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The Professor (Part 4)

(originally launched into cyberspace on 05/19/2007)

Dear Subscriber,

I expect this to be my last message in this series regarding the
radio debate between myself and Jonathan Siegel (professor of law
at GWU). Again, the show is archived at the following site (bottom
of the page):

Mr. Siegel's current position can be summed up as: Yes, you CAN use
Section 861 and its regulations to determine your taxable domestic
income, but your "worldwide" income (foreign and domestic) will
show up as taxable anyway. For example, he claims that 26 USC
861(a)(3) means that compensation earned for services performed in
the U.S. is taxable for everyone.

As you may have notice, I have a habit of trying to jam a million
points into one e-mail (along with two million supporting
citations), but this time I want to focus on just ONE section. That
one section is Section 217 of the Revenue Acts of the 1920's, the
"grandfather" of the current Section 861. All by itself, that older
statute is very telling.

I bet you've all seen signs along the highway that say something
along the lines of "trucks must use right lane." When you see
those, do you interpret that to mean "EVERYONE must use the right
lane"? Of course not. Why would someone make a rule that says
CERTAIN PEOPLE must do a certain thing, if they meant EVERYONE must
do that certain thing?

This painfully obvious concept is really the heart and soul of the
legal principle of "inclusio unius." It would be logically moronic
for a law to specifically say only that it applied to "A" and "B,"
if it was supposed to apply to "C" and "D" as well. So it makes
sense that, as the Supreme Court put it (in Gould v. Gould), we are
NOT supposed to assume that tax laws apply to "matters not
specifically pointed out." Why on earth would we?

Again, the reason for this is really basic logic. How goofy would
our legal system be if the law DIDN'T specifically say what it
applied to, and we all had to guess? What would such a law even
look like?

"Section 1. Somebody--we won't say who--must do the following..."

The only thing worse than that would be a law that said "People
with red hair must do the following" when it really meant that
"EVERYONE must do the following." The idea is obviously absurd. Any
idiot knows that when he sees a sign about trucks using the right
lane, the rule ISN'T ABOUT HIM, unless he's driving a truck.

Now suppose that there was a law that said that CERTAIN people must
pay a tax on any income they receive from working inside the United
States. Well, there is, and there has been for over ninety years.
Here is what it looked like in the 1920's:

“Sec. 217. (a) In the case of a NONRESIDENT ALIEN or of a citizen
ENTITLED TO THE BENEFITS OF SECTION 262, the following items of
gross income shall be treated as income from sources within the
United States:
(1) Interest on bonds, notes, or other interest-bearing
obligations of residents, corporate or otherwise;
(2) The amount received as dividends from a domestic
(3) Compensation for labor or personal services performed in the
United States;
(4) Rentals or royalties from property located in the United
(5) Gains, profits, and income from the sale of real property
located in the United States;
(b) From the items of gross income specified in subdivision (a)
there shall be deducted [the allowable deductions]. The remainder,
if any, shall be included in full as net income from sources within
the United States.” [Section 217, Revenue Act of 1925]

So the listed types of domestic income are, after deductions, to be
reported as taxable income in the case of foreigners, and in the
case of citizens "entitled to the benefits of section 262." For the
record, here is what Section 262 back then said:

"(a) In the case of citizens of the United States or domestic
corporations, satisfying the following conditions, gross income
means only gross income from sources within the United States—(1)
If 80 per centum or more of the gross income of such citizen or
domestic corporation...for the three-year period immediately
preceding the close of the taxable year...was derived from sources
within a POSSESSION of the United States..." [Section 262, Revenue
Act of 1925]

So, to summarize a bit, if a person got most of his income from
federal possessions (e.g., Guam or Puerto Rico) he could be
"entitled to the benefit" of being taxed only on any income he
received from inside the states, and NOT on his possessions income.
(As a result, certain U.S. citizens COULD have taxable income from
inside the U.S.)

So now we can easily paraphrase the old Section 217: In the case of
FOREIGNERS, and in the case of Americans with POSSESSIONS income,
domestic interest, domestic wages, and other domestic income are,
after subtracting deductions, to be included as taxable domestic

Based on the principle mentioned above, all by itself that section
should raise some red flags. Aren't wages earned in the U.S.
taxable for EVERYONE, including ALL U.S. citizens as well as
foreigners? That's what "conventional wisdom" says. So, regardless
of what any other section of law might say, why on earth would
there be a section of law saying, in essence, that domestic wages
are taxable for foreigners and for CERTAIN Americans? I challenge
anyone to come up with an explanation for that which doesn't blow
"conventional wisdom" out of the water.

