Uncertainties of the Income Tax
by Larry Becraft,
attorney
For several
years now, a variety of high public officials have openly declared that the
federal income tax laws are incredibly complex and need to be either
substantially revised or scrapped. But after making such statements, these
officials invariably fail to identify what specific parts of the tax laws
suffer from this condition, choosing instead to conceal them. Are the
objectionable parts of the federal tax code secretly and quietly discussed behind
closed Congressional committee doors? If they are, why doesn't someone inform
the American public of these deficiencies so that they may likewise participate
in this debate? Is it possible that it is the major and not various minor
features of the tax laws which are complex, even uncertain? Is it possible that
these major features are so fundamentally flawed that they simply cannot be
repaired? If so, what is the legal consequence of this complexity?
It is
alleged that the legal duties arising from the tax laws are clearly known to
all, but there are a few exceptions to this rule. For example, in United
States v. Critzer, 498 F.2d 1160 (4th Cir. 1974),
at issue was the validity of the conviction of an Indian for tax evasion. Here,
the Bureau of Indian Affairs had informed Mrs. Critzer
that the money she derived from real property located within a reservation was
not taxable; Mrs. Critzer relied upon this advice and
failed to report such income. But, the IRS
maintained a contrary position and indicted and convicted her for tax evasion.
This conviction was reversed on the grounds that the unsettled nature of this
field of law precluded any conviction:
"While the record amply supports the conclusion
that the underreporting was intentional, the record also reflects that,
concededly, whether defendant's unreported income was taxable is problematical
and the government is in dispute with itself as to whether the omitted income
was taxable," Id., at 1160.
"We hold that defendant must be exonerated from
the charges lodged against her. As a matter of law, defendant cannot be guilty
of willfully evading and defeating income taxes on income, the taxability of
which is so uncertain that even co-ordinate branches of the United States
Government plausibly reach directly opposing conclusions. As a matter of law,
the requisite intent to evade and defeat income taxes is missing. The
obligation to pay is so problematical that defendant's actual intent is
irrelevant. Even if she had consulted the law and sought to guide herself
accordingly, she could have had no certainty as to what the law required.
"It is settled that when the law is vague or
highly debatable, a defendant -- actually or imputedly
-- lacks the requisite intent to violate it," Id.,
at 1162.
This single
case is an adequate demonstration that there is at least one part of the tax
code which is unclear and that lack of clarity caused the reversal of Mrs. Critzer's criminal conviction. But there are others; see United
States v. Mallas, 762 F.2d 361 (4th Cir. 1985) (a
prosecution for violating an unclear legal duty abridges principles of due
process); United States v. Garber, 607 F.2d 92, 97-98 (5th Cir. 1979); United
States v. Dahlstrom, 713 F.2d 1423, 1429 (9th
Cir. 1983); United States v. Heller, 830 F.2d 150 (11th Cir. 1987); and United
States v. Harris, 942 F.2d 1125 (7th Cir. 1991). Unclear legal duties in
other fields of law besides tax likewise prevent criminal convictions on due
process grounds; see United States v. Insco,
496 F.2d 204 (5th Cir. 1974); People v. Dempster,
396 Mich. 700, 242 N.W.2d 381 (1976); United States v. Anzalone,
766 F.2d 676, 681-82 (1st Cir. 1985); United States v. Denemark,
779 F.2d 1559 (11th Cir. 1986); United States v. Varbel,
780 F.2d 758, 762 (9th Cir. 1986); United States v. Dela
Espriella, 781 F.2d 1432 (9th Cir. 1986); and United
States v. Larson, 796 F.2d 244 (8th Cir. 1986).
Under the
U.S. Constitution, the Congress is authorized to impose two different types of
taxes, direct and indirect. Via Art. 1, Sect. 8, cl. 1, of the Constitution,
indirect taxes (excises, duties and imposts) must be uniformly imposed
throughout the country. Direct taxes are required via Art. 1, Sect. 2, cl. 3,
and Art. 1, Sect. 9, cl. 4, to be imposed pursuant to the regulation of
apportionment. These tax categories are mutually exclusive and any given tax
must squarely fit within one category or the other. To which constitutional
category does the federal income tax belong? Is it a direct tax, or is it an
indirect tax? Do American courts speak with unanimity about this simple
question of what is the nature of this tax?
