Why is this Important?

Tax on Individuals

The Internal Revenue Code Subchapter A, PART I—TAX ON INDIVIDUALS (§§ 1 – 5) claims to not tax individuals as the title appears. Instead, IRS Code 26 U.S. Code § 1 imposes on the taxable income of persons, either married, head of household, unmarried persons, and married persons filing a separate list or return. Recently however, the Supreme Court in Moore, (2024) upheld that direct taxes on persons and property remains subject to the apportionment clause.

Direct Taxes and Representation

The Constitution has firmly established that direct taxes be portioned to census or pupulation, which does so by directly linking all direct tax liability to Representation in Congress, where the power of the purse firmly stands. The "Direct Tax and Representation" clause is found in Article I, Section 2, Clause 3 of the Constitution and in Article I, Section 9, Clause 4. ¹

The first tax on incomes, the Revenue Act of 1861, levied a 3% flat rate income tax on those with an annual income at or exceeding $800 (the corresponding income in 2021 is $384K). In 1861, only 3% of the population had an annual income of at least $800; this was a war time tax. The 1913 Income Tax or 16th Amendment was also structured so that only those with that were wealthy would pay. In fact, that 1913 law only taxed 3% of the population due to the high exemption of $3,000. The income tax was originally intended to be a tax on the wealthy, but it has morphed into a tax on the middle class beginning in 1943.

Around the turn of the 20th century, wealthy industrialists and financiers in the United States were often criticized for avoiding taxation. These individuals, sometimes referred to as "robber barons," amassed significant wealth during the Gilded Age through industries like railroads, steel, oil, and banking. Prominent figures included John D. Rockefeller, Andrew Carnegie, J.P. Morgan, and Cornelius Vanderbilt. These wealthy individuals used legal loopholes, trusts, and other mechanisms to minimize their tax burdens. This led to public outcry and eventually spurred reforms, such as the introduction of the federal income tax in 1913 through the 16th Amendment to the U.S. Constitution.

This appears to be the same situation today, where the wealthy are able to escape taxation by various means, including forming corporations and other financial devices to limit or avoid paying taxes.

But Congress has imposed individual income taxes directly onto individuals, instead of imposing an indirect taxes on vocations, occupations, and/or wage earners. Many in Congress express that some direct taxes and/or the "Individual Income Tax" is allowed by Amendment to the Constitution, but the decisions of the Supreme Court has always maintained that income taxes were indirect taxes. As pointed out in Moore, (2024), the Supreme Court has held individual income taxes in the category of indirect taxation. There was no alteration to the plain language of the Constitution in the manner of direct taxes and representation, and the Supreme Court Moore upheld the principle that all direct taxes are still are subject to the apportionment clause.

The Plan to Save Trillions

This plan proposes maintaining the tax imposed on employers at its current level while eliminating taxation on individuals after wages are paid. This approach mirrors other types of excise or indirect tax systems, such as the gas tax, where taxes are collected by the seller rather than the buyer.

Employers would remain responsible for paying the required taxes, including those that are deducted and withheld, and would forward these funds as they do currently. This change would exempt the vast majority of the population from filing tax returns.

Indirect taxes, a key element of this system, would be collected and paid at the point of transaction. These taxes can be shifted or passed on to the cost of the product or service. The power to collect taxes in this manner is one of the inherent plenary powers.

Direct or Indirect Application of Wages

For employers, employment taxes are considered indirect taxes, as they can be passed on and incorporated into the cost of products or services. For employees, however, employment taxes are direct and personal, with liability enforced under penalty of perjury after wages become personal property. These taxes imposed on individuals qualify as direct taxes.

Social Security and Medicare taxes on employment are examples of indirect taxes and are not subject to the apportionment clause. These taxes create an obligation for employers to withhold and remit the required amounts without discretion on the part of either the employer or the employee.

Indirect Tax on Wages and salaries

The nations first income tax, the Revenue Act of 1861, Chap. XLV, 12 Stat. 292, (see Sec. 49) imposed an indirect income tax on wages and salaries, etc., and collected them at the source. Employers were required to deduct, withhold, and remit the tax.² The Civil War income tax (1962) was also recognized as an indirect tax “under the head of excises, duties and imposts.”, see Brushaber 240 U. S., at 15; see also Springer v. United States, 102 U.S. 586, 598, 602 (1881). The income tax placed a 3% tax on all individuals whose annual incomes were above $800 per year, ($800 in 1862 is worth $24,000 in 2025) which exempted most citizens due to lower average income.

