly 
the  principle  upon  which  the  
Pollock   case  was  determined.  The 
Pollock   Court  did  not  resort  to  a  consideration  of  the  source  to 
reach its conclusion, but found that from the earliest enactment of 
income  taxes  in  England  and  other  European  Countries,  and  in 
enactments  imposing  state  income  taxes  prior  to  the  adoption  of 
the Constitution, such taxes were always deemed to be direct taxes. 
Pollock   also relied upon the definition of direct taxes given by
Hamilton in the
Federalist  Papers,   the fact that incomes are
personal property of general distribution, the candid admission of
the Attorney General, and the views of cyclopaedists,
lexicographers, and political economists. In stating that it was
unable to conclude that the enforced subtraction from the yield of
all the owner’s real or personal property, in the manner prescribed,
was not any different than a tax on real or personal property, the
Pollock   Court  was  merely  stating  that  any  tax  on  real  or  personal 
property,  including  income,  was  considered  by  the  framers  of  the 
Constitution  to  be  a  direct  tax  and  subject  to  the  rule  of 
Brushaber  Court then reiterated the reason for its opinion: 
We say this because it is to be observed that although 
from  the  date  of  the  
Hylton   case because  of 
statements  made  in  the  opinions  in  that  case  it  had 
come  to  be  accepted  that  direct  taxes  in  the 
constitutional  sense  were  confined  to  taxes  levied 
directly  on  real  estate  because  of  its  ownership,  the 
challenging  the  ruling  in  the  
Pollock   case that  the 
word  direct  had  a  broader  significance  since  it 
embraced  also  taxes  levied  directly  on  personal 
property  because  of  its  ownership,  and  therefore  the 
Amendment  at  least  impliedly  makes  such  wider 

significance a part of the Constitution"a condition
which clearly demonstrates that the purpose was not
to change the existing interpretation except to the
extent necessary to accomplish the result intended,
that is, the prevention of the resort to the sources
from which a taxed income was derived in order to
cause a direct tax on the income to be a direct tax on
the source itself and thereby to take an income tax out
of the class of excises, duties and imposts and place it
in the class of direct taxes.
Brushaber,  240 U.S. at 19. 
Brushaber   Court  first  stated  that  the  Sixteenth  Amendment 
impliedly  recognized  the  broader  classification  of  direct  taxes 
propounded  in  
Pollock,   which  classification  encompassed   all 
personal  and  real  property.  
The   Brushaber   Court next stated
the purpose of the Sixteenth Amendment was limited to changing
existing interpretations [a clear reference to
Pollock]   to  the  extent 
necessary to accomplish the result necessary, and identified what it 
believed the intended result was to be: 
[T]he  prevention  of  the  resort  to  the  sources  from 
which a taxed income was derived in order to cause 

direct tax  on  the  income  
to be a direct tax on the 
source itself and thereby to take an income tax out of 
the class of excises, duties and imposts and place it in 
the class of direct taxes. [Emphasis added.] 
Brushaber, id. 
After stating the income tax is a direct tax, how could Justice White
contend it belonged in the class of excises, duties and imposts? Only
by claiming the purpose of the Sixteenth Amendment was to change
an admittedly direct tax into an indirect tax. He tells us this can be
done because the only way it became a direct tax in the first place
was by the
Pollock   Court’s  consideration  of  the  source.  However, 
Pollock  Court never once said that an income tax was anything 
but a direct tax, clearly showing that the 
Pollock  Court did not take
the income tax out of the class of indirect taxes as claimed by the
Brushaber   Court.  According  to   Pollock,   income taxes had always
been considered to be direct taxes in their own right because they
operated directly on the ownership of personal property [including
income], a result reached when considering the burden on the
income itself. Since the
Pollock  Court used the correct principle, the 
position expressed by the 
Brushaber  Court as to the purpose of the 
Amendment is clearly incorrect. 
The  absurd  result  of  the  
Brushaber   Court’s  reasoning  as  to  the 
application  of  the  alleged  
Pollock   principle  is  shown  as  follows:  1) 
Brushaber  Court stated the tax is direct on income but indirect
on the source, 2) by considering the burden on the income, the
burden on the source is changed from indirect to direct, 3) this
process somehow “causes� the direct tax on income to become an
indirect tax.
(Brushaber,  240 U.S. at 19.) 
Now compare what the Supreme Court in 
Eisner v. Macomber,  252
U.S. 189 (1920), stated was the intended result of the Sixteenth
The Sixteenth Amendment must be construed in
connection with the taxing clauses of the original
Constitution and the effect attributed to them before
the Amendment was adopted. In
Pollock  v.  Farmers’ 
Loan  and  Trust  Co.,  
158 U.S. 601, under the Act of
August 27, 1894, c. 349, Section 27, 28 Stat. 509, 553,
it was held that taxes upon rents and profits of real
property were in effect direct taxes upon the property
from which such income arose,35 imposed by reason
of ownership; and that Congress could not impose
such taxes without apportioning them among the
States according to population, as required by Art. I,
section 2, cl. 3, and section 9, cl. 4, of the original
Afterwards,  and  evidently  in  recognition  of  the 
limitation  upon  the  taxing  power  of  Congress  thus 
determined,  the  Sixteenth  Amendment  was  adopted, 
in  words  lucidly  expressing  the  object  to  be  
accomplished:  “The  Congress  shall  have 
power  to  lay  and  collect  taxes  on  incomes, 

apportionment  among  the  several  States,  and 

enumeration.� As repeatedly held, this did not 
extend  the  taxing  power  to  new  subjects,  but 
merely removed the necessity which otherwise 
might  exist  for  an  apportionment  among  the 
States  of  taxes  laid  on  income.
Brushaber,  240 U.S. at 17-19, and other cases.]
A proper regard for its genesis, as well as its very clear
language, requires also that this Amendment shall not
be extended by loose construction, so as to repeal or
modify, except as applied to income, those provisions
of the Constitution that require an apportionment
according to population for direct taxes upon
property, real and personal. This limitation still has
an appropriate and important function, and is not to
be over ridden by Congress or disregarded by the
In order, therefore, that the clauses cited from Article
I of the Constitution may have proper force and effect,
save only as modified by the Amendment, and that the
latter also may have proper effect, it becomes essential
to distinguish between what is and what is not
“income� as the term is there used; and to apply the
distinction, as cases arise, according to truth and
substance, without regard to form. Congress cannot
by any definition it may adopt conclude the matter,
since it cannot by legislation alter the Constitution,
from which alone it derives its power to legislate, and 
within  whose  limitations  alone  that  power  can  be 
lawfully exercised. [Emphasis added.] 
Eisner,  252 U.S. at 205-206.
It is legally significant to note that in stating the purpose of the
Sixteenth Amendment the
Eisner   Court  found  no  necessity  to  add 
additional  words,  but  the  
Brushaber   Court  did,  in  clear 
contravention to established legal principles: 
The words of the Constitution are to be taken in their 
obvious sense, and to have a reasonable construction. 
Gibbons v. Ogden,  Mr. Chief Justice Marshall, with 
his  usual  felicity,  said:  “As  men,  whose  intentions 
require  no  concealment,  generally  employ  the  words 
which  most  directly  and  aptly  express  the  ideas  they 
intend to convey, the enlightened patriots who framed 
our Constitution, and the people who adopted it must 
be  understood  to  have  employed  words  in  their 
natural  sense,  and  to  have  intended  what  they  have 
said.� 9 Wheat. 1, 188. 
Pollock,  158 U.S. at 619. 
I submit that the 
Brushaber  Court had to use extra words in stating 
the  purpose  of  the  Sixteenth  Amendment  because  
misstates  the  intent  of  Congress  in  proposing  the  Sixteenth 
Amendment.  To  support  the  
Brushaber   decision,  it  would  have  to 
be  shown  that  Congress  wanted  to  overturn  the  
Pollock   decision
that income taxes are direct taxes. This follows because it is clear
that the
Brushaber   Court believed the Sixteenth Amendment
prevented income taxes from being classed as direct taxes by
reference to the source, thereby placing them in the only other
possible class, indirect taxes. Yet the
Brushaber   Court  proves  the 
invalidity of its decision when it stated in its opinion that Congress 
obviously did not challenge or repudiate the holding of the 

Court that a tax on real and personal property, imposed by reason
of its ownership, was a direct tax in the constitutional sense. The
Sixteenth Amendment was not proposed in the form: Income taxes
are indirect taxes and do not require apportionment! It was
proposed that Congress shall have the power to lay and collect taxes
on incomes without apportionment. If income taxes were not direct
taxes, why did the Sixteenth Amendment remove the need to
apportion them, when even
Brushaber   recognized that indirect
taxes do not have to be apportioned? I submit the
decision  fails  to  recognize  that   Pollock   did consider the burden
imposed on the income itself, and reached the conclusion that
income taxes were direct taxes in the constitutional sense.
No other case in the history of income taxation went into such
depth on the issue of what is and is not a direct tax as did
This  issue  was  extensively  researched  and  briefed  by  the  parties 
involved in the case and by the Supreme Court. Justice White, being 
unable  to  refute  this  fact  of  law  neither  overruled  the  
holding nor disputed it; instead Justice White held that the purpose 
of the Sixteenth Amendment was to prevent the use of the 
principle.� It is my opinion that Justice White’s indirect attempt to 
Pollock  is wholly unpersuasive; he clearly failed to state a
historical, factual or legal basis for his conclusion that a tax on
income is an indirect, excise tax.
It is clear that Mr. Brushaber and his attorneys correctly stated the
proposition to the Supreme Court that the Sixteenth Amendment
relieved the income tax, which was a direct tax, from the
requirement of apportionment, and that the
Brushaber  Court failed
miserably in attempting to refute Mr. Brushaber’s legal position.
A tax imposed on all of a person’s annual gross receipts is a direct
tax on personal property that must be apportioned. A tax imposed
on the “income� derived from those gross receipts is also a direct
tax on property, but as a result of the Sixteenth Amendment,
Congress no longer has to enact legislation calling for the
apportionment of a tax on that income. As stated in
Eisner,   the 
issue does indeed become, “What is and what is not income?� That 
question is answered in the next chapter. 
It appears that Mr. Hamilton was a forerunner of today’s typical 
politician, saying one thing to be elected and doing the complete 
opposite once in office. 
Who  made  this  assumption  is  not  stated  in  the  
The  word  “guise�  is  defined  in  Webster’s  Third  New 
International Dictionary as: “A superficial seeming: an artful or 
simulated  appearance  (as  of  propriety  or  worth)<that  such 
misconduct should take the guise of religious ritual is shameful> 
<tricked the widow in the guise of a friend of her late husband>“ 
Pollock,  157 U.S. at 687, quoting from the case of  Cohens v.
6  Wheat.  264,  399:  “It  is  a  maxim  not  to  be 
disregarded that general expressions, in every opinion, are to be 
taken in connection with the case in which those expressions are 
used.  If  they  go  beyond  the  case,  they  may  be  respected,  but 
ought not to control the judgment in a subsequent suit when the 
very point is presented for decision. The reason of the maxim is 
obvious.  The  question  actually  before  the  court  is  investigated 
with  care,  and  considered  in  its  full  extent.  Other  principles 
which  may  serve  to illustrate  it  are  considered in  their  relation 
to the case decided, but their possible bearing on all other cases 
is seldom completely investigated.� 
This is not what 
Pollock  held, but unlike  Brushaber  which held
the income tax was an excise tax,
Eisner   correctly  found  the 
purpose  of  the  Sixteenth  Amendment  was  to  remove  the 
requirement  for  apportionment  from  the  income  tax,  which 
Pollock  did hold was direct in the constitutional sense. 
Any analysis of the federal tax laws requires a basic understanding 
of the arrangement of the Internal Revenue Code. Although not yet 
officially  codified  within  the  United  States  Code  due  to 
“inconsistent,  redundant  and  obsolete  provisions,�36  the  Internal 
Revenue Code of 1986, as amended, is nonetheless often referred to 
as  “Title 26�  of the United  States Code.  The “title� is broken  down 
into  subtitles,  which  are  further  broken  down  into  chapters, 
subchapters,  parts,  subparts  and  sections.  Sections  can  be  further 
subparagraphs  and  sub-sub-subparagraphs.  The  primary  Subtitles 
Subtitle  A 

