THE TRUTH
ABOUT THE INCOME TAX
The act
establishing the income tax, passed in1913, is the most misunderstood piece
of legislation in human history. This
single page is intended to cut through all the confusion about that law,
because in reality there is no confusion
in the law, to quickly and absolutely demonstrate the proper application of
the income tax since its inception. In
the Supreme Court decision that established the constitutionality of the income
tax legislation, it clearly states in the very first sentence of the Opinion of
the Court, delivered by Chief Justice White:
“…, the appellant filed his bill to enjoin the corporation from
complying with the income tax
provisions of the tariff act of October 3, 1913.” Brushaber v. Union Pacific R.R. Co, 240
Notice the fact that Chief Justice White clearly
and unequivocably identifies the income tax as part of a tariff act.
By definition, a tariff is a tax
laid on foreign imports or
activity. Black’s Law Dictionary tells us that a “tariff”
is: “a schedule or system of duties imposed by a government on imported
or exported goods. In the
In the Brushaber decision cited above the Court further tells us “2. The act provides for collecting the tax at the source; that is, makes it the duty of corporations, etc., to retain and pay the sum of the tax …” Brushaber v. Union Pacific R.R. Co, 240 US 1, 21 (1916). Here, the Supreme Court clearly tells us that the scheme of the income tax, as provided by the tariff act, is that of a tax that is collected at the source, by third parties, identified as “corporations, etc.” The entire scheme of the income tax as it was originally imposed, and as it is still actually established and imposed under the law, is described by the Court in this sentence. The Court identifies that “collecting the tax at the source;” is how the income tax is actually imposed in the law because “The act provides…”, and it identifies how the tax is to be collected and paid under the actual laws that were passed into existence, as it “…makes it the duty of corporations, etc. to retain and pay the sum of the tax…”.
This “collecting the tax at the source” – through a legislatively created “duty… to retain and pay” is called “withholding”, and is of course, what the income tax was really all about in 1913, and the legislatively created “duty” of the “corporations, etc.”, referenced here by the Court, is defined in the law, and has been since the inception of this tax in 1913. Title 26 U.S. Code Section 7701(a)(16) clearly states ”Withholding Agent. - The term "Withholding Agent" means any person required to deduct and withhold any tax under the provisions of sections 1441, 1442, 1443, or 1461.” This is the complete and entire authority in the law to withhold (collect) income taxes under Subtitle A (Income Tax), and has been continuously since 1913.
This “Withholding Agent” is the entity defined in the income tax laws (Title 26 - Subtitle A) with the legal “duty” to “retain and pay the sum of the tax” as identified by the Supreme Court in the Brushaber Opinion, or re-stated – the duty to withhold the income tax at the source from all subject persons under the Subtitle A income tax authorities and mandates. The definition, and full legal powers, of the “Withholding Agent” are simple and straight-forward. To understand the complete enacted authority to collect income tax at the source by withholding, all one need do is read the actual code sections invoked by the statutory definition. The first three code sections, 1441, 1442, and 1443 which are cited in the definition of a Withholding Agent, each provide as follows: § 1441 Withholding of Tax on Nonresident Aliens, § 1442 Withholding of Tax on Foreign Corporations, § 1443 Foreign Tax Exempt Organizations. One should carefully note that the law authorizes the withholding of income tax only from foreign persons, and then remember that the Supreme Court says the income tax is part of a tariff act (imposed on foreign activity). Finally, the last code section referenced in the definition of a Withholding Agent, § 1461 Liability for withheld tax, states: “Every person required to deduct and withhold any tax under this chapter is hereby made liable for such tax and is hereby indemnified against the claims and demands of any person for the amount of any payments made in accordance with the provisions of this chapter.”
Section 1461 says that the Withholding Agents are made liable for the payment of the income taxes that they have withheld from subject
persons - who
are all foreign. This is the only code section in all of the
income tax laws (Subtitle A) where anyone is made liable for the payment of
the income tax by a statute (law). And who is made liable by
statute? The Withholding Agents are made liable for the payment of the tax - that they have collected from subject
foreign persons. It is not
the persons who are the actual
subjects of the tax (the non-resident aliens and foreign corporations) that are
made liable for the payment of the tax directly, it is the Withholding Agents that
are made liable in an indirect fashion, under
Article I, Section 8, Clause 1. The injection of this third party, the Withholding Agent, into the income tax
collection scheme of collection at the
source, keeps the income tax
indirect because the burden to pay
the tax is shifted from the tax collector (the Withholding Agent), to the subject foreign taxpayer. While it is the corporations, etc. who
actually retain and pay the tax,
the tax is only collected from foreign
subject persons. Under the law the tax is collected by a third party, indirectly, and is not collected directly by the IRS, nor is the tax paid directly by the
subject taxpayer - the foreign entity (or any other person), by a mandatory
filing requirement imposed on the taxpayer. Nor is there any direct
liability ever established in the name of the actual subject taxpayer by the
statutes because none is necessary, as “the act provides for collecting
the tax at the source”. Under
the actual provisions of the statutes, the income tax is collected by the third
party tax collector, by withholding. And
if they fail to withhold, it is the Withholding
Agent that pays the penalty and interest under § 1463 which states: “If
-any person …
fails to deduct and withhold any tax under
this chapter,… this section shall in no case relieve such person from
liability for interest or any penalties or additions to the tax otherwise
applicable in respect of such failure to
deduct and withhold.”
This is all straight from the law as it exists today, and this agrees
completely with what the Supreme Court wrote in its Brushaber Opinion in 1916: that the income tax is part of
a tariff act under Article I, Section 8, Clause 1 of the Constitution, laid indirectly and collected
at the source by withholding from
subject taxpayers – who under the
tariff, are of course, all foreign. The tax is laid in the original act, and
still in the law today, as a tariff that
is withheld only from foreign persons – because only non-resident foreign persons
(aliens and foreign corporations) can
be lawfully forced to pay a tariff on their activities in the fifty
states. Under the true scheme of
the income tax adopted in the tariff act, and still captured and evident in the
law today, the foreign entities, the
non-resident aliens and foreign corporations, are the actual taxpayers and subjects of the income tax, and the sovereign entities, the American
citizens and corporations, are cast in
the role of the income tax collector, and not as the subject taxpayers. All this information is documented in
statutory detail, and more is revealed, at www.Tax-Freedom.com
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