Are You in the 98%?
Are you in the 98%?
The Wake-Up Call
The United States federal government’s actions in 2020 surrounding Covid-19 should have been a wake-up call for all Americans. We found ourselves being “asked” to comply with “mandates” regarding various behaviors, such as wearing masks and “social distancing” (when the state introduces new terms, watch out!). This led some citizens to start asking some questions. For starters, are we bound to obey mandates? Many of us discovered that there was no law obligating the citizenry to wear a mask or limit the number of people in their home for Thanksgiving dinner. We found out that we are not answerable to Washington D.C. as to whether we can gather for corporate worship as the Church on the Lord’s Day.
The U.S. Constitution contains a process for the enactment of laws and our government officials did not follow this process. There was no law.
The federal income tax has been imposed on the majority of the population of this country in much the same manner. There is NO LAW that requires most Americans to file a tax return, pay the federal income tax nor have the tax withheld from their earnings.
This means that 98% of Americans are not required to file and pay income taxes.
How Did We Get Here?
To figure out how we got to the point where the majority of Americans pay federal income tax, we need to start with a basic understanding of U.S. statutes. The United States Code is the official codification of the general and permanent federal statutes of the United States. The Internal Revenue Code (IRC) is in Title 26 of the United States Code (USC). CHAPTER 24 of Title 26 covers Collection of Income Tax at Source. In the section titled Definitions, we read this:
Wages
For purposes of this chapter, the term “wages” means all remuneration for services performed by an employee.
Employee
For purposes of this chapter, the term "employee" includes an officer, employee, or elected official of the United States, a State, or any political subdivision thereof, or the District of Columbia, or any agency or instrumentality of any one or more of the foregoing. The term "employee" also includes an officer of a corporation.
Employer
For purposes of this chapter, the term "employer" means the person for whom an individual performs or performed any service, of whatever nature, as the employee of such person.
Most people who pay federal income tax are not Government employees (although the number of Government employees continues to grow).
Therefore, most Americans are exempt from having taxes withheld by their employer.
Taking It To Court
Let’s look at some court cases that inform these definitions.
CAMINETTI v. UNITED STATES, Decided January 15, 1917, contains this explanation:
When the language of a statute is plain and does not lead to absurd or impracticable results, there is no occasion or excuse for judicial construction; the language must then be accepted by the courts as the sole evidence of the ultimate legislative intent, and the courts have no function but to apply and enforce the statute accordingly.
It is elementary that the meaning of a statute must, in the first instance, be sought in the language in which the act is framed, and if that is plain, and if the law is within the constitutional authority of the law-making body which passed it, the sole function of the courts is to enforce it according to its terms.
Where the language is plain and admits of no more than one meaning the duty of interpretation does not arise and the rules which are to aid doubtful meanings need no discussion. There is no ambiguity in the terms of this act.
This supports the Government worker definition of “employee”.
The Opinion of the Court in GOULD v. GOULD, Decided November 19, 1917, states:
In the interpretation of taxing statutes it is the established rule not to extend their provisions, by implication, beyond the clear import of the language used, or to enlarge their operations so as to embrace matters not specifically pointed out. Doubts are resolved against the Government.
In the interpretation of statutes levying taxes it is the established rule not to extend their provisions, by implication, beyond the clear import of the language used, or to enlarge their operations so as to embrace matters not specifically pointed out. In case of doubt they are construed most strongly against the Government, and in favor of the citizen.
This case confirms that we must maintain the definition of “employee” as pertaining solely to Government workers. If there is any doubt, the court is to decide against the Government.
In STENBERG, ATTORNEY GENERAL OF NEBRASKA, et al. v. CARHART, Decided June 28, 2000, we read the following:
When a statute includes an explicit definition, we must follow that definition, even if it varies from that term’s ordinary meaning. Meese v. Keene, 481 U. S. 465, 484–485 (1987) (“It is axiomatic that the statutory definition of the term excludes unstated meanings of that term”)
This upholds the definition of “employee” as only Government workers, since this was the explicit definition provided in the IRS Code.
Cutting Off the Flow
In Title 26 of the IRC, in Section 3402, Income tax collected at source, Requirement of withholding, we read:
Every employer making payment of wages shall deduct and withhold upon such wages a tax.
Under Allowance certificates, we find that:
The employee shall furnish the employer with a signed withholding allowance certificate.
Employees incurring no income tax liability
Notwithstanding any other provision of this section, an employer shall not be required to deduct and withhold any tax under this chapter upon a payment of wages to an employee if there is in effect with respect to such payment a withholding allowance certificate (in such form and containing such other information as the Secretary may prescribe) furnished to the employer by the employee certifying that the employee-
(1) incurred no liability for income tax imposed under subtitle A for his preceding taxable year, and
(2) anticipates that he will incur no liability for income tax imposed under subtitle A for his current taxable year.
This means that if you have incurred no tax liability (since you are not a Government employee) for the preceding or current year, you can claim exemption on Form W-4.