To determine
whether and to what extent there is any uncertainty or conflict of authority
regarding the nature of the federal income tax requires at least a short review
of the fundamental decisions concerning it. In 1894, Congress adopted an income
tax act which was declared unconstitutional in Pollock v. Farmers' Loan
& Trust Co., 157 U.S. 429, 15 S.Ct. 673, aff. reh., 158 U.S.
601, 15 S.Ct. 912 (1895). The Pollock
Court found that the income tax was a direct tax
which could only be imposed if the tax was apportioned; since this tax was not
apportioned, it was found unconstitutional. In an effort to circumvent this
decision, the 16th Amendment was proposed by Congress in 1909 and allegedly
ratified by the states in 1913. As a result, various opinions arose regarding
the legal effect of the amendment. Some factions contended that the 16th
Amendment simply eliminated the apportionment requirement for one specific
direct tax known as the income tax, while others asserted that the amendment
simply withdrew it from the direct tax category and placed the income tax in
the indirect, excise tax class. These competing contentions and interpretations
were apparently resolved in Brushaber v. Union Pacific Railroad Co., 240
U.S. 1, 36 S.Ct. 236 (1916).
Rather than attempt a determination of what the Court held in this case, it is
more important to learn what various courts have subsequently declared
Brushaber to mean.
A little
more than a week after the opinion in Brushaber, similar issues were
present for decision in Stanton v. Baltic Mining Co., 240 U.S. 103,
112-13, 36 S.Ct. 278 (1916), which involved the
question of whether an inadequate depletion allowance for a mining company
constituted a direct tax on the company's property. As to Baltic's
contention that "the 16th Amendment authorized only an exceptional direct
income tax without apportionment," the Court rejected it by stating that
this contention:
"... manifestly disregards the fact that by the
previous ruling it was settled that the provisions of the 16th 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, and being placed in the category of direct taxation."
The Court
clearly held that income taxes inherently belonged to the indirect/excise tax
class, but had been converted by Pollock to direct taxes by considering
the source of the income; the 16th Amendment merely banished the rule in Pollock.
See also Tyee Realty Co. v. Anderson,
240 U.S. 115,
36 S.Ct. 281 (1916), decided the same day.
However, the
victory of defining what the 16th Amendment meant was short lived and later
decisions commenced a course which appears to have changed the meaning of Brushaber,
or at least provided fertile grounds for an entirely different and opposite
construction of it. In William E.
Peck and Co. v. Lowe, 247 U.S. 165, 172-73, 38 S.Ct.
432, 433 (1918), which involved a tax imposed on export earnings, the Court
seemed to indicate that what was accomplished by the amendment was the
elimination of the apportionment requirement for the direct tax known as the
income tax, an argument rejected in Baltic:
"The Sixteenth Amendment, although referred to
in argument, has no real bearing and may be put out of view. As pointed out in
recent decisions, it does not extend the taxing power to new or excepted
subjects, but merely removed all occasion, which otherwise might exist, for an
apportionment among the states of taxes laid on income, whether it be derived
from one source or another."
The drift
away from the position of the Court that the income tax via the 16th Amendment
fell within the excise tax category became more pronounced with the decision in
Eisner v. Macomber, 252 U.S. 189, 206, 40 S.Ct. 189 (1920), which involved the application of this
tax to a stock dividend. Here, the Court plainly stated what many lawyers and
some judges today think was accomplished by means of this amendment, the
elimination of the apportionment requirement for the direct tax known as the
income tax. In deciding this case, the Court quoted the amendment and then redeclared its meaning:
"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....,"
252 U.S., at
206.
"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."
Is this the
resurfacing of the argument that "the 16th Amendment authorized only an
exceptional direct income tax without apportionment" condemned in Baltic?
From a study
of Brushaber, it is thus possible for someone to rely upon those
portions of the two phrases at the beginning and ending of 240 U.S.
