On what would be an otherwise wonderful spring day, it’s April 15th, which is not a wonderful day as it’s tax day where many Americans “voluntarily comply” with paying into the government and telling the IRS about their private life (as if the 4th amendment didn’t exist).
I decided to crack open the tax code which consists of millions of words to look up some definitions. As a private-sector entrepreneur, I am of course curious as to the definition of “self-employment” in the code and where it imposes a tax on “self-employment” activities, as if making a living was not a common right.
Section 1401 imposes the tax:
But what is “self-employment income”? Section 1402 defines it:
So taxable income is any gross income derived from a trade or business, which would probably make it look like it applies to anyone such as myself who is a private-sector entrepreneur. Maybe there is a definition of “trade or business” in the IRC. There is, conveniently far from that above quoted section within the title known as the Internal Revenue Code. In section 7701:
Oh! I don’t hold public office.
Many of you may want to look up the term employee (Section 3401).
If taxes are based on “voluntarily complying,” why can people be arrested and even imprisoned for not paying them?
Isn’t that like being arrested and imprisoned for not donating your old clothes to a charity?
How could the government possibly get away with imprisoning people like this? Wouldn’t some lawyer have figured out the legal loophole, in an effort to make millions from clients?
Umm… where are the terms “employee” and “trade or business” fully defined? Those definitions include extra clauses specific to public positions, but say nothing about the private sector.
How is taxing self employment activities infringing your right to make a living?
It’s up to the “taxpayer” to comply. If you engage in a taxable activity (see below), then you are required to pay the excise tax.
A lot of people mistaking think they owe a tax on their activities and when someone else files information returns reporting this to the IRS, such as a W-2 or 1099, and it goes undisputed, then the presumption is that claim made against you is correct. If you fill out a W-4 or W-9, you are telling the entity you are providing that form to that you are engaging in a taxable activity, which means they need to report to the IRS on the W-2 or 1099.
Then you will love private roads. Very smooth. As for traffic lights, I prefer round abouts and yield signs.
Take the red pill… but be careful when doing so and be cautious if you decide to proceed in your newfound knowledge.
Those terms are not defined elsewhere. It means what it says. While the definition uses the term “includes”, that just means it’s a term of limited expansion. What’s listed is for illustrative purposes and it can be expanded as long as it’s in the same class. For example: The term “food” includes apples, bananas, oranges, and pears. This means that all fruits are in the definition, but stuff like vegetables and meat are not.
Lets assume you meant taxing private-sector activities. To make a living, I need to put a certain amount of effort or work into it. If I am taxed on that, then I am forced to put forth more effort than I would have otherwise. Therefore it infringes on the right to make a living.
The definitions I showed above are simply artifacts to help prove a point that the code does not impose a tax on private-sector activities, nor could they even if it clearly said so in the code. It may be different in the UK, since the history of your system has different classes of people (kings, dukes, the common person, etc). In the USA, we separated from that, declaring our independence. The Declaration of Independence reiterates the basis of law and authority in the USA, stating “that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness.” This is in the legal sense that all men are created equal. Nobody has authority over anyone else. You don’t have authority over me. You grouping up with another person does not make you have authority over me. No matter how many others you group up with, you do not have authority over me. If I go about my business without infringing on the right of others to go about their business, then there is nothing that can be imposed on me.
In the USA, the States are simply a legal fiction. They were created by people other than myself. It is a contract between those people who created it, not a contract that makes me bound by it. This contract creates a trust. The elected officials are trustees of the trust, whose purpose is to carry out the intent of the trust. I am simply a beneficiary to this trust.
As an example, I could form a new entity with a few others, for the benefit of helping the homeless. The beneficiaries of this entity are the homeless, but there is no way we can make the homeless bound by this entity simply by creating it. The entity lacks jurisdiction to do that. One cannot create an entity that has more powers than those who created it.
The federal government is also a legal fiction. The federal government was created as a contract between the States via the representatives of the States. It can have no jurisdiction that the States do not have and can only have the powers given to it by the States in the charter that created it, the Constitution.