You might wonder whether some OTHER section said that such domestic
income was also taxable "in the case of all OTHER U.S. citizens."
Nope, but that shouldn't really come as a surprise. Why on earth
would one part of a law say that CERTAIN people must do something,
only to have another part of the law say that EVERYONE ELSE must do
it as well? (That would be like a traffic sign that said "trucks
must use right lane," followed by another sign that said "And
everyone else must also use the right lane, too." Why on earth
would that ever happen?)

There are a lot of different pieces to the income tax "puzzle," and
as a result, understanding the big picture takes time and effort.
But in some cases just ONE piece, all by itself, blasts a major
hole in conventional wisdom. And this is one of those pieces. If
"compensation for services performed in the United States" was
taxable for anyone who received it, there would be NO REASON for
there to have ever been a section of law worded like the old
Section 217.

While decades of obfuscation and complication have made the truth
more difficult to find THAT SECTION is what "evolved" into the
current Section 861 and its regulations, which STILL show that
income from within the U.S. is taxable for foreigners and for
CERTAIN Americans (those with possessions income). Why not say it's
taxable for ALL citizens? Why, in 90 YEARS, has the section about
U.S.-source income NEVER said that?

As I said before, I will be asking Professor Siegel two simple
questions regarding his claim that 861 means that domestic income
is taxable for all of us. Those questions are:

1) Did Section 217(a)(3) of the Revenue Act of 1925 mean that
compensation for services performed in the United States is taxable
for ALL U.S. citizens?

2) Did the scope and application of that part of the law CHANGE
somewhere along the line, on its way to becoming the current

The answer to the first is obviously "no." The answer to the second
is also "no," as demonstrated by Treasury Decision 8687, all the
regs under Section 119 of the 1939 Code, the "Wodehouse" Supreme
Court decision, and Congress' own reports on the different tax

So if that 1925 section DIDN'T mean that domestic wages are taxable
for all U.S. citizens, and the scope of that part of the law DIDN'T
change substantially since then, how could the current 861(a)(3)
mean that all domestic wages are taxable? It can't, and it doesn't.
Let's see how the professor explains this.


Larken Rose

The Professor (Part 3)

originally launched into cyberspace on 05/18/2007)

Dear Subscriber,

I just had to insert a few comments at this point, ahead of the
next message I was going to send. In response to an e-mail from
someone saying he found my position more convincing that Professor
Siegel's rebuttal, Mr. Siegel wrote this:

> > If you have read those pages [from Siegel's site]
> > and you still find Mr. Rose's arguments convincing,
> > then I'm afraid I have little more to add, other
> > than to ask this: do you really believe that every
> > judge who has looked into this issue is mistaken?
> > Do you really believe that all the law professors
> > and lawyers that have looked into this issue is
> > mistaken? Why do you believe that this one,
> > untrained guy and disbelieve everyone who is
> > so much better equipped to find the answer?

First of all, a lot of lawyers HAVE come to the same conclusions I
have. But I'm sure Mr. Siegel would dismiss them as "fringe kooks"
(because remember, the issue is not up for "reasonable debate") so
they don't count. But notice how he again resorts to the POPULARITY
of a position as the supposed proof of its validity. And this from
a LAW professor. If he is so well "equipped" to find the truth in
the law, why does he so often run AWAY from the law and resort to
logical fallacies? Incidentally, very few judges and lawyers HAVE
looked into the position. Instead, they've heard the punch line,
assumed it had to be wrong, and then tried to support their
foregone conclusion.

In fact, Mr. Siegel gives an excellent example of this. After
arguing that 861 is only for international matters--that most of us
should NOT look there--he eventually conceded that, according to 26
CFR 1.861-1 and 1.861-8, "you, or anyone else, whether a U.S.
citizen or not, CAN USE SECTION 861 and following of the code to
figure your gross income from sources within the United States, and
then your taxable income from sources within the United States." He
followed that with the (incorrect) claim that if you do, your
income will show up as taxable. (I'll address that claim shortly.)

He is not the first (or the second, or third) supposed "expert" who
has CHANGED his position in order to maintain his foregone
conclusion. I've gotten two obviously contradictory positions from
different credentialed tax professionals and/or lawyers. They go
something like this:

a) Yes, you should look to 861 and its regs.
b) Yes, they show your income to be taxable.

a) No, you should not look to 861 and its regs.
b) No, they don't show your income to be taxable.

The only thing these claims have in common is the conclusion:
"everyone owes!" But wait a second: if "Yes, you SHOULD look
there," and "No, it does NOT show your income to be taxable," are
both things that educated tax professionals (and government
officials) can believe, why is it so impossible to believe both at
once? Because the CONCLUSION they lead to is heresy: that most of
us DON'T OWE federal income taxes. So the supposed "experts" will
CHANGE the reasoning they use, as long as it still leads to the
acceptable foregone conclusion.

