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by John Sasser

“I recommend first, the adoption of a joint resolution by two-thirds of both Houses, proposing to the States an amendment to the Constitution…of an excise tax upon all corporations, measured by 2 per cent of their net income.”

-President Taft stumping for the 16th Amendment. June 16, 1909, Congressional Record – Senate, p. 3344.

The 16th Amendment of the Constitution of the United States of America, which was supposedly ratified by the states in 1913 and is generally referred to as the income tax amendment, is the most misunderstood provision in the Constitution. The misleading statements and publications of the IRS about the 16th Amendment are completely different from the explanation of the Amendment given by President William Howard Taft in his message to a joint session of Congress on June 16, 1909.
The President’s message was published in the Congressional Record (Senate) on page 3344 and 3345. President Taft explained that the purpose and function of his proposed 16th Amendment was to assure the constitutionality of his proposed Corporation Income Act that was passed in the same 1909 session of Congress. The amendment did not authorize any income tax on U.S. citizens.
To better understand the 16th Amendment, it is necessary to learn a few basic facts about the economic and political issues in America during the latter years of the 1800’s and how they led up to the creation of the 16th Amendment. In the years following the end of the War Between The States, there was a great expansion of the economic and industrial activity in the nation, resulting in a concentration of power in the managements of corporations. This concentration of power was further increased by the joining together of corporations involved in the same line of business to form organizations called trusts which were formed to dominated the business or industry of their member corporations. Each trust had a management with central control over the corporations in the trust which eliminated competition and enable the corporations to exploit the public by means of the trust monopolies that were created to fleece the public.


These economic abuses caused a public reaction resulting in a political movement to stop the trusts’ exploitation of the public by enacting Federal laws designed to destroy the trusts. The first major reform law was the Sherman Anti-Trust Act enacted in 1890. This law declared illegal “every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several states, or with foreign nations”; it also included criminal penalties for violations of the laws’ provisions.
In 1894 Congress enacted an income tax law that imposed a tax on the income of corporations. The legality of the law was immediately challenged in court and the issue was decided in 1895 in the case of Pollock v. Farmers Loan and Trust Co., (157U.S. 420). The United States Supreme Court, which, at that time was considered very favorable to big business, ruled that the law was unconstitutional, but for a very unusual reason. The Court ruled that the law was unconstitutional because it imposed a tax on income derived from property. Some examples are rents from real estate, profits from farming and profits from operation of a factory.
The Court’s reasoning was that to tax income when the source of the income was property, imposes a Federal tax burden on the property itself, which is forbidden by limitation on direct taxation in the Constitution (quoted below). The Court ruled that any tax on property, like any tax upon an individual citizen, is a direct tax in the constitutional sense. A Federal direct tax is allowed by the Constitution to be imposed only on the governments of the states of the union. The amount of the tax on each state government is determined by apportioning (dividing) the total amount of the direct tax among the state governments, to be collected from all the states in proportion to the population of each state.
The apportionment requirement for direct taxes is found in two provisions in the Constitution. First, Article I, Section 2, Clause 3 states:

“Representatives and direct Taxes shall be apportioned among the several States which may be included within this Union, according to their respective Numbers…”

This sentence continues and explains how the nation’s census is taken every ten years to determining the mentioned “respective Numbers”, meaning the populations of each of the States. By this method each State’s portion of the total Federal direct tax is determined. Upon receipt of their apportioned Federal tax bill, each of the fifty states must then raise its share from its citizens by whatever means its state constitution permits. There have been only five direct Federal taxes in the history of the republic. The last one was imposed in 1862.
Second, Section 9 of Article I of the Constitution contains a list of actions that are forbidden to Congress. In that list, Clause 4 states:

“No capitation, or other direct, tax shall be laid, unless in proportion to the census or enumeration herein-before directed to be taken.”

Black’s Law Dictionary, Fifth Edition, defines “capitation tax” as “a tax or imposition on the person.” This constitutional prohibition means that no Federal tax on the people or their earnings is allowed! This provision clearly forbids any Federal direct tax unless it is levied upon, and apportioned among, the State governments in proportion to the population of each State as required in Article I, Section 2, Clause 3 discussed above.
The U.S. Supreme Court, in the 1913 decision in the case of Stratton’s Independence v. Howbert, 231 U.S. 399 explained that the income tax is an excise tax imposed on activities involving the exercise of a government granted privilege. The Supreme Court said that the income is not the subject on which the tax is imposed and that income is merely the measurement for determining the amount of the tax. For non-resident aliens, having no rights under our Constitution, being allowed to work, invest, do business in and even to enter the country are privileges granted by the U.S. government. Citizens have the right to do these things without government permission.
The decision of the U.S. Supreme Court in the case of Brushaber v. Union Pacific Railroad, Inc., 240 U.S. 1 (1916) is the cornerstone decision relied upon by the IRS that established the constitutionality of the income tax (but only as an excise tax) under the 16th Amendment. This case involved withholding from monies accruing to non-resident aliens, but not to citizens! It is interesting to note that nothing in the Court’s decision exposes this very important fact.
The Brushaber court explained that the 16th Amendment states that the tax authorized by the Amendment must be laid “without apportionment,” and because the Constitution still requires that all direct taxes must be apportioned among the states, the income tax cannot stand constitutionally as a direct tax (a tax on citizens). The Court stated that the income tax is constitutional only as an indirect tax in the nature of an excise.
Also, in other decisions the U.S. Supreme Court has ruled that the income tax is an excise tax imposed on activities involving the exercise of a government-granted privilege, such as the activities of corporations or activities of non-resident aliens working or doing business in this nation and that income is the measurement for determining the amount of the tax for such corporations or nonresident aliens.
Again, in 1916 the U.S. Supreme Court, in the case of Stanton v. Baltic Mining, 240 U.S. 103, held that the 16th Amendment created no new power of taxation.
In the 1918 U.S. Supreme Court decision of Peck & Co. v. Lowe, 247 U.S. 165, the Court also explained the limited application of the 16th Amendment. The Court stated:

