Supreme Court – Moore decision – income taxes are direct, privilege tax

From LostHorizons.net. 

ON AUGUST 15, 2024, A TAX COURT JUDGE, Ronald L. Buch, ruled against a student of my book, ‘Cracking the Code- The Fascinating Truth About Taxation In America’ (CtC) in a litigation over an IRS Notice of Deficiency. CtC is the book in which I reveal the long-hidden truth about the legal nature of the income tax. I also explain in CtC how the tax has been successfully misapplied on a massive scale for decades; what victims of the scheme can do to make things right; and why all of this is so important to the health of our now-deeply-wounded Constitutional republic.

Buch made his ruling, in part, with the following language summarizing the student’s key contentions and then archly dismissing them out of hand:

“Mr. ____ offers only frivolous arguments in response to the information in the Commissioner’s documents, arguing … that [sic] income tax is an excise tax, it cannot be imposed as a non-apportioned direct tax under the 16th Amendment, and liability only can result in relation to taxable activities. We have addressed these frivolous arguments in Waltner v. Commissioner, T.C. Memo. 2014- 35, affd, 659 F. App’x 440 (9th Cir. 2016), and we need not address them further. See Crain v. Commissioner, 737 F.2d 1417, 1417 (5th Cir. 1984) (“We perceive no need to refute these arguments with somber reasoning and copious citation of precedent; to do so might suggest that these arguments have some colorable merit.”).”

This language, and the snarky dismissals of the argument that the income tax is an excise, rather than a non-apportioned direct tax, and can only fall upon a distinguished class of taxable activities, is in harmony with not only the cases cited by the tax court, but many other lower court rulings over the last several decades, such as these:

“[T]he income tax is a direct tax,… See Brushaber v. Union Pacific Railroad Co., 240 U.S. 1, 19, 36 S.Ct. 236, 242, 60 L.Ed. 493 (1916) (the purpose of the Sixteenth Amendment was to take the income tax “out of the class of excises, duties and imposts and place it in the class of direct taxes”).”

United States v. Francisco, 614 F.2d 617, 619 (8th Cir. 1980)

…and:

“The Supreme Court promptly determined in Brushaber v. Union Pacific Ry. Co., 240 U.S. 1, 36 S.Ct. 236, 60 L.Ed. 493 (1916), that the sixteenth amendment provided the needed constitutional basis for the imposition of a direct non-apportioned income tax.”

Parker v. Comm’r, 724 F.2d 469 (5th Cir. 1984)

For decades the IRS has published and distributed in hard copy and, more recently, maintained on websites, the same claims about the Brushaber decision, and the nature of the income tax, as those shown above. For instance (fifth entry on this page):

Contention: The Sixteenth Amendment does not authorize a direct non-apportioned federal income tax on United States citizens.

Some assert that the Sixteenth Amendment does not authorize a direct non-apportioned income tax and thus, U.S. citizens and residents are not subject to federal income tax laws.

The Law:

The courts have both implicitly and explicitly recognized that the Sixteenth Amendment authorizes a non-apportioned direct income tax on United States citizens and that the federal tax laws as applied are valid. In United States v. Collins, 920 F.2d 619, 629 (10th Cir. 1990), cert. denied, 500 U.S. 920 (1991), the court cited Brushaber v. Union Pac. R.R., 240 U.S. 1, 12-19 (1916), and noted that the U.S. Supreme Court has recognized that the “Sixteenth Amendment authorizes a direct nonapportioned tax upon United States citizens throughout the nation.”

All pretty grim for that student of CtC and his “tax is an (indirect) excise which can’t be imposed as a non-apportioned direct tax under the 16th Amendment, and liability can only result in relation to taxable activities” argument, right?

Well, no, not really.

Three months ago, as though quoting CtC itself in every particular, the US Supreme Court unanimously declared that,

The Civil War income tax was recognized as an indirect tax “under the head of excises, duties and imposts.” Brushaber, 240 U. S., at 15; see also Springer v. United States, 102 U. S. 586, 598, 602 (1881).