19 to believe that "the 16th Amendment authorized only an exceptional
direct income tax without apportionment." If one fell into that error,
this belief would be magnified by the above highlighted portions of Eisner.
Confusion abounds as to the correct interpretation of Brushaber, and
this is obvious because various courts of this nation have relied upon this
line of authority to reach diametrically opposing results.
The state
courts have been particularly split over the nature of an income tax and
whether it constitutes a direct property tax or an indirect/excise, which is
not imposed on property. A small number of them hold that an income tax is a
direct property tax; see Eliasberg Bros.
Mercantile Co. v. Grimes, 204 Ala. 492, 86 So. 56, 58 (1920); State v. Pinder, 108 A. 43, 45 (Del. 1919); Bachrach
v. Nelson, 349 Ill. 579, 182 N.E. 909 (1932); Opinion of the Justices,
220 Mass. 613, 108 N.E. 570 (1915); Trefry
v. Putnam, 227 Mass. 522, 116 N.E. 904 (1917); Maguire v. Tax Comm. of
Commonwealth, 230 Mass. 503, 120 N.E. 162, 166 (1918); Hart v. Tax Comm.,
240 Mass. 37, 132 N.E. 621 (1921); In re Ponzi, 6 F.2d 324 (D.Mass. 1925); Kennedy v. Comm. of Corps. & Taxation,
256 Mass. 426, 152 N.E. 747
(1926); In re Opinion of the Justices, 266 Mass.
583, 165 N.E. 900, 902 (1929); Hutchins v. Comm. of Corps. & Taxation,
272 Mass. 422, 172 N.E. 605, 608
(1930); Bryant v. Comm. of Corps. & Tax'n.,
291 Mass. 498, 197 N.E. 509
(1935); Culliton v. Chase, 174 Wash.
363, 25 P.2d 81, 82 (1933) ; Jensen
v. Henneford, 185 Wash. 209, 53 P.2d 607 (1936); State
ex rel Manitowoc Gas Co. v. Wisconsin Tax Comm.,
161 Wis. 111, 152 N.W. 848, 850 (1915); and State ex rel
Sallie F. Moon Co. v. Wisconsin Tax Comm., 166 Wis. 287, 163 N.W. 639, 640
(1917). A far larger number of state courts disagree with the cases noted above
and have held that an income tax is not a property tax but an excise; see Purnell v. Page, 133 N.C. 125, 45 S.E. 534,
535 (1903); State v. Frear, 148 Wis. 456, 134
N.W. 673, 692 (1912); Opinion of Justices, 77 N.H. 611, 93 A. 311, 313
(1915); Ludlow-Saylor Wire Co. v. Wollbrinck,
275 Mo. 339, 205 S.W. 196 (1918); Hattiesburg Grocery Co. v. Robertson,
126 Miss. 34, 88 So. 4 (1921); Stanley v. Gates, 179 Ark. 886, 19 S.W.2d
1000, 1001 (1929); Featherstone v. Norman, 170 Ga. 370, 153 S.E. 58
(1930); Diefendorf v. Gallet,
51 Idaho 619, 10 P.2d 307, 313 (1932); O'Connell v. State Board, 95
Mont. 91, 25 P.2d 114, 119 (1933); Maxwell v. Kent-Coffey Mfg. Co., 204
N.C. 365, 168 S.E. 397, 400 (1933); Reed v. Bjornson, 191 Minn. 254, 253
N.W. 102, 109 (1934); Opinion of the Justices, 133 Me. 525, 178 A. 621,
623 (1935); Miles v. Dept. of Treasury, 209 Ind. 172, 199 N.E. 372, 377
(1935) (citing Brushaber); Marshall v. South Carolina Tax Comm.,
178 S.C. 57, 182 S.E. 96, 97 (1935); Hunton
v. Commonwealth, 166 Va. 229, 183 S.E. 873, 876 (1936); Reynolds Metal
Co. v. Martin, 269 Ky. 378, 107 S.W.2d 251, 259 (1937); Vilas v. Iowa
State Bd. of Assess. & Review, 223 Iowa
604, 273 N.W. 338, 342 (1937); Oursler v. Tawes, 178 Md.
