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"Peter Hendrickson has done it again!  'Upholding The Law' does for individual liberties what 'Cracking the Code' did for tax law compliance: exposes the reader to the unalienable truth!"

-Jesse Herron, Bill Of Rights Press, Fort Collins, Colorado

Learning From Mistakes

A FEW DAYS AGO I FOUND MYSELF PRESENTED with yet another expression of misunderstanding of the "income tax". This misunderstanding is presented with great confidence and even the citation of a few relevant Supreme Court rulings which do, in fact, support the aspects of the contention for which they were used, thus lending the whole misunderstanding some undeserved credibility. (The at least one egregiously false excerpt/citation also included will likely be overlooked by most readers.)

Rather annoyingly, this elaborately-presented misunderstanding appears to be posted on a prominent newsgroup page, and is thus likely to be widely viewed. As a consequence, many folks will be misled as to the true nature of both the tax and the scam by which it is misapplied.

On the other hand, pointing out an error always involves explaining what is correct, and usually in a new way. Such new presentations often make the truth click where it hasn't made sense to someone before, and thus, even errors have their upside. With that in mind...

THE SUBSTANCE OF THIS PARTICULAR ERROR can be seen almost immediately in the long article. The second paragraph starts with a line that says it all: "We have all been led to believe that, "of course, my wages are "income," however, as you will soon discover, that is a lie."

After correctly pointing out that "income" doesn't mean "all that comes in", the article goes on to argue at length that pay for labor isn't profit, and companies get to deduct business expenses (including pay for labor) so why shouldn't the worker be able to treat his pay in the same fashion? This paragraph is a good summary of this argument: "Simple example. You make a wage. You pay all your expenses. You have some left over "principal," and you invest this in some means, and "derive" some interest from the extra money. THAT is what is lawful income. You are deriving NOTHING from your wages. It is the value of your labor, which costs money."

The arguments made here about the economics of pay for labor, and that the tax is essentially on derived gains, aren't necessarily unsound (up to a point). However, because the tax actually ISN'T LAID on mere "pay for labor" (whether as the writer imagines the tax to be written, or by what he imagines to be the scheme of its misapplication in defiance of how it is written), these accuracies are irrelevant to the subject of the true nature of the tax. Worse, observing them clouds the eyes of the writer and leads him to imagine that he is being taxed on what he calls his 'wages', and that therefore the tax is being laid in defiance of the law, logic, and the Constitution.

The big source of confusion here revolves around the word 'wages'. Seeing that what are called "wages" in the tax law are being deemed a measure of something taxable, this writer presumes that this means the tax is being laid on people simply for working, or being paid for their labor.

The writer doesn't understand that what are called "wages" in the tax law are not what he means when he uses the word. Grasping that simple point is the key to reconciling all that he observes about the tax with the endless pronouncements of the tax's Constitutionality by the courts over many decades (including many in which the judiciary was in no way party to obscuring the real nature of the tax).

When one grasps the fact that the things declared to be subject to the tax in the law are custom-defined-- some by explicit statutory specifications and all by context-- and why; and how this reveals that everything subject to the tax is distinguished from the larger class of such things (i.e.: working as a plumber where federal permission to do so is required versus working as a plumber generally), the true nature of the tax comes into clear focus. Among other things, it becomes clear that nothing unconstitutional is involved in the tax, as written.

When this key revelation comes into focus, it then becomes clear that the tax scheme is simply the default presumption by those administering the tax that all the products of all economic activity are of these custom-defined varieties, putting the onus of saying otherwise on the recipients of these products. This "opted-in-by-default" structure is obnoxious, to be sure. But it exists because the government wants to lay claim to every penny it can get its hands on, while not actually having the authority to lay claim to some part of every gain that occurs.

The tax DOES fall on "wages". But it falls only on the "wages" custom-defined as such in the tax law-- a special subclass of 'pay for labor' distinguished by a federal connection creating a legitimate federal interest in those particular gains (interest being used here in the sense of an "ownership interest" arising out of the United States being a part of the production of the gains, through the permission it gives for the work involved to be performed on its behalf and by the exercise of its authority).

THE WRITER OF THIS MISTAKEN ARTICLE IMAGINES that the tax is being applied to his undistinguished 'pay for labor' ('wages' as commonly-defined, rather than as defined in the tax law), but this is simply because he hasn't grasped the fact that "wages" IS custom-defined in the law. Or perhaps he simply refuses to grasp this fact because it is easier to blindly rail against a tax he doesn't think he owes, or should owe, than to learn how the tax actually works, discover how harmless it is, and how virtuous it is, when confined to its proper objects by educated Americans.

It's a shame either way. This fellow is articulate and energized. He COULD be spending his time and energy educating others about the true nature of the tax and helping roll us all back to the pre-1940s when the tax troubled no one improperly and most folks had no occasion to pay it the least attention...

CtC-Educated Lawyers: It's Way Past Time For You All To Queue Up!

[Y]ou really need to familiarize yourself with Pete Hendrickson's absolutely magnificent work at his website and in his book(s).  He has, brilliantly and lucidly, "cracked the code" regarding the federal income EXCISE tax(es)."

-Mark C. Phillips, JD

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