I saw the thread "100 Years of the Income Tax" and started to respond.

But I realized this response needs its own post.

So, here goes ...

Several SCOTUS decisions have defined what the word "income" means, as it relates to the income tax, per the Constitution.

Congress has NO LAWFUL AUTHORITY to define the word "income," which is why there is no definition of "income" anywhere in the tax code.

This is because Congress has no authority to define what the Constitution means. They can only follow it, not define it.

Title 26 of the United States Code (26 USC) is where we find the "internal revenue laws," which includes the income tax ... AND OTHER TAXES, as well.

The Constitution gives Congress the authority to tax "income." But that is NOT what Congress taxes. Read 26 USC 1 (the very first section of the tax code). It says:

There is hereby imposed on the TAXABLE INCOME of ...

You see the subtle deception? The tax is NOT imposed on "income," which is what they have autority to tax, per the Constitution. Instead, the tax is imposed on "taxable income."

https://www.law.cornell.edu/uscode/text/26/1

This is a DIFFERENT thing. It has its own definition (which Congress can define, because they are NOT taxing "income" -- they are taxing a DIFFERENT thing which they call "taxable income").

One more time, to drive home the point:

(1) The Constitution grants Congress the power to tax income.

(2) Congress has chosen instead to impose a tax on something they call "taxable income," not "income," and they define what that means.

(3) These are TWO DIFFERENT THINGS -- because they MUST be.

Congress HAS NO AUTHORITY to define any of the terms in the Constitution (as that would mean they have sole authority to determine their own authority). So, they do not define "income" in the tax code (because they can't). And they do NOT actually tax "income." Instead, they tax something else entirely.

This is the deception of the income tax.

It IS a constitutional law. it is NOT unconstitutional. It's just that deception is used to trick people into believing they have a tax obligation, which they may or may not have (some people DO have to pay an income tax; others do not).

Congress has ONLY imposed a tax on "taxable income."

They define "taxable income" as "gross income, minus deductions."

OK, so what is "gross income?"

"Gross income" is defined at 26 USC 61 as "All income, from whatever source derived ..." [giving examples, such as salaries, etc.].

This is language taken direction from the 16th Amendment ... BUT TO DEFINE "gross income" and NOT to define "income," which is what the 16th Amendment actually authorizes.

Notice, the word "income" is used in the definition of "gross income," BUT they do not define what "income" is -- anywhere in the tax code. This is because they cannot determine what the Constitution means. Only SCOTUS can.

So, they do not tax income. Instead, they tax "taxable income," and define it as "All income minus deductions," but without defining "income."

https://www.law.cornell.edu/uscode/text/26/subtitle-A/chapter-1/subchapter-B/part-I

Now, what is REALLY interesting is taking a look at what the regulations say about "gross income." No government agency or department (or even private organization acting like a government agency) can enforce ANY law passed by Congress unless it has a regulation spelling out what it can do, and what the statutes MEAN, according to the enforcing agency.

The regulations are found in the Code of Federal Regulations ("CFR").

If you look up the regulation related to the definition of "gross income," you will find it at 26 CFR 1.61-1. It says:

Gross income means all income, from whatever source derived, unless excluded by law.

https://www.law.cornell.edu/cfr/text/26/1.61-1

The first part is directly taking from the 16th Amendment, but is used to define "gross income" and NOT "income," which is the ONLY thing Congress has the power to tax.

That's because this regulation is a direct copy of the statute that the regulation is to enforce (26 USC 61).

BUT ...

What does "unless excluded by law" mean?

Notice: That wording is NOT in the statute. It is ONLY found in the regulation.

Your average accountant, or even most tax attorneys, will NOT look up the regulation, but only the code.

So, MOST OF THE DO NOT EVEN KNOW THIS EXISTS, but it is PART OF THE LAW !!!

In fact, it is REPEATED in the regulations, several times:

26 CFR 1.61-1 Gross Income:

Gross income means all income from whatever source derived, unless excluded by law.

26 CFR 1.61-2 Compensation for services, including fees, commissions, and similar items.

Wages, salaries, commissions paid salesmen, compensation for services on the basis of a percentage of profits, commissions on insurance premiums, tips, bonuses (including Christmas bonuses), termination or severance pay, rewards, jury fees, marriage fees and other contributions received by a clergyman for services, pay of persons in the military or naval forces of the United States, retired pay of employees, pensions, and retirement allowances are income to the recipients unless excluded by law.