Income Taxes 
Subtitle  B 

Estate and Gift Taxes 
Subtitle  C 

Employment Taxes and Collection of 
Income Tax at Source 
Subtitle D 

Miscellaneous Excise Taxes 
Subtitle  E 

Alcohol,  Tobacco  and  Certain  Other 
Excise Taxes 
Subtitle  F 

Procedure and Administration 
Subtitle G 

The Joint Committee on Taxation 
Subtitle H 

Financing  of  Presidential  Election 
The Internal Revenue Code (1988 edition) defines the term
“taxpayer� as used in Title 26 as follows:
The term “taxpayer� means any person subject to any
internal revenue tax.
26 U.S.C. Section 7701(a)(14). 
The term “internal revenue tax� is not defined in the Internal
Revenue Code, but I submit the Internal Revenue Code contains the
only federal “internal revenue taxes.� Thus if one is subject to any
particular tax imposed in the Internal Revenue Code, one is a
taxpayer. A person may be a taxpayer with respect to more than one
tax at a time, but may not therefore necessarily be a taxpayer with
respect to a different tax. Whether or not one is a taxpayer is a
mixed question of law and fact.
In the case of
Long v. Rasmussen,  281 F. 236 (1922), the collector
of Internal Revenue assessed certain excise taxes against Mr. Wise,
and sought to collect the tax through seizure of certain property.
Mr. Long brought a suit against the collector to prevent the sale of
the property"claiming ownership of it"and to recover its
possession. The collector argued that the anti-injunction statute,
Section 3224 of the Internal Revenue Code, prevented Mr. Long
from suing to challenge the collection of the tax. In refusing to
dismiss the suit under the provisions of the anti-injunction statute,
the Court held that as to the taxes assessed against Mr. Wise, Mr.
Long was not the taxpayer of that tax, and therefore, Section 3224
did not apply to him:
The instant suit is not to restrain assessment or
collection of taxes of Wise, but is to enjoin trespass
upon property of plaintiff, and against whom no
assessment has been made, and of whom no collection
is sought. Note, too, the taxes are not assessed against
the property. This presents a widely different case
than wherein the person assessed, or whose property

is assessed, seeks to restrain assessment or collection
on the theory that he or it is exempt from taxation, or
that for any reason the tax is illegal.
The distinction between persons and things within the
scope of the revenue laws and those without them is
vital. See
DeLima v.   Bidwell,   182 U.S. 176, 179, 21
Sup.Ct. 743, 45 L.Ed 1041. To the former only does
section 3224 apply (see cases cited in
Violette  v. 
(D.C.) 272 Fed. 1016), and the well-
understood exigencies of government and its revenues
and their collection do not serve to extend it to the
latter. It is a shield for official action, not a sword for
private aggression.
Long v. Rasmussen , 281 F. at 238. 
First National Bank of Emlenton, Pa. v. United States,  161 F.Supp. 
844 (1958), also discusses this issue in 
dicta ,37 the suit having been
dismissed because the United States was named as a party as
opposed to the District Director. The purchaser of certain tools
obtained a loan from the First National Bank, and as security for
the loan gave the bank a chattel mortgage on the tools. The I.R.S.
issued a lien for non-payment of employment taxes under Subtitle
C of the Internal Revenue Code, and then seized the tools. The bank
brought suit claiming an ownership interest in the tools as a result
of its chattel mortgage. While the case was dismissed for lack of
jurisdiction, the Court nonetheless discussed whether the bank was
a nontaxpayer as to the tax assessed against the purchaser of the
tools, and found that it was.
Stuart v. Chinese Chamber of Commerce of Phoenix,  168 F.2d 709
(1948), is similar to the above cases. Mr. Thet was arrested for
narcotics violations and a search uncovered $32,000 in a safe. The
money was taken by the Narcotics Bureau and then it was seized by
the I.R.S. for payment of Thet’s tax liability. Suit was brought by the
Chinese Chamber of Commerce alleging the $32,000 was theirs,
and that Thet was just holding the money for them in his safe. The
Court found that the Chinese Chamber of Commerce was not a
taxpayer in the strict sense of the word;
i.e.,  they had no obligation
as to Thet’s taxes, which were the only taxes in question. The Court
ordered the money to be returned to the Chinese Chamber of
Commerce, and denied a motion by the I.R.S. for dismissal on the
grounds the Chinese Chamber of Commerce did not follow the steps
outlined in the Internal Revenue Code to recover their property.
The Court specifically found that Section 3772 was not applicable to
nontaxpayer third parties to the tax.
Economy Plumbing & Heating Co., Inc. v. U.S.  case, [470 F.2d 
585 (1972)], was limited to the issue of whether or not the plaintiffs 
were  entitled  to  interest  
(Economy, 470  F.2d  at  587),  and  the 
comments  about  nontaxpayers  are  
dicta.   As a nontaxpayer
Economy Plumbing & Heating would not receive interest on the
money illegally seized by the I.R.S., so it was their attempt to be
declared taxpayers. The Court stated:
We agree with the defendant that the plaintiffs are not
taxpayers in this case with respect to these funds
within the meaning of the revenue laws. Lieb was the
taxpayer and it is not a party to this action. While it is
true that there was a misapplication of plaintiffs’
funds to the payment of Lieb’s taxes, this wrongful act
did not result in plaintiffs becoming taxpayers to the
extent of misapplied funds. Neither was there any
over payment of plaintiffs’ taxes.
Economy,  470 F.2d at 588.
These cases lead to the conclusion that whether or not one is a
taxpayer is dependent upon the particular tax in question. The
Internal Revenue Service specifically recognizes that not everyone
must file a federal income tax return. On page 4 of the instruction
booklet for preparing the 1989 Form 1040, under the hearing “Who
Must File,� the I.R.S. tells us: “Use Chart A below to see if you must 
file a return.� 
Congress  has  enacted  two  laws,  the  Privacy  Act,  5  U.S.C.  Section 
552a(e)(3),  and  the  Paperwork  Reduction  Act,  44  U.S.C.  Section 
3504(c)(3)(C),  which  directs  the  government  to  advise  you  if  you 
are required to file a federal income tax return. 
The Privacy Act states that an agency [the Internal Revenue Service 
is such an agency]38 requesting information from a citizen must: 
(3)  inform  each  individual  whom  it  asks  to  supply 
information,  on  the  form  which  it  uses  to  collect  the 
information  or  on  a  separate  form  that  can  be 
retained by the individual" 
the  authority  which  authorizes  the 
solicitation  of  the  information  and 
the principal purpose or purposes for 
which the information is intended to 
be used; 
the routine uses which may be made 
of  the  information,  as  published 
pursuant  to paragraph  (4)(D)  of this 
subsection; and 
the  effects  on  him,  if  any,  of  not 
providing  all  or  any  part  of  the 
requested information ... 
The Paperwork Reduction Act states that the Director of the Office 
of  Management  and  Budget  must  include  with  his  information 
[A]  statement  to  inform  the  person  receiving  the 
request why the information is being collected, how it 
is  to  be  used,  and  whether  responses  to  the  request 
are  voluntary,  required  to  obtain  a  benefit,  or 
mandatory ... 
The Privacy Act and Paperwork Reduction Act statements which the 
Internal Revenue Service currently uses with respect to the federal 
income tax state: 
Our  legal  right  to  ask  for  information  is  Internal 
Revenue Code Sections 6001, 6011, 6012(a) and their 
regulations.  They  say  that  you  must  file  a  return  or 
statement with us for any tax you are liable for. Your 
response is mandatory under these sections. 
Sections 6001 and 6011 are set forth for your information: 
Section 6001: 
Every person liable for any tax imposed by this title,
or for the collection thereof, shall keep such records,
render such statements, make such returns, and
comply with such rules and regulations as the
Secretary may from time to time prescribe. Whenever
in the judgment of the Secretary it is necessary, he
may require any person, by notice served upon such
person or by regulations, to make such returns, render
such statements, or keep such records as the Secretary
deems sufficient to show whether or not such person
is liable for tax under this title. The only records
which an employer shall be required to keep under
this section in connection with charged tips shall be
charge  receipts,  records  necessary  to  comply  with 
Section 6053(c) and copies of statements furnished by 
employees under Section 6053(a). 
Section 6011: 
(a) General Rule. When required by regulations
prescribed by the Secretary any person made liable for
any tax imposed by this title, or for the collection
thereof, shall make a return or statement according to
the forms and regulations prescribed by the Secretary.
Every person required to make a return or statement
shall include therein the information required by such
forms or regulations.
* * *
(f) Income, estate, and gift taxes. For requirement that
returns of income, estate, and gift taxes be made
whether or not there is tax liability, see subparts B
and C.
As to Sections 6001 and 6011 it is important at this point to make
the observation that in several places in the Internal Revenue Code
Congress was quite specific in identifying those made liable for a tax
and the fact that a return was required. For example, in Subtitle E
pertaining to alcohol, tobacco and other excise taxes are found
these provisions:
Section 5005: 
(a) The distiller or importer of distilled spirits shall be 
liable  for  the  taxes  imposed  thereon  by  section 
Section 5061: 
(a)  The  taxes  on  distilled  spirits,  wines,  and  beer 
shall be collected on the basis of a return.  
Section 5703: 
(a)(l)  The  manufacturer  or  importer  of  tobacco 
products  and  cigarette  papers  and  tubes  
shall be
for the taxes imposed therein by section 5701. 
(b)(l)  ...  Such  taxes  shall  be  paid  on  the  basis  of 
In Subtitle D, pertaining to miscellaneous excise taxes, we find 
Section 4374: 
The  tax  imposed  by  this  chapter  
shall be paid, on 
basis of a return, by any person who makes,
signs, issues, or sells any of the documents and
instruments subject to the tax, or for whose use or
benefit the same are made, signed, issued, or sold.
There is, however, no section in Subtitle A pertaining to
stating  that  one  is   liable   for  the  income  tax,39  that  one  is 
required   to  make  a  return  or  that  one  must  pay  the  income  tax, 
nor  are  there  any  cross  references  to  any  of  the  provisions  in 
Subtitle  F  where  Sections  6001  or  6011  are  found.  The  only 
exception  to  this  is  found  in  Section  1461  which  pertains  to  the 
withholding of taxes on nonresident aliens. Under the legal doctrine 
“expressio  unius  est  exclusio  alterius,�40  it  appears  that  Congress 
could  have,  but  specifically  chose  not  to  create  an  automatic, 
statutory liability for Subtitle A Income Taxes. 
Liability for  income  taxes  is  established through  an  administrative 
action known as an assessment: 