Collection at the the source keeps this tax as an indirect tax.

The Quarterly Journal of Economics: The Income Tax of 1913 at page 53 "The general rule of the law covering deduction at the source is of sufficient importance to be quoted in full. It reads as follows: -"

All persons, firms, co-partnerships, companies, corporations, joint-stock companies or associations, and insurance companies, in whatever capacity acting, including lessees or mortgagors of real or personal property, trustees acting in any trust capacity, executors, administrators, agents, receivers, conservators, 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, remuneration, emoluments, or other fixed or determinable annual gains, profits, and income of another person, exceeding $3,000 for any taxable year, other than dividends on capital stock, or from the net earnings of corporations and joint-stock companies or associations subject to like tax, who are required to make and render a return in behalf of another, as provided herein, to the collector of his, her or its district, are hereby authorized and required to deduct and withhold from such annual gains, profits, and income such sum as will be sufficient to pay the normal tax imposed thereon by this section, and shall pay to the officer of the United States Government authorized to receive the same; and they are each hereby made personally liable for such tax.

Social Security 26 U.S. Code § 3101 - Rate of tax

(a)Old-age, survivors, and disability insurance. In addition to other taxes, there is hereby imposed on the income of every individual a tax equal to 6.2 percent of the wages (as defined in section 3121(a)) received by the individual with respect to employment (as defined in section 3121(b)).

The Federal Insurance Contributions Act (FICA) (codified in the Internal Revenue Code) imposes a Social Security withholding tax equal to 6.20% of the gross wage amount, up to but not exceeding the Social Security Wage Base. The same 6.20% tax is imposed on employers. A separate payroll tax of 1.45% of an employee's income is paid directly by the employer, and an additional 1.45% deducted from the employee's paycheck, yielding a total tax rate of 2.90%

The Internal Revenue Code 26 U.S. Code § 3403 - Liability for tax

The employer shall be liable for the payment of the tax required to be deducted and withheld under this chapter, and shall not be liable to any person for the amount of any such payment.

An indirect tax, collected from whatever source derived, such as the income tax and employment taxes can be applied and collected indirectly, onto those economic activities that are the sources of the income.

This plan would create harmony with the great Constitutional principles that binding taxation and representation together; avoiding taxing citizens and families with unfair taxation, lest this principle has no meaning.

It seems that collecting an indirect in this manner, by direct placement, not only violates the Constitution, it is too costly and inefficient; spending millions of hours and billions of dollars needlessly. The income tax is an indirect tax, and the Constitution requires that it be applied and collected as an indirect tax.

IRS Code 26 U.S. Code § 1 imposes on the taxable income in varying types of persons, either married, head of household, unmarried persons, and married persons filing a seperate list or return.

Context

In each year from 2006 to 2012, at least two-thirds of all active corporations had no federal income tax liability. GOA: CORPORATE INCOME TAX NONPAYS

There were just 2 million taxpayers in 1932. Just ten years later, in 1942, the Victory Tax Act increased the rolls further to 50 million taxpayers. Senate Committee on Finance: History The revenue from income tax also rose. It rose from $1 billion in 1918, to $43 billion by 1943. Tax laws and forms are so complex that by 1991, 40 percent of all taxpayers hired professional tax people to do their taxes for them.

Tax the Rich Schemes ~ Historical Context

Soon after the framing the new Constitution, Congress passed a tax on ownership of carriages, over James Madison’s objection that it was an unapportioned direct tax. Id., at 597. In context, at this time, carriages were few and owned only by wealthy individuals. Hylton v. United States, 3 U.S. 171 (1796)

Once regarded as a means to place income taxes on the wealthy who had largely escaped taxes altogether, the income tax today is now a tax on the middle class. Prior to the adoption of the income tax amendment the USA was largely funded by tariffs. It was argued that these tariffs were largely seen as oppressive to those who had very little or poor; the income tax was seen as a scheme to make the wealthy contribute a fair share. In the debates over the income tax amendment in 1909, Senator Owen remarked with evidence that 87 percent of wealth:

that the very great part of all of the wealth of this country has already passed into the hands of less than 10 per cent, and over half of the national wealth into the hands of less than 1 per cent of the people. (P. 32S2, Congressional Record, June 15.) Congressional Record 1909

In 1909, President William Howard Taft proposed the 16th Amendment, which was eventually ratified by the required number of states in 1913.³ The Pollock decision was met with popular outrage with Progressive Democrates to charge the court with “judicial usurpation.” In the debates during 1909, Congress had pressed to pass a corporate income tax that was previously found unconstitutional in Pollock v. Farmers' Loan & Trust Co., 157 U.S. 429 (1895), with many Congressmen expressing disagreement with the Supreme Court ruling in Pollock, went forward and passed a corporate income tax in a manner to avoid the Supreme Court ruling.