In 1895, however, in Pollock v. Farmers’ Loan & Trust Co., this Court held that a tax on income from property equated to a tax on the property itself, and thus was a direct tax that had to be apportioned among the States. 158 U. S. 601, 627–628. The Pollock decision sparked significant confusion and controversy throughout the United States.

Congress and the States responded to Pollock by approving a new constitutional amendment. Ratified in 1913, the Sixteenth Amendment rejected Pollock’s conflation of (i) income from property and (ii) the property itself. The Amendment provides: “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.” U. S. Const., Amdt. 16 (emphasis added).

Therefore, the Sixteenth Amendment expressly confirmed what had been the understanding of the Constitution before Pollock: Taxes on income … are indirect taxes that need not be apportioned. Brushaber, 240 U. S., at 15, 18.

Moore v. United States, 602 U.S. ___ (2024)

The excerpt above is from the majority opinion; the concurring opinions and even the dissenting opinions in the case all echo this declaration. J. Jackson’s concurring opinion goes a bit further, expressly describing the tax as applied in the case as “an excise tax on the privilege of doing business through a controlled foreign corporation”.

Jackson’s addition puts a finer point on the Moore court’s acknowledgements, underscoring that because the tax is an indirect excise it cannot be a capitation, which is a tax on all that comes in (or some portion thereof) simply because it comes in, and is expressly in the category of direct taxes. (Click on the link and learn the meaning of this often misunderstood term.)

Further, because the tax cannot be a capitation, and therefore can only fall on distinguished, special varieties of “what comes in”, and because it is an excise tax (as the Brushaber court also holds expressly), it is necessarily and inescapably a tax on the specialized category of gainful, privileged activities (measured by the dollar value of the gains therefrom), because an excise tax IS a privilege tax. (Click on the link and learn the meaning of this often misunderstood term.)

Following from these two facets of the Moore-affirmed nature of the tax is the fact that in order for the government to validly establish tax liability (in the face of a properly-made dispute thereof) it must show that any gains by which it proposes to measure such a liability are the product of qualifying privileged activity. (That requirement is expressly specified in tax law, but has been routinely ignored by courts in denial about the excise-character of the tax.)

ALL-IN-ALL, THE DECLARATIONS IN MOORE are rather strikingly different from the assertions of all the lower courts (and the IRS) cited above, and especially that obnoxiously snarky one made in the ruling against that CtC-educated filer with which we began, right? In fact, the Moore court unanimously says exactly the opposite of what those lower courts have said– while being exactly what CtC has told you is the case, in every particular, since way back in 2003.

The fact is, rather than operate from their own research– even when presented with chapter and verse by a disfavored litigant– those lower courts have relied upon government-serving wrongly-decided prior lower court decisions. Such decisions form an ever-more massive chain that began with one long-ago case, apparently badly briefed, and argued before a corrupt judge and against a corrupt DOJ lawyer– very possibly with the deliberate connivance of all parties involved– and which was never appealed for correction.

That first case was then cited in the next case involving an ill-prepared litigant against the government, with the bad decision echoed and then perhaps affirmed in a circuit court. Those outcomes will have been widely published into the legal community of the day (by then some years removed from the Brushaber decision, which is, sad to say, written by a Chief Justice White who was fond of 100-word sentences and circuitous reasoning sure to discourage impulses to verify) and will quickly have become the reigning precedent.

And yet it is, and always has been– as the Moore decision now re-instructs the country– a steaming pile.

SO, TO SUM UP, THE SUPREME COURT just unanimously bitch-slapped every tax court judge who has ever made an adverse ruling against an educated filer or claimant in defiance of the FACT that the income tax is an excise and cannot lawfully be applied as any kind of non-apportioned direct tax, and the FACT that in order to sustain an asserted tax against a filer who has disputed it on his or her return in a consistent and appropriate manner, as explained in CtC, the tax-hungry government has to prove that the activities which produced the targeted gains were actually of the special variety liable to the tax.