The statute prescribes the rule of taxation. Some
machinery must be provided for applying the rule to
the facts in each taxpayer’s case, in order to ascertain
the amount due. The chosen instrumentality for the
purpose is an administrative agency whose action is
called an assessment. The assessment may be a
valuation of property subject to taxation which
valuation is to be multiplied by the statutory rate to
ascertain the amount of tax. Or it may include the
calculation and fix the amount of tax payable, and
assessments of federal estate and income taxes are of
this type.
Bull v. United States,  295 U.S. 247, 259 
The assessment procedure for taxes shown on returns is contained 
in Sections 6201, 6203 and 6303 of the Internal Revenue Code: 
Section 6201: 
(a)(l)  The  Secretary  is  authorized  and  required  to 
make  the  inquiries,  determinations,  and  assessments 
of  all  taxes  (including  interest,  additional  amounts, 
additions to the tax and assessable penalties) imposed 
by  this  title,  or  accruing  under  any  former  internal 
revenue law, which have not been duly paid by stamp 
at the  time and in the  manner provided by law. Such 
authority  shall  extend  to  and  include  the  following: 
The Secretary shall assess all taxes determined by the 
taxpayer  or  by  the  Secretary  as  to  which  returns  or 
lists are made under this title. 
Section 6203: 
The  assessment  shall  be  made  by  recording  the 
liability of the taxpayer in the office of the Secretary in 
accordance with rules or regulations prescribed by the
Secretary. Upon request of the taxpayer, the Secretary
shall furnish the taxpayer a copy of the record of the
Section 6303: 
Where  it  is  not  otherwise  provided  by  this  title,  the 
Secretary shall, as soon  as practicable,  and within 60 
days,  after  the  making  of  an  assessment  of  a  tax 
pursuant  to  Section  6203,  give  notice  to  each  person 
liable  for  the  unpaid  tax,  stating  the  amount  and 
demanding payment thereof. 
Sections 6001 and 6011 clearly apply to those taxpayers specifically 
made liable by statutes such as Sections 5005, 5061, 5703 and 4374, 
or  to  those  who  have  been  assessed.  With  respect  to  the  personal 
federal  income  tax,  and  absent  an  assessment  having  been  made, 
only the withholding agents described in Section 1441 fall within the 
requirement to file returns under Sections 6001 and 6011. 
Section  6011(f)  makes  reference  to  subparts  B  and  C.41  Subpart  C 
involves  estate  and  gift  taxes.42  Subpart  B  involves  federal  income 
taxes and  consists of Sections 6012 through 6017A.43 Section 6013 
pertains to the election to file a joint return if married; Section 6014 
pertains  to  the  election  to  have  the  government  compute  the  tax; 
Section  6017A  requires  those  required  to  file  returns  to  provide 
information with respect to residence. Only Sections 6012 and 6017 
are relevant to the determination of a statutory requirement to file; 
they are discussed below. 
Section 6012(a): 
(a) General rule. Returns with respect to income taxes 
under subtitle A shall be made by the following: 
(1)(A)  Every  individual44  having  for  the 
taxable  year  gross  income  which  equals 
or  exceeds  the  exemption  amount  or 
more, ...45 
Section 6017: 
Every individual (other than a nonresident alien
individual) having net earnings from self-employment
of $400 or more for the taxable year shall make a
return with respect to the self-employment tax
imposed by chapter 2.
The self-employment tax mentioned in Section 6017 is the “Tax on
Self-Employment Income� as contained in Chapter 2 of Subtitle A,
Sections 1401 through 1403. The definition of the term “net
earnings from self-employment� is found at Section 1402(a) which
states in pertinent part:
Section 1402: 
(a)  The  term  “net  earnings  from  self-employment� 
means the gross income derived by an individual from 
any trade or business carried on by such individual, ... 
Both Sections 6012 and 6017 require the understanding of the term 
“gross income.� It is defined in the Internal Revenue Code: 
Section 61: 
Except  as  otherwise  provided  in  this  subtitle,  gross 
income  means  all  income  from  whatever  source 
derived,  including  (but  not  limited  to)  the  following 
Compensation for services, including 
fees,  commissions,  fringe  benefits, 
and similar items; 
Gross income derived from business; 
Gains  derived  from  dealings  in 
Alimony  and  separate  maintenance 
Income  from  life  insurance  and 
endowment contracts; 
Distributive  share  of  partnership 
Income in respect of a decedent; and 
Income from an interest in an estate 
or trust. 
Congress is unable to define the word “income� due to its inclusion 
in the Sixteenth Amendment,46 and Congress acknowledges that the 
word “income� as contained in the Internal Revenue Code is to have 
the meaning attributable to it in the Sixteenth Amendment.47 While 
Section  61  states  that  
“gross�  income   means “all�  income, 
Congress  did  not  define  the  term   “income�   in  the  Internal 
Revenue Code.48 
As was pointed out in Chapter II, the decision of the United States 
Supreme  Court  in  
Brushaber   is  in  irreconcilable  conflict  with  the 
decisions of the United States Supreme Court in 
Pollock  and  Eisner. 
The   Brushaber   Court  took  the  position  that  the  purpose  of  the 
Sixteenth Amendment was to cause the income tax to be considered 
an indirect, excise tax, while the 
Eisner  Court took the position that 
the purpose of the Sixteenth Amendment was to amend the United 
States  Constitution  to  relieve  the  direct  income  tax  from  the 
requirement  of  apportionment.  As  a  result  of  these  conflicting 
Supreme  Court  opinions  there  is  a  conflict  between  the  United 
States Courts  of Appeal;  the  Second Circuit takes  the position that 
the income tax is an excise tax and the remaining circuits take the 
position that the income tax is a direct tax. 
“Income Taxes� are contained in Subtitle A of the Internal Revenue 
Code. Excise taxes are contained in Subtitles D and E of the Internal 
Revenue Code, with excise taxes on “employers� being contained in 
Subtitle  C. One could conclude, therefore, that Congress  chose  not 
to  impose  in  Subtitle  A  an  [indirect]  excise  tax  on  business, 
professions or vocations, but instead chose to impose an income tax 
on all income regardless of the source of the income, just as it had 
imposed  under  the  1894  Act.  The  conflict  between  the  Circuit 
Courts  of  Appeal  together  with  the  irreconcilable  conflict  between 
Pollock, Brushaber  and  Eisner  cases will have to be determined
by the United States Supreme Court in an appropriate case.
There is no question but that the taxes imposed by Subtitle A are
not apportioned, so if the Sixteenth Amendment has not been
properly ratified,49 the taxes imposed by Subtitle A are not
constitutional under the
Pollock   decisions. One would not be a
taxpayer as to the income tax if the Sixteenth Amendment was
never ratified.
Assuming, for further analysis, that the Sixteenth Amendment has
been properly ratified, for purposes of Section 6012 of the Internal
Revenue Code, one would be required to file a personal federal
income tax return (Form 1040) only if one were an “individual�50 as
that term is used in Section 6012(a)(l), and one had more than the
threshold amount of “gross income.�
Inasmuch as the term “income� is not defined in the Internal
Revenue Code but is used in Section 61 (a), one must resort to the
intent of Congress in enacting Section 61 in order to determine the
meaning of the term “gross income.� The intent of Congress is set
forth in both the Senate and House Reports which accompanied the
Internal Revenue Code of 195451 as follows:
Section 61 (a) provides that gross income includes “all
income from whatever source derived.� This
definition is based upon the 16th Amendment and the
word “income� is used in its constitutional sense.
House Report No. 1337; Senate Report
No. 1622;
U.S.  Code  Cong,  and  Admin. 
83rd  Congress,  2nd  Session, 
pages 4155 and 4802 respectively, 1954. 
The  United  States  Supreme  Court  has  provided  us  with  the 
constitutional  definition  of  income  based  upon  the  Sixteenth 
Income  may  be  defined  as  the  gain  derived  from 
capital, from labor or from both combined, provided it 
include  profit  gained  through  a  sale  or  conversion  of 
capital assets. 
Stratton’s  Indep.  v.  Howbert, 231 U.S.
399 (1913);
Doyle  v.  Mitchell, 247 U.S.
179 (1920);
So. Pacific v. Lowe, 247 U.S.
330 (1918);
Eisner  v.  Macomber,   252 
U.S.  189  (1920);  
Merchant’s  Loan  v. 
 255 U.S. 509 (1921). 
and  in  order  for  wages,  salaries,  compensation  for  services,  etc. 
received for labor to constitute income, there must be a gain derived 
from that labor. The procedure to determine whether there is or is 
not a gain also has its foundation in decisions of the United States 
Supreme Court: 
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.� 
Butchers’  Union  Co.  v.  Crescent  City 
, 111 U.S. 746, 757 (1883) (concurring 
opinion of Justice Fields). 
Not only does one’s labor constitute property, but the employment 
contract also constitutes property: 
The  principle  is  fundamental  and  vital.  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. 
Coppage  v.  Kansas,   236  U.S.  1,  14 
Thus a contract for labor is a contract for the sale of property: 
In  our  opinion  that  section,  in  the  particular 
mentioned,  is  an  invasion  of  the  personal  liberty,  as 
well  as  of  the  right  of  property,  guaranteed  by  that 
Amendment  (Fifth  Amendment).  Such  liberty  and 
right  embraces  the  right  to  make  contracts  for  the 
purchase of the labor of others and equally the right to 
make contracts for the sale of one’s own labor; ... 
Adair v. United States,  208 U.S. 161, 172 
Internal  Revenue  Code  Sections  1001,  1011  and  1012,  and  their 
regulations,  26  C.F.R.  Sections  l.1001-l(a)  1.1011-1  and  1.1012-l(a), 
provide the method for determining the gain derived from the sale 
of property: 
Section 1001(a): 
The gain from the sale or other disposition of property 
shall  be  the  excess  of  the  amount  realized  therefrom 
over  the  adjusted  basis  provided  in  section  1011  for 
determining gain, ... 
Section 1001(b): 
The  amount  realized  from  the  sale  or  other 
disposition of property shall be the sum of any money 
received  plus  the  fair  market  value  of  the  property 
(other than money) received. 
Section 1011: 
The  adjusted  basis  for  determining  the  gain  or  loss 
from  the  sale  or  other  disposition  of  property, 
whenever  acquired,  shall  be  the  basis  (determined 
under section 1012...), adjusted as provided in section 
Section 1012: 
The basis of property shall be the cost of such
property ...
The cost of property purchased under contract is its fair market
value as evidenced by the contract itself, provided neither the buyer
nor seller were acting under compulsion in entering into the
contract, and both were fully aware of all of the facts regarding the
Terrance  Development  Co.  v.  C.I.R .52 345 F.2d 933
Bankers  Trust  Co.   v.   U.S.,   518  F.2d  1210  (1975);   Bar  L 
Ranch, Inc. v. Phinney, 
426 F.2d 995 (1970);  Jack Daniel Distillery 
v.  U.S.,  
379  F.2d  569  (1967);   In  re  Williams’  Estate,   256 F.2d 217
(1958). In other words, if an employer and employee agree that the
employee will exchange one hour of his time in return for a certain
amount of money, the cost, or basis under Section 1012, of the
employee’s labor is the pay agreed upon. By the same token, if an
attorney, doctor or other independent contractor agrees to perform
a certain service for an agreed upon amount of compensation, the
value of the service to be performed is the amount agreed upon as
payment for the service.
In the case of the sale of labor, none of the provisions of Section
1016 are applicable, and the adjusted basis of the labor under
Section 1011 is the amount paid. Therefore, when the employer pays
the employee the amount agreed upon, or the professional is paid
for his or her services, there is no excess amount realized over the
adjusted basis, and there is no gain under Section 1001. There being
no gain, there is no “income� in the constitutional sense, and no
“gross income� under Section 61 (a).
If one has no gain, one would not have sufficient “gross income� to
require the filing of a federal personal income tax return under
Section 6012. Likewise, without gain, there can be no “self-
employment income,� and one who is self-employed would not be
required to file a federal personal income tax return under Section
If one has no income, one would also not be subject to many of the
provisions of Subtitle C dealing with employment taxes, nor would
one be required to file a Form W-4:
a) The Federal Insurance Contributions Act (FICA) tax
contained in Subtitle C, Subchapter A of Chapter 21 at Section 3101
is imposed on the “individual’s� income; if there is no income, there
can be no tax.
b) The corresponding FICA tax on employers contained in
Subtitle C, Subchapter B of Chapter 21 at Section 3111 is clearly
identified as a separate excise tax on employers.
c) The Railroad Retirement Tax on employees contained in
Subtitle C, Subchapter A of Chapter 22 at Section 3201 is also a tax
on the employee’s income; with no income there is no tax.
d) The corresponding Railroad Retirement Tax on
employers contained in Subtitle C, Subchapter C of Chapter 22 at
Section 3221 is a separate excise tax on employers.
e) The Federal Unemployment Tax contained in Subtitle C,
Chapter 23 at Section 3301 is another excise tax on employers.
f) The Railroad Unemployment Repayment Tax contained
in Subtitle C, Chapter 23A at Section 3321 is also a separate excise
tax on employers.
g) The provisions for withholding of wages at the source
under Chapter 24 of Subtitle C is also an income tax, but the
amount of tax withheld is computed upon the amount of wages
received.53 Section 3402(m) makes it clear that if one anticipates a
lower year-end income tax liability, one is entitled to additional
withholding allowances. Each withholding allowance serves the
function of lowering the amount of wages upon which the
withholding is computed. And if one had no income tax liability for
the preceding year and expects to have no income tax liability for

the current year, Section 3402(n) authorizes filing a W-4 claiming
The history of the federal income tax, decisions of the United States
Supreme Court, and the Internal Revenue Code itself, all lead to the
conclusion that wages do not constitute income. Notwithstanding
the legal correctness of this proposition, many Federal Courts of
Appeal have ruled that wages do constitute income. The next
several chapters analyze these cases in detail, and, in my opinion,
conclusively establish the erroneous and unconstitutional nature of
those cases.
Preface to United States Code, 1982 edition, p. xv, contained in
volume 26 U.S.C.A. Sections 1-100 (May 1988 supplement).
“Opinions of a judge which do not embody the resolution or
determination of the court. Expressions in court’s opinion which
go beyond the facts before court and therefore are individual
views of author of opinion and not binding in subsequent cases.�
Black’s Law Dictionary,  p. 408 (5th Ed. 1988).
See 5 U.S.C. Section 551.
See Appendix B in which this was confirmed by the testimony of
an I.R.S. expert witness during a criminal trial.
“The express mention of one thing means the implied exclusion
of another.�
26 U.S.C., Subtitle F, Chapter 61, Part II, Subparts B and C.
This subpart will not be analyzed in that estate and gift taxes
have nothing to do with the federal income tax.
Sections 6015 and 6016 have been repealed.
Section 6012 also applies to corporations [6012(a)(2)J, estates
[6012(a)(6)] and homeowners’ associations [6012(a)(7)].
Section 6151(a) of the Internal Revenue Code provides that if a
tax return is required, the amount of taxes shown on the return,
if any, should be paid with the return when it is filed, and
irrespective of any assessment, notice or demand.
Eisner  v.  Macomber,   252 U.S. 189, 206 (1920), [“In order,
therefore, that the clauses cited from Article I of the