I spent a year in prison for believing I "can use section 861 and
following of the code to figure [my] gross income from sources
within the United States, and then [my] taxable income from sources
within the United States," as Mr. Siegel put it. At trial the
government never argued that 861 shows my income to be taxable;
their entire case was that their clueless paper-pushers "TOLD" me I
was NOT supposed to look there, so how could I possibly believe
otherwise? I wonder what would happen if IRS bureaucrats "told"
Professor Siegel that. Would he believe them?

(Incidentally, my appeal will probably be heard in September.
Apparently the Third Circuit court of Appeals is horrendously

There are tell-tale signs when someone is using backwards logic:
starting with a desired conclusion and then trying to justify it,
instead of using the scientific method of letting evidence and
logic lead us to the truth. Peoples' brains work very differently
depending upon which they are doing: following the evidence or
trying to bolster a foregone conclusion.

For example, Mr. Siegel obviously does NOT know what the regs meant
when they say that some income is EXEMPT from the federal income
tax, not because of any statute, but because of the Constitution
itself. He made one guess, which I proved wrong (stock dividends a
la the Eisner case). After that, he showed no curiosity, and made
no further guess, but instead changed the subject. Is it really so
difficult for a supposed "expert" to say "I don't know"? Well, if
his agenda is sustaining a position, yes, it is. (Incidentally,
this is how lawyers are TRAINED to think. As paid advocates, their
JOB is to start with the desired result, and work backwards trying
to justify it, which is the OPPOSITE of what a truth-seeker does.)

As I've often said, when watching the discussion of the 861
evidence, be mindful of human psychology as much as you are of the
law. In the next few days I will be asking Mr. Siegel TWO simple
questions. Watch carefully how he responds, and then decide if he
is to be "trusted" (which is a term he likes to bring up).


Larken Rose

The Professor (Part 2)

(originally launched into cyberspace on 05/12/2007)

Dear Subscriber,

It's time to look at what little substance there was in the radio
debate between myself and Professor Siegel. Again, you can listen
to the show here:

Unfortunately, the beginning of my questioning Professor Siegel is
missing from the archived recording. What I first asked him was:
What kinds of income are the regulations referring to when they say
that some income is EXEMPT because of the Constitution itself?

His guess was that those regulations were referring to the issue
addressed by the Supreme Court in the Eisner v. Macomber case, in
which they ruled that certain stock dividends don't constitute
"income," and therefore couldn't be subject to the federal income
tax. As I pointed out, there are several reasons why that is NOT
what the regulations are talking about:

1) Years BEFORE the Eisner case happened, the regs were already
talking about some income being Constitutionally non-taxable. They
obviously could not have been referring to a ruling that hadn't
happened yet.

2) From 1921 to 1936, AFTER Eisner, the tax statutes said "A stock
dividend shall not be subject to tax"--in other words, the types of
dividends discussed in Eisner were, BY STATUTE, identified as
exempt. And the regulations said that IN ADDITION TO those things
exempted by statute, some OTHER income was excluded because of the
Constitution itself. Obviously that statement was NOT talking about
"Eisner" stock dividends, which were specifically exempted by
statute following the decision.

3) The Eisner case did NOT actually conclude that any income was
Constitutionally non-taxable; instead, it concluded that the
dividends in question WERE NOT EVEN INCOME. (When I pointed this
out, Mr. Siegel said, "I think that's too fine a distinction."
Well, since it proves him wrong, I'm not surprised.)

So his one guess at what the regulations are referring to was
proven dead wrong, for several reasons, yet he suggested no
alternative explanation. He threw out a guess (and it was pretty
obviously only a guess), because he knew that even a bad guess
would look better than saying "I don't know," which obviously would
have been the truth. He showed no curiosity and no desire to
discuss it further, demonstrating that his agenda was not to
DETERMINE the truth, but to try to convince the listener that he
already KNOWS the truth (when he obviously does not). He clearly
doesn't KNOW what all is exempt, and therefore cannot possible know
what all is taxable (non-exempt), yet he has the gall to insult you
and me for wanting to have a "reasonable debate" about it.

