The tax activists of the Sixteenth Amendment of the United States Constitution argued that the claims of the obligation of the U.S.A national income tax regime was unconstitutional, because the Sixteenth Amendment of the Constitution was never properly ratified by the U.S, and that the modifications done did not provide the mandate to tax income on individuals. Tax protesters disputed the proper approval of the Sixteenth Amendment arguing that the quoted wording of the Amendment was different from the text proposed by the Congress and that Ohio was not a State during the time of ratification. In most court cases where this issue of the Sixteenth Amendment ratification arguments has been raised, the courts have rejected it arguing that it is a law suits that has little to no chance of winning. Hence it was regarded as not having any serious value of being presented in court.
Other activists argued that since the Sixteenth Amendment did not include the repeal clause, thus, the modification would not be effective in changing the law as regards taxation. Some argued that from its definition, income tax is an inequitable direct tax that should be apportioned equally amongst the citizens of the various states. Several tax protesters claimed that the Congress had no constitutional right to tax revenue earned from labor. These arguments include assertions that the term income cannot be perceived as applying to wages in accordance to its usage in the Sixteenth Amendment; in that wages are not regarded as income because labor is provided only in exchange of income.
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Therefore, the taxing of wages tampers with a person's right to own property and make viable investments. These protesters also argued that because the national income tax is a progressive type of tax, the inequalities and discriminations created by this tax render it unconstitutional under the amendment, which was meant to ensure equal protection under the law. However, these arguments have been ruled to be frivolous according to court precedents under contemporary jurisprudence and therefore evading taxes is a punishable criminal offense in the United States (United States of America v. George M. House and Marion M. House).
Countless tax protesters argue that the Sixteenth Amendment to the Constitution of United States was never appropriately endorsed. This non-ratification argument was tabled by defendant James Walter Scott in the case of United States v. Scott. (United States v. Scott) This case was presented after some sixty-two years subsequent to the approval of the Sixteenth Amendment. The defendant, who regarded himself as a federal tax resistance leader was found guilty of intentionally failing to file state income tax returns. Bob Tammen who was a member of United Tax Action Patriots; a group that held the position that the Sixteenth Amendment was improperly passed and was therefore invalid; he was however found guilty of evading taxes. The United States District Court for the Northern District of Texas disregarded his controversy with the Ratio decidendi being that his argument was invalid.
Two contentious issues in court cases finally developed after the Scott and Tammen rulings. The initial line of cases dealt with the assertions of William J. Benson, a co-author of the book entitled The Law That Never Was. While the second group of cases involved the controversy that Ohio was not a state in 1913 at the time that the Constitution was approved. The Benson controversy is basically concerned with the administration of the various states that passed the ratification declarations, in which the quoted manuscript of the Amendment was different from the wording proposed by Congress in terms of spelling, capitalization of words and proper punctuation of text. He argued that these disparities rendered the endorsement null and void. Benson also made other claims which asserted that some states which had rejected the modification had been falsely described as having approved the Amendment, which was actually not the case. The Benson contentions have been rejected in every court case where they have been raised, and a Stare decisions was ruled out in 2007 that his claims were explicitly fraudulent to his customers (Beckman).
The contentious issues Beckman and Benson discovered as regards the ratification were actually issues that the Secretary of State, Knox had essentially considered in 1913. Of the thirty-eight states that endorsed the sixteenth amendment, thirty-seven sent officially formal documents of confirmation to the Secretary of State, while Minnesota replied orally. Though, only four documents used the actual wording of the sixteenth amendment identically to what the Congress had approved. The other instruments from the other states contained blunders in spelling, capitalization, diction and punctuation. The original manuscript Congress sent to the states was: "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." Owing to the grammatical errors most states made, this became the basis of countless controversies regarding the proper ratification of the sixteenth amendment of the Constitution.
Arguing from the book by M. Beckman and W. Benson and a review of the documents pertaining to the ratification of the sixteenth amendment, it is actually only four states that ratified the sixteenth amendment. Therefore, they are of the opinion that the official execution of this amendment by the Secretary Knox in 1913 was consequently unacceptable. Based on these arguments, some tax protesters declined to file tax returns because they perceived the sixteenth amendment to be against the law, as it was not properly approved. Thomas, a tax protestor argues that because the states did not endorse exactly the same content, then the amendment did not go into effect as intended. The Secretary Knox evaluated this argument but the Solicitor of the Department of State advised the secretary to proclaim the amendment as adopted. He argued that the errors in the documents were insignificant and not enough ground to nullify the enactment of this document (Beckman).