Constitution may have proper force and effect save only as
modified by the Amendment, and that the latter also may have
proper effect, it becomes essential to distinguish between what
is and what is not “income,� as the term is there used; and to
apply the distinction, as cases arise, according to truth and
substance, without regard to form. Congress cannot by
legislation alter the Constitution, from which alone it derives its
power to legislate, and within whose limitations alone that
power can be lawfully exercised.�].
50 Cong. Rec., 63rd Cong., 1st Session, p. 3844.
The term “ordinary income� is defined in Section 64 as the gain
from the sale or exchange of property.
See note 6.
The term “individual� which is used not only in Section
6012(a)(l) but also in Section 1 as the subject upon whose
income the tax is imposed, is not defined in the Internal
Revenue Code. It is, however, defined in the treasury regulations
accompanying Section 1. The regulations make a distinction
between “citizens� and “residents� of the United States, and
define a “citizen� as every person born or naturalized in the
United States
and   subject  to  its  jurisdiction  [see  26  C.F.R. 
Section l.l-l(a)-(c)]. An extremely strong argument can be made 
that  the  federal  income  tax  as  passed  by  Congress  and  as 
implemented  by  the  Treasury  Department  was  only  meant  to 
apply  to  individuals  within  the  “territorial  or  exclusive 
legislative jurisdiction of the United States,� as those individuals 
would be subject to the “jurisdiction of the United States.� These 
exclusive areas, per Article I, Section 8, Clause 17, of the United 
States Constitution, are Washington, D.C., federal enclaves and 
United  States  possessions  and  territories.  Outside  of  these 
exclusive areas, state law controls, not federal law. Thus a State 
citizen, residing in a State, would not meet the two part test for 
being an “individual� upon whose income the tax is imposed in 
Section 1 of the Internal Revenue Code, and would not have the
“status� of a “taxpayer.� It is the official policy of the I.R.S.
[Policy P-(11)-23] to issue, upon written request, rulings and
determination letters regarding status for tax purposes prior to
the filing of a return. On August 29, 1988, I requested such a
“status determination� from the I.R.S. on behalf of one of my
clients. The I.R.S. responded that the argument was “frivolous.�
No change was made in the 1986 Tax Reform Act, PL 99-514,
with respect to the intent of Congress. See 2 U.S. Code, Cong.
and Admin. News, 99th Congress, 2nd Session, 1986.
“C.I.R.� is the abbreviation for Commissioner of Internal
This may account for the common misconception of today’s
citizens that the terms “wages� and “income� have the same
Of course, one who does not have the status of a taxpayer would
not be subject to Subtitle C taxes at all, and would have no
requirement of filing a Form W-4. Thus one must determine if
he is a taxpayer, and if so, the amount of his anticipated income
tax liability. The filing of a Form W-4 could be considered as an
admission of status as a taxpayer of the Subtitle A income tax, in
which case one would probably be subject to additional income
taxes under Subtitle C and subject to wage withholding. The
I.R.S. imposes severe penalties for filing documents the contents
of which are disagreeable to them, such as admitting status as a
taxpayer and then claiming exempt. I suggest consultation with
a competent professional any time you are asked to fill out any
government form associated with your employment.

A court decision is one or more judges’ interpretation of the law
written by Congress. The theory behind “case law� is that once a
specific issue or statute has been litigated and decided upon, it
should be considered finally settled unless in error. Thus litigants in
an action often cite in their arguments prior case law in which the
issue was previously determined. This concept is known as
If there is no case law previously determining the issue,
then the litigants look for cases that tend to support their position,
and analogize those cases to the specific issue to be decided in order
to persuade the Court that their position is legally correct. A court
decision will usually state a principle of law and cite to prior cases
which it has relied upon in deciding in favor of one litigant over the
In my analysis of the case law which holds that wages constitute
income, I have analyzed not only those cases regarding that specific
issue, but every case cited in the Court’s written decision. I have
arranged all of these cases by date in an attempt to provide an
historical analysis of the subject.
Stratton’s  Independence,  Ltd.  v.  Howbert,  231  U.S.  399 

Stratton’s Independence, Ltd., was a British corporation carrying
on mining operations in the State of Colorado upon mining lands
owned by itself. Suit was brought by the corporation to recover
taxes paid under protest. The issue presented in the trial court was
whether the value of the ore in place that was extracted from the
mining property was properly allowable as depreciation in
estimating the amount of net income of the corporation which was
subject to taxation under the Corporation Tax Act of August 5,
1909.55 Three questions were certified by the Court of Appeals to the
United States Supreme Court:
Does Section 3856 of the Act of Congress, entitled “An Act to
provide revenue, equalize duties, and encourage the industries of
the United States, and for other purposes,� approved August 5,
1909 (36 Stat., p. 11), apply to mining corporations?
II. Are the proceeds of ores mined by a corporation from its own
premises income within the meaning of the aforementioned Act of
III. If the proceeds from ore sales are to be treated as income, is
such a corporation entitled to deduct the value of such ore in place
and before it is mined as depreciation within the meaning of
Section 38 of said Act of Congress?
As pertinent to the issue of what is and is not income, the
corporation argued that the proceeds of its mining operation
resulted only from the conversion of the capital represented by real
estate into capital represented by cash; the corporation thus argued
that it had no income but a mere change in the form of its capital
assets, and hence argued that it was not actually engaged in
business as that term was used in the 1909 Act.
The Supreme Court distinguished between the mere selling of the
land with the ore not extracted, calling this a conversion of capital
from one form to another, and the selling of the ore which had been
extracted from the land through a mining operation,57 and called
this engaging in business for a profit:
The very process of mining is, in a sense, equivalent in
its results to a manufacturing process. And, however
the operation shall be described, the transaction is
indubitably “business�  within the fair meaning of the 
act of 1909; and the gains derived from it are property 
and  strictly  the  income  from  that  business;  for 
“income�  may  be  defined  as  the  gain  derived  from 
capital, from labor, or from both combined, and here 
we have combined operations of capital and labor. 
Stratton’s,  231 U.S. at 414-415. 
The Court went on to say: 
As  to  the  alleged  inequality  of  operation  between 
mining  corporations  and  others,  it  is  of  course  true 
that  the  revenues derived  from  the  working  of  mines 
result to some extent in the exhaustion of the capital. 
But  the  same  is  true  of  the  earnings  of  the  human 
brain  and  hand  when  unaided  by  capital,  yet  such 
earnings  are  commonly  dealt  with  in  legislation  as 
Stratton’s, id. 
It is too bad that the Supreme Court failed to specifically identify
the legislation to which it was referring. To the extent the Court is
referring to the prior income tax acts passed by Congress, it must be
remembered that these first acts each included a separate provision
for the taxation of the salary of persons employed by the United
States Government; others were taxed in these acts upon the profit
and gain derived from business, vocations and professions, an
altogether different tax than a direct tax on a civilian’s salary. Also,
at the time of the passage of the 1909 Corporation Excise Tax Act,
no income tax act was in effect, so the gratuitous comments about
earnings from the human brain were not made with respect to any
then existing income tax legislation.58
Also, in discussing income, the Court distinguished between the
type of income by which the corporation excise tax was measured
and the type of income that can be taxed under the Sixteenth
As to what should be deemed “income� within the
meaning of Section 38, it of course need not be such
an income as would have been taxable as such, for at
that time (the Sixteenth Amendment not having been
as yet ratified), income was not taxable as such by
Congress without apportionment according to
population, and this tax was not so apportioned.
Evidently Congress adopted the income as the
measure of the tax to be imposed with respect to the
doing of business in corporate form because it desired
that the excise should be imposed, approximately at
least, with regard to the amount of benefit presumably
derived by such corporations from the current
operations of the Government. In
Flint v. Stone Tracy 
220  U.S.  107,  165,  it  was  held  that  Congress  in 
exercising  the  right  to  tax  a  legitimate  subject  of 
taxation as a franchise or privilege, was not debarred 
by  the  Constitution  from  measuring  the  taxation  by 
the  total  income,  although  derived  in  part  from 
property which, considered by itself, was not taxable. 
It was reasonable that Congress should fix upon gross 
income,  without  distinction  as  to  source,  as  a 
convenient  and  sufficiently  accurate  index  of  the 
importance of the business transacted. And from this 
point  of  view,  it  makes  little  difference  that  the 
income may arise from a business that theoretically or 
practically involves a wasting of capital. 
Strattons,  231 U.S. at 416-417. 
Finally, the Court recognized that the wasting of capital assets had 
to somehow figure into the computation of income: 
corporations,  amongst  others,  were  doing  business 
with  a  wasting  capital,  and  for  such  wastage  they 
made  due  provision  in  declaring  that  from  the  gross 
income  there  should  be  deducted  
(inter  alia)   “all 
losses actually sustained within the year,� including “a 
reasonable  allowance  for  depreciation  of  property,  if 
any,� etc. 
Stratton’s,  231 U.S. at 417-418.
The Supreme Court, based upon this analysis, answered the first
two questions certified to it in the affirmative, and then turned its
attention to the third question.
Stratton’s  case had come to the Supreme Court upon an agreed
statement of facts, one of which was that the gross proceeds of the
sale of the ores during the year were diminished by the moneys
expended in extracting, mining, and marketing the ores, and the
precise difference was taken to be the “value of the ores when in
place in the mine.� The Supreme Court concluded that the
definition of the “value of the ore in place� was intentionally
adopted to exclude all allowance of profit upon the process of
mining, and to attribute the entire profit upon the mining
operations to the mine itself. Thus, the amount of profit, if any,
would be reduced to zero through depreciating the value of the
mine dollar for dollar. Of course, the Court concluded that this
would serve to exempt mining companies from the corporate excise
tax, and the Court, earlier in its opinion, had specifically decided
that Congress had intended to tax them.
Accordingly, the Court had to answer the third question certified to
it in the negative. The Court then declared that it was powerless to
change the definition of “value of the ore in place� which definition
was included within the third question certified for answering, and
therefore the Court was precluded from adjudicating exactly how
much depreciation should be deducted from the gross receipts to
compensate  for the  wasting  of the  capital  asset"the  original  value 
of the ore [and to continue the analogy of the Court, the earnings of 
the human brain] in place. 
Stratton’s  Independence,  Ltd.,   decision thus stands for the
proposition that “income� for purposes of measuring an excise tax
is different than the “income� that can be taxed under the Sixteenth
Amendment; gives us a broad definition of “income,� and for the
decision of the case, adjudicates that the definition of “net income�
in the Corporate Excise Tax Act of 1909 is gross receipts [called
gross income by the Court] less the actual expenses of producing
the gross receipts [this would result in determining the profit or
gain except for the consideration of the wasting capital] less some
unsettled amount as depreciation for the reduction of capital59 [thus
determining net income], such depreciation not to exceed the total
amount of the gross receipts less the actual expenses of producing
the gross receipts, where the ore is sold for many times more than
its original cost/market value.
One can easily conclude from this that if the property is sold at a
cost which approximates its intrinsic value, then a deduction of that
amount from the gross receipts [or as called by the Court, from the
gross income] is required prior to the calculation of the amount of
the tax. Applying this same principle to wages, they would not
constitute income.
Stanton v. Baltic Mining Co., 240 U.S. 103 (1916): 
A stockholder of the Baltic Mining Company instituted a lawsuit to
enjoin the corporation and its officers from voluntarily paying the
tax assessed against it under the Income Tax Section of the 1913
Tariff Act, c. 16, Section 2, 28 Stat. 166, 181 applying to
corporations. This particular statute contained a provision allowing
the mining company to deduct, as a depreciation for the depletion
of its ore deposits, up to 5% of the gross value at the mine of the
output during the year. Mr. Stanton contended that “the 5 per cent
deduction permitted by the statute was inadequate to allow for the