"Arrogance and ignorance go hand in hand." - Metallica

- --------------------------------------

About the only other point of substance that was covered had to do
with the purpose of Section 861. Pay close attention, because the
professor did on the show what he had done previously in e-mails.
Early on, he said this: "Section 861 deals with the international
aspects of taxation." His main position is that, as a U.S. citizen
living and working in the U.S., you don't NEED to use 861 and its

On the show, as you can hear for yourself, at one point he quoted
from 26 CFR 1.1-1, which says that U.S. citizens are "liable to the
taxes imposed by the code," whether their (taxable) income is "from
sources within or without the United States." In response, I asked
whether Mr. Siegel agreed that the taxes imposed by the code are
only upon "TAXABLE income" (not all income). Mr. Siegel agreed. I
then quoted from 26 CFR 1.863-1, which says that a taxpayer's
TAXABLE income "from sources within or without the United States"
WILL BE DETERMINED under the rules in Section 1.861-8 and
following. His response was this: "And when you do that, you
discover that it's all their worldwide income for a U.S. citizen."

Now hold on. Before dealing with whether that statement is
accurate, make note of his position CHANGE. He went from saying
that 861 is just for international stuff--you don't need to look
there--to apparently CONCEDING that you should look there. And this
isn't the first time he's done that.

In responding to an e-mail question from someone (who then sent me
the entire exchange), Professor Siegel QUOTED directly from the
regs at 1.861-1 and 1.861-8, which clearly state that one SHOULD be
looking to 861 and related regs to determine his taxable domestic
income. Then the law professor said this:

"Therefore, the answer to your question is that, as these
regulations provide, you, or anyone else, whether a U.S. citizen or
not, can use section 861 and following of the code to figure your
gross income from sources within the United States, and then your
taxable income from sources within the United States. Go right
ahead, be my guest."

Hang on. What happened to those sections being irrelevant for us?
What happened to those just being about "international aspects of
taxation"? What happened to us just looking at Section 61, and
assuming that the "source" of income doesn't matter? Now we ARE
supposed to use those sections?

This is important to note: for any given person, either you ARE
supposed to use those sections, or you're NOT. It can't be both.
(Oddly, Mr. Siegel says one "can" use those sections, as if it's
optional.) Why did he just CHANGE his position, from "don't look
there," to "well, even if you do..."?

He follows his admission that you SHOULD look there (or at least
you "can," whatever that means) by saying that, "If you are like
most U.S. citizens, you will discover, if you do this, that it
makes no difference as to your ultimate tax." In the next message
I'll show why he is dead wrong about that. But don't overlook the
significance of the classic lawyer-think stunt here: have one
argument, and have a back-up, CONFLICTING argument to justify the
same conclusion.

I've seen other lawyers do this as well, including Dan Evans (who
attempts, and fails, to refute the 861 evidence on his web site).
They argue that you should IGNORE Section 861, until they are
buried in so many citations saying the opposite that they revert
to, "Well, even if you DO look there, it says your income is
taxable." Then, to keep the water as muddy as possible, they say it
doesn't "matter" whether you use those sections or not.

Why try so hard to keep us from looking at those sections, if they
say our income is taxable? On the other hand, why argue that those
sections say we owe the tax, if we're not even supposed to be
looking there? Why do these supposed "experts," who say the issue
isn't even debatable, have to have two CONFLICTING positions about

It reminds me of the lawyer joke, in which a lawyer argues
something like: "My client didn't take this man's lawnmower. And if
he did, it wasn't broken when he gave it back. And if it was, it
was broken when he borrowed it."

Why do they do this? The answer is simple: both of their positions
are dead wrong, so they want to be able to jump back and forth
between them each time one is proven incorrect. It's the classic,
"Well, even if that's true" obfuscation technique. The truth is, we
ARE supposed to use those sections--as you just saw the professor
finally concede--and they do NOT show our income to be taxable (as
you'll see in the next message). But they jump between multiple
incorrect arguments in this manner so they always have a fall-back:
each time one of their two huge mistakes is exposed, they change
the subject to the OTHER argument. They can jump back and forth
forever, keeping the average observer confused.

So, as we go to the next message, be sure to have it cemented in
your mind that Mr. Siegel, professor of law, admitted that the
regulations say that "you, or anyone else, whether a U.S. citizen
or not, can use section 861 and following of the code to figure
your gross income from sources within the United States, and then
your taxable income from sources within the United States." Don't
forget that.


Larken Rose

The Professor (Part 1)

(originally launched into cyberspace on 05/09/2007)

Dear Subscriber,

For those of you who missed it, the radio show debate between me
and Professor Siegel is now archived (in MP3 format) at the bottom
of the following web page:

Since we didn't have time to get into the substance of the issue on
the show, I'll give a few comments here.

After my opening statement, in which I summarized the issue,
professor Siegel did his introductory monologue. Of note, whereas
mine was all about the law, his opening comments avoided talking
about the law entirely. After asserting that my conclusions are
wrong, he said this: "What I would like your listeners to
understand is this isn't really subject to reasonable debate."