26 CFR 1.61-14 Miscellaneous items of gross income.

In addition to the items enumerated in section 61(a), there are many other kinds of gross income. For example ... unless excluded by law.

To understand what it means, it is helpful to go all the way back to the 1939 revised tax code. The 1913 tax code has been revised several times, and also amended. Every so often, they do a major revision, where things are re-organized. They then amend it each year when they tweak it this way or that way (to continually make it more and more difficult for most people to understand, and to use it for political campaign rhetoric).

I suspect that most members of Congress also have no clue what the tax law REALLY says.

Today's section 61, "Gross income defined" was the same thing but in a different location in the 1939 revision. In that revision, it was section 39, "Gross income defined" and gave the same definition.

In 1954, there was a major revision, and section 39 was changed to section 61. There was another major revision in 1986, keeping this section as 61.

Today's tax code is the 1986 revision, as amended each year up until 2024.

But that 1939 revision is still part of the law, except where changes have been made via amending it over the years.

Anyway, the regulation for section 39 back then said:

Gross income means all income, from whatever source derived, unless excluded by fundamental law or otherwise not taxed.

What does "fundamental law" mean? Or "otherwise not taxed?"

It means ... the CONSTITUTION !!!

In the 1954 revision, they removed this word, but it still today in the regulations says, "unless excluded by law." It means the same thing today as it did in 1939. "Excluded by law" means anything that the federal government is powerless to tax due to constitutional restraints.

But the statute does not say it. Only the regulations do.

The 1939 regulations also said, at 26 CFR § 39.22(b)-l (1956):

No other items may be excluded from gross income except (a) those items of income which are, under the Constitution, not taxable by the Federal Government ...

Pretty clear, huh?

But they took that language out when they moved the "Gross income" definition in 1939 from section 39 and moved it to section 61 in the 1954 revision.

They ALWAYS tell the truth somewhere in the code or regulations, but they do not promote it, and IRS will blatantly deny what the clear language says, because they WANT to violate those constitutional restraints.

But they can't. So instead, they use deceptive wording.

So ...

What type of "income" is exluded by law from "gross income" (which is the starting point of arriving at "taxable income," which is the ONLY thing that Congress has passed ANY laws to tax, as it relates to income?

Several SCOTUS cases, combined, tell us. Though reading through them and getting at what they mean is not easy.

The biggest thing to understand is that "income" is NOT the money you receive -- for anything. The money you receive in exchange for services or buying and selling things (i.e. business and investment) is PROPERTY, and not INCOME.

The federal government is PROHIBITED by the Constitution from directly taxing your property. That would be a direct tax, which the Constitution allows, but ONLY by apportionment to the states.

There are only TWO types of taxes that Congress can enforce: Direct and Indirect.

A tax on property is a direct tax, and Congress can only do that by sending a bill to the states for the states to pay -- NOT to the People directly.

BUT ...

An excise tax is an indirect tax that Congress CAN enforce on the People.

An excise is a tax on some ACTIVITY, not on property.

When you buy gas at the gas station, the price includes a "federal gasoline excise tax" on the privilige of the ACTIVITY of buying gas, which is regulated by the federal government, per the interstate commerce clause of the Constitution.

BUT you do not pay the government DIRECTLY. Instead, the government imposes the tax on the gas station (really, the state which imposes it on the gas station). The gas station collects the tax and pays it to the government.

Thus, it is an INDIRECT tax to you, and not a direct tax.

The income tax is an excise tax on the activity of engaging in some federal privilege. THAT is what it is. That is what all the SCOTUS decisions point to, though they never spell it out that clearly in any particular case.

Each case is based on the facts and circumstances of THAT case only. So, they rule on that, and not on what "income tax" means, as a whole. So, you have to piece it all together to understand it.

There are SCOTUS cases that say that if you receive money as compensation for your labor, then that is NOT income, and therefore Congress cannot tax it.

BUT ...