depletion of the ore body and therefore the law to a large extent
taxed not the mere profit arising from the operation of the mine,
but taxed as income the yearly product which represented to a large
extent the yearly depletion or exhaustion of the ore body from
which during the year ore was taken.�
Stanton,  240 U.S. at 109-110. 
This argument was phrased by the Supreme Court that Mr. Stanton 
was contending the statute under which the corporation was being 
taxed deprived the stockholders of equal protection and due process 
“[b]ecause  [among  other  reasons]  by  reason  of  the  differences  in 
the  allowances  which  the  statute  permitted,  the  tax  levied  was 
virtually a net income tax on other corporations and individuals and 
a gross income tax on mining corporations.�60 
Stanton,  240 U.S. at 
111. The Court referred back to its opinion in the 
Brushaber  case for 
the resolution of this issue. 
A  review  of  the  
Brushaber   decision,  however,  shows  that  the 
specific  issue  raised  in  the  
Stanton   case  was  not  raised  in  the 
Brushaber   case, although Mr. Brushaber did claim that several
other aspects of the taxing act were violative of the due process
clause. The Court disposed of these issues as follows:
So far as the due process clause of the Fifth
Amendment is relied upon, it suffices to say that there
is no basis for such reliance since it is equally well
settled that such clause is not a limitation upon the
taxing power conferred upon Congress by the
Constitution; in other words, that the Constitution
does not conflict with itself by conferring upon the
one hand a taxing power and taking the same power
away on the other by the limitations of the due
process clause.
Brushaber,  240 U.S. at 25. 
Brushaber   opinion  cites  the  following  cases  to  support  this 
Treat  v. White,  181 U.S. 264 (1901);  Patton v. Brady, 
184 U.S. 608 (1902); 
McCray v. United States,  195 U.S. 27 (1904); 
Flint v. Stone Tracy Company,  220 U.S. 107 (1911); and  Billings v. 
United States, 
232 U.S. 261 (1914).
Inasmuch as the history of the United States Constitution discloses
that the first ten amendments were added after the original
Constitution had been ratified, and because the people demanded
that the protection enunciated in the Bill of Rights be set forth, it is
absurd for the Court to take the position that the people did not
intend the government to impose and collect taxes (provisions for
which were contained in the original Constitution) in accordance
with due process. A review of the cases cited by the Court in
Brushaber  clearly shows the unconstitutional position of the Court: 
Treat v. White: 
Section 25 of Schedule “A� of the War Revenue Act of June 13,
1898, 30 Stat. 448, provided for a stamp tax of two cents on each
hundred dollars of face value on the sale, agreement to sell,
memoranda of sale, delivery or transfer of shares or certificates of
stock. Mr. White was a stock broker who sold “calls� for 30,200
shares of stock, upon which calls a tax was imposed and paid under
protest. The issue decided by the Court was whether or not a “call�
was an “agreement to sell� under the statute; Mr. White’s argument
was that if Congress intended the tax to apply to “calls,� it would
have specified the same in the statute. The Court discussed the
several rules of statutory construction which Mr. White believed
were controlling, decided against applying them, and then stated:
The power of Congress in this direction is unlimited.
It does not come within the province of this court to
consider why agreements to sell shall be subject to
stamp duty and agreements to buy not. It is enough
that Congress in this legislation has imposed a stamp
duty upon the one and not upon the other.
In  conclusion,  we  may  say  that  the  language  of  the 
statute seems to us clear. It imposes a stamp duty on 
agreements to sell. “Calls� are agreements to sell. We 
see  nothing  in  the  surroundings  which  justifies  us  in 
limiting  the  power  of  Congress  or  denying  to  its 
language its ordinary meaning. 
Treat,  181 U.S. at 269.
No due process challenge was made to the fact that Congress chose
to tax agreements to sell (“calls�) and did not choose to tax
agreements to buy (“puts�), nor was any other constitutional
challenge made to the validity of this tax. Thus any reliance upon
this case for the proposition that Congress can violate the Bill of
Rights at will in legislating taxes is wholly without foundation.
Patton v. Brady: 
In May of 1898, Mr. Patton purchased over 100,000 pounds of
tobacco on the open market and paid all the taxes which to that
point in time were due. In June of 1898 Congress passed a taxing
act which imposed an additional tax on the tobacco. Mr. Patton
refused to pay the tax, was threatened by seizure by the Collector,
and paid the tax under protest. Mr. Patton contended the act passed
by Congress was repugnant to the Constitution. The Court stated
unconstitutionality of the act,
Patton,  184 U.S. at 611, and found: 
It is true other counsel in their brief have advanced a 
very  elaborate  and  ingenious  argument  to  show  that 
this  is  a  direct  tax  upon  property  which  must  be 
apportioned  according  to  population  within  the  rule 
laid  down  in  the  
Income  Tax  Cases,   but, as we have
seen, it is not a tax upon property as such but upon
certain kinds of property, having reference to their
origin and their intended use. It may be, as Dr.
commodities�; an opinion evidently shared by Black
stone, who says, after mentioning a number of articles
that had been added to the list of those excised, “a list
which no friend to his country would wish to see
considerations of policy and to be determined by the
legislative branch, and not of power, to be determined
by the judiciary. We conclude, therefore, that the tax
which is levied by this act is an excise, properly so
called, and we proceed to consider the further
propositions presented by counsel.
Patton,  184 U.S. at 618-619.
Thus far, the Court is stating that Congress has the power to
determine the articles, the consumption ,or manufacture of which
will be subject to an excise tax; the Court does not state that
Congress can ignore the provisions of the Fifth Amendment in
imposing the tax.
Mr. Patton next challenged the right of Congress to pass a tax which
levied an excise tax on articles which had once before been
subjected to an excise tax. This issue was disposed of by the Court
under the doctrine that Congress passed the legislation under
wartime exigencies and it was not the Court’s function to interpose
its policy opinions over the policy opinions of the Legislature. But in
direct opposition to the position elaborated in the
opinion [that the due process clause of the Constitution does not
apply to taxation], quoting Mr. Justice Cooley in his work on
Taxation at page 34, the
Patton  Court stated:
But so long as the legislation is not colorable merely,
but is confined to the enactment of what is in its
nature strictly a tax law, and so long as none of the
constitutional rights of the citizen are violated in the
directions prescribed for enforcing the tax, the
legislation is of supreme authority.61
Patton,  184 U.S. at 621.
It was also contended by Mr. Patton that the power granted to
Congress to impose excises was an arbitrary, unrestrained power.
The Court responded:
[B]ut the Constitution, art. 1, sec. 8, provides that “all
duties, imposts and excises shall be uniform
throughout the United States.� The exercise of the
power is, therefore, limited by the rule of uniformity.
The framers of the Constitution, the people who
adopted it, thought that limitation sufficient, and
courts may not add thereto.
Patton,  184 U.S. at 622. 
Patton  clearly states the Court cannot change the Constitution
by expanding on specific limitations which are contained in it. In
Brushaber  quote above, the Court contends it has authority to
remove the limitations of due process in the imposition and
collection of federal taxes. No court has the power to destroy the
Constitution or any part thereof.
McCray v. United States: 
Mr. McCray, a licensed retail dealer in oleomargarine, bought fifty
pounds of oleomargarine which was yellow colored because of the
use of yellow coloring in butter, and butter was an included
ingredient of the oleomargarine. Congress had imposed an excise
tax on oleomargarine manufactured to look like butter at a higher
rate than the excise tax imposed on oleomargarine manufactured
not to look like butter. The government sought to collect from Mr.
McCray the excise tax at the higher rate because of the yellow
appearance of the oleomargarine he had purchased for resale under
his license. Mr. McCray objected, alleging that despite the fact that
the oleomargarine he had purchased looked like butter, it was not
manufactured to look like butter by the introduction of artificial
coloring during the manufacturing of the oleomargarine. Therefore, 
he argued that the higher rate did not apply to the oleomargarine he 
had purchased, and having paid the excise tax at the lower rate, he 
argued that he had fully complied with the law. 
McCray,  195 U.S. at
Mr. McCray also argued that if the proper construction of the law
required him to pay the higher tax, then the law was repugnant to
the Constitution because; 1) requiring the payment of the higher
rate of tax would drive the price of oleomargarine up to the point
where it could no longer compete with butter, and would thus
destroy the oleomargarine industry, and deprive him of his
property without due process of law; 2) the levy of such a burden (of
the higher tax) was beyond the constitutional power of Congress; 3)
the act was an unwarranted interference by Congress with the
police powers reserved to the several States and to the people of the
United States by the Tenth Amendment; 4) the act was
unconstitutional because the statute left the determination of what
constituted artificial coloration of oleomargarine with an executive
officer thereby investing him with judicial authority;62 and 5) the
tax discriminated against oleomargarine in favor of butter, which
would result in a government-caused destruction of the
oleomargarine industry in favor of the butter industry, violating
fundamental principles of equality and justice which are inherent in
the Constitution of the United States.
McCray,  195 U.S. at 29-30. 
This case was decided by Mr. Justice White63 who first summarized 
the  statutes  in  question.  The  first  section  defined  butter  as 
including or not including “additional coloring matter.� The second 
section  defined  oleomargarine  as  including  that  manufactured 
partially  from  butter.  Mr.  Justice  White  then  recognized  that  the 
law had been amended in 1902,64 and that the title of the act was: 
An  act  to  make  oleomargarine  and  other  imitation 
dairy  products  subject  to  the  laws  of  any  State  or 
Territory or the District of Columbia in which they are 
transported,  and  to  change  the  tax  on  oleomargarine 
McCray,  195 U.S. at 44.
The first section of the amended act provided that immediately
upon importation into a State, Washington D.C., or a Territory, the
product was to be subject to their respective laws as if produced
within the jurisdiction itself, and this was so regardless of the
oleomargarine having been introduced into the jurisdiction in its
original packages.65 The third section amended section eight of the
original act, and provided that “[w]hen oleomargarine is free from
artificial coloration that causes it to look like butter of any shade of
yellow, said tax shall be one-fourth of one cent per pound.� The tax
on colored oleomargarine was ten cents per pound under the
amended act.
McCray,  195 U.S. at 44-45. 
The  Court  first  found  that  Congress  clearly  intended  to  tax 
oleomargarine that was colored to look like butter at a higher rate, 
that  Mr.  McCray  admitted  the  product  was  oleomargarine  which 
contained  a  coloring  to  make  the  product  yellow  like  butter,  and 
therefore  concluded  the  product  fell  within  the  statute.  The  Court 
was not impressed with the argument that the yellow coloring was 
used to make the butter look like butter66 and was not used to make 
the oleomargarine look like butter. 
McCray,  195 U.S. at 47-50.
The Court next determined the issue of whether Congress exerted a
power not granted to it in the Constitution when it passed this tax
on oleomargarine. The Court concluded that the tax was a valid
excise tax, and found invalid the following more detailed arguments
raised by Mr. McCray:
That the purpose of the tax was not to raise revenue,
but to suppress the manufacture of the taxed article.
That the power to regulate oleomargarine belonged in
the States and not with the federal government.
That the tax was so high [thereby suppressing the
oleomargarine industry] that it was not a legitimate tax authorized
by law.
That the tax was discriminatory [on artificially colored
oleomargarine] and thus acted to suppress the industry.
That the tax was repugnant to the Fifth Amendment
because the amount of the tax was so out of proportion to the value
of the property taxed as to destroy that property, and thus
amounted to a taking thereof without due process of law; and that
the tax was repugnant to the Tenth Amendment because the
necessary operation and effect of the acts would be to cause the
destruction of the oleomargarine industry and thus exert a power
not delegated to Congress, but reserved to the several States.67
That notwithstanding that the congressional power to
tax was unlimited except as otherwise expressed in the
Constitution, the tax was so onerous and so unjust as to be
confiscatory, and therefore it amounted to a violation of those
fundamental rights which was the duty of every free government to
McCray,  195 U.S. at 50-53.
The Court contended that all of the propositions raised by Mr.
McCray rested only on inferences and deductions as to the motives
and purposes of Congress, and disposed of the case by looking into
the constitutional power of the Court to inquire into the purposes or
motives of Congress in considering the power of that body to enact
the laws in question.
McCray,  195 U.S. at 53. Mr. McCray asked the 
Court  to  examine  whether  the  tax  fell  within  or  without  the 
mandates  of  constitutional  limitations,  and  the  Court  decided  to 
address the issue of whether or not Congress can impose an excise 
tax, two entirely different issues. 
Mr. Justice White also had this to say: 

Whilst, as a result of our written constitution, it is
axiomatic that the judicial department of the
government is charged with the solemn duty of
enforcing the Constitution, and therefore in cases
properly presented, of determining whether a given
manifestation of authority has exceeded the power
conferred by that instrument, no instance is afforded
from the foundation of the government where an act,
which was within a power conferred, was declared to
be repugnant to the Constitution, because it appeared
to the judicial mind that the particular exertion of
constitutional power was either unwise or unjust. To
announce such a principle would amount to declaring
that in our constitutional system the judiciary was not
only charged with the duty of upholding the
Constitution but also with the responsibility of
correcting every possible abuse arising from the
exercise by the other departments of their conceded
authority. So to hold would be to overthrow the entire
distinction between the legislative, judicial and
executive departments of the government, upon which
our system is founded, and would be a mere act of
judicial usurpation. [Emphasis added.]
McCray,  195 U.S. at 53-54. 
With this thought in mind, Justice White, relying upon other cases 
for authority, further stated: 
As  quite  recently  pointed  out  by  this  court  in 
Knowlton v. Moore,  178 U.S. 41, 60, the often quoted 
statement  of  Chief  Justice  Marshall  in  
McCulloch  v. 
that  the  power  to  tax  is  the  power  to 
destroy,  affords  no  support  whatever  to  the 
proposition  that  where  there  is  a  lawful  power  to 
impose a tax its imposition may be treated as without 
the  power  because  of  the  destructive  effect  of  the 
exertion of the authority. 
McCray,  195 U.S. at 56.
Justice White was very adept at quoting the Constitution and
subverting it at the same time. The very purpose of our system of
government was to prevent abuse, the idea being if one department
became abusive, the other two would prevent the abuse from
harming the people:
To what expedient, then, shall we finally resort, for
maintaining in practice the necessary partition of
power among the several departments as laid down in
the Constitution. The only answer that can be given is
that as all these exterior provisions are found to be
inadequate the defect must be supplied, by so
contriving the interior structure of the government as
that its several constituent parts may, by their mutual
relations, be the means of keeping each other in their
proper places.
* * *
But the great security against a gradual concentration
of the several powers in the same department consists
in giving to those who administer each department
the necessary constitutional means and
to resist encroachments of the others. The
provision for defense must in this, as in all other
cases, be made commensurate to the danger of the
attack. Ambition must be made to counteract
ambition. The interest of the man must be connected
with the constitutional rights of the place. It may be a
reflection on human nature that such devices should
be necessary to control the
abuses of government. 