Right out of the starting gate, he's going for psychological tricks
instead of evidence and logic. Implying that no one "reasonable"
would ever think such a thing, or would even CONSIDER or DEBATE
such a topic, is a direct insult to every one of you who is even
curious about the issue.

Next, he used the strawman logical fallacy, by saying: "The
question, 'Is there an income tax?' is just not subject to
reasonable debate." Who is suggesting that there ISN'T an income
tax? Not me. He then said: "This question has been to court
hundreds of times, perhaps thousands of times." That's absolutely
untrue. But then he uses the guilt-by-association psychological
trick, saying that my "argument" is "just one of many arguments
people make." So he wants ALL theories and claims to be jumbled
together in peoples' minds (which they often are anyway).

He then said, with tax time coming up, "it would be irresponsible
to suggest that there's really a debate about this." In addition to
being condescending and arrogant, that statement includes an
implied threat: you can get in trouble if you agree with the 861
evidence. That's true, but what does that have to do with whether
something is true or not? Nothing. (As an aside, in passing he said
that "It's healthy in a democracy that people should have some
distrust of government." Yeah, and some distrust of legal "experts"
too, who call a Constitutional Republic a "democracy.")

He then made the laughable claim that our system of "checks and
balances" makes sure the IRS wouldn't lie about the law, and that
many federal judges have "independently investigated the law," and
decided everyone owes the tax. He then argued another non-sequitur,
saying that if I even might be right, there would be a thousand
lawyers suing the government over it. Well, some have tried, and
have learned the hard way that the system punishes anyone who
doesn't spout the party line.

But notice how all of his opening comments were about WHO asserts
that we all owe, and not at all about what the LAW says. The exact
same thing could have been said when all the learned minds and
authorities said that the sun goes around the earth, and punished
people who said otherwise. He would much rather focus on WHO says
that we all owe the tax (lawyers, judges, etc.), instead of on what
the law itself shows.

When it was his turn to ask questions, his first question for me
was basically, if I'm right, why did I go to prison? (He later
admitted he didn't know the details of my trial.) Again, he dodged
the evidence entirely, and went for the psychological tricks. I
answered with a question: if the earth goes around the sun, why did
Galileo go to prison? His response: "Well, Galileo lived at a
rather different time. He didn't live in a free democratic society
with independent judges making independent judgments about what the
law is."

So apparently NOW, unlike in the past, the "authorities" and
"experts" are always right, and everyone they punish is always
guilty. That's comforting. I then went through how our supposed
objective, fair system made sure I couldn't present ANY evidence
demonstrating my state of mind over the last eight years. (I also
pointed out that my supposedly objective "judge" made glaringly
obvious mistatements about the income tax laws, such as saying that
Congress did not have the power to impose income taxes prior to the
16th Amendment.)

He then tried to challenge my motives, by pointing out that I SELL
a video, with the obvious implication being that, if I make money
off of it, I shouldn't be trusted. His sails deflated, however,
when I informed him that, after I get paid back the interest-free
loan I gave the 861 Evidence mini-CD project years ago, I won't be
getting any more from it. But again, what does his little motive-
impugning stunt have to do with the EVIDENCE? Not a thing. But it
is a lot easier than addressing the substance of the issue.

(Incidentally, I must admit I'm getting a little tired of that
stupid accusation. I now have to borrow another $80,000 to give to
the IRS (they refused any installment agreement) just for "interest
and penalties," for taking the stand I openly took. The court is
also taking $16,000 more from us for telling the truth and obeying
the law. That's all above and beyond the original taxes which we
didn't owe but were coerced into paying. So pardon me if I think
it's a little slimy for someone to allege that I'm just saying this
stuff for my own financial benefit. Speaking of which, I've been
spending many UNPAID hours completely redoing the "Taxable Income"
report, which will be posted on the internet--for free, as always--
very soon.)

After that, Mr. Siegel talked about the "consequences" of not
paying, asking me "is it nice, is it moral, is it appropriate" for
me to state my conclusions, knowing what can happen to people who
disagree with the IRS? The implication is clearly that it's BAD to
state an opinion that, if people agree with it, can get them in
trouble. What a pathetic attitude.

Mr. Siegel then argued that, of the 600,000 lawyers in the country,
he didn't think even 1% agreed with me. Again, he wants the truth
to be a popularity contest. (Of course, the vast majority of
lawyers have never even looked into the issue anyway, so their
opinions on the topic are utterly worthless.)