Those cases had to do with private labor. Exchanging your labor for money is a COMMON LAW RIGHT, or a FUNDAMENTAL RIGHT that existed long before the government existed, and you STILL HAVE THAT RIGHT TODAY.

See: 9th Amendment.

UNLESS ...

Your labor is some sort of federal government PRIVILEGE.

In that case, Congress CAN tax it.

Congress would be taxing the ACTIVITY of working and receiving a "gain" by engaging in a government privilege.

Examples:

(1) Husband has a job working for General Electric, and receives money as compensation for his services. His wife is a federal judge, and receives money as compensation for her services. His salary is NOT "income" under the Constitution because he has a common law right to work for a living. But his wife's salary IS "income" under the Constitution, because nobody has a RIGHT to work for the government. That is a privilege.

(2) They own stock in IBM and in Fannie Mae. They receive dividends from both companies. The dividend from IBM is NOT "income," consitutionally, because they have a RIGHT to own property and receive a benefit from owning it. But the dividend from Fannie Mae IS "income," constitutionally, because Fannie Mae is a corporation that was created by Congress and would not exist if the federal government did not exist. So, they can tax it.

(3) Grandpa receives a pension as part of his compensation for working for Boeing for 40 years. He also receives Social Security. His Boeing pension is NOT "income" because he has a common law right to work and receive compensation, as well as retirement benefits, from his work. But he does NOT have a RIGHT to receive ANY money from the federal government in the form of a retirement handout (it is NOT a return on investment, legally, no matter how many politiicans lie about that -- it is legally a welfare benefit). The government CAN tax it, or they can choose not to. But even if they choose not to, they can if they decide to change the law.

THIS is why the Secretary of the Treasury, who is the head of the IRS, ultimately, put into the regulations (many years ago) something that was not and is not in the actual statute. Namely, that "gross income" includes ALL income, but does NOT include ANY income that is EXCLUDED BY LAW (i.e. the Constitution and the Supreme Court decisions that define what the word "income" means).

The famous SCOTUS case that ruled that the 16th Amendment is constitutional was Brushaber v. Union Pacific (1916). SCOTUS ruled that the 16th Amendment "confered no new taxing power" because the NATURE of an income tax WAS ALWAYS an indirect, excise tax (which is a tax on the ACTIVITY of engaging in a government privilege).

The tax is NOT on the income. It is a tax on the ACTIVITY that produces monetary compensation, and that monetary compensation is the MEASURE used to determine the AMOUNT of tax to pay.

However, what most people miss about that case is that "Union Pacific" was the Union Pacific Railroad, which was a special corporation CREATED BY CONGRESS for the purpose of building out the railroads in the 19th century.

Therefore, Congress COULD tax the dividends to Mr. Brushaber, as his ownership in that government corporation was a privilege and not a common law right.

Other SCOTUS cases have always distinguished between right and privilege, which allows them to make constitutional rulings, even though they also engage in deception.

Remember all the 2020 election challenge cases that were not heard by courts?

SCOTUS has the constitutional authority to CHOOSE which cases to hear and which to ignore. So, they WAIT until they get just the right case, with just the right facts and circumstances with the ISSUE they want to rule on ... and ONLY take that one or a few cases that will allow them to rule they way the want to.

That's why they used Brushaber, and not some other case. They could rule the 16th Amendment constitutional, without directly mentioning that ownership of stock in Union Pacific Railroad was a privilege, not a right.

NOW ... HAVING SAID ALL OF THAT ...

Even if you do not engage in any federal government privilege, you CAN VOLUNTEER to do so, if you want (or if you are deceived into believing that you must).

If you volunteer to engage in the privileged activity, then you MUST comply with the laws that govern that activity.

HENCE ...

Voluntary compliance.

Make sense now?

Finally, take a look at another tax that is imposed by Title 26, the Internal Revenue Laws:

26 USC 5001:

There is hereby imposed on all distilled spirits produced in or imported into the United States a tax at the rate of $13.50 on each proof gallon and a proportionate tax at the like rate on all fractional parts of a proof gallon.

https://www.law.cornell.edu/uscode/text/26/5001

Do you see that THIS tax is IMPOSED within Title 26, just like the income tax is imposed in Title 26, as well?

Do YOU have to pay this tax?

Do YOU produce or import distilled spirits?

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