But what is government itself but the greatest of all
reflections on human nature? [Emphasis added.]
James Madison, The Federalist Papers,
No. 51.
When the Constitution was proposed to the American people as the
foundation of a form of government designed to 1) promote the
maximum liberty for the people and 2) provide the maximum
protection from government encroachment, Founding Father
James Madison stated it was a mandated duty for members of one
branch of government to examine the motives of those in the other
branches of government and to stop abuses of government when
found. Just a little over one hundred years later, Supreme Court
Justice White declared it to be a mandated duty for members of the
other branches of government not to stop abuse, especially when
the abuse is founded under the guise of lawful constitutional
All of the cases cited by Justice White support the position that the
other branches of government cannot interfere with a legitimate
exercise of the taxing power by Congress. With that principle there
is no argument. However, when the taxation becomes destructive,
as Justice White readily admits it can, then the power exerted by
Congress is not legitimate. The power to tax under the Constitution
doesn’t change, but the exercise of the power can be either lawful or
not. And when the power is exercised unlawfully, the other two
branches of government are obligated to stop the abuse.
Justice White concluded here in the opinion that neither the motive
nor the purpose of Congress in enacting the oleomargarine statutes
could be inquired into,68 and then proceeded to analyze whether
Congress had exceeded its powers within the framework of its
totally unfettered power. In this context, Justice White easily found
that Congress had not exceeded its powers:
1. Undoubtedly, in determining whether a particular
act is within a granted power, its scope and effect are
to be considered. Applying this rule to the acts
assailed, it is self-evident that on their face they levy
an excise tax. That being their necessary scope and
operation, it follows that the acts are within the grant
of power. The argument to the contrary rests on the
proposition that, although the tax be within the
power, as enforcing it will destroy or restrict the
manufacture of artificially colored oleomargarine,
therefore the power to levy the tax did not obtain.
This, however, is but to say that the question of power
depends, not upon the authority conferred by the
Constitution, but upon what may be the consequence
arising from the exercise of the lawful authority.69
McCray,  195 U.S. at 59.
The other contentions of Mr. McCray were also swiftly disposed of,
leaving only the last argument that: “the taxing laws are void,
because they violate those fundamental rights which it is the duty of
every free government to safeguard, and which, therefore, should be
held to be embraced by implied though none the less potential
guaranties, or in any event to be within the protection of the due
process clause of the Fifth Amendment.�
McCray,   195  U.S.  at  62-
63.  Justice  White  believed  this  principle  did  not  apply  in  Mr. 
McCray’s case. Justice White reasoned that the Supreme Court had 
found  oleomargarine  could  be  mistaken  for  butter  and  hence  the 
opportunity for deception existed. Thus, the Court had found that a 
State  could,  under  its  police  powers,  completely  prohibit  the 
manufacture  of  oleomargarine  within  its  jurisdiction,  and 
specifically found that such state legislation did not violate “the due 
process  clause  of  the  Fourteenth  Amendment.�  The  conclusion  of 
the  Court  was  that  Congress  could  impose  a  federal  tax  that  is 
destructive of the manufacture of oleomargarine70 [
McCray, id. ], a
position contrary to the very principle that the Constitution is the
Supreme Law of the Land and must be adhered to by the courts in

determining if a law passed by Congress is in conflict with its
express provisions:
The question whether an act, repugnant to the
constitution, can become the law of the land, is a
question deeply interesting to the United States; but
happily, not of an intricacy proportioned to its
interest. It seems only necessary to recognize certain
principles, supposed to have been long and well
established, to decide it.
That the people have an original right to establish, for
their future government, such principles, as, in their
opinion, shall most conduce to their own happiness is
the basis on which the whole American fabric has
been erected. The exercise of this original right is a
very great exertion; nor can it, nor ought it, to be
frequently repeated. The principles, therefore, so
established, are deemed fundamental. And as the
authority from which they proceed is supreme, and
can seldom act, they are designed to be permanent.
The original and supreme will organized the
government, and assigns to different departments
their respective powers. It may either stop here, or
establish certain limits not to be transcended by those
The government of the United States is of the latter
description. The powers of the legislature are defined
and limited, and that those limits may not be
mistaken, or forgotten, the constitution is written. To
what purpose are powers limited, and to what purpose
is that limitation committed to writing, if these limits
may, at any time, be passed by those intended to be
restrained? The distinction between a government
with limited and unlimited powers is abolished, if
those limits do not confine the persons on whom they
are imposed, and if acts prohibited and acts allowed,
are of equal obligation. It is a proposition too plain to
be contested, that the constitution controls any
legislative act repugnant to it; or, that the legislature
may alter the constitution by an ordinary act.
Between these alternatives there is no middle ground.
The constitution is either a superior paramount law,
unchangeable by ordinary means, or it is on a level
with ordinary legislative acts, and, like other acts, is
alterable when the legislature shall please to alter it.
If the former part of the alternative be true, then a
legislative act contrary to the constitution is not law; if
the latter part be true, then written constitutions are
absurd attempts, on the part of the people, to limit a
power in its own nature illimitable.
Certainly all those who have framed written
constitutions contemplate them as forming the
fundamental and paramount law of the nation, and,
consequently, the theory of every such government
must be, that an act of the legislature, repugnant to
the constitution, is void.
This theory is essentially attached to a written
constitution, and, is consequently, to be considered,
by this court, as one of the fundamental principles of
our society. It is not therefore to be lost sight of in the
further consideration of this subject.
If an act of the legislature, repugnant to the
constitution, is void, does it, notwithstanding its
invalidity, bind the courts, and oblige them to give it
effect? Or, in other words, though it be not law, does it
constitute a rule as operative as if it was a law? This

would be to overthrow in fact what was established in
theory, and would seem, at first view, an absurdity too
gross to be insisted on. It shall, however, receive a
more attentive consideration.
It is emphatically the province and duty of the judicial
department to say what the law is. Those who apply
the rule to particular cases, must of necessity expound
and interpret that rule. If two laws conflict with each
other, the courts must decide on the operation of
So if a law be in opposition to the constitution; if both
the law and constitution apply to a particular case, so
that the court must either decide the case conformably
to the law, disregarding the constitution, or
conformably to the constitution, disregarding the law,
the court must determine which of these conflicting
rules governs the case. This is of the very essence of
judicial duty.
If, then, the courts are to regard the constitution, and
the constitution is superior to any ordinary act of the
legislature, the constitution, and not such ordinary
act, must govern the case to which they both apply.
Those, then, who controvert the principle that the
constitution is to be considered, in court, as a
paramount law, are reduced to the necessity of
maintaining that courts must close their eyes on the
constitution, and see only the law.
This doctrine would subvert the very foundation of all
written constitutions. It would declare that an act
which, according to the principles and theory of our
government, is entirely void, is yet, in practice,
completely obligatory. It would declare that if the
legislature shall do what is expressly forbidden, such
act, notwithstanding the express prohibition, is in
reality effectual. It would be given to the legislature a
practical and real omnipotence, with the same breath
which professes to restrict their powers within narrow
limits. It is prescribing limits, and declaring that those
limits may be passed at pleasure.
That it thus reduced to nothing what we have deemed
the greatest improvement on political institutions, a
written constitution, would of itself be sufficient, in
America, where written constitutions have been
viewed with so much reverence, for rejecting the
construction. But the peculiar expressions of the
constitution of the United States furnish additional
arguments in favour of its rejection.
The judicial power of the United States is extended to
all cases arising under the constitution.
Could it be the intention of those who gave this power,
to say that in using it the constitution should not be
looked into? That a case arising under the constitution
should be decided without examining the instrument
under which is arises?
This is too extravagant to be maintained.
In some cases, then, the constitution must be looked
into by the judges. And if they can open it at all, what
part of it are they forbidden to read or to obey?
There are many other parts of the constitution which
serve to illustrate this subject.
It is declared that “no tax or duty shall be laid on
articles exported from any states.� Suppose a duty on

the export of cotton, of tobacco, or of flour, and a suit
instituted to recover it. Ought judgment to be
rendered in such a case? Ought the judges to close
their eyes on the constitution and see only the law?
The constitution declares “that no bill of attainder or
ex post facto law shall be passed.�
If, however, such a bill should be passed, and a person
would be prosecuted under it, must the court
condemn to death those victims whom the
constitution endeavors to preserve?
“No person,� says the constitution, “shall be convicted
of treason unless on the testimony of two witnesses to
the same overt act, or on confession in open court.�
Here the language of the constitution is addressed
especially to the courts. It prescribes, directly for
them, a rule of evidence not to be departed from. If
the legislature should change that rule, and declare
one witness, or a confession out of court, sufficient for
conviction, must the constitutional principle yield to
the legislative act?
From these, and many other selections which might
be made, it is apparent, that the framers of the
constitution contemplated that instrument as a rule
for the government of courts, as well as of the
Why otherwise does it direct the judges to take an
oath to support it? This oath certainly applies in an
especial manner, to their conduct, in their official
character. How immoral to impose it on them, if they
were to be used as the instruments, and the knowing
instruments, for violating what they swear to support!
The oath of office, too, imposed by the legislature, is
completely demonstrative of the legislative opinion on
this subject. It is in these words: “I do solemnly swear
that I will administer justice without respect to
persons, and do equal right to the poor and to the
rich; and that I will faithfully and impartially
discharge all the duties incumbent on me as

, according to the best of my abilities and
understanding agreeably to the constitution and laws
of the United States.�
Why does a judge swear to discharge his duties
agreeable to the constitution of the United States, if
that constitution forms no rule for his government? If
it is closed upon him, and cannot be inspected by
If such be the real state of things, this is worse than
solemn mockery. To prescribe, or to take this oath,
becomes equally a crime.
It is also not entirely unworthy of observation, that in
declaring what shall be the supreme law of the land,
the constitution itself is first mentioned, and not the
laws of the United States generally, but those only
which shall be made in pursuance of the constitution,
have that rank.
Thus, the particular phraseology of the constitution of
the United States confirms and strengthens the
principle, supposed to be essential to all written
constitutions, that a law repugnant to the constitution
is void; and that courts, as well as other departments,
are bound by that instrument.
Marbury  v.  Madison,   5  U.S.  137,  176-
180 (1803). 
Flint v. Stone Tracy Company: 
On August 5, 1909, Congress approved “The Corporation Tax� law, 
36 Stat. c. 6, 11. Section 38 of the act provided: 
That  every  corporation,  joint  stock  company  or 
association  organized  for  profit  and  having  a  capital 
stock  represented  by  shares,  and  every  insurance 
company  now  or  hereafter  organized  under  the  laws 
of the United States or of any State or Territory of the 
United States or under the acts of Congress applicable 
to  Alaska  or  the  District  of  Columbia,  or  now  or 
hereafter  organized  under  the  laws  of  any  foreign 
country  and  engaged  in  business  in  any  State  or 
Territory  of  the  United  States  or  in  Alaska  or  in  the 
District of Columbia, shall be subject to pay annually a 
special  excise  tax  with  respect  to  the  carrying  on  or 
doing  business  by  such  corporation,  joint  stock 
company  or  association  or  insurance  company 
equivalent  to  one  per  centum  upon  the  entire  net 
income over and above five thousand dollars received 
by  it  from  all  sources  during  such  year,  exclusive  of 
amounts  received  by  it  as  dividends  upon  stock  of 
other  corporations,  joint  stock  companies  or 
associations or insurance companies subject to the tax 
hereby imposed; or if organized under the laws of any 
foreign country, upon the amount of net income over 
and  above  five  thousand  dollars  received  by  it  from 
business  transacted  and  capital  invested  within  the 
United  States  and  its  Territories,  Alaska  and  the 
District  of  Columbia,  during  such  year,  exclusive  of 
amounts so received by  it as  dividends  upon stock of 
other  corporations,  joint  stock  companies  or 
associations or insurance companies subject to the tax 
hereby imposed. 
Flint,  220 U.S. at 143-144. 
Several  companies  brought  suit  to  have  Section  38  declared 
unconstitutional  on  several  grounds,  and  the  
Flint   case  was  a 
consolidation of those various suits. One of those grounds was that 
the act was void as lacking in due process of law. 
Flint,  220 U.S. at
167. The Court disposed of this issue by referencing what it had said
as to the power of Congress to lay the excise tax in question.
The Supreme Court first analyzed Section 38 and stated that it was
the intent of Congress to impose a special excise tax with respect to
the carrying on or doing business by corporations, joint stock
companies or associations, or insurance companies; that the tax
was not imposed upon the franchises of the corporation irrespective
of their use in business, nor upon the property of the corporation,
but upon the doing of corporate or insurance business and with
respect to the carrying on thereof, in a sum equivalent to one per
centum upon the entire net income over and above $5,000 received
from all sources during the year.
Flint,  220 U.S. at 145-146.
In other words, the tax is imposed upon the doing of
business of the character described, and the measure
of the tax is to be the income, with the deduction
stated, received not only from property used in
business, but from every source.
Flint,   220  U.S.  at  146.  The  Court stated 
This  interpretation  of  the  act,  as  resting  upon  the 
doing  of  business,  is  sustained  by  the  reasoning  in 
Spreckles  Sugar  Refining  Co.  v.  McClain,   192 U.S.
397, in which a special tax measured by the gross
receipts of the business of refining oil and sugar was
sustained as an excise in respect to the carrying on or
doing of such business.
Flint,  220 U.S. at 147. 