In the next couple of messages, I'll cover some of the points which
had to do with the actual evidence. But notice that nothing the
professor said in his opening, or in his questions to me, was about
the LAW. It was all about persuasion via logical fallacy
(demonization, guilt-by-association, truth-by-popularity, expert-
worship, etc.). Now why do you suppose a LAW professor didn't want
to talk about the LAW? In the next message, you'll see.


Larken Rose

Exempted By Fundamental Law

(originally launched onto cyberspace on 05/05/2007)

Dear Subscriber,

I started to write up a response to a letter I received, and
realized I might as well answer it here instead. As most of you
know, the older income tax regulations said, quite plainly, that
neither income exempted by the statutes of the tax code, NOR income
excluded because of "fundamental law," are to be included in the
computation of one's taxable income (e.g., 26 CFR 39.21-1 (1956)).

As many of us have learned first hand, if you ask an attorney or
CPA what that is talking about, you're unlikely to get much more
than a blank stare. (Occasionally one will at least make a guess,
usually involving municipal bonds or the income of state
governments, but those have always been exempted by STATUTE, so
that's not what those regulations were talking about.) Most of the
time, the supposed "experts" DON'T KNOW the regulations ever said
that, so they have no explanation for it, and don't take it into
account when determining what (if anything) people owe.

I like tormenting self-proclaimed "experts" with evidence which
reveals their ignorance, but now I'll give my answer to the
question (since someone just sent me a letter asking me to).

First of all, "fundamental law" means the Constitution. Though we
common folk don't usually hear the term, it's well known to refer
to the foundation upon which all legislative laws are based: the
Constitution. In fact, the older regulations, in addition to
mentioning "fundamental law," in another place explained that some
income is exempt from tax because it is, "under the Constitution,
not taxable by the Federal government" (26 CFR 39.22(b)-1 (1956)).

But WHAT income does the Constitution render non-taxable? It gives
rules about HOW "direct" and "indirect" taxes must be administered,
but as far as saying WHAT can be taxed, the only specific
prohibition has to do with state exports. The Supreme Court has
ruled (in Peck v. Lowe), however, that just because the income tax
might happen to be applied to income from state exports, that
doesn't make it an export tax per se. So state exports is NOT what
those regulations are talking about.

But if that's not it, what else could it be? There's nothing in the
Constitution which identifies anything else as being untaxable by
the federal government. Answering the question requires an
understanding of how the Constitution works.

The Constitution, except for the first ten amendments, is not a
list of what Congress CAN'T do. In fact, the anti-federalists were
right to complain about the proposed Bill of Rights (the first ten
amendments), because listing certain things the government CANNOT
do could be construed as meaning they CAN do anything not
specifically prohibited. (So the Ninth Amendment was included to
dispute such a notion.)

In short, the federal government is legally authorized to do
ABSOLUTELY NOTHING, except for carrying out the specific,
"enumerated powers" which the Constitution lists (mainly in Article
I, Section 8). So looking for the Constitution to spell out LIMITS
on the feds' power is looking at it backwards. The feds are to be
assume to have NO POWER AT ALL, unless the Constitution
specifically gives them that power.

Imagine you hired a plumber to fix your leaky sink, and then found
him eating stuff out of your refrigerator. If he said, "Well, you
didn't say I couldn't," would that be a good excuse? If he
complained that nothing in his contract specifically forbad him
from eating your food, would you accept that? Of course not. If you
hired him to do a SPECIFIC JOB, that doesn't give him the right to
do whatever he wants with your property.

The same is true of the federal government. It's a mistake to start
with the assumption that the feds are authorized to do anything
they please unless the Constitution forbids it. That's the exact
OPPOSITE of how it works. You should assume they have the power to
do NOTHING, unless the Constitution specifically AUTHORIZES it.

This principle affects the taxing power as well. The Supreme Court
has explained that there are "virtual limitations" upon the taxing
power, not from any specific prohibition in the Constitution, but
from the limits of what the Constitution says Congress IS allowed
to do. The way the Court put it, for Congress to “resort to the
taxing power to effectuate an end which is not legitimate, not
within the scope of the Constitution, is obviously inadmissible”
(United States v. Butler, 297 U.S. 1).

For example, Congress once tried to combat “child labor” in the
states (which is NOT a federal issue under the Constitution) by
trying to TAX it out of existence. The Supreme Court threw out the
tax, explaining it this way:

“Grant the validity of this law, and all that Congress would need
to do hereafter, in seeking to take over to its control any one of
the great number of subjects of public interest, jurisdiction of
which the states have never parted with, and which are reserved to
them by the 10th Amendment, would be to enact a detailed measure of
complete regulation of the subject and enforce it by a socalled tax
upon departures from it. To give such magic to the word ‘tax’ would
be to break down all constitutional limitation of the powers of
Congress and completely wipe out the sovereignty of the states”
(Child Labor Tax Cases, 259 U.S. 20).

