American Republic Online

The IRS has lost a case involving the constitutionality of income taxes.

The argument is an interesting one:

Essentially, he argued that income is not necessarily any money that comes to a person, but rather categories such as profit and interest.

He said the free exchange of labor for compensation has been upheld as a right by the Supreme Court, but that doesn’t necessarily make the compensation income.

In other words, income is only profit or gain achieved from the exchange of goods.  In sum, selling something for more than you paid for it. By this definition, so-called income from wages becomes harder to define. That is, we exchange our labor and time for wages, just as we would exchange our newly remodeled house for cash (or subprime mortgage: how ever you want to look at it). How much is our time and labor worth? Well, according to the IRS, it’s worth $0.00: all your wages are counted as income.

Let me put it this way: Wal-Mart sells a TV for $100. Is that all counted as income? Well, since they paid $70 for the TV, and then spent another $20 getting it to the store, paying people to sell it, electricity for the store to sell it in, etc, Wal-Mart only has $10 of income: price of the good minus the costs associated with it. That $10 is what the IRS considers income at the corporation level, and that is what will be taxed.

Come back to wage-earners. That person working at Wal-Mart for $8 an hour, 40 hours a week, takes home $320 gross. Well, they spent 40 hours of their week earning it, and applied the skills needed to operate the cash register, bag items, etc. How much is that worth, and how much can we claim as “income:” the price received for our service, minus the cost? Well, anyone who has looked at their pay stub knows that the government does not take that into account, and considers the whole $320 as income.

The issue, of course, is how does one measure the “worth” of one’s time and labor? This is a nebulous figure, but certainly we could all agree it is worth more than $0.00.

This was the issue in the case mentioned above, and a jury ruled against the IRS 12-0. This is an astounding precedent:

“There’s no law making the average working man liable [for income taxes], there’s no law or regulation that allows the IRS to contend that earnings are 100 percent profit received in exchange for nothing, and the right to earn a living through any lawful occupation is a constitutionally protected fundamental right, and it is exempt from taxation.”

If this is upheld, and people catch on, tax receipts would drop dramatically. Well, our defendant has a solution to that too:

…the expenses could be reduced equally by eliminating programs, departments and agencies that also have no foundation in the Constitution.

Amen.