If the income tax can apply to my private-sector activities, then the claim is that they have authority over me. That’s a violation of my rights and they would have no jurisdiction to do so. A federal income tax can only apply to activities that the federal government has authority over, for example, performing the functions of a public office. When the income tax was first enacted in 1862 by Lincoln, the tax code was more revealing than it is now. It was more clear that it taxed those engaging in activities with the US government, with a lot of the revenue coming from the railroad industry which was run by the US government. People investing in the railroad industry and employees of the railroad companies were subject to the income tax.
If you think the income tax applies to everyone’s private activities, then you must think this is an authoritarian country where your rights are derived from the state instead of from your mere existence.
When you realize that we live in a free society, where nobody has authority over another, you’ll realize that you probably don’t owe an income tax, which may lead you to try to decipher the tax code to see what it actually says and how they are getting away with this notion that everyone owes a tax.
Gilby, I thoroughly enjoy your posts and explanations. Especially this topic, which I never would have even thought to question.
But I have another question (if you don’t mind sharing this information, I can understand why you might not want to):
Do [I]you[I] pay income tax?
Also, you answered my question in your last post, but it brought up another:
From what you said, I gathered that when someone else (a current or former employer) submits a W-2 to the IRS, my income on that W-2 becomes taxable. If I were to be self-employed, is it theoretically possible to just not submit a W-2, and thus have no taxable income? What would happen if I actually did this? (not that I plan to)
I pay all taxes I am liable to pay, and probably some that I am not.
No, it can not change from non-taxable to taxable or vice versa. It either is or it isn’t. If someone submits an information return about you, then they are simply claiming to the IRS that you received taxable income, but if that income is not taxable income, then you can dispute their claim. Not disputing it would give the IRS the presumption that you received taxable income.
I’ll assume by self-employed, you mean something other than what it is defined as in the IRC and that you are in the private sector. One who works for them self does not file a W-2, even if they are a taxpayer. They may get 1099 from others, or they simply report their income on Schedule C.
If you want to be a nontaxpayer, then don’t get a job with the federal government, with a federally chartered corporation, or engage in any activity that is a federal privilege, which would legally make you have a tax obligation. Then, don’t let another company submit a W-2 or 1099 to the IRS about your activities that would give them the presumption that you have a tax liability. Never use your social security number, or better yet, don’t bother getting a SSN if you can (though they give them out at birth now days). You don’t need it and most forms that ask for it is so that you can declare your activity as being taxable. It might be a little difficult opening bank accounts and explaining to the businesses you get a paycheck from, but it is possible. I personally know some people that have done this for several years.
The answer is a bit cryptic and leaves a little wiggle room, but I suppose if Gilby had wanted to disclose any personal information bluntly, he would have done so.
Gilby, thanks for answering my questions. I don’t think I’d be able to stop using my SS# at this point, since its already tied into so many things, but I was, and still am, very interested in this topic.
Plus, I think I support paying income tax, in principle. I think. I guess I’m not really that sure, but that’s why I ask questions
Here is another reason not to support it. Before the federal income tax was imposed on Americans, the government system was a bottom up system, where the federal government was very limited in what it could do and the control of government was more local at the state, county or city level. Now that the federal government takes in the massive amount of revenue that it does via the income tax (and their ability of endless borrowing via the Federal Reserve), the money is concentrated in the federal government. This has caused the state and local governments to comply with the demands of the federal government so that they can get a piece of the funds, thereby flipping the control completely over. What used to be a union among several states is now just one large national entity that has authoritarian control over the states and the people. The complete opposite of what made America a great country and what was fought for in the Revolutionary War. Income taxation is all about redistribution of wealth… and most of it does not go to help the poor and others with social programs, but goes to the military industrial complex, the pharma industrial complex, the banking cartel, etc. The result is endless warfare, killing millions of people throughout the world, locking up nonviolent “criminals”, giving funds to dictators who use those funds as weapons to oppress their citizens, and oppressing people in America (the very people that they claim to help).
All of this is done, of course, “for your own good”, as if you are too stupid to know how to spend the fruits of your own labor. Most humans are very compassionate and willing to help their neighbors and their community if they can. But when you let a few elite individuals, who claim to serve that very purpose, take control and force you to do it their way, you end up with something that does the exact opposite of what was intended.