In other words, Congress cannot circumvents the limits of the
Constitution just by passing a regulation in the form of a "tax,"
to control something NOT under their Constitution jurisdiction.

So how might that apply to limits upon an "income tax"? Well, the
Supreme Court has ruled that because Congress has the general
taxing power, AND specific power to "regulate commerce with foreign
nations," they can therefore "undoubtedly" apply an income tax to
income which American companies derive from INTERNATIONAL commerce
(Peck v. Lowe, 247 U.S. 165).

Now ask yourself, why is the tax code tens of thousands of pages
long? What on earth could all those pages be about? Almost all of
it is about BEHAVIORAL CONTROLS, rewarding this and punishing that.
Via tax credits, deductions, exemptions, incentives, tax
deferments, and so on, the tax code in effect REGULATES all sorts
of behaviors and economic choices relating to investment,
retirement planning, borrowing money, giving to charities, dealing
with insurance, and so on.

However, only those with TAXABLE income are subject to all of those
controls. If someone is engaged in "commerce with foreign nations,"
for example, the Constitution DOES allow Congress to regulate such
matters. And if they want to do it by way of a "tax," that's just
fine too, since “The power of taxation, which is expressly granted,
may, of course, be adopted as a means to carry into operation
ANOTHER power also expressly granted." On the other hand, “If, in
lieu of compulsory regulation of subjects within the states’
reserved jurisdiction, which is prohibited, the Congress could
invoke the taxing and spending power as a means to accomplish the
same end, clause 1, Section 8 of Article I [of the U.S.
Constitution] would become the instrument for total subversion of
the governmental powers reserved to the individual states” (United
States v. Butler, 299, U.S. 1).

It would absurd for anyone to deny that the tax code is an attempt
to CONTROL THE BEHAVIOR of those who receive taxable income. It
would also be absurd for anyone to claim that Congress has the
Constitutional power to regulate all such matters as they relate to
Americans living and working just in the 50 states. If the domestic
income of all Americans were taxable, how could those be
reconciled? They couldn't. But if only INTERNATIONAL trade is taxed-
- -as the law itself shows--then all the rewards and punishments
apply only to those engaged in "commerce with foreign nations,"
which the Constitution DOES authorize Congress to regulate.

In conclusion, when looking for the limits on the taxing power due
to "fundamental law," don't just look for what the Constitution
specifically prohibits; look for what it authorizes, and know that
EVERYTHING ELSE is assumed to be prohibited. Since the Tenth
Amendment says just that, if you want one particular thing in the
Constitution which exempts the income of the average American from
being subject to the federal income tax, that would be it.


Larken Rose

[ June 21, 2007, 05:19 PM: Message edited by: 3rdEar ]

The Artful Dodger

(originally launched into cyberspace on 05/4/2007)

Dear Subscriber,

I received a response from Professor Siegel to my two questions,
and I must say, I am quite impressed. I'm not impressed with his
answers, because he didn't answer either question. But I am
impressed with his quintessential lawyer-speak method of using lots
of words to NOT answer two simple yes-or-no questions. I'll give
you his entire response, with comments of mine inserted inside
brackets [like this]. Here goes:

- ----------< begin Siegel reply >-----------

> > 1) Did Section 217(a)(3) of the Revenue Act of 1925
> > mean that compensation for services performed in
> > the United States is taxable for ALL U.S. citizens?

Mr. Rose,

First of all, I note that you are, as usual, overly focused on
studying arcane issues relating to what the law was many decades

[Wow, change the subject and insult the questioner. He's off to a
good start.]

We are governed by the current law, not by what the law was in the
days of our grandparents. The 1920s Revenue Acts are long gone.
Yes, the old law may in some cases have some influence on the
interpretation of the current law, but what really matters is the
current law.

[For the record, both the Supreme Court (in the Wodehouse case) and
the Secretary of the Treasury (in Treasury Decision 8687) looked to
Section 217 to decide the correct interpretation of later statutes.
But again, he starts by complaining about the questions, even
though the questions connect it with the current law.]

However, for the sake of argument, I took a look at these old
acts. I don't see a Revenue Act of 1925, but I looked at the
Revenue Act of 1924, 43 Stat. 253, and the Revenue Act of 1926, 44
Stat. 9.

Unsurprisingly, I discovered that the income tax imposed by these
old laws, like the current income tax, applied to the domestic
income of U.S. citizens.

