Brushaber v. Union Pacific R.R. Co.
(1916)
Brushaber v.
Union Pacific R.R. Co. (1916)
This
Supreme Court case, Brushaber v. Union
Pacific R.R. Co., is the very first decision handed down by the Supreme
Court regarding the constitutionality of the Subtitle A income tax laws enacted
in 1913. HOWEVER, it is not a case about
any individual (Brushaber) paying income tax directly, it is a case about contesting the legal duty TO COLLECT INCOME TAX, not pay it ! This
decision, together with the Stanton decision,
a case about a CORPORATION paying
the income tax on
its MINING (of commodities) activity,
handed down consecutively, immediately after this one, are still the
recognized, controlling Supreme Court decisions on the issue of the
constitutionality of the income tax laws.
In the very first sentence, of the very
first paragraph of this decision, it clearly states:
“As a stockholder…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,
supra at 9
Do you know what a TARIFF is? A TARIFF
is a tax laid on FOREIGN GOODS entering America and on FOREIGN ACTIVITY occurring IN America.
BY DEFINITION, A
TARIFF CANNOT BE A TAX LAID ON DOMESTIC ACTIVITY OR DOMESTIC LABOR IN
AMERICA!
And then, on page
21 of this (Brushaber) Decision, the
Supreme Court tells us how the tax is to be collected:
"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 on interest due on bonds and mortgages,
unless the owner to whom the interest is payable gives a notice that he claims an exemption.. This duty cast upon corporations, because of the cost
to which they are subjected, is asserted to be repugnant to due process of law
as a taking of their property without compensation…"
Brushaber v. Union Pacific
R.R. Co., 240 US 1, 21 (1916) (Entire
text of ruling)
I am going to show you the omitted
portion, the “…”, in a moment, but first
notice that the Court identifies in this decision that the tax is collected
through the legislatively created duty of the “corporations, etc.”, to “retain and pay the sum of the tax”.
In this case the Court recognizes that it was the federal tax
collectors, the “corporations,
etc.”, the legislatively defined "Withholding Agent" who, under the laws enacted, had to
collect the income tax and pay the collected tax over to the Treasury. The case does not say that the income
tax is paid by individual citizens directly to the government because the
scheme of the tax being tested in this case, is the “scheme” of collecting the tax at the source. This case is not about citizens having to pay
income tax on their own income because that is not in the law. This case is about the allegedly undue burdens imposed on the
company in being made a federal tax collector in the form of a Withholding Agent, with a legal duty
imparted by the tested legislation to collect tax for the federal government as
a Withholding Agent.
It says right there in that first
sentence that “As a stockholder…the appellant filed his bill to enjoin the corporation from complying with the income tax
provisions…”. Frank Brushaber filed this
suit not because tax was being taken
from him, and NOT because he had to
pay the tax himself on his own income, but to contest the burden laid upon his corporation in being forced to bear the burden and expense of
being made a federal tax collector in the form of a Withholding
Agent, and as such, to consequently collect income tax for the federal government from certain persons. As a shareholder (an owner of the company),
Frank Brushaber had legal standing to
contest the legal and economic burdens
placed on the company by the legislation in mandating that the company collect tax for the federal government
from certain persons.
And Treasury
Decision 2313 clearly shows the
Orders emanating from the Treasury as a resultant of this Supreme Court
decision. That Treasury Decision says to
collect the income tax from foreign persons, not citizens.
The
Brushaber decision determined that since the provisions of Article I of the
Constitution regarding direct taxation were not repealed or amended, and since
it is improper to use one provision of the law to destroy another, then those Article I provisions are still in
full force and effect. (Article I,
Section 2, Clause 3 specifies that Direct taxes must be apportioned (to
the state governments for collection), and Article I, Section 9, Clause 4
requires that any direct tax be laid in proportion to the census.)