CONGRESSIONAL RECORD — HOUSE. July 12, 1909, p. 4412

SUPREME COURT DECISION ERRONEOUS, AND SHOULD BE RECONSIDERED WITHOUT CONSTITUTIONAL AMENDMENT.

Mr. Speaker, no member of his profession has a higher regard for the dignity of the courts than I have; but I refuse to subscribe to the doctrine that “the king can do no wrong ” and that the courts are infallible. In a respectful way, as a citizen and a Representative, I have a right to challenge the decision of the Supreme Court in the Pollock Income Tax case. If any opinion of that court ever received practically the universal disapproval of the bar and the bench of the country, it is that case. The very flower of the American bar now concur with practical unanimity that the judgment of the court was erroneous. The court itself is rapidly curtailing the force of the same and stripping it of much of its vital efficiency. ⁴

But the Supreme Court found in Stratton's Independence, Ltd. v. Howbert, 231 U.S. 399 (1913):

As has been repeatedly remarked, the Corporation Tax Act of 1909 was not intended to be and is not, in any proper sense, an income tax law. This Court had decided in the Pollock case that the income tax law of 1894 amounted in effect to a direct tax upon property, and was invalid because not apportioned according to populations, as prescribed by the Constitution. The Act of 1909 avoided this difficulty by imposing not an income tax, but an excise tax upon the conduct of business in a corporate capacity, measuring, however, the amount of tax by the income of the corporation, with certain qualifications prescribed by the act itself. Flint v. Stone Tracy Co. 220 U. S. 107; McCoach v. Minehill Co., 228 U. S. 295; United States v. Whitridge (decided at this term, ante, p. 231 U. S. 144). For this and other obvious reasons, we are little aided by a discussion of theoretical distinctions between capital and income.

Under Pollock, a tax on the interest income derived from any state bond was considered a direct tax on the State, and thus unconstitutional. Pollock v. Farmers' Loan & Trust Co., 157 U. S. 429 (1895), held that any interest earned on a state bond was immune from federal taxation.

During the Congressional debates of a new tax in 1913, under the 16th Amendment, the Senator Lodge stated:

Of course the men of small earnings and small incomes pay taxes to the Government of the United States in the indirect form, and one great objection to indirect taxes, so excellent economically, is that people do not realize fully that they are paying them. The tax which the man pays over the counter is the one he realizes. When he walks up to the taxgatherer in his town and finds that his rate has been raised he takes an interest in tile administration of the business of the town. But as to the indirect tax, the tax that the man pays on alcoholic liquors, if he chooses to drink, or the tax that lie pays on tobacco, are not only indirect but voluntary taxes, and he does not know, as a matter of fact, whether he pays them or not. He. pays them, but he does not feel them. The difference, moreover, between what one man consumes and what another consumes in the way of food and drink and tobacco and raiment is not very great, for the power of consumption of the individual can not vary very largely, and he who lives and chooses most expensively pays most in taxation. But this tax which we are now imposing for the first time is a direct tax; and this country has hardly known direct taxes except in times of war.

In the debates over the income tax amendment in 1909, Mr Bailey stated:

Although it is not pertinent to this discussion, I have no hesitation in declaring that a tax on any useful occupation can not be defended in any forum of conscience or of common sense. To tax a man for trying to make a living for his family is such a patent and gross injustice that it should deter any legislature from perpetrating it. ... There are 7,000,000 families of wage-earners in; the United! States liying upon a medium wage of $436 a year and 5,000,000 farmers whose average income is about $350 a year... The vast majority of American, families live' on $500 or less per year; In the great iron and steel industries, in 1900, the income of the family was about $540 a year, and in 1905, $5S0 per year. The cost of living, has increased from $74.31 in 1896 to $107.26 in 1906. I do not hesitate to say that every occupation tax in America ought to be repealed, because it is a tribute exacted by sovereignty from a man because of his effort to make a living for himself and his family. ... A graduated income tax exempting all incomes of less than $3,000' a year would plaee: upon the wealth of the country a share of the burden of maintaining the Federal Government, which it ought to hear and bear gladly and willingly.

