Breaking Free
When the tax gatherer puts his finger on the citizen, he must also put his finger on the law permitting it.—Clarence Thomas
The IRS has gone beyond putting their finger on the average citizen; the typical taxpayer is under the thumb of this 800-pound government gorilla. The way out begins with education and we certainly can’t rely on the state school system to be of any help. Let’s start by looking at some United States Supreme Court cases that speak to the issue of income tax.
Supreme Court Cases
Gould v. Gould, 245 U.S. 151 (1917)
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.
United States v. Field, 255 U.S. 257 (1921);
The provisions of laws imposing taxes are not to be extended by implication.
Smietanka v. First Trust & Sav. Bank, 257 U.S. 602 (1922);
The Income Tax Act of 1913 made no provision for taxing income held and accumulated by a trustee for unborn and unascertained beneficiaries.
Miller v. Standard Nut Margarine Co. of Florida, 284 U.S. 498 (1932);
Tax laws are to be interpreted liberally in favor of taxpayers; words defining things to be taxed may not be extended beyond their clear import; doubts must be resolved against the Government and in favor of the taxpayer.
Old Colony R. Co. v. Commissioner, 284 U.S. 552 (1932)
The words of a statute are to be interpreted in their usual, ordinary, and everyday meaning, and this rule applies to taxing acts. However, if the law gives specific definitions, those meanings rule and exclude other meanings.
Where the language of a tax statute is ambiguous, the Court adopts that construction which is most favorable to the taxpayer.
United Dominion Industries, Inc. v. United States, 532 U.S. 822, 839 (2001)(J. Thomas concurring)
When the tax gatherer puts his finger on the citizen, he must also put his finger on the law permitting it.
Regulations Determine Operation of Specific Tax
A good example of how regulations help in determining the operation of a specific tax is the first tax on electronic transmissions, imposed by Section 500(f) of the Revenue Act of 1918. See “An Act To provide revenue, and for other purposes”, 40 Stat. 1057, ch. 18. The first set of regulations to interpret how this tax was imposed was Regulations 57.
The revised, 1920 edition of Regulations 57 is posted here:
ORIGIN OF MESSAGE DETERMINES TAXABILITY.
ART. 3. Originating within the United States.– The tax is upon the transmission by telephone, telegraph, radio, or cable of dispatches, messages, and conversations originating within the United States. Messages transmitted from a point within the United States to a point without the United States are subject to the provisions of the act unless sent with charges “reversed” or “collect.” Messages transmitted from a point without the United States to a point within the United States are not subject to the tax, unless sent with charges “reversed” or “collect.”
Nothing in this set of regulations stated that a transmission completely within the United States was subject to the tax.
Wage Withholding
The Revenue Act of 1918 limited wage withholding to non-resident aliens and foreign corporations:
(a) That all individuals, corporations and partnerships, in whatever capacity acting, including lessees or mortgagors of real or personal property, fiduciaries, employers, and all officers and employees of the United States, having the control, receipt, custody, disposal, or payment, of interest, rent, salaries, wages, premiums, annuities, compensations, remunerations, emoluments, or other fixed or determinable annual or periodical gains, profits, and income, of any nonresident alien individual (other than income received as dividends from a corporation which is taxable under this title upon its net income) shall (except in the cases provided for in subdivision (b) and except as otherwise provided in regulations prescribed by the Commissioner under section 217) deduct and withhold from such annual or periodical gains, profits, and income a tax equal to 8 per centum thereof:
This same scheme was set forth in the §§ 221 and 237 of the Revenue Act of 1921, 42 Stat. 227, ch. 136.
Wage withholding was also limited to non-resident aliens and foreign corporations in §§ 143 and 144 of the Revenue Act of 1936, 49 Stat. 1648, ch. 690.