The
Court ruled, in assessing whether or not the tested legislation imposed a
direct or indirect income tax, that:
“We are of opinion, however, that the confusion is not inherent, but rather arises from the conclusion that the 16th Amendment provides for a
hitherto unknown power of taxation; that is, a power to levy an income tax
which, although direct, should not be subject to the regulation of
apportionment applicable to all other direct taxes. And the far-reaching effect of this erroneous assumption will be made clear…” Brushaber v. Union Pacific R.R., 240 U.S. 1, 11 (1916)
Here the Court states that it is an erroneous conclusion to believe that the 16th
Amendment did away with apportionment requirement regarding direct taxes. And, in further denying the proposition and contention that the 16th
Amendment authorizes a direct income tax, the Court very clearly states:
“…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 Amendment exempting a direct tax from apportionment into
irreconcilable conflict with the general requirement that all direct taxes
be apportioned ... This result … would
create radical and destructive changes in our constitutional system and
multiply confusion.” Brushaber
v. Union Pac. R.R., 240 U.S. 1, 12
The
Court recognized that since the power granted by the Amendment to tax income,
by virtue of the wording of the 16th Amendment itself, is "without
apportionment", then it cannot be applied as a direct tax, because direct
taxes MUST still be apportioned, as
per Article 1, Section 2, Clause 3, and must be laid in proportion to the
census, as per Article 1 Section 9, Clause 4. So, under the 16th
Amendment, the income tax authorized is an
indirect tax, not a direct tax.
And the 16th Amendment also does not provide for any “new” type of tax, or
power to tax, or third category of federal taxation, besides direct and
indirect.
Now, if you remember, indirect taxes can only
be either an impost, a duty, or an
excise, as clearly specified under Article 1, Section 8, Clause 1 of the
Constitution. Imposts are taxes on foreign activity or goods entering the
country, duties are taxes on activity or goods leaving the country, and according to the Supreme Court excise taxes are taxes on corporations, and on commodities,
licenses and certain taxable activities.
Do
I need to remind you that the Supreme Court identified in the first sentence of
this decision that they are testing the provisions of a TARIFF ACT? And that a
tariff, being applied to foreign
goods and activity entering the country, is one form of an impost!
According
to the Supreme Court, the 16th Amendment does nothing in
the way of creating a new taxing power or authority to tax (directly). It (the 16th Amendment) merely prevents the income tax from being moved out of the category
of INdirect taxation to which it
inherently belongs.
Clearly,
even under the 16th Amendment, the income
tax actually enacted by the tested
legislation, is done so as an indirect tax. It is not a direct tax without apportionment, as
deceptively and fraudulently claimed by the I.R.S. The Eisner v Macomber
decision confirms this.
Now,
I told you earlier I was going to show you the part in the middle, the “…”,
well here it is (below). One should
note, that while the court identifies that the withholding of income tax from
the “interest on bonds and mortgages”
is the extent of the authority of the
law under the instant circumstances before the court in this matter, and the
focus of this specific case, , i.e.:
"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 on interest due
on bonds and mortgages, unless the owner to whom the interest is payable gives a
notice that he claims an exemption. …" Brushaber v. Union Pacific R.R. Co.,
240 US 1, 21 (1916) (Entire
text of ruling) ;
that is not the extent
of the legal authority of the Withholding Agent in the law to withhold income tax,
it is just the focus of the circumstances of the case, and specific application
of the law, in the instant matter (Brushaber).
The
Withholding Agent is tasked under the
law with the requirement to withhold tax on “interest … dividends, rent, salaries, wages, premiums,
annuities, compensations, remunerations, emoluments, or other fixed or
determinable annual or periodical gains, profits, and income,...” under the provisions of 26 U.S.C. Sec 1441(b) . This provision exists, both still in today’s
law, and also under the original instructions to the collectors of internal
revenue provided in Treasury Decision 2313,
distributed by the Treasury Department immediately after this Brushaber decision was handed down in
1916.
Also, please note that the withholding of tax is not required if:
“…the owner to whom the interest is payable gives a notice that
he claims an exemption”.
