Section 86. And be it further enacted, that on and after the first day of August, eighteen hundred and sixty-two,
there shall be levied, collected, and paid on all salaries of officers, or payments to persons in the civil, military,
naval, or other
employment or Service of the United States, including senators and representatives and delegates in Congress, when
exceeding the rate of six hundred dollars per annum, a duty of three per centum on the excess above the said six
hundred dollars; and it
shall be the duty of all paymasters, and all disbursing officers, under the government of the United States or in
the employ thereof, when making any payments to officers and persons as aforesaid, or upon settling or adjusting
the accounts of such
officers and persons, to deduct and withhold the aforesaid duty of three per centum, and shall, at the same time,
make a certificate stating the name of the officer or person from whom such deduction was made, and the amount
thereof, which shall be
transmitted to the office of the Commissioner of Internal Revenue, and entered as part of the internal duties;
and the payroll, receipts, or account of officers or persons paying such duty, as aforesaid, shall be made to
exhibit the fact of such
...[balance of section 86 applied to passports]
Please note that the only people who were subject to this duty were primarily the officers serving in the northern armies fighting in the civil war and other Federal Employees. The EFFECT of Section 86 identifies what it really is - a kickback of part of the property agreed under contract to be paid for the service of military officers and for the labor of Federal government employees. By this Act the amount of compensation contractually agreed to was diminished by one party to the agreement (Congress), without the consent of the other party (the federal officers and employees). A unilateral change in the employment contract of all persons already in the employ of the Federal government was not legal just because Congress promulgated it as a law, and the conduct of the United States judges for the next 70 years proves it, as they refused to pay this "duty" until after 1932. The result of arranging for the withholding of three percent of the compensation due Federal government employees under existing contracts was deprivation of property and liberty without due process of law, which is violative of the Fifth Amendment to the Constitution.
In 1863 Supreme Court Chief Justice Taney sent a letter to the Secretary of the Treasury attacking implementation of Section 86 on the compensation of Federal judges as being unconstitutional. This letter was also published as a Supreme Court decision (157 U.S. 701). In it, Justice Taney states:
Here you can see that the judges understood the effect of this law was a diminishment by the name of a tax". They knew it was not an actual tax, but a forced debt obligation. In this country there exists no circumstance under which a person lawfully can be forced to accept a debt against their will. The judges chose to exercise their right to refuse to accept this debt.
The facts presented above were expressed by the Supreme Court in Pollock v Farmer's Loan & Trust Co. in 1895 where they said:
The "tax" program illegally forced a three percent debt obligation upon Federal government employees working
under an existing employment agreement in 1862. However the "tax" program established by Section 86 was
legal when applied to the salary of persons who took employment with the Federal government after the Act was
passed because they were on notice that a three percent duty (kickback) was part of their employment agreement.
This "tax" (Duty), only applied to Federal Officers and Employees. It is these two acts from the 1860's, the Income Duty and the Federal Employment tax, whose provisions served as part of the foundation and model for the income tax passed in 1913, which again was imposed only on a small group of persons, just like in 1861. The small group upon which the tax was imposed in 1913 is those non-resident foreign persons and foreign corporations earning money in the United States and on all persons with income in the territories and possessions (where the federal government holds jurisdiciton), but not on citizens in the fifty states where the federal government is not the jurisdictional authority (the State government is).
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