*****

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 3 of 'CtC for Dummies':

Chapter Three

The Relevant Meaning Of "Privilege/Permission/Stuff"

WE'VE SEEN THAT THE "INCOME" TAX IS AN EXCISE by designation and by operation (and therefore a "privilege tax"), and is also and in any event prohibited under the Constitutional provision regarding capitations and other direct taxes from imposing liabilities on persons for unprivileged activities. But what exactly does "privileged" mean?

In Chapter One I used the example of someone operating a roadside produce stand. Our vendor can choose to set the stand up on his own property, or he can set it up on federal land. He can sell only his own vegetables, or he can sell the government's vegetables.

If our produce vendor sets up on his own land and sells his own vegetables, he is exercising no government-granted privilege by doing so. He is simply exercising his natural rights, and cannot be subjected to an excise tax for doing so. As the Arkansas Supreme Court puts it in Sims v. Ahrens, 167 Ark. 557, 271 SW 720 594, 595 (Ark. 1925):

"[Although the Legislature may declare as privileges and tax as such for State revenue purposes those pursuits and occupations that are not matters of common right], the Legislature has no power to declare as a privilege and tax for revenue purposes occupations that are of common right."

After all, the government has no skin of its own in this business activity.

On the other hand, if our produce vendor decides that federal land offers a better access to customers, or that the government's produce has more shelf appeal and will sell better, he can opt to use these federal resources instead of his own. The downside is that these are the sort of choices that involve the exercise of a government-granted privilege and create a legitimate government claim to some of the proceeds of the activity (an excise tax).

The government's claim in such a case is no different from the claim YOU would have if our vendor made money from some of YOUR stuff, or chose to sell his stuff from an optimal spot on YOUR land. Neither claim arises due to some kind of sovereignty over the produce vendor per se; rather, such claims arise solely because the vendor chose to use someone else's stuff in his business. That someone else has property rights which can be exercised by charging for the privileges granted, either by fixed fees beforehand, or as a percentage of any proceeds.

Theoretically, permission to use the government's stuff must be applied for and granted, and in the course of normal business relations, these things would be done beforehand. In most activities to which the tax applies, this is, in fact, how it's done. We'll talk about that process in the next chapter.

But it's important to note that as a legal matter, the use of the government's stuff alone constitutes the conduct of a taxable activity, even without any prior agreement. The structure of the tax is designed to account for that, as well. Think of that structure by imagining a sign in a federal garage that says, "Anyone borrowing our lawnmower to cut grass for money agrees that he owes us for the privilege based on the following schedule..."

The tax structure presumes that whether agreed-to beforehand or not, when the government's stuff is used in an effort to make money, the user is accepting terms obliging him to honestly declare the proceeds, apply various formulas for calculating how much qualifies as profits, assess upon those profits a tax at a specified rate, and send it in to Uncle Sam.

IT'S ALSO IMPORTANT TO KEEP CLEAR THAT taxable use of government stuff under the "income" tax only includes the explicit use of government stuff in money-making activities. It doesn't include peripheral activities like using a federal road to get to the place you engage in efforts to make money, and it doesn't include the use of a national bank to store the proceeds of your money-making activities.

Nor is the tax in any way a tax on, or arising because of, being something, or for doing anything-- even making money-- while being something. Simply being a beneficiary of some kind of federal privilege (such as being a corporation, or a naturalized citizen, for instance) does not make anything anyone does into an "income"-taxable activity. "Income"-taxable activities are taxable as such when conducted by anyone, anywhere; and they are only taxable because of their own discrete character, not because of any additional or external consideration.

At the same time, and at the risk of complicating this more than I really want to do, it's important to also understand that Congress can and does apply the tax selectively in some cases, and in doing so may invoke peripheral characteristics as qualifications for the special treatment. But these peripheral characteristics mustn't be mistaken as reflecting anything about the nature of the "income" tax itself.

For instance, in 1909 Congress adopted the Corporate Excise Tax Act. This is a tax specifically on the "income" of federal corporations. As such, 'corporate status'-- that is, being a federal corporation-- is a necessary characteristic in order for this tax to apply.

But this is not a tax on being a corporation per se, or an expression of anything about the nature of "taxable income". Rather, the Corporate Excise Tax is simply a tax on "income" that is narrowly crafted to apply only to the "income" of corporations. As the Harvard Law review explained in its 1910 publication, Federal Income Tax On Corporations,

“The new federal tax is expressed to be on corporations doing business, and is measured by the net income of such corporations. There are therefore three factors which determine whether the tax shall be levied,-- (1) existence as a corporation, (2) doing business, (3) the receipt of a certain income. Unless all of these three are present in a given case, no tax is levied; if they are all present, a tax is levied."

FURTHER, THE EXERCISE OF FEDERAL PRIVILEGE-- or doing things with federal permission-- for purposes of the tax also doesn't mean "doing things regulated by the government". If you have a right to do something, but simply are required by some regulatory structure or another to do it in certain ways (for public safety, for instance, or any other regulatory purpose), you're not actually "doing it with government permission" at all.

In such a case, the government has, and claims, no authority to keep you from doing what you do. The government only has, and is only exercising, authority to prescribe the way in which the thing is done, and it must leave unhindered anyone who wishes to do the thing in the prescribed ways. More, being subject to regulation is in no way using government stuff to make money, in any event

The same is true of licenses. If the government must give a license to anyone who meets certain specified conditions, the licensee is not enjoying any privilege. (Further, the mere possession of a license is not only not gainful, it is rather the opposite, since licensure is usually accompanied by a fee.)

Now, it's true that in a version of the Corporate Excise Tax Act dynamic discussed above, the government might say, "Only those with this or that particular license can engage in this or that particular money-making exercise of federal privilege..." But in such a case, it is still not the mere possession of the license that would be taxable or taxed, nor merely activity of the sort to which the license generally relates. Instead, what would be taxable or taxed is whatever inherently taxable activity the government has chosen to allow only license-holders to conduct.

For instance, the government might decide that only those holding a license will be allowed to fix the plumbing in a government facility and be paid for doing so-- inherently taxable money-making exercises of federal privilege. But that same license-holder's activities fixing other people's pipes are not exercises of federal privilege, and are not made so just because the plumber has a license that lets him do this for the government.

HAPPILY (considering that much of the foregoing was a bit complicated), the actual activities subjected to the tax are laid out with considerable specificity in the body of tax law, and we'll look at the couple of those that are of actual practical concern to most people next.

TO BE CONTINUED...