“The 16th Amendment does not extend the power of taxation to new or excepted subjects…Neither can the tax be sustained as a tax on the person, measured by income. Such a tax would be by nature a capitation rather than an excise.” (emphasis added).

As previously noted, capitation taxes are still forbidden by Article I, Section 9, Clause 4 of the Constitution!
IRS’ own Treasury Decision #2313 which is a notification bulletin sent to all Internal Revenue Collectors, acknowledges that the Brushaber case involved the withholding of tax on monies accruing to non-resident aliens only, but not to citizens and that the IRS form 1040 is to be used for reporting “income” of non-residential alien individuals. Treasury Decision #2313 states,
Under the decision of the Supreme Court of the United States in the case of Brushaber… it is hereby held that income accruing to nonresident aliens in the form of interest from the bonds and dividends on the stock of domestic corporation is subject to the income tax imposed by the act of October 3, 1913… The responsible heads, agents, or representatives of nonresident aliens, who are in charge of the property owned or business carried on with in the United States, shall make a full and complete return of the income therefrom on Form 1040, revised, and shall pay any and all tax, normal and additional, assessed upon the income received by them in behalf of their nonresident alien principals. (Emphasis added.)


However, the BIG LIE that is spread is that the Constitutional limitations on the impositions of direct taxes were changed by the 16th Amendment, thus authorizing income tax as a direct tax on citizens of the U.S.
The 1895 Pollock decision of the U.S. Supreme Court effectively prevented the enactment of any new corporation income tax law until 1909 during the administration of President William Howard Taft. President Taft had been elected on a “trust buster” platform that obligated him to enact additional legislation to prohibit the existence of trusts. Taft wanted to get access to corporations’ business records through the government’s taxing power in order to uncover any corporations’ abuses of the public and any secret violations of the Sherman Anti-Trust Act.
In President Taft’s June 16, 1909 message to a joint session of Congress, he called for a bill to impose a tax of only 2% on the income of corporations. He described his proposed corporation income tax bill as being: “…in form and substance almost exactly the same character as that…” income tax law involved in the Pollock decision of the U.S. Supreme Court, wherein the law was ruled to be unconstitutional. President Taft considered it unlikely that the Court would be willing to reverse the Pollock ruling. Therefore, in order to assure the constitutionality of an income tax on corporations, he proposed a Constitutional amendment that would override the crux of the Pollock decision and thereby assure the constitutionality of his newly proposed 1909 Corporation Income Tax Act.
It is easy to understand how simply the wording in President Taft’s proposed 16th Amendment overrode the U.S. Supreme Court’s ruling in the Pollock case. The Pollock ruling stated that the income could not be taxed if the source of the income was property. The 16th Amendment states:

“Congress shall have the 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.” (Emphasis added.)

The underlined words clearly mean that income derived from all sources, including property, can be taxed by Congress, thus overriding the Pollock decision of the U.S. Supreme Court. However, the income tax authorized by the 16th Amendment applies to corporations and monies received by non-resident alien individuals but not by citizen individuals.




Nothing in the Sixteenth Amendment repealed or nullified the Constitutional limitations on the imposition of direct taxes which still prohibit the imposition of any Federal taxes on individual citizens of this country or on their property. This paper shows why there is no provision in the Internal Revenue Code imposing any Federal tax on real estate or making any individual citizen liable for payment of income tax. No U.S. citizen is required by law to file any 1040 U.S. Individual Income Tax Return or to pay any “income” tax on his or her earnings, or on any profits or gains derived from business, investments or from buying or selling any form of property.
Because there is no income tax imposed on individual citizens, the idea that repealing the Sixteenth Amendment would eliminate income tax on individual citizens is totally erroneous. Instead, a repeal of the Amendment would simply restore the legal force of the Pollock decision and make the Corporation Income Tax Act unconstitutional.
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