I had a popular comment on this recent popular /r/btc thread: John McAfee: Taxation Is Illegal, And I Have Not Filed A Tax Return In 8 Years
I attempted to clarify the legal argument of “tax protesters” like John McAfee (note: like Peter Schiff, I don’t recommend people immediately stop paying taxes unless they know what they’re doing/in for; more on this later). Several commenters replied asking if the 16th Amendment didn’t in fact negate my argument. I created a new post because it requires more than a few sentences to adequately respond. People have gone to jail over this stuff, as it gets complicated. For those with limited attention please skip to the TL;DR/Conclusion for the most important part. Others may find a benefit to reading as it will make you a more effective tax protester or possibly a new one.
There are several problems with the Sixteenth Amendment to the United States Constitution
Problem #1 – The 16th Amendment doesn’t appear to have been properly ratified
A proposed amendment becomes part of the Constitution as soon as it is ratified by three-fourths of the States. source However, tax protesters argue the 16th Amendment was likely not properly ratified. This site details the findings of Bill Benson, author of The Law that Never Was, on why the 16th Amendment wasn’t properly ratified. The official position of the government, of course, is that it in fact was ratified properly. My conclusion is the situation is dubious at best.
Problem #2 – The text of the 16th Amendment doesn’t undo the original wording in question
Here is the exact wording of the 16th Amendment:
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.
Notice how nothing is said about the original wording of the Constitution this amendment aims to address. As stated in my original comment that wording is in two places:
Article I, Section 2: direct Taxes shall be apportioned among the several States
Article I, Section 9, Clause 4:No Capitation, or other direct, Tax shall be laid, unless in Proportion to the Census or enumeration herein before directed to be taken.
For the 16th Amendment to NULLIFY existing stated requirements it must explicitly do so. For example, the amending text could instead start with “This hereby repeals any existing requirement that Direct taxes be apportioned by states or in proportion to any census or enumeration.” Now, that is explicit. That is clear. That is NOT what the 16th Amendment says. Why not? If I could think of it, couldn’t legal experts in the early 1900s? Is the reason such clear text isn’t there because it would be harder to get that properly passed by the States?
Since it doesn’t explicitly repeal anything we must therefore conclude the original requirements REMAIN IN EFFECT. What then does the 16th Amendment do, if anything? Again, look at the wording. It is very clear. It says Congress has the power to collect taxes on INCOMES from whatever source derived and without any apportionment requirement.
Let’s pause right there. What is “income”? That’s the explicit key word, income. The dictionary definition is “a coming in”. For example, if one is standing and an airplane shoots a missile at them, that would be an appropriate time to say “missile incoming!” In other words, to have something coming in doesn’t require the recipient do anything. The action of coming in happens independently by definition. An example of monetary income is a savings account earning interest. At intervals additional money is added to the account automatically. The money has come in, regardless of action of the account holder. Similarly, payments from winning a lottery or gaining an inheritance would qualify as “income” because those would be come in by mail or other means to the recipient automatically, independent of any action. These are fitting monetary definitions of income. By contrast, showing up on a job site, performing a task, and being handed cash at the end of that task has not anything to do with “income”. That is simply an exchange of labor for something else of value, in this case the the monetary payment.
A clearer example might be workers in fields. Historically, there were vendors who set up shop selling refreshing drinks and delicious food at the edges of fields so that sometimes workers who had sweat for hours, upon being handed cash payment at the end of the day then spent everything at the vending booths! It could have been decided, to save time, the workers were instead simply rewarded with plates of food and drinks as payment, leaving cash out of the picture. Would the gov call that income? Obstinate gov lawyers might, so let’s continue the thought experiment. Say a person eats a meal at a restaurant then finds they’ve left their wallet at home. Nervously, they tell the shop owner they’re a bit drunk and prefer skipping a long drive to retrieve their wallet and would, if allowed, wash all the dishes instead to cover the meal. The shop owner could agree. Would that then be income? If so how so? If a person could trade cash for a meal and have it not be income, but trade their labor for a meal and have it be income what has changed? The same activity MUST be classified consistently. Wages on labor are NOT income, and therefore are NOT newly allowed to be taxed by the 16th Amendment.
Problem #3 – The 16th Amendment Doesn’t Nullify the 5th Amendment
The 5th Amendment of course protects individuals from being forced to incriminate themselves. If it’s true that filing a tax return incorrectly can result in prosecution for jail time, and federal prosecutors can use said tax returns to achieve that result, then how can the government also mandate a person potentially incriminate themselves by filing a return by a deadline, contrary to the protection of the 5th Amendment?
By the way, why is the paperwork filed at tax time called “tax returns”? How can one “return” something they never receive? The reason for the wording is the government used to handle taxes in a legally consistent way: the government would assess a person’s tax liability and send them the a bill for taxes due. The individual could then review things, claim adjustments or disputes then return forms with adequate payment if any. That makes a lot more sense. In this way, the individual never admits up front they owe the government anything. People start out innocent, clear of liability. The government then makes a claim for a liability, and the individual can agree or reject and defend against it.
Individuals cannot be legally compelled to submit and sign paperwork which can then simultaneously be used to prosecute them, as that’s a violation of the 5th Amendment.
TL;DR and Conclusion
Say you disagree with Problem’s 1, 2, and 3, as presented. You believe the 16th Amendment was ratified properly, the text was clear enough that the people of the time knew what they were signing on to, that this includes the non-explicitly stated power to repeal the original wording of the Constitution, that “income” does include wages on labor, and individuals must file forms that can incriminate them in conflict with the 5th Amendment. Let’s say you believe ALL that, because that’s what’s required to enforce the system as it now exists in the United States. There is still a giant problem.
Where is the law?
The 16th Amendment says Congress has the power to collect taxes on incomes, so where is the law Congress made that does this? Find me that and then maybe I’ll say, yes, it can be argued the current system is above board and justifiably enforced with jail, violence and other means. I won’t hold my breath.
The amazing gift the Founders gave to ordinary citizens was more than simply physical freedom. They gave people economic freedom. That’s the secret to America’s success. People didn’t flock to America in search of handouts. They didn’t come for Social Security, welfare, or other social safety nets like Obamacare, because none of that existed. They came for opportunity, they came to be free. It turns out if you simply let people keep the fruits of their own labor they are perfectly capable of prospering just fine, and the unprecedented success of the USA, being such as young country, shows the power of that simple design. America has been moving away from its founding roots, though, and has been suffering more and more various ways as a result. There are too many examples of this to list. But this is where Bitcoin comes in. The fact is Bitcoin Cash has the potential to return economic freedom to Americans, allowing them to again prosper more evenly, not just watch the top tiniest percent flourish. It doesn’t stop there. Americans were fortunate to have the unique situation of such educated men leading the way out of the American Revolution and giving birth to a free country. Bitcoin Cash can deliver some of that same power to people around the world. THAT is what’s so exciting and what makes so many passionate about this technology.
Happy New Year! Let’s get back to work.