There were other protesters who advocated that conformity on literal text is the only way to make a legal document operational, a view similarly expressed by most state courts. However, the Supreme Court considers the enrolled bill rule, whereby if a law enacting instrument is regarded as genuine in its standard form by the authorized officials then such a court should treat that instrument as appropriately approved. Similarly, this precedent is also applicable to constitutional amendments. Secretary Knox declared that enough states had approved the sixteenth amendment, implying that it was properly ratified therefore citizens have no otherwise other than accept it as effective. This portrays that issues and questions regarding ratification of amendments are not a defense in the court of law.
William J. Benson was also arraigned in court and convicted of evading taxes and willingly failing to file tax returns, but he lost the case as the court rejected his argument regarding the ratification of the sixteenth amendment. In 2007, the Northern District Court of Illinois made a ruling that Benson's contentious arguments regarding the ratification constituted a fraud that Benson had perpetrated and that he had caused unnecessary misunderstanding among the citizens. The court declared that Benson had misled people by not presenting substantial evidence that would form the basis of a legitimately disputed fact as regards whether the Sixteenth Amendment was appropriately approved or whether the citizens of United States are legally obliged to pay taxes to the state.
Ohio not being a state by the time ratification was done was another claim some tax protesters.
They argued that the Congress had not passed an official declaration recognizing admittance of Ohio to statehood until 1953. Therefore, the Sixteenth Amendment was in actual sense not properly ratified. This argument has also been rejected uniformly by the courts. The arguments that the Sixteenth Amendment was not properly ratified together with its disparities have been publicly identified as baseless lawsuits for the purposes of federal taxes and filing of returns. The tax protesters also argued that in light of the language used in the amendment, income tax was unconstitutional since direct tax is a tax that should be apportioned equally among all citizens who earn an income under the protection of the state.
In my opinion, the sixteenth amendment was properly ratified as opposed to the views of a few tax protesters. Since the original manuscript was prepared by effective officials, then this implies that despite the few grammatical errors that some states committed in their documents; this document was properly ratified as those errors were insignificant as regarding the context of this amendment. The Sixteenth Amendment is deemed to be effective because there is no article in the Constitution that stipulates that an amendment must exclusively revoke another stipulation of the Constitution. Because, according to common practice, most amendments are rarely revoked by an earlier stipulation. If this argument was to be upheld, then various articles of the Constitution would not hold as of today.
With respect to income taxes, the ratification of the Sixteenth Amendment is immaterial as regards whether a tax is direct or indirect. The principal purpose of the Sixteenth Amendment was to relieve all income taxes from apportionment when imposed and from the ideology of having to consider the source from which income was derived.
Definition of Net Income according to the revenue act of 1913
The Revenue Act of 1913 defines net income as any income, gain or profit from the operation of any lawful business transaction or remuneration derived from any other legal sources like personal services delivered from which a person earns wages, salaries or any other form of compensation used to remunerate irrespective of its kind either in monetary form or in kind. The income could be derived from businesses, professions, trade, vocations, dealings in property, both personal and real and also from deemed sources like dividend, rent and interest from investments also form part of the net taxable income of an individual. Expect for allowable deductions and exemptions like contributions to registered life insurance schemes for individual and family.
The progressive tax system implemented by the states meant that the high income earners were to pay more taxes. Tax protesters in this regard argued that because the national income tax is a progressive type of tax, then the inequalities and discriminations created by this tax rendered it unconstitutional under the amendment, which was meant to ensure equal protection of individuals under the law in matters concerning levying of taxes by the state. These tax protesters would still be subject to paying income tax in the absence of the 16th Amendment, because income from personal services rendered is taxable irrespective of the apportionment (Hylton v. United States).
In accordance to my view; the Revenue act of 1913 clearly defines net income. This act stipulates clearly the various sources of income which are eligible to tax. It also indicates the specific types of incomes that fall under the jurisdiction of tax for instance wages and salaries. The Act outlines the allowable and disallowable sources of income regarding taxation. Hence, in my opinion this Revenue Act evidently describes net income, in a way that is clear and easily understandable by all people ( Pollock v. Farmers' Loan & Trust ).