Further, I was aware that a very large proportion of at least the first readers of CtC would be folks already engaged in study of the tax (thanks to the efforts of folks like Irwin Schiff, Miss Lynn Johnston, Otto Skinner and others). Many of these folks would have already taken-in additional and often very disparate myths about the tax especially, and some myths and misunderstandings about the related, broader subjects as well.

In all, then, I saw my obligation as addressing a wide range of readers and perspectives. Accordingly, I include in CtC everything I think is needed to equip readers to recognize that what I reveal about the tax is solidly-founded in the law, and is, in fact, inescapable if the tax is to be harmonious with the broader body of law within which it operates (very much unlike the misunderstanding of the tax, which is clearly DIS-harmonious with the broader body of law and therefore dangerously undermines true understanding of that broader body of law in everyone persuaded to embrace it).

I include clarifications and illuminations directed at many of the myths and misunderstandings unique to the "tax honesty" community. I include historical background and logical analysis of relevant legal and political principles. I include commentary and a little speechifying in an effort to help overcome the natural tendency of folks to close down in the face of information that will force them into seemingly-difficult or even scary decisions.

And I do it all by way of my best effort to be accessible, while maintaining a scholarly voice, and necessarily dipping now and then into esoterica in order to pull some folks back to where the whole forest can be seen and a proper path can be charted through its depths.

To most folks-- many tens of thousands of folks, anyway-- CtC "as is" is just what it needs to be. For some others, though, either the depth of content or the voice with which it is delivered is a bit overwhelming.

Some who find CtC just right for their own purposes nonetheless worry that the depth of content and language with which it is delivered keeps the book from as wide an audience as it might otherwise have if things were simpler. I've heard more than once the advice to endeavor to write to an eighth-grade education in order to maximize the audience (and I agree with this view).

Accordingly, with each edition of CtC, from the second to the current fourteenth, I have worked over selected areas of the book, revising for simplification where possible and and clarification where it seemed to be needed. Accordingly, I wrote 'Was Grandpa Really a Moron?' in 2009, addressing many aspects or implications of the revelations in CtC often asked about (or misunderstood) by readers. Accordingly, I have, over the years, written and compiled a huge volume of in-depth FAQs, "misunderstanding"-corrections, and drill-down papers on various topics (links to most of which can be found here).

Accordingly, I have written simplified treatments of the tax dynamics and made my strictly-amateur but illuminating videos; offered a series of educational quizzes; posted around a thousand examples of the tens of thousands of victories won by CtC readers over the years, hundreds of which include the complete filings that produced them; and written-up and posted scores of fully-documented  victory episodes involving varyingly extensive tax agency resistances and balkiness (some of which are still in progress), each of which is particularly and uniquely illuminating of some aspect of the tax (and/or of the still-intense government efforts to interfere with people's intake of the truth).

Still, though, what I had not done is write a complete, all-in-one-place 'CtC for Dummies' (meant strictly in the sense of the 'For Dummies' series of books-- which is not that those who would be interested are incapable of understanding the original). While I believe that wisdom directs any serious student and activist to the complete presentation, I've decided to write the simpler version as well, and to present the first few chapters as a newsletter serial. Here, then, is part 2 of 'CtC for Dummies':

Chapter Two

The Income Tax Is An Excise, And Has Been Since All The Way Back In 1862

IN THE LAST CHAPTER, I described "indirect" taxes as the variety that arise when YOU want money and you choose to get it using a government's stuff. This choice of resources for your gainful activity creates a basis for that government to claim a "piece of the action" (an "excise").

Excises are not only "indirect" (because they are not imposed by the government's choice, but by your own). They can also be fairly described as "voluntary", because you have chosen to use the government's stuff all on your own, and it is only because of that use that that you become liable for the charge.

The income tax is just such a tax:

"[T]axation on income [is] in its nature an excise..."

A unanimous United States Supreme Court in Brushaber v. Union Pacific R. Co., 240 U.S. 1 (1916)

It is an excise which falls on the gainful use of federal stuff. The "use" itself is actually what is taxable and taxed (rather than the money that results); that's why you've seen the phrase "taxable activity" in regard to the tax.

Here's how long-time Treasury Department legislative draftsman F. Morse Hubbard (a man who wrote tax laws and regulations) put it in testimony to Congress in 1943:

"The income tax... ...is an excise tax with respect to certain activities and privileges which is measured by reference to the income which they produce. The income is not the subject of the tax; it is the basis for determining the amount of tax.”

As Hubbard says, the tax is on the taxable activities, not the money those activities produce. Thus, it is really "taxable activity" that is the "income" in "the income tax".

This is a very important distinction, and for more than merely the sake of academic accuracy. Confusion on this issue can lead people to lose sight of the limited scope of the tax, and that's the last thing we want to do.

The problem arises because the amount of taxable activity that takes place is measured by the dollar value that the activities produce, as Hubbard says, and the taxing government tends to refer to that money itself as "income". This creates the appearance that the tax is laid simply on money (or making money), and obscures the fact that it is only money from "taxable activities" that really has anything to do with "the income tax".

The danger of losing sight of the real limits of the "income tax" to activities using federal stuff is made worse because in common usage 'income' is generally thought of as 'all that comes in'-- that is, as any and all money that someone receives. We can see this confusion at work even in the words of the very knowledgeable F. Morse Hubbard, who inadvertently mixes the tax-relevant term "income" and the word 'income' when explaining the tax. Sorting out his words, we can clarify Hubbard as follows:

The income tax... ...is an excise tax with respect to certain activities and privileges which is measured by reference to the money which they produce. The money is not the subject of the tax; it is the basis for determining the amount of tax.