Could that exemption be the exemption of the American citizens, from the collection at the source by withholding, provided
for in regulation, and also, consistently provided as instructions to the
federal tax collectors in Publication 515.
Does Treasury
Decision 2313 instruct the collectors of internal revenue to collect the
income tax from citizens, or from non-resident aliens
and foreign corporations?
The
Brushaber decision concludes by referring the reader to the Flint v. Stone Tracy Co. (1911) decision, handed down
five years earlier, for the definition of excise taxes, setting the stage for the enforcement of the income tax as a corporate
tax and as a tax on the revenue derived from alcohol, tobacco and firearms
activities and sales, and other excise taxable activities involving commodities
UNDER Subtitles D and E of Title 26.
In
this case (Brushaber) The Supreme
Court tells Frank Brushaber (an American citizen) that the tax IS Constitutional as an indirect tax, and that he (Brushaber) cannot interfere with its
scheme of collection at the source by withholding, or the duty of the
corporation to withhold tax from certain persons
identified in the law. The court
knew that where the burden of the tax is shifted away
from the third party tax collector and to the subject taxpayer by withholding,
and that where there is no contact between the government and the taxpayer,
only between the government and its tax collectors, that the tax is classically indirect, and recognized
that the tax was therefore constitutional, and was not imposed by the enacting legislation as a direct tax without
apportionment on all persons, or on all income, in
the United States, but , rather, was imposed as an indirect tax in the form of a corporate excise and as an
individual tax that is collected
indirectly by federal tax collectors, those Withholding Agents, by withholding.
The
IRS relies on, and cites this Supreme Court ruling as absolute proof that the
income tax IS CONSTITUTIONAL, AND THEY
ARE RIGHT. HOWEVER, Frank Brushaber, a citizen, filed this law suit “as a
stockholder of the corporation” to try and prevent the company from
having to take on the administrative duties and expenses of determining, and
keeping track of, from whom to withhold tax and how much. Most
of this case is about whether or not there is an undue burden placed on the
company in being made a Withholding Agent
and compelled to perform as a tax collector for the government. It is not
about individual citizens paying tax.
Frank got told that he could not
interfere with the collection of the tax because the Court determined that the
burden placed on the company is not un-due or too great a burden to bear. HOWEVER, he never got told to pay tax on
his own income as a U.S. citizen living and working in one of the fifty states. He was never told to file a FORM 1040
reporting his own income. That was not
the scheme of the tax enacted within the legislation whose constitutionality
was being tested by the Court in this case.
The scheme being tested was that of “collection at the source”, of a
tariff, or foreign tax, that is withheld at the source by Withholding Agents, acting as federal tax collectors who withhold
tax from payments made to certain persons who are
made subject to the withholding of tax by the provisions of the statutes. If you don't believe me, please check the (entire
text of the ruling) and note the very first sentence.
This is a case about the duty and
burdens of the Withholding
Agent to withhold tax from
non-resident foreign “persons”, who have NO rights under the
Constitution, and who are under the federal
jurisdiction over foreign affairs established for the federal government in the
Constitution to exercise, and who, under the law, are the true and proper
subjects of a tariff. It is not a case
related to the taxation of a citizen's own domestic income earned by
right. This is a case about whether or
not being forced to act as a federal tax collector is a lawful burden,
and being compelled to withhold tax as a tax
collector is a legitimate tasking by the Congress. The Court says it is.
BUT, It is a fundamental fraud to
misrepresent this case as applicable or related to the issue of the domestic
taxation of a citizen’s own income, as the IRS has done for over 60 years !!!
According to the Supreme Court in 1916,
THERE IS STILL NO DIRECT TAXATION OF WE THE PEOPLE. This is still true, even after the 16th
Amendment:
UNDER THE ACTUAL PROVISIONS
OF THE LAW, the INCOME TAX IS AN INDIRECT FOREIGN TAX
(tariff)!
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Last Update: 02/28/07
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