[So far, no answer to what I actually asked. And I won't let him
side-track the discussion by responding to every false statement he

Specifically, the answer to your question [Here we go!] is yes,
section 217 of the 1920s Revenue Acts, in connection with the other
sections, particularly section 213, did mean that compensation for
services performed in the United States was taxable for U.S.

[Wow, nice dodge! I didn't ask if that section, "in connection
with" anything else, said something. I didn't ask anything about
any other section. I asked if Section 217(a)(3) meant that domestic
wages are taxable for all U.S. citizens. Anyone can see that it
does NOT. So why wouldn't he just say "No," and then give his
explanation? Why change the QUESTION before answering it? Because
the honest answer ("No, it did not") would be hard to reconcile
with his previously stated position.]

You make the same fundamental error for these old Revenue Acts as
you do for the current Code: you focus only on the "sources"
section (the only section mentioned in your question), when you
should also be looking at the sections that define gross income.

[So apparently I got the QUESTION wrong. How does that work? I
won't bother pointing out all the things he gets wrong in these
paragraphs, which I've done before. Again, I don't intend to let
him change the topic of discussion in order to distract attention
from the fact that he completely dodged the question, but to be
fair I wanted to show his entire response.]

Section 213(a) of the old Acts provided that gross income "includes
gains, profits, and income derived from salaries, wages, or
compensation for personal service . . . of whatever kind and in
whatever form paid . . . ."

However, section 213(c) provided that "In the case of a nonresident
alien individual, gross income means only the gross income from
sources within the United States, determined under the provisions
of section 217."

Thus, the basic structure was the same as today's. Section 213(a)
was comparable to today's section 61. Section 213(c) was
comparable to today's section 2(d).

Then, as now, the Act first defined gross income as including
compensation for personal service, without any restriction as to
geographic source.

But then, as now, it provided that *for nonresident aliens*, gross
income means only gross income from sources within the United

Therefore, nonresident aliens needed to know which part of their
income was from sources within the United States. Section 217
answered that question. But, because there was no geographic
restriction in section 213(a), gross income for U.S. citizens
included compensation for services performed anywhere, as is true
under today's section 61.

The role of section 217, like the role of section 861 today, was to
determine which income was from sources within the United States.
Section 213, however, specified the scope of gross income: for
nonresident aliens, only income from U.S. sources [213(c)]; but for
U.S. citizens, all income without regard to geographic source

(The old Acts also put certain other taxpayers, such as U.S.
citizens subject to then-section 262, in the same position as
nonresident aliens.)

Section 217 was a little different from current section 861 in that
it only mentioned nonresident aliens (and others in special
categories). That just makes it all the clearer that U.S. citizens
did not need to determine which part of their income was from
sources within the United States because section 213(a) defined
their gross income without regard to geographic source.

[Note how he's back to implying that we don't need to look to 861.
Once again, he changes positions to try to cling to his incorrect

So the bottom line is yes, the income tax imposed in those days,
like the current income tax, applied to the domestic income of U.S.
citizens, because it defined their gross income without regard to
geographic source, as opposed to the gross income of nonresident
aliens, which, then as now, was limited to gross income from U.S.

[Nice "bottom line," except that's not what I asked. It was a
simple yes-or-no question, about one particular section, and he
refused to answer it, even though the answer is painfully obvious.
Why is that, do you suppose? Now, on to the second question...]

The answer to this question makes it unnecessary to answer your
second question.

- -------------< end Siegel reply >----------

Well, that makes two questions and zero answers.

Now, I don't mind people expounding to their heart's delight. I do
it quite often myself. But it's one thing to do that AFTER
answering a question, and another to do it INSTEAD OF answering a
question, which is what Professor Siegel did. The answer to the
first question is obviously "NO," but he refused to say that. As
for the second question, he used his prior tap-dance as an excuse
to not answer it. (I wonder how often his law students ask him a
question, only to have him tell them that it's "unnecessary" for
him to answer.)

I'd now like to quote myself, from a recent message:

"As I've often said, when watching the discussion of the 861
evidence, be mindful of human psychology as much as you are of the
law. In the next few days I will be asking Mr. Siegel TWO simple
questions. Watch carefully how he responds, and then decide if he
is to be "trusted" (which is a term he likes to bring up)."

Well, did he answer the questions, or did he tap-dance? This is why
the back-and-forth, question-and-answer method is so much more
informative than one-sided articles or speeches. (It's also why the
status quo experts so rarely agree to engage in a rational
discussion.) In a monologue you can make almost anything sound
convincing. It's on "cross-examination" that mistakes and untruths
get uncovered. And when someone dances around a question, changes
it, insults it, complains about it, or says answering is not
"necessary," what does that tell you?


Larken Rose