Another allegation of those seeking a declaration that Section 38
was unconstitutional was so far as the tax was measured by the
income of bonds non-taxable under Federal statutes, and of
municipal and state bonds beyond the Federal power of taxation,
and so far as the tax was measured by the income from real and
personal estates, Section 38 must fall under the holding of
Flint, id.
In disposing of this contention, the Court stated: 
The  act  now  under  consideration  does  not  impose 
direct  taxation  upon  property  solely  because  of  its 
ownership,  but  the  tax  is  within  the  class  which 
Congress is authorized to lay and collect under Art. I, 
section  8,  cl.  1,  of  the  Constitution,  and  described 
generally  as  taxes,  duties,  imposts  and  excises,  upon 
which  the  limitation  is  that  they  shall  be  uniform 
throughout the United States. 
Within  the  category  of  indirect  taxation,  as  we  shall 
have further occasion to show, is embraced a tax upon 
business  done  in  a  corporate  capacity,  which  is  the 
subject-matter  of  the  tax  imposed  in  the  act  under 
consideration.  The  
Pollock   case construed the tax
there levied as direct, because it was imposed upon
property simply because of its ownership. In the
present case the tax is not payable unless there be a
carrying on or doing of business in the designated
capacity, and this is made the occasion for the tax,
measured by the standard prescribed. The difference
between the acts is not merely nominal, but rests
upon substantial differences between the mere
ownership of property and the actual doing of
business in a certain way.
Flint,  220 U.S. at 150. 
The  Court  next  cited  to  
Thomas  v.  United  States,   192  U.S.  363, 
regarding the terms “duties, imposts and excises,� and said: 
We  think  that  they  were  used  comprehensively  to 
cover  customs  and  excise  duties  imposed  on 
importation,  consumption,  manufacture  and  sale  of 
certain  commodities,  privileges,  particular  business 
transactions, vocations, occupations and the like. 
Duties  and  imposts  are  terms  commonly  applied  to 
levies  made  by  governments  on  the  importation  or 
exportation  of  commodities.  Excises  are  “taxes  laid 
upon  the  manufacture,  sale  or  consumption  of 
commodities  within  the  country,  upon  licenses  to 
pursue  certain  occupations,  and  upon  corporate 
privileges.� Cooley, 
Const. Lim. , 7th ed., 680. 
The tax under consideration, as we have construed the 
statute,  may  be  described  as  an  excise  upon  the 
particular  privilege  of  doing  business  in  a  corporate 
i.e.,   with  the  advantages  which  arise  from 
corporate  or  quasi-corporate  organization;  or,  when 
applied  to  insurance  companies,  for  doing  the 
business  of  such  companies.  As  was  said  in  the 
Thomas case 192 U.S. 363 supra,  the requirement to 
pay such taxes involves the exercise of privileges, and 
the  element  of  absolute  and  unavoidable  demand  is 
lacking.  If  business  is  not  done  in  the  manner 
described in the statute, no tax is payable. 
Flint,  220 U.S. at 151-152.
Another contention made by some of the insurance companies was
that they had large investments in municipal bonds and other non-
taxable securities, and in real estate and personal property not used
in the business, and therefore the selection of the measure of the
income from all sources is void, because it reaches property which
is not the subject of taxation. The insurance companies relied upon
Pollock  decision.  Flint,  220 U.S. at 162. The Court stated: 
But  this  argument  confuses  the  measure  of  the  tax 
upon the privilege, with direct taxation of the estate or 
thing taxed. In the 
Pollock  case as we have seen, the
tax was held unconstitutional, because it was in effect
a direct tax on the property solely because of its
* * *
There is nothing in these cases contrary, as we shall
have occasion to see, to the former rulings of this
court which hold that where a tax is lawfully imposed
upon the exercise of privileges within the taxing
power of the State or Nation, the measure of such tax
may be the income from the property of the
corporation, although a part of such income is derived
from property in itself non-taxable. The distinction
lies between the attempt to tax the property as such
and to measure a legitimate tax upon the privileges
involved in the use of such property.
It is therefore well settled by the decisions of this
court that when the sovereign authority has exercised
the right to tax a legitimate subject of taxation as an
exercise of a franchise or privilege, it is no objection
that the measure of taxation is found in the income
produced in part from property which of itself
considered is non-taxable. Applying that doctrine to
this case, the measure of taxation being the income of
the corporation from all sources, as that is but the
measure of a privilege tax within the lawful authority
of Congress to impose, it is no valid objection that this
measure includes, in part at least, property which as
such could not be directly taxed.
Flint,  220 U.S. at 162-165. 
With respect to due process, the Court further stated: 
It  is  urged  that  this  power  can  be  so  exercised  by 
Congress  as  to  practically  destroy  the  right  of  the 
States  to  create  corporations,  and  for  that  reason  it 
ought  not  to  be  sustained,  and  reference  is  made  to 
the declaration of Chief Justice Marshall in 
v. Maryland 
that the power to tax involves the power 
to  destroy.  This  argument  has  not  been  infrequently 
addressed to this court with respect to the exercise of 
the powers of Congress. Of such contention this court 
said in 
Knowlton v. Moore, supra:
This principle is pertinent only when there is no
power to tax a particular subject, and has no relation
to a case where such right exists. In other words, the
power to destroy which may be the consequence of
taxation is a reason why the right to tax should be
conditioned to subjects which may be lawfully
embraced therein, even although it happens that in
some particular instance no great harm may be
caused by the exercise of the taxing authority as to a
subject which is beyond its scope. But this reasoning
has no application to a lawful tax, for if it had there
would be an end of all taxation; that is to say, if a
lawful tax can be defeated because the power which is
manifested by its imposition may when further
exercised be destructive, it would follow that every
lawful tax would become unlawful, and therefore no
taxation whatever could be levied.
Veazie Bank v. Fenno, 8 Wall. 533, supra,  speaking 
for the court, the Chief Justice said: 
It is insisted, however, that the tax in the case before 
us  is  excessive,  and  so  excessive  as  to  indicate  a 
purpose  on  the  part  of  Congress  to  destroy  the 
franchise  of  the  bank,  and  is,  therefore,  beyond  the 
constitutional power of Congress. 
The  first  answer  to  this  is  that  the  judicial  cannot 
prescribe  to  the  legislative  department  of  the 
government  limitations  upon  the  exercise  of  its 
acknowledged  powers.  The  power  to  tax  may  be 
exercised  oppressively  upon  persons,  but  the 
responsibility  of  the  legislature  is  not  to  the  courts, 
but to the people by whom its members are elected. So 
if a particular tax bears heavily upon a corporation, or 
a class of corporations, it cannot, for that reason only, 
be pronounced contrary to the Constitution. 
Flint,  220 U.S. at 168-169. 
Flint  Court next cited to the   McCray  case which was analyzed 
hereinabove. In deciding the due process question in the 
Flint  case
there can be little  question but that the justices  departed from  the 
principle enunciated in 
Marbury v. Madison.  
Billings v. United States:  
Section 37 of the Tariff Act of August 5, 1909, c.6, 36 Stat. 11, 112,
levied a tonnage tax of seven dollars per gross ton upon the use of
every foreign-built yacht, not used for trade, owned or chartered for
more than six months by any citizen or citizens of the United States.
Section 37 went into effect on August 6, 1909, and the collector of
the port of New York made a demand upon Mr. Billings, as the
owner of a foreign-built yacht weighing 1,091.71 tons, for payment
of $7,644.00. Mr. Billings failed to pay the tax, the United States
brought suit and Mr. Billings raised three defenses:
1) That the vessel was not enrolled, registered, or documented
as a vessel of the United States and enjoyed no privileges from the
United States. Also that the yacht had only been used outside of the
waters and territorial limits or jurisdiction of the United States;
2) That the tax imposed by the statute was intended by
Congress to be “an annual tax, that it should be prospective and
operate only upon the future use of any such foreign-built yacht,
and that said annual tax had not yet accrued and could not be duly
levied and collected prior to the first day of September in the year
1910.�; and
3) After averring that there were within the United States many
pleasure yachts not foreign-built which were virtually identical to
Mr. Billings’ yacht, charged that the law imposing the burden
sought to be enforced was void because repugnant to the due
process clause of the Fifth Amendment.
Billings,  232 U.S. at 278.
The lower court found the sum claimed was due by Mr. Billings as
an excise or duty upon the use of his yacht and that the act
imposing the tax was not repugnant to the Constitution, but found
the government was not entitled to recover interest.
In order “to avoid if it may be the necessity of determining the
constitutional question�
(Billings,   232  U.S.  at  279),  the  Court 
assumed the Tariff Act in question was adopted by Congress in the 
light  of  the  ruling  in  
Pollock  v.  Farmers  Loan  &  Trust  Company, 
stated it was certain that Congress intended Section 37 to be an
excise tax, and stated that this was not seriously disputed in
argument, with the controversy turning first upon the period when
the tax provided for was to take effect and the nature and character
of the use which was taxed.
Billings,  232 U.S. at 279. The Court also
stated the two issues were so interwoven that they would be
considered and disposed of together.
The Court found that the word “annually� was used not for the
purpose of postponing the time of payment, but rather as provision

for continuity, and found the tax could be imposed in September of
1909. The Court next addressed the issue of upon what the tax was
The Court stated the issue of upon what the tax was assessed was
clearly addressed in the statute:
[T]he recurrence of the tax is annual and depends
upon two elements, ownership or charter rights, as
specified in the act, and the use for any time during
the year. It is to be observed that the provision deals
with ownership and distinguishes between ownership
and use, since it bases the tax not upon the former but
upon the latter.
Billings,  232 U.S. at 280. 
The Court, in sophisticated double-talk, then attempted to point out 
that  even  though  ownership  necessarily  entails  and  contemplates 
“use,� as used in the statute, some other type of “use� was intended 
than the mere privilege of using which the owner enjoys: 
Let  it  be  conceded  that  the  ownership  of  property 
includes the right to use, plainly we think, as use and 
ownership are distinguished one from the other in the 
provision,  the  word  “use�  as  there  employed  means 
more  than  the  mere  privilege  of  using  which  the 
owner enjoys, and relates to its primary signification, 
as  defined  by  Webster;  “The  act  of  employing 
anything or of applying it to one’s service; the state of 
being so employed or applied.� If the use which arises 
from the fact of ownership without more was what the 
statute  proposed,  then  it  is  inconceivable  why  the 
difference between use and ownership was marked in 
the  provision  and  made  the  basis  of  the  tax  which  it 
imposed. While this construction in this case leads to 
the  same  conclusion  as  does  that  which  the  court 
below affixed to the statute, that is, that it taxed the
privilege of use, or, in other words the potentiality of
using involved in ownership, inherently there is this
fundamental difference between the interpretation we
give and that which the lower court adopted, since the
privilege of use is purely passive (or subjective), a
right which necessarily pertains to ownership and
must exist where there is ownership, as one may not
obtain ownership without acquiring the privileges of
use which ownership gives. The other, on the
contrary, that is, use in the statutory sense, although it
arises from ownership, is active (objective), that is, it
is the outward and distinct exercise of a right which
ownership confers but which would not necessarily be
exerted by the mere fact of ownership. The contention
that inequality must be the result of making the tax
depend upon mere use without reference to the extent
of its duration, addresses itself not to the question of
power, and is therefore beyond the scope of judicial
Billings,  232 U.S. at 281.
The author of this opinion is none other than Justice White! On
page 279 the Justice tells us he is going to do his best to avoid
answering the constitutional questions. To do this, first he assumes
Congress knows the distinction between a direct tax and an indirect
tax,71 and then without examining the nature and effect of the tax in
operation, found it to be an excise tax. And to conclusively establish
that the tax was an excise, Justice White merely distinguished the
“use� derived from ownership from the “use� derived from
ownership, the former being “passive (or subjective)� and the latter
being “active (objective).�
With respect to the due process issue of inequality of operation
between citizens who own American-made yachts and citizens who
own foreign-made yachts, Justice White disposed of it by stating,
without  quoting  any  authority  for  the  proposition,  that  the  issue 
was  “beyond  the  scope  of  judicial  cognizance,  and  besides,  the 
“excise� tax is levied uniformly among all of those it taxes, and thus 
is not violative of Article I, Section 8, Clause 1 nor the due process 
clause of the Fifth Amendment.� 
Billings,  232 U.S. at 282-284.
Finding the tax to be valid in all respects, Justice White ruled that
the government was entitled to interest even though there was no
provision for the collection of interest applicable to Section 37 taxes
in the Tariff Act in question.
The above analysis of
Treat,  Patton,  McCray,  Flint   and   Billings 
shows  that  those  cases  cannot  support  the  proposition  of  Justice 
White  as  stated  in  the  
Brushaber   case  that  the  due  process 
provisions of the United States Constitution have no applicability to 
the  levying  and  collection  of  federal  taxes.  And,  notwithstanding 
Justice  White’s  closing  his  eyes  to  the  Constitution,  the  
case cannot be cited as authority for the proposition that wages
constitute income.
Edwards v. Keith, 231 F. 110 (2nd Cir. 1916): 
Mr. Edwards was an insurance salesman who received commissions
when he first sold an insurance policy, and again whenever the
policy was renewed. Mr. Edwards paid his income tax under protest
and sued the collector, Mr. Keith, for its recovery. Mr. Keith filed a
demurrer to the complaint which the lower court sustained and the
Court then dismissed the case on its merits. This appeal followed on
the single question of:
[W]hether or not the commissions payable to
complainant under the contracts with the Assurance
Society annexed to the complaint, upon renewal
premiums paid on policies obtained through the
instrumentality of appellant prior to March 1, 1913,
but which commissions were not actually paid to and
received by complainant until after March 1, 1913, and
between that date and December 31, 1913, constitute a 
part of the “entire net income� of complainant “arising 
or accruing from all sources� between those dates. 
Edwards,  231 F. at 111. 
The issue presented to the Court was not whether the commissions 
constituted income; that question was not raised by the parties. The 
Court  was  asked  to  consider  the  commissions  as  income,  and 
determine in what year they were to be taxed: 
[B]ut the question seems to us a very simple one and 
one  absolutely determined  by  the provision in  all  the 
contracts  that  “commissions  shall  accrue  only  as  the 
premiums are paid in cash.� 
Edwards,  231 F. at 112.
One can only speculate as to how this Court would rule if the
question as to what is and is not income were presented to it, for the
Court stated in the last lines of the opinion:
[T]he statute and the statute alone determines what is
income to be taxed. It taxes only income “derived�
from many different specified sources; one does not
“derive income� by rendering services and charging
for them.
Edwards,  231 F. at 113. 
Doyle v. Mitchell Brothers Co., 247 U.S. 179 (1918): 
Mr. Doyle, the Collector of Internal Revenue, assessed additional
taxes against Mitchell Brothers Company under the Corporation
Excise Tax Act of August 5, 1909, c. 6, 36 Stat. 11, 112, Section 38.
Mitchell Brothers paid the tax under protest and sued for its
recovery. It won in both the District Court and Court of Appeals.
Doyle,  247 U.S. at 180. 

