Are federal income taxes legal?

Why in the world would a group of anti-tax activists who believe the federal income tax to be a government ruse choose for their mascot Toto, the little dog owned by Dorothy Gale from the children’s classic, “The Wizard of Oz?”

Because while the rest of Dorothy’s entourage in Oz were terrified of the all-powerful “Wizard,” in the end, it was Toto who pulled back the curtain, revealing the wizard’s true nature, explained Robert Schulz, chairman of the We the People Foundation for Constitutional Education.

Schulz’s group is one of several preparing for tomorrow’s informational and planning meeting to discuss details of “Project TOTO.” The project is a public information campaign aimed at making known “the true nature of the income tax laws, to expose operations of the IRS that are unauthorized by law, and to put an end to their illegal collection of taxes from people who do not owe them — the vast majority of U.S. citizens,” wrote Schulz to Internal Revenue Service Commissioner Charles Rossotti, who was invited to the meeting.

Anti-tax activists are commonly known as “tax protesters,” although many reject the characterization as they say they do not disagree with paying taxes that are legally authorized. The key is their belief that the 16th Amendment to the U.S. Constitution, which authorized a federal income tax, was never properly ratified. It follows then that government compelling citizens to pay income taxes under threat of personal incarceration and loss of property is illegal and constitutes tyranny.

The 16th Amendment states in its entirety, “The Congress shall have 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.”

While the legitimacy of the amendment’s ratification has been debated since government began operating under it in 1913, the anti-tax movement has been gathering steam in recent years. Indeed, USA Today is again running a full-page ad by We the People in today’s edition that explains the group’s position. The ad is available for viewing at the group’s website.

“Exhaustive legal research from both state and national archives documented conclusively that the amendment did not even come close to being legally approved by the required number of states,” the ad claims.

The ad lists examples of various states that did not properly ratify the amendment. Kentucky’s legislature rejected the amendment, but Secretary of State Philander Knox counted Kentucky as having approved it, the ad asserts. Additionally, Oklahoma’s legislature changed the amendment’s wording so that it meant “just the opposite” of the original draft, according to the group’s research. Minnesota did not submit any results or copy of its legislative vote to Knox, the group says, yet the nation’s record keeper counted the state as one that approved the amendment.

“Legal scholars have agreed that if any state violated provisions of its own state constitution in the ratification process, its approval would be null and void,” the ad continues. “At least 20 states were guilty of serious violations of their constitutions.”

In fact, Bill Benson, a former criminal investigator for the Illinois Department of Revenue, began in 1984 to examine the ratification of the 16th Amendment, state by state. After a massive search of state archives and other repositories of the relevant documents, he determined that the 16th Amendment was never legally ratified. His work is contained in a two-volume book set called “The Law That Never Was.”

Nevertheless, the argument regarding the 16th Amendment’s controversial ratification — or lack thereof — has been debated. After all, the original 13 states of the Union violated provisions of their own state constitutions by ratifying the U.S. Constitution and joining the union. In 1788, people argued the U.S. Constitution was illegal on that very point. But the Constitution is universally accepted today as having been legally ratified.

Anti-tax activists have tried for years to get government officials to cite legal authority authorizing collection of taxes from U.S. citizens. From their own readings of tax law, activists claim income taxes are due the government only from citizens working in foreign countries and resident aliens working in the United States. Refusal by officials to cite such authority is regarded as acknowledgment by government that no such authority exists.

Section 1 of the Internal Revenue Code states, “There is hereby imposed on the taxable income of (1) every married individual … and (2) every surviving spouse … a tax …” The section continues, “There is hereby imposed on the taxable income of every head of a household … a tax …” and, “There is hereby imposed on the taxable income of every individual … who is not a married individual … a tax…” A large percentage of the volumes of code that follow Section 1 is devoted to defining “taxable income” — another contentious issue among federal income tax opponents.

