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Resist We Much on March 19, 2013 at 10:26 AM

A flat wealth tax of just 1.5 percent on financial assets and other wealth like housing, cars and business ownership would have been more than enough

A wealth tax is unconstitutional. The Sixteenth Amendment permits taxation only on income and the Supreme Court has ruled on numerous occasions that there must be a “liquidity event” or “transaction” before the Federal government can tax assets.

‘Income may be defined as the gain derived from capital, from labor, or from both combined,’ Stratton’s Independence v Howbert, 231 U.S. 399, (1913).

‘Income within the meaning of the 16th Amendment and the Revenue Act means, gain … and, in such connection, gain means profit… proceeding from property severed from capital, however invested or employed and coming in, received or drawn by the taxpayer for his separate use, benefit and disposal.’ – Staples v United States, (1918).

While it acknowledged the power of the Federal government to tax income under the Sixteenth Amendment in Eisner v Macomber, 252 U.S. 189 (1920, the Court said this did not give Congress the power to tax — as income — anything other than income, i.e., that Congress did not have the power to re-define the term income as it appeared in the Constitution:

“Throughout the argument of the Government, in a variety of forms, runs the fundamental error already mentioned—a failure to appraise correctly the force of the term “income” as used in the Sixteenth Amendment, or at least to give practical effect to it. Thus, the Government contends that the tax “is levied on income derived from corporate earnings,” when in truth the stockholder has “derived” nothing except paper certificates which, so far as they have any effect, deny him [or "her" — in this case, Mrs. Macomber] present participation in such earnings. It [the government] contends that the tax may be laid when earnings “are received by the stockholder,” whereas [s]he has received none; that the profits are “distributed by means of a stock dividend,” although a stock dividend distributes no profits; that under the Act of 1916 “the tax is on the stockholder’s share in corporate earnings,” when in truth a stockholder has no such share, and receives none in a stock dividend; that “the profits are segregated from his [her] former capital, and [s]he has a separate certificate representing his [her] invested profits or gains,” whereas there has been no segregation of profits, nor has [s]he any separate certificate representing a personal gain, since the certificates, new and old, are alike in what they represent—a capital interest in the entire concerns of the corporation.”

Holding:

“A pro rata stock dividend where a shareholder received no actual cash or other property, and retained the same proportionate share of ownership of the corporation as was held prior to the dividend, was not taxable income to the shareholder within the meaning of the Sixteenth Amendment, and that an income tax imposed by the Revenue Act of 1916 on such dividend was unconstitutional, even where the dividend indirectly represented accrued earnings of the corporation.”

Instead, income is realised whenever there are “instances of

1) undeniable accessions to wealth

2) clearly realised, and

3) over which the taxpayers have complete dominion.”

‘Congress has taxed INCOME, not compensation or property.’ – Conner v United States, 303 F Supp. 1187 (1969). Notice that the Court took special pains to emphasize only INCOME IS TAXABLE.

“… whatever may constitute income, therefore, must have the essental feature of gain to the recipient. This was true when the 16th Amendment became effective, it was true at the time of Eisner v Macomber, it was true under Section 22(a) of the Internal Revenue Code of 1938, and it is likewise true under Section 61(a) of the I.R.S. Code of 1954. If there is not gain, there is not income … Congress has taxed income not compensation.” – Conner v United States, 303 F Supp. 1187 (1969).

“Before the 1921 Act this Court had indicated (see Eisner v Macomber, 252 U.S. 189 (1920)), what it later held, that ‘income,’ as used in the revenue acts taxing income, adopted since the 16th Amendment, has the same meaning that it had in the Act of 1909, Merchants; Loan & T. Co. v Smietanka, 255 U.S. 509, (1921); Southern Pacific Co. v Lowe, 247 U.S. 330, (1918).” – Burnet v Harmel, 287 U.S. 103 (1932).

Resist We Much on March 19, 2013 at 12:27 PM