44 Congressional Record 4424 (1909):

“Mr. COX. It is not my intention to belittle wealth, but, on the other hand, I believe it should be the duty of all to uphold it where it is honestly procured. The idea that men like Carnegie, now the holder of more than $300,000,000 worth of the bonds of the United States steel trust, escape federal taxation is indeed absurd. . .and then, to realize that all these enormous fortunes are escaping their just and proportionate share of taxation while the people themselves are staggering under our present system of indirect taxation, it is no wonder to me they cry for relief. > If it be the determination of the so-called “business interests’ in this country to maintain an enormous navy at a cost of hundreds of millions of dollars annually, as well as an army, to protect and defend their various business interests, I insist that this part of the wealth of the country ought to stand its proportionate share of taxation, and I know of no way to compel them to do it as justly and equitably as an income tax. [Loud applause.]”

44 Cong.Rec. 4006 (1909)

“Mr. CUMMINS (Iowa). Our people are separated into three classes: The men who work, who are laying up out of their earnings provision for the future, and on whom the hand of the taxgatherer should be laid most lightly; the owners of land, the farmers and other landowners, whom it is universally acknowledged that it was the intention of the fathers of the Constitution to protect by the provisions regarding the apportionment of Direct Taxes; and the possessors of the stored-up wealth of the country, which is being invested in the corporations that are doing the business of the country. And by the simple course of dropping out from this income-tax measure the parts that are unconstitutional under the decision of the Supreme Court, that are unjust according to the acknowledged judgment of all students of the income tax, that are incapable of enforcement within such a time as to relieve the deficiency that may be before us and by saving the tax upon the storedup wealth of the country invested in corporations, called an ‘excise,’ we shall have accomplished the great object of the income tax.”

1. Soon after the framing, Congress passed a tax on ownership of carriages, over James Madison’s objection that it was an unapportioned direct tax. Id., at 597.
2. 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).
3. In Springer v. United States, 102 U.S. 586 (1881), the Court upheld the federal income tax imposed under the Revenue Act of 1864 as an indirect tax.
4. In Pollock v. Farmers' Loan & Trust Co., 157 U.S. 429 (1895), the Court held that income from property was a direct tax requiring apportionment.

Congress strggled with the Supreme Court ruling in Pollock, and in 1909, Congress sought to challenge the Pollock decision, and in the debates, CONGRESSIONAL RECORD — HOUSE July 12, 1909, p, 4413

With a mighty stroke, a divided court annihilates precedent and sets up an un-heard of standard of law in Pollock’s case, nullifying the Wilson income-tax law. In order that it may be plainly stated here, let me recite the action of the court:

First. It held that a tax on rents or income of real estate is a direct tax within the meaning of the Constitution. Second. That a tax upon income derived from interest of bonds issued by municipalities is a tax upon the power of the State and its instrumentalities and is invalid.
Third. The court in the original opinion did not decide the points pertaining to the provisions held void as invalidating the whole act, or that touching income from personal property being unconstitutional as laying a direct tax, or the point made as to the uniformity provided the tax was construed not to be direct. On these propositions the justices hearing the argument, being equally divided, could not decide the same. Avarice of wealth, not content with the adjudication, asked for a rehearing and begged that every vestige of the law that could possibly lay its hands upon their fortunes be destroyed. ⁴

Congress and the States responded to Pollock by approving a new constitutional amendment. Senator Norris Brown of Oklahoma introduced the resolution in the Senate. The proposed text read:

“The Congress shall have the power to lay and collect direct taxes on incomes without apportionment among the several states according to population.” The joint resolution was referred to the Finance Committee. The Committee proposed an amendment to strike the word “direct” and add the phrase “from whatever source derived” after the word “incomes.” Minnesota Senator Knute Nelson, a Member of the Judiciary Committee, suggested this change to Chairman Aldrich to allow the Federal Government to include incomes from state and municipal securities as well as incomes from fortunes consisting of invested capital. Senate Committee on Finance

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—including taxes on income from property—are indirect taxes that need not be apportioned. Brushaber, 240 U. S., at 15, 18. Meanwhile, property taxes remain direct taxes that must be apportioned. Moore v. United States, 602 U.S. 572 (2024).

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just a few notes on the history of the income tax.