The real limits of the tax-- and hence, the real meaning of "income" to the tax-- are critically-important to our purpose in studying the subject and ensuring that the tax is properly applied. Therefore, we will adopt the practice from this point forward of only using "income" as the legal term relevant to the tax (that is, as a reference to the conduct of taxable activities and the dollar value by which they are measured), and never in its common-meaning sense as 'all that comes in'. (The reminder-mechanism of quote marks around the term will be employed in an effort to help keep this clear.)

***

SO, THE "INCOME" TAX IS AN EXCISE, and that means a tax on doing gainful things with the tax-claiming government's stuff (by which is effectively meant, with its permission), for which that government can thus naturally claim a piece of the action. The reciprocal, of course, is that things done for which the government's permission is not needed (or for which it has no authority to withhold permission) aren't subject to that tax...

The very first "income tax return" form was very clear about the tax's character. Here is the affirmation (jurat) from that form (with emphasis added):

"I hereby certify that the following is a true and faithful statement of the gains, profits, or income of _____ _____, of the _____ of _____, in the county of _____, and State of _____, whether derived from any kind of property, rents, interest, dividends, salary, or from any profession, trade, employment, or vocation, or from any other source whatever, from the 1st day of January to the 31st day of December, 1862, both days inclusive, and subject to an income tax under the excise laws of the United States."

 This remains true today, as shown by both the words of the Supreme Court and F. Morse Hubbard quoted earlier, and the fact that the tax is not apportioned as is required of all capitations and other direct taxes-- a requirement that has never changed, not even in regard to "income" taxation. There is considerable considerable misunderstanding (and deliberate misinformation) about the Sixteenth Amendment to the US Constitution to the contrary, but it is just misunderstanding and misinformation.

Here is another useful declaration by the Supreme Court from many years after the adoption of the Sixteenth Amendment that rebuts that misunderstanding in one simple paragraph:

"If [a] tax is a direct one, it shall be apportioned according to the census or enumeration. If it is a duty, impost, or excise, it shall be uniform throughout the United States. Together, these classes include every form of tax appropriate to sovereignty. Whether the [income] tax is to be classified as an "excise" is in truth not of critical importance [for this analysis]. If not that, it is an "impost", or a "duty". A capitation or other "direct" tax it certainly is not."

U.S. Supreme Court, Steward Machine Co. v. Collector of Internal Revenue, 301 U.S. 548 (1937) (Emphasis added; citations omitted.)

The court says plainly here that direct taxes must still be apportioned, and that the "income" tax needn't be, because it isn't one (contrary to an argument by the errant party in this case to whom the court is responding). As discussed in Chapter One direct taxes are those imposed by the taxing government's will, whereas indirect taxes, like the "income" tax, arise because of the choice by an individual to conduct a taxable activity, and the only rule that applies is that the rate at which that activity is taxed is the same for everyone.

In fact, all that the Sixteenth Amendment did was overturn an 1895 Supreme Court ruling that had briefly interrupted the application of the already-long-standing tax (the twice-heard case of Pollock v. Farmer’s Loan & Trust, 157 U.S. 429, and 158 U.S. 601, (both 1895)), while making no changes to its pre-amendment nature as an excise.

In its Pollock ruling, the court embraced an argument that when applied to excisable gains realized in the form of dividends and rent, the "income" tax was transformed into a property tax on the personal property sources (stock and real estate) from which the gains were derived. The tax on these fruits, said the court, amounted to a tax on the trees (even though the analogy is less than perfect, since the thing really being taxed is neither the fruit nor the tree, but rather the privileged activity that produced the “fruit”, which might be described as “using government fertilizer to make one’s orchard flourish”).

The Sixteenth Amendment says the Pollock court's conclusion was wrong (or, in any event, is overruled). The amendment provides that Congress can continue to apply the "income" tax to taxable activities without being made to treat the tax as direct and needing apportionment.

Again quoting F. Morse Hubbard from his Congressional testimony:

"[T]he amendment made it possible to bring investment income within the scope of the general income-tax law, but did not change the character of the tax. It is still fundamentally an excise or duty..."

Here are a few other knowledgeable voices explaining the limited meaning and effect of the Sixteenth Amendment:

"In Brushaber v. Union Pacific Railroad Co., Mr. C. J. White, upholding the income tax imposed by the Tariff Act of 1913, construed the Amendment as a declaration that an income tax is "indirect," rather than as making an exception to the rule that direct taxes must be apportioned."

Harvard Law Review, 29 Harv. L. Rev. 536 (1915-16)

"The Amendment, the [Supreme] court said, judged by the purpose for which it was passed, does not treat income taxes as direct taxes but simply removed the ground which led to their being considered as such in the Pollock case, namely, the source of the income. Therefore, they are again to be classified in the class of indirect taxes to which they by nature belong."

Cornell Law Quarterly, 1 Cornell L. Q. 298 (1915-16)

"The Supreme Court, in a decision written by Chief Justice White, first noted that the Sixteenth Amendment did not authorize any new type of tax, nor did it repeal or revoke the tax clauses of Article I of the Constitution, quoted above.  Direct taxes were, notwithstanding the advent of the Sixteenth Amendment, still subject to the rule of apportionment…"

Legislative Attorney of the American Law Division of the Library of Congress Howard M. Zaritsky in his 1979 Report No. 80-19A, entitled Some Constitutional Questions Regarding the Federal Income Tax Laws

TO BE CONTINUED...