Subject: SHORT Summary
Dear List Subscriber,
As many of you have noticed, I'm not exactly a master of brevity when it comes to the 861 evidence. I always want to pile on a ton of citations, logic, etc., proving every little step. In doing so, sometimes I overwhelm the reader, and drown him in legalese before he ever gets to the punchline. So this message is a test, to see if I can really do a SHORT summary of the 861 evidence. (Last time I tried, my "short" summary was about five pages long.) So here goes...
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There are two routes to the truth in the lawbooks concerning the very limited nature of the federal income tax:
1) The issue of exempt income.
2) The issue of when domestic income is taxable.
I will summarize them separately:
THE ISSUE OF EXEMPT INCOME
For ages and ages, the income tax laws have included a very broadly-worded general definition of "gross income," which would seem to include all income from everywhere. (Generally speaking, "gross income" becomes "taxable income" after subtracting deductions.) There are a few types of income that Congress specifically exempted from income taxation, such as life insurance proceeds and gifts, but the STATUTES passed by Congress do not specifically exempt the income of most Americans. (This is why the tax professionals think most of us owe the tax.) However, the Supreme Court says that every statute is to be read in light of the Constitution, and the regulations (past and present) show that some types of income NOT exempted by any statute are nonetheless exempt from taxation because of the Constitution itself. The regulations, past and present, specifically list what is NOT exempt from taxation (i.e. what IS taxable), and while those lists always include the domestic income of FOREIGNERS, and certain FOREIGN income of Americans, they do NOT include the income of the average American. That is because the income of the average American is EXEMPT from taxation.
THE ISSUE OF WHEN DOMESTIC INCOME IS TAXABLE
In addition to the general definition of "gross income," the income tax laws have included (for more than 80 YEARS) sections which specifically said when income from WITHIN the United States is taxable. Currently it is found in Section 861 of the tax code, and the related regulations. (Section 862 describes when income from OUTSIDE of the U.S. is taxable.) Section 861 and its regulations (and 80 years of predecessors) show the domestic income of foreigners to be taxable, in addition to the income of certain people doing business in federal possessions, but do NOT show the domestic income of the average American to be taxable. Again, that is because such income is NOT taxable. (The Supreme Court says we are not to ASSUME that taxing statutes apply to things not "specifically pointed out.")
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Hey, that was almost short! (I just barely survived writing it.) However... I need to add one more thing, to address something that has often come up recently. There is some confusion (and it was by design) about the scope and purpose of Section 861 and its regulations. Some insist that only people who have foreign AND domestic income should be looking there... though they can never find any CITATION supporting such a claim. Some claim that Section 861 DOES show the income of the average American to be taxable (though IRS Chief Counsel does not argue such a thing, because they know how weak that claim is). So here is a little more in-depth summary of how 861 and following work: Section 861(a) and the related regulations from 1.861-2 through 1.861-7 say what kinds of income count as income from WITHIN the United States, and Section 862(a) and related regulations say what kinds of income count as income from OUTSIDE of the United States. (In the case of income that comes partly from inside and partly from outside the U.S., Section 863 gives rules about how to divide up such income into "within" and "without" income.) These are often called the "source rules."
As the status quo defenders are quick to point out, those "source rules" do NOT say that the income of the average American is exempt. They also do not say that the income of a billion people in China is exempt from U.S. taxation (though of course it is). The "source rules" in 861 and 862 say NOTHING about exactly what income is actually TAXABLE; they only distinguish between "within" income and "without" income. One who looks at the generally-worded "source rules" (in particular Section 861(a)(3) of the statutes and Section 1.861-4 of the regulations) is likely to come away thinking that ALL pay for services performed in the United States is subject to tax.
(Step Six of "Theft By Deception" shows how the law was intentionally changed over time to make such a misreading not just possible, but very likely. But the history of the section leaves no room for doubt.) However, the NEXT step is to determine when income from within the United States is actually TAXABLE, and that is done under 26 CFR § 1.861-8. That convoluted and mangled section (and again, that was by design) only shows income from within the U.S. to be taxable when it comes from certain "specific sources and activities" listed in 26 CFR § 1.861-8(f)(1), which are all related to INTERNATIONAL and FOREIGN commerce. (That is commerce which IS under federal jurisdiction, but which most of us do NOT get our income from.)
Again, the history of the sections really solidify the truth about this, whereas the current 1.861-8 is as likely to give someone a headache as it is to tell them how the law works.
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There, now I feel better, since my clarification tripled the length of my summary. (Oops.) I hope that helps. Sincerely,
Larken Rose
http://www.theft-by-deception.com
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