471, 13 A.2d 763, 768 (1940); California Co. v. State, 141 Colo.
288, 348 P.2d 382 (1959); and Burns v. State Bureau of Revenue, 79 N.M.
53, 439 P.2d 702, 706 (1968).
This split
of authority evident within the state cases also manifests itself in the
federal appellate courts. For example, in the First Circuit it is difficult to
determine the meaning of the 16th Amendment because in United States v. Turano, 802 F.2d 10, 12 (1st Cir. 1986), that court
held that the "16th Amendment eliminated the indirect/direct distinction
as applied to taxes on income." Next door in the Second Circuit, there is
uncertainty revealed by three completely inconsistent cases. In Jandorf's Estate v. Commissioner, 171 F.2d
464, 465 (2nd Cir. 1948), that court declared, "It should be noted that
estate or inheritance taxes are excises ... while surtaxes, excess profits and
war-profits taxes are direct property taxes." Surtaxes are the graduated
taxes of the income tax, so this court holds that the personal income tax is a
direct tax. But in Ficalora v. Commissioner,
751 F.2d 85, 87 (2nd Cir. 1984), that court stated that the personal income tax
was an indirect tax: "[T]he Supreme Court explicitly stated that taxes on
income from one's employment are not direct taxes and are not subject to the
necessity of apportionment." But compare United States v. Sitka,
845 F.2d 43, 46 (2nd Cir. 1988) (citing Parker, infra, for the
proposition that the tax is direct). In the Third Circuit, it has been held in
one case that all income taxes are direct, but in another that only some are
direct; see Keasbey & Mattison Co. v. Rothensies,
133 F.2d 894, 897 (3rd Cir. 1943) ("[A]n income tax is a direct tax upon
income therein defined"); and Penn Mutual Indemnity Co. v. Commissioner,
277 F.2d 16, 19 (3rd Cir. 1960) ("Pollock .... only held that a tax
on the income derived from real or personal property was so close to a tax on
that property that it could not be imposed without apportionment. The Sixteenth
Amendment removed that barrier").
In the
remainder of the Circuits, the difference of opinion as to whether the federal
income tax is a direct or indirect tax is likewise as profound and confusing. In
the Fourth and Sixth Circuits, the income tax has been held to be an excise
tax; see White Packing Co. v. Robertson, 89 F.2d 775, 779 (4th Cir.
1937) ("The tax is, of course, an excise tax, as are all taxes on
income..."); and United States v. Gaumer,
972 F.2d 723, 725 (6th Cir. 1992) ("Brushaber and the Congressional
Record excerpt do indeed state that for constitutional purposes, the income tax
is an excise tax"). However, in the Fifth, Seventh, Eighth and Tenth
Circuits, arguments that this tax is an excise have been squarely rejected and
determined to be frivolous. For example, in Parker v. Commissioner, 724
F.2d 469, 471 (5th Cir. 1984), the court clearly rejected the contention that
this tax is an excise:
"The Supreme Court promptly determined in Brushaber...
that the sixteenth amendment provided the needed constitutional basis for the
imposition of a direct non-apportioned income tax.
"The sixteenth amendment merely eliminates the
requirement that the direct income tax be apportioned among the states.
"The sixteenth amendment was enacted for the
express purpose of providing for a direct income tax."
In Coleman
v. Commissioner, 791 F.2d 68, 70 (7th Cir. 1986), the court held that an
argument that this tax was an excise was frivolous on its face ("The power
thus long predates the Sixteenth Amendment, which did no more than remove the
apportionment requirement..."). A similar conclusion was reached in United
States v. Francisco, 614 F.2d 617, 619 (8th Cir. 1980), that court
declaring that Brushaber held this tax to be a direct one:
"The cases cited by Francisco clearly establish
that the income tax is a direct tax, thus refuting the argument based upon his
first theory. See Brushaber v. Union Pacific Railroad Co., 240 U.S.
1, 19, 36 S.Ct. 236, 242, 60 L.Ed.