Mitchell Brothers was a lumber manufacturing corporation. In 1903
it purchased land with timber on it for $20.00 per acre. In 1908 the
land was valued at $40.00 per acre. When the corporation filed
returns under the 1909 tax act, it deducted from gross receipts the
market value of the land from which trees were cut at the $40.00
per acre value. The I.R.S. thought the land should have been valued
at $20.00, and sought the difference.
Doyle,  247 U.S. at 181-182. As 
stated by the Court: 
[T]he  question  is  whether  this  difference  (made  the 
basis of the additional taxes) was income for the years 
in  which  it  was  converted  into  money,  within  the 
meaning of the act. 
Doyle,  247 U.S. at 182. 
The Court stated the position of the Collector as follows: 
Starting from this point, the learned Solicitor General 
has submitted an elaborate argument in behalf of the 
Government,  based  in  part  upon  theoretical 
definitions  of  “capital,�  “income,�  “profits,�  etc.,  and 
in part upon expressions quoted from our opinions in 
Flint  v.  Stone  Tracy  Co. , 220 U.S. 107, 147, and
Anderson  v.  Forty-two  Broadway  Co.,   239 U.S., 69,
72, with the object of showing that a conversion of
capital into money always produces income, and that
for the purposes of the present case the words “gross
income� are equivalent to “gross receipts�; the
insistence being that the entire proceeds of a
conversion of capital assets should be treated as gross
income, and that by deducting the mere cost of such
assets we arrive at net income.
Doyle,  247 U.S. at 183-184. 
While the only issue before the Court was whether the $20 or $40 
valuation should be  used, based upon the government’s argument, 
the Court felt compelled to respond: 
Yet  it  is  plain,  we  think,  that  by  the  true  intent  and 
meaning  of  the  act  the  entire  proceeds  of  a  mere 
conversion  of  capital  assets  were  not to  be  treated  as 
Whatever difficulty  there  may be  about a precise and 
scientific  definition  of  “income,�  it  imports,  as  used 
here,  something  entirely  distinct  from  principal  or 
capital either as a subject of taxation or as a measure 
of  the  tax;  conveying  rather  the  idea  of  gain  or 
increase arising from corporate activities. As was said 
Stratton’s Independence v. Howbert,  231 U.S. 399, 
415: “Income may be defined as the gain derived from 
capital, from labor, or from both combined.� 
Understanding  the  term  in  this  natural  and  obvious 
sense,  it  cannot  be  said  that  a  conversion  of  capital 
assets invariably produces income. If sold at less than 
cost, it produces rather loss or outgo. Nevertheless, in 
many  if  not  in  most  cases  there  results  a  gain  that 
properly  may  be  accounted  as  a  part  of  the  “gross 
income�  received  “from  all  sources�;  and  by  applying 
to  this  the  authorized  deductions  we  arrive  at  “net 
income.�  In  order  to  determine  whether  there  has 
been gain or loss, and the amount of the gain, if any, 
we must withdraw from the gross proceeds an amount 
sufficient  to  restore  the  capital  value  that  existed  at 
Doyle,  247 U.S. at 184-185. 

The Court determined that the $40 per acre was the correct amount
to restore the capital value of the land for the cutting of the timber,
and sustained the judgment of the Court of Appeals. Applying the
same principle to labor, and deducting the cost of the labor from the
wages received in exchange therefore, wages would not constitute
“As has been repeatedly remarked, the Corporation Tax Act of
1909 was not intended to be and is not in any proper sense an
income tax law. This court had decided in the
Pollock  case that
the income tax law of 1894 amounted in effect to a direct tax
upon property, and was invalid because not apportioned
according to population as prescribed by the Constitution. 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, with certain qualifications
prescribed by the Act itself.�
Stratton’s,  231 U.S. at 414. 
Sec. 38 imposed a tax on every corporation, joint stock company 
or  association,  organized  for  profit  and  having  a  capital  stock 
represented by shares, and every insurance company, organized 
under the laws of the United States or of any State or Territory 
of the United States, or organized under the laws of any foreign 
country and engaged in business in any State or Territory of the 
United States or in Alaska or in the District of Columbia. 
“[E]mploying  capital  and  labor  in  transmuting  a  part  of  the 
realty  into  personalty,  and  putting  it  into  marketable  form.� 
Stratton’s,  231 U.S. at 415. 
There was no income tax between  the years 1895 when  
held the Act of 1894 unconstitutional, and 1913, when Congress
enacted an income tax law after the alleged ratification of the
Sixteenth Amendment.
“It was of course contemplated that the income might be derived
from the employment of property in business, and that this
property might become more or less exhausted in the process;
and because of this, a reasonable allowance was to be made for
depreciation of it, if any. But plainly, we think, the valuation of

the property and the amount of the depreciation were to be
determined not upon the basis of latent and occult intrinsic
values, but upon considerations that affect market value and
have their influence upon men of affairs charged with the
management of the business and accounting of corporations
that are organized for profit and are engaged in business for
purposes of profit.�
Stratton’s,  231 U.S. at p. 421. 
It is interesting to note that the gross receipts of the corporation 
was called gross income by the Court. In 
Doyle v. Mitchell,  247
U.S. 179 (1918), the Supreme Court specifically held that the
government’s contention that gross receipts were the same as
gross income was erroneous (see p. 128).
The clear distinction between this quote upholding the
fundamental principles of a federal republic and the
quote  declaring  that  citizens  have  no  constitutionally  protected 
rights is indicative of our government today. 
This argument was not contained in the “assignment of errors,� 
and  was  thus  not  considered  by  the  Supreme  Court.  
195 U.S. at 46. 
Thus Mr. Justice White cites himself in the 
Brushaber decision
for his legal authority to excise the Fifth Amendment from the
Constitution with respect to income taxation.
32 Stat. 193.
It is clear that Congress here specifically ceded jurisdiction to
the States and the governments of Washington D.C. and of the
United States Territories to tax and otherwise regulate the
oleomargarine industry within their respective jurisdictions.
Mr. McCray advised the Court that depending upon the season
of the year, the color of natural butter went from pale yellow to
dark yellow, and that consumers preferred the darker yellow
The argument was worded such that it appears it is being argued
that under the Tenth Amendment, the States have the power to
destroy an industry. An interpretation of the Tenth Amendment
as a grant from the people to the States to destroy industries
defies reality.
Thereby eliminating from consideration whether the motive of
Congress in enacting the legislation was merely the return of a
political favor to the dairy lobby. If it was, then any legislation
passed would be null and void as contrary to constitutional
principles, and the Court would be without jurisdiction due to
the lack of a statute imposing the tax.
Justice White again refused to recognize that the lawfulness of
the authority ceases when the power becomes abusive. This
includes not only the abuse arising at the time of enacting the
statute, but each and every time an American is injured by the
abuse. The injury resulting from an unlawful exertion of power
includes having one’s due process violated. It is clear, then, that
Justice White used the
McCray case  to  lay  the  foundation  for 
the policy he announced in 
Brushaber,  the complete eradication
of the Fifth Amendment from proceedings involving taxation.
See note 68. This may explain why Congress gave concur rent
jurisdiction to the States to tax oleomargarine when it amended
the 1886 Act. Rather than challenging this nebulous quantum
leap of jurisdiction, Justice White treacherously used it to avoid
the one fundamental limitation on the exercise of governmental
power over the American people"the lack of jurisdiction of the
federal government in the States. The very fact that Justice
White recognized the principle in light of a complaint of injury
resulting from the violation of that principle shows that his
destruction of the separation of powers doctrine was deliberate.

A highly suspect assumption in light of the fact the Supreme
Court in
Pollock  had less than ten years before struck down a tax
that Congress thought to be an indirect excise tax, but was in
actuality a direct tax.
Eisner v. Macomber, 252 U.S. 189 (1920): 
Justice Pitney, the author of the Court’s majority opinion, stated
that the question presented in the case was “whether, by virtue of
the Sixteenth Amendment, Congress had the power to tax, as
income of the stockholder and without apportionment, a stock
dividend made lawful and in good faith against profits accumulated
by the corporation since March 1, 1913.�
Eisner,  252 U.S. at 199. 
Justice Pitney stated the statute in question was the Revenue Act of 
September  8,  1916,  c.  463,  39  Stat.  756  
et  seq.,   Sec. 2(a), which
statute provided that the net income of a taxable person72 shall
include, among other things, dividends. The statute also defined a
dividend as any distribution made by a corporation out of its
earnings or profits accrued since March 1, 1913, and payable to its
shareholders, whether in cash or in stock of the corporation, said
stock to be considered income to the amount of its cash value.
Eisner,  252 U.S. at 199-200.
The facts were that on January 1, 1916, the Standard Oil Company
of California had approximately $50,000,000 worth of $100 par
value shares of stock outstanding. It also had surplus and undivided
profits invested into the corporation worth approximately
$45,000,000, of which about $20,000,000 had been earned prior
to March 1, 1913. In January, 1916, in order to readjust the
capitalization, it was decided to issue additional shares sufficient to
constitute a stock dividend of fifty per cent of the outstanding stock,
and to transfer from surplus account to capital stock account an
amount equivalent to such issue.
Eisner,  252 U.S. at 200.
Ms. Macomber had been the owner of 2,200 shares of the old stock,
and received certificates for 1,100 additional shares, of which 18.07
percent, or 198.77 shares, par value $19,877, were treated as
representing surplus earned between March 1, 1913, and January 1,
Eisner,  252 U.S. at 200-201.
Ms. Macomber paid, under protest, a tax under Section 2(a) of the
1916 Act on the $19,877, filed an administrative appeal, and then
brought suit against the Collector to recover the tax. She contended
that the 1916 tax act was in violation of Article I, Section 2, Clause 3,
and Article I, Section 9, Clause 4, requiring direct taxes to be
apportioned according to population, and that the stock dividend
was not income within the meaning of the Sixteenth Amendment.
Eisner,  252 U.S. at 201.
The Defendant, Mr. Eisner, filed a general demurrer to the
complaint which was overruled, and he did not file any pleadings
thereafter. Judgment was issued in favor of Ms. Macomber, and the
case came to the United States Supreme Court on a writ of error.
Eisner, id.  In a split decision, the Court held that neither under the
Sixteenth Amendment nor otherwise did Congress have power to
tax without apportionment a true stock dividend made lawfully and
in good faith, or the accumulated profits behind it, as income of the
stockholder. The Court held the Revenue Act of 1916 contrary to
Article I, Section 2, Clause 3, and Article I, Section 9, Clause 4, with
respect to the tax imposed on such true stock dividends.
Eisner,  252 
U.S. at 219. 
The Court relied upon the decision in 
Towne v. Eisner,  245 U.S. 418
(1918), where the question was whether a stock dividend made in
1914 against surplus earned prior to January 1, 1913, was taxable
against the stockholder under the Act of October 3, 1913, c. 16, 38
Stat. 114, 166, which provided