America has turned into the very thing that America fought independence from in 1776.
Enclosed you will find my 2008 tax return showing that I owe $3,407.00 in taxes.
Please note the attached article from the USA Today newspaper; dated 12 November, wherein you will see the Pentagon (Department of Defense) is paying $171.50 per hammer and NASA has paid $600.00 per toilet seat.
I am enclosing four (4) toilet seats (valued @ $2,400) and six (6) hammers (valued @ $1,029), which I secured at Home Depot, bringing my total remittance to $3,429.00.
Please apply the overpayment of $22.00 to the ‘Presidential Election Fund,’ as noted on my return.
You can do this inexpensively by sending them one (1) 1.5’ Phillips Head screw (see aforementioned article from USA Today newspaper detailing how H.U.D. pays $22.00 each for 1.5’ Phillips Head Screws).
One screw is enclosed for your convenience.
It has been a pleasure to pay my tax bill this year, and I look forward to paying it again next year.
I think I support the concept of an income tax, in general. Whether it’s at the federal or state level wasn’t a specification I intended to make, as I feel like my largely uneducated opinion isn’t of much worth. I have little or no experience, be it personal or academic, in that realm.
Although I do support an income tax in general, I DO think that the current level of taxation is too high. My sister, along with a few other people I’ve met, could really use the money they have to pay to federal income taxes. And I don’t mean they need it for a new set of golf clubs.
I think a country needs certain programs, such as welfare, even if it does get taken advantage of. Also, taxation is needed to fund the military, police, and other such public servants. Also, I believe the income tax should be graduated, based on your income.
I guess when it comes down to it, I don’t feel like an individual is entitled to every penny their labor produces. I think taxes could possibly be lower, but definitely existent.
Sometimes, this sense of entitlement, also applied to other areas, bothers me. Kind of can feed selfishness and greed.
I think we both agree that certain programs to help society is neccessary, but we just disagree in how that should be done. You’re saying that it needs to be paid for through involuntary and forceful action against others, which is what the income tax we see practiced provides. If people are allowed to keep the fruits of their labor, they will be compassionate with any extra resources they have acquired and help those in their community.
The income tax is not the only tax in the US, and in fact, if we cut spending to what it was a decade ago, you would not need an income tax and other taxes would be more than sufficient.
well we see today what happens if you refuse to accept the US tax system, even if you’re famous. Weslie Snipes is going to be spending 3 years in a 9 foot square room for his efforts.
I think this is the point where our views differ. I don’t believe people would willingly give up their extra resources. Those that already give, might give a little more should they not be taxed so heavily, but those that are greedy and/or selfish will keep it for themselves. I feel like a capitalist system fosters a lot of greed. This is evident in Americans working longer hours than most other countries, in order buy more things they don’t need. I think we’re all guilty of it, at least to some degree. I know I am. Do I really need three unicycles? A cow-print piggy bank? Two Zippos? A beanie baby turkey?
Currently, I like the system where donations and charitable contributions can be tax deductible. In fact, there are a lot of tax deductible activities, such as renting homes/apartments for a good price, that give the landlord a tax deduction, for providing housing that is easy to afford. This is the case in PA, at least. Not sure if its federal or not. For years, my family has always donated its extra clothes, household items, and toys to Goodwill and Salvation Army. Thus, other people can afford things they might not have been able to, and my family gets a small tax break in return. I think this idea could be expanded upon, to give people more incentive to make charitable contributions.
What peeves me a lot is when people take their extra resources and THROW THEM IN THE TRASH. Last year, as the dorms were emptying out, I went through all the trash cans and dumpsters. I found used-once irons, calculators, mounds of clothes, sealed un-expired food wrapped in plastic/cans, new looking wallet (with $5 inside! ), movies, silverware, REFRIGERATORS, and many sorts of things. Some of these things I kept for myself to use. After washing the clothes on my own dime, I loaded them and everything else into my car and drove over to Goodwill, less than a quarter mile from the university, and donated them.
That was back at Shenandoah U, where there were only three small dorm buildings. This year at UNT, which has a lot more on-campus students, I’ll be going through every dorm building (I think there’s 5) at least twice with a duffel bag.