493 (1916) (the purpose of the Sixteenth Amendment was to take the income tax
'out of the class of excises, duties and imposts and place it in the class of
direct taxes')".
Finally, in United
States v. Lawson, 670 F.2d 923, 927 (10th Cir. 1982), that court expressed
in the following fashion its contempt for the contention that the federal
income tax was an excise:
"Lawson's 'jurisdictional' claim, more
accurately a constitutional claim, is based on an argument that the Sixteenth
Amendment only authorizes excise-type taxes on income derived from activities
that are government-licensed or otherwise specially protected... The contention
is totally without merit... The Sixteenth Amendment removed any need to
apportion income taxes among the states that otherwise would have been required
by Article I, Section 9, clause 4."
Therefore,
while the Supreme Court rejected in Baltic the argument that "the
16th Amendment authorized only an exceptional direct income tax without
apportionment," this position now prevails in the Fifth, Seventh, Eighth
and Tenth Circuits. In the Second Circuit, the existing authority illogically
claims that the tax is both.
A direct tax
applies to and taxes property while an indirect, excise tax is never imposed on
property but usually an event such as sales; see Bromley v. McCaughn, 280 U.S. 124, 50 S.Ct.
46, 47 (1929). Those
courts which hold that an income tax is a direct property tax believe that
income is property, yet those which hold that this tax is an excise declare
that income is not property. If the courts of this nation cannot identify what
is the nature of this ephemeral item known as income, then
how can the American people? While in Critzer
the difference of opinion existed between two government agencies, here the
difference of opinion is among many different courts, a situation far more
serious than that presented in Heller. Aren't we being subjected to a
monumental due process problem far bigger than that to which Mrs. Critzer was subjected?
The question
of what constitutes property is an issue governed by state law; see Aquilino v. United States, 363 U.S. 509,
512-13, 80 S.Ct. 1277, 1280 (1960), and United
States v. Baldwin, 575 F.2d 1097, 1098 (4th Cir. 1978). The definition of
the term, "property," is very broad; see Samet
v. Farmers' & Merchants' Nat. Bank, 247 F. 669, 671 (4th Cir. 1917)
("Property is .... everything that has exchangeable value or goes to make
up a man's wealth"). It includes money, credits, evidences of debt, and choses in action; see State v. Ward, 222 N.C. 316,
22 S.E.2d 922, 925 (1942). Income is property according to St. Louis Union
Trust Co. v. United States, 617 F.2d 1293, 1301 (8th Cir. 1980). Accrued
wages and salaries are likewise property; see Sims v. United States, 252
F.2d 434, 437 (4th Cir. 1958), aff'd., 359 U.S.
108, 79 S.Ct. 641 (1959); and Kolb v. Berlin,
356 F.2d 269, 271 (5th Cir. 1966). Accounts receivable are property; see In
re Ralar Distributors, Inc., 4 F.3d 62, 67 (1st
Cir. 1993). Even private employment and a profession are considered property;
see United States v. Briggs, 514 F.2d 794, 798 (5th Cir. 1975).
There
appears to be no dispute about the plain requirements of the Constitution that
direct taxes must be apportioned and that indirect taxes must be uniform.
Likewise as shown above, there is a line of decisional authority regarding the
generally accepted proposition that income is property, although there are
courts which deny this. In James v. United States, 970 F.2d 750, 755,
756 n. 11 (10th Cir. 1992), the 10th Circuit made it clear that income is
property. Pursuant to United States v. Lawson, supra, the 10th
Circuit declares that the property known as income is subject to tax under the
view that the 16th Amendment eliminated the apportionment requirement for a
specific class of property known as income. However, there is ample contrary
judicial authority which demonstrates that this construction of the 16th
Amendment is erroneous and that the purpose, intent and meaning of the
amendment was the opposite construction and that the amendment did not free
this one type of property tax from the regulation of apportionment. An error in
a logical argument involving a single premise affects the ultimate conclusion.
If the 10th Circuit accepted the proposition that the meaning of the 16th
Amendment was contrary to that asserted in Lawson, but adhered to its decision
in James, a valid legal argument would logically follow that property known as
income could not be taxed because the current income tax is not apportioned.