To fund the Civil War, an act of August 5, 1861 (12 Stat. 292) levied a direct tax on property and an income tax. The Revenue Act of 1861 levied a 3% flat rate income tax on those with an annual income at or exceeding $800 (the corresponding income in 2021 is $384K). In 1861, only 3% of the population had an annual income of at least $800;

William M. Springer had filed a federal income tax return for the tax year 1865 showing $50,798 in income and $4,799 in income tax, but he refused to pay the tax. His income was from two sources: income in his profession as an attorney at law and interest income on United States bonds.

The Tariff Act of 1894, ch. 349, 28 Stat. 509, 553. "Of the 12 million American households in 1894, only 46,000? 85,000 had incomes over $4,000, well under 1 percent."

Imposed a 2% tax on income over $4,000, which the Supreme Court struck down in Pollock v. Farmers' Loan & Trust Co., 157 U. S. 429 (1895).

Under Pollock, a tax on the interest income derived from any state bond was considered a direct tax on the State, and thus unconstitutional. Pollock v. Farmers' Loan & Trust Co., 157 U. S. 429 (1895), which held that any interest earned on a state bond was immune from federal taxation.

J. Bracken Lee, the Governor of Utah in 1954 writes this in the forward to Chodrov's book:

The Constitution, then[pre-1913], kept the federal government off balance and weak. And a weak government is the corollary of a strong people. . . The Sixteenth Amendment changed all that. . . by enabling the federal government to put its hands into the pockets and pay envelopes of the people, it drew the people's allegiance away from their local governments. It made them citizens of the United States rather than of their respective states. . . They became subject to the will of the central government. . . For those of us who still believe that freedom is best, the way is clear: we must concentrate on the correction of the mistake of 1913. The Sixteenth Amendment must be repealed. Nothing less will do.

Albert Einstein may have been correct that “[t]he hardest thing in the world to understand is the income tax,” TheMacmillan Book of Business and Economic Quotations 195 (Michael Jackman ed., 1984)

Footnotes

1. National Federation of Independent Business v. Sebilius, 567 U.S. 519, p. 668, Taxes have never been popular, see, e. g., Stamp Act of 1765, and in part for that reason, the Constitution requires tax increases to originate in the House of Representatives. See Art. I, § 7, cl. 1. That is to say, they must originate in the legislative body most accountable to the people, where legislators must weigh the need for the tax against the terrible price they might pay at their next election, which is never more than two years off. The Federalist No. 58 “defend[ed] the decision to give the origination power to the House on the ground that the Chamber that is more accountable to the people should have the primary role in raising revenue.

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2. Sec. 86. And be it further enacted, That on and after the first day of August, eighteen hundred and sixty-two, there shall be levied, collected, and paid on all salaries of officers, or payments to persons in the civil, military, naval, or other employment or service of the United States, including senators and representatives and delegates in Congress, when exceeding the rate of six hundred dollars per annum, a duty of three percentum on the excess above the said six hundred dollars; and it shall be the duty of all paymasters, and all disbursing officers, under the government of the United States, or in the employ thereof, when making any payments to officers and persons as aforesaid, or upon settling and adjusting the accounts of such officers and persons, to deduct and withhold the aforesaid duty of three per centum, and shall, at the same time, make a certificate stating the name of the officer or person from whom such deduction was made, and the amount thereof, which shall be transmitted to the office of the Commissioner of Internal Revenue, and entered as part of the internal duties; and the pay-roll, receipts, or account of officers or persons paying such duty, as aforesaid, shall be made to exhibit the fact of such payment. (https://fraser.stlouisfed.org/files/docs/historical/congressional/1862_revenueact_12stat432.pdf)

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3. Pres. Wm. H. Taf, CONGRESSIONAL RECORD – SENATE – JUNE 16, 1909: '...the decision in the Pollock case left power in the National Government to levy an excise tax, which accomplishes the same purpose as a corporation income tax and is free from certain objections urged to the proposed income tax measure.

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4. CONGRESSIONAL RECORD – HOUSE – JULY 12, 1909: 'The Government began to collect money under such laws, and for a hundred years collected many millions from the people; and such sums have not been refunded and will never be returned. Thus, with such a law, a unanimous approval of the Supreme Court, and thorough executive indorsement, this Republic began its career in undoubted recognition of the principle of an income tax, and pursued its tenor for a century without a dissent from any source to the system. At the end of a century, when a divided court uproots firmly fixed jurisprudence covering all these years, we are entitled to send the great question again and again to that tribunal. Guided by previous history and such construction by the Supreme Court, Congress has several times provided for direct taxes and apportioned them according to the Constitution

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