But there are other arguments laid out by Project TOTO, including the allegation that courts refuse to even consider whether or not the 16th Amendment was legally ratified.
In 1986, Leland Stahl was sued by the United States, which attempted to collect Stahl’s unpaid taxes. The 9th Circuit Court of Appeals stated: “Stahl’s claim that ratification of the 16th Amendment was fraudulently certified constitutes a political question because we could not undertake independent resolution of this issue ‘without expressing lack of respect due coordinate branches of government.'” This statement is key in the anti-tax community’s position. It is used as evidence that the judicial system flatly refuses to address the question of the amendment’s veracity.

However, the court’s statement begs explanation. It stems from what is known as the “political question doctrine” – a 150-year-old rule that prevents courts from deciding controversies that are inherently political in nature and that must be decided by a different branch of government. It began in 1849 when Rhode Island was locked in a bloodless civil war with two factions claiming to be the legitimate state government. The Supreme Court refused to decide which of the two was indeed “legitimate,” because “it rests with Congress to decide what government is the established one in a state.”

In Stahl’s case, the court refused to decide his claim of fraud in ratification for the same reason it refuses to decide whether or not pieces of legislation were properly enacted. In fact, the 9th Circuit referred to such a case in its decision in United States v. Stahl. The Supreme Court in 1892 held that when a bill has been signed by the speaker of the House and by the president of the Senate and has received the president’s approval, “its authentication as a bill that has passed Congress should be deemed complete and unimpeachable. … The respect due to coequal and independent departments requires the judicial department … to accept, as having passed Congress, all bills authenticated in the manner stated.”

The 16th Amendment was regarded by the court as analogous to cases involving a bill. A court will not look into whether or not a bill was properly enacted, because that is a function that is expressly delegated by the Constitution to the legislative and executive branches. It is commonly believed that courts may decide any matter that comes before them, but throughout the United States’ history, that has not been the case. Courts may only decide those cases for which they are empowered by the Constitution to decide.

Another point made by the Project TOTO group is that filing an income tax return may be a self-incriminating act and therefore is a violation of the 5th Amendment. That constitutional provision states that the government cannot compel citizens to submit information that may be used against them later.

Schulz believes the Project TOTO campaign is the most effective tool to educate the public and members of the professional community, including tax lawyers, government officials, accountants and others about questions surrounding the federal income tax.

“I don’t know what else a free people are to do when they’re up against an unjust … government,” he said. “People can just tolerate this for so long.”

Income tax opponents, specifically business owners who subscribe to the idea that the 16th Amendment is a fraud, were described by the New York Times recently as a “flamboyant fringe.” However, the list of participants at tomorrow’s meeting hardly merits such an extreme characterization.

Details of Project TOTO will be presented tomorrow to about 400 participants by Mike Bodine, who became involved in the 1993 “whistleblower” case involving fraudulent accounting, procurement and progress claims on a major Energy Department contract. Bodine was a key witness in the case, which was eventually settled out of court, resulting in the largest settlement amount in U.S. history of any whistleblower case where the Justice Department did not intervene on behalf of the witness. He has been instrumental in Project TOTO’s development. Bodine held a top-secret “Q” clearance with the Department of Energy for many years, and was a first-hand witness to the management of the nation’s leading technology programs.

Additionally, Joe Banister — the famed former IRS special agent who quit his job after private research led him to believe the agency was acting illegally — will make a presentation at the meeting.

Other speakers include Walker Todd, an attorney and economic consultant in private practice in Chagrin Falls, Ohio. Todd is a 9-year veteran of the Federal Reserve Bank in Cleveland and spent a decade in the legal department of the Federal Reserve Bank of New York. He is now an adjunct faculty member of the Cleveland-Marshall College of Law at Cleveland State University.

Paul Chappell, a retired tax attorney who spent 10 years on staff at the U.S. Tax Court, will also be featured. After his time in the tax court, Chappell joined the Office of Chief Counsel at the IRS, where he specialized in handling corporate tax matters for 7 years. While in private practice representing many taxpayers before the IRS and federal courts, Chapell began to re-examine the statutory and constitutional bases for the individual income tax enforcement system, leading to his current solidarity with We the People.

The meeting is open to the public and will take place at the Crystal City Hilton Hotel in Arlington, Va.

Related story:

“The law that never was”