This same
problem, but from an opposite perspective, is evident within the Fourth Circuit
where the existing authority of Sims v. United States, supra,
declares that income is property. Since that Circuit holds that the federal
income tax is an excise via White Packing Co. v. Robertson, supra,
and since the definition of an excise tax appearing in that Court's opinion in New
Neighborhoods, Inc. v. West Virginia Workers' Comp. Fund, 886 F.2d 714, 719
(4th Cir. 1989), excludes a tax on property, does it not logically follow that
there is a tremendous gap in the decisional authority within the Fourth Circuit
which presents a view of the law that the property known as income might not be
taxed? Based on these cases, is this tax clearly imposed?
Review of
the above noted authority in other circuits and states only demonstrates how
profound this problem is. In the 6th Circuit, United States v. Gaumer, supra, declares the income tax to be an
excise; via Jack Cole Co. v. MacFarland, 337
S.W.2d 453, 455-56 (Tenn. 1960), the Tennessee Supreme Court has held that an
excise tax cannot be used to tax the right to earn a living. Which authority do
the people living in Tennessee
follow? If they follow the word of their own state court, they might be charged
with a tax crime, yet they have a right to rely upon the word of the courts,
even when erroneous; see United States v. Albertini,
830 F.2d 985, 989 (9th Cir. 1987). A different problem emerges in the 8th
Circuit where United States v. Francisco, supra, holds that an
income tax is a direct property tax. Missouri
is within the 8th Circuit, but the Missouri Supreme Court held in Ludlow-Saylor
Wire Co. v. Wollbrinck, supra, that an
income tax is an excise; if income is not property under Missouri
state law,
then how does this federal property tax operate as to this
"non-property"? Iowa is
also in the 8th Circuit, but in Hale v. Iowa State Board of Assessment and
Review, 223 Iowa 321, 271
N.W. 168, 172 (1937), that court held that "income is not property within
the law of taxation." If state law holds that income is not property yet
the federal appellate court for the same state holds the exact opposite, is not
a serious uncertainty of the law, due process problem clearly evident?
The
decisional authority within the 5th Circuit, Parker v. Commissioner, supra,
holds that this tax is a direct property tax, but a contrary view prevails in Mississippi
where its citizens are told that an income tax is an excise; see Hattiesburg
Grocery Co. v. Robertson, supra. The courts in Wisconsin and Indiana,
via State v. Frear, supra, and Miles
v. Dept. of Treasury, supra, have found this tax to be an excise,
yet the federal appellate court which encompasses these two states has an
entirely different view of the object of the tax; see Coleman v. Commissioner,
supra. The 10th Circuit, which sits in Denver, held in Lawson, supra,
that the income tax is a property tax, yet a state court in the same city has
declared that such a tax is an excise; see California Co. v. State, supra.
In Alabama,
income is property via Eliasberg Bros.
Mercantile Co. v. Grimes, supra; but next door in Georgia
via Featherstone v. Norman, it
is not. While the 11th Circuit appears not as yet to have passed upon the
question of what type of tax the federal income tax is, consultation of Supreme
Court decisions still doesn't resolve the question. By following the rationale
of Brushaber and Bromley, supra, which declare the federal
income tax to be an excise tax which is not imposed on property, are the people
of Alabama exempt from this tax
while those in Georgia
are not? But by reversing the choice of Supreme Court decisions to follow in an
effort to resolve this controversy merely changes the results but not the
problem. By following Eisner which seems to hold that the tax is imposed
on property, do the people of Alabama
owe the tax while those in Georgia
do not? These differing conclusions plainly reveal a serious uncertainty about
what is taxed, and I do not attempt herein to offer any explanation for all of
this inconsistency; the fact of the matter is that I cannot other than to
allege that this is uncertainty of the law creates a serious due process
problem.
The problems
created by the failure of American courts to determine what is the nature of an
income tax are very broad. Any particular federal tax must fit within one of
the two constitutional tax categories and once the category is known, it may be
determined whether the tax in question complies with the constitutional
regulation for imposition of that type of tax. A direct tax which is uniformly
imposed would still be unconstitutional as one imposed in the absence of
apportionment. An indirect tax imposed via apportionment would likewise be
unconstitutional since it would not be uniform. But if it is impossible to
determine which class any given tax falls within, then it is likewise
impossible to determine which constitutional regulation, if any, applies to
that tax. If the courts of this nation hold that an income tax is both an
excise tax and a direct one, it cannot with any degree of certainty be
determined what constitutional restrictions might or might not apply to this
tax or what is even the meaning of the 16th Amendment. What's more, it cannot
be determine what is income, whether property or non-property.
But this is
not the only fundamental problem for the federal income tax. Additionally, the
question of which statute controls the duty to file income tax returns is
subject to judicial dispute. In Commissioner v. Lane-Wells Co., 321 U.S.
219, 222, 64 S.Ct. 511, 513 (1944), the Court noted
that Sect. 54 of the 1939 Internal Revenue Code, the predecessor for Internal
Revenue Code Sect. 6001, related to the filing requirement; see also Updike
v. United States, 8 F.2d 913, 915 (8th Cir. 1925). In True v. United
States, 354 F.2d 323, 324 (Ct.Cl. 1965), United
States v. Carlson, 260 F.Supp. 423, 425 (E.D.N.Y. 1966), White v. Commissioner,
72 U.S.T.C. 1126, 1129 (1979), McCaskill v.
Commissioner, 77 U.S.T.C. 689, 698 (1981), Counts v. Commissioner,
774 F.2d 426, 427 (11th Cir. 1985), Blount v. Commissioner, 86 U.S.T.C.
383, 386 (1986), and Beard v. Commissioner, 793 F.2d 139 (6th Cir.
1986), these courts held that Internal Revenue Code Sect. 6011 related to the
filing requirement. In United States v. Moore, 627 F.2d 830, 834 (7th
Cir. 1980), United States v. Dawes, 951 F.2d 1189, 1192, n. 3 (10th Cir.
1991), and United States v. Hicks, 947 F.2d 1356, 1360 (9th Cir. 1991),
those courts held that Internal Revenue Code Sect. Sect. 6011 and 6012 governed
this duty. In contrast, the cases of Steinbrecher
v. Commissioner, 712 F.2d 195, 198 (5th Cir. 1983), United States v.
Bowers, 920 F.2d 220, 222 (4th Cir. 1990), and United States v. Neff,
954 F.2d 698, 699 (11th Cir. 1992), held that only Sect. 6012 governed this
duty. But in United States v. Pilcher, 672
F.2d 875, 877 (11th Cir. 1982), none of the above sections were mentioned and
it was held that Sect. 7203 required returns to be filed. It is very apparent
that there is even a diversity of opinion among judges regarding which sections
of the Internal Revenue Code govern the requirement to file income tax returns.
The
observation of the dissenting judge in Culliton
v. Chase, 25 P.2d at 89-90, that this "disagreement of the courts and
judges on identical problems seems to afford the highest proof that 'reasonable
doubt' does exist," is particularly appropriate here. If American courts
cannot decide such fundamental questions as what is the nature of the income
tax and which section of the Internal Revenue Code requires the filing of an income
tax return, then it is obvious that a serious due process problem exists within
the federal income tax laws.
If American
courts cannot decide such fundamental questions as what is the nature of the
income tax and which section of the Internal Revenue Code requires the filing
of an income tax return, then it is obvious that the problem with this tax
involves these basic questions. Since even the courts are split over these
questions, shouldn't we just scrap the whole thing since the condition which exists
is incapable of repair?
In 1913
during the debate on the first income tax act under the 16th Amendment, Senator
Elihu Root commented about the complexity of that
first law:
"I guess you will have to go to jail. If that
is the result of not understanding the Income Tax Law I shall meet you there.
We shall have a merry, merry time, for all of our friends will be there. It
will be an intellectual center, for no one understands the Income Tax Law
except persons who have not sufficient intelligence to understand the questions
that arise under it."
Apparently, nothing has changed.