                           Chapter 1:
                     The Brushaber Decision
                                

     Historically, defensive  federal officials  have argued that
the 16th Amendment is constitutional because the Supreme Court of
the United  States has said so.  In the year 1916, the high court
issued a  pivotal decision which is identified in the case law as
Brushaber vs.  Union Pacific Railroad Company, 240 U.S. 1.  It is
important to realize that the evidence impugning the ratification
of the  16th Amendment  was not  published until  the year  1985.
This evidence  was simply  not available  to plaintiff  Frank  R.
Brushaber when  he filed his first complaint on March 13, 1914 in
the District Court of the United States for the Southern District
of New  York.   His complaint challenged the constitutionality of
the income  tax statute  which Congress  had  passed  immediately
after the 16th Amendment was declared ratified.  Specifically, he
challenged the  constitutionality of the income tax as it applied
to a  corporation of  which he  was a shareholder, i.e. the Union
Pacific Railroad  Company.  His challenge went all the way to the
Supreme Court, and he lost.

     Ever since  then, attorneys,  judges and  other officials of
the federal  government have  been quick  to cite  the  Brushaber
case, and  others which  followed, as  undeniable proof  that the
16th Amendment  is constitutional.   With  its  constitutionality
settled by  the Brushaber ruling, former Commissioner of Internal
Revenue Donald  C. Alexander felt free, almost 60 years later, to
cite the  16th Amendment as the government's general authority to
tax the  income of  individuals and  corporations.   Consider the
following statement  of his  which was  published in the official
Federal Register  of March  29, 1974,  in  the  section  entitled
"Department  of   the   Treasury,   Internal   Revenue   Service,
Organization and Functions".  His statement reads in part:


     (2)   Since 1862, the Internal Revenue Service has undergone
     a period  of  steady  growth  as  the  means  for  financing
     Government operations  shifted from  the levying  of  import
     duties  to   internal  taxation.    Its  expansion  received
     considerable impetus  in 1913  with the  ratification of the
     Sixteenth Amendment to the Constitution under which Congress
     received constitutional  authority  to  levy  taxes  on  the
     income of individuals and corporations.
                                                 [emphasis added]


     What is not widely known about the Brushaber decision is the
essence of  the ruling.   Contrary  to widespread  legal  opinion
which has  persisted even until now, the Supreme Court ruled that
taxation on  income is  an indirect  tax, not  a direct tax.  The
Supreme Court  also ruled  that the 16th Amendment did not change
or repeal  any part of the Constitution, nor did it authorize any
direct tax  without apportionment.  To illustrate the persistence


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of wrong  opinions, on  a  recent  vacation  to  Montana,  I  had
occasion to  visit the  federal building in the city of Missoula.
On the  wall outside  the Federal  District Court,  Room  263,  a
printed copy  of the U.S. Constitution is displayed in text which
annotates the 16th Amendment with the following statement:

     This amendment modifies Paragraph 3, Section 2, of Article I
     and Paragraph 4, Section 9, of Article I.
     
     In light  of  the  Brushaber  decision,  this  statement  is
plainly wrong  and totally  misleading.   The text  of  the  16th
Amendment contains  absolutely no references to other sections of
the Constitution  (unlike the  repeal of  Prohibition).   In  his
excellent book entitled The Best Kept Secret, author Otto Skinner
reviews a  number of common misunderstandings like this about the
16th Amendment, and provides ample support in subsequent case law
for the  clarifications he  provides.    Interested  readers  are
encouraged to  order Otto  Skinner's work  by  referring  to  the
Bibliography (Appendix N).

     The U.S.  Constitution still  requires that  federal  direct
taxes must  be apportioned  among the  50 States  of  the  Union.
Thus, if  California has  10 percent  of the nation's population,
then California's  "portion" would  be 10  percent of  any direct
federal tax.   In  the  Brushaber  decision,  the  Supreme  Court
concluded that  income taxes  are excises  which  fall  into  the
category  of   indirect  taxes,  not  direct  taxes.    From  the
beginning, the U.S. Constitution has made an explicit distinction
between the  two types  of taxation  authorized to  the Congress,
with separate  limitations for each type:  indirect taxes must be
uniform across  the States;   direct  taxes must  be apportioned.
Writing for  the majority  in one  of his clearer passages, Chief
Justice Edward Douglass White explained it this way:

     [T]he conclusion  reached in the Pollock Case did not in any
     degree involve  holding that  income taxes  generically  and
     necessarily  came  within  the  class  of  direct  taxes  on
     property, but  on the  contrary  recognized  the  fact  that
     taxation on  income was  in its nature an excise entitled to
     be enforced as such ....

     [Brushaber vs Union Pacific Railroad Co., 240 U.S. 1 (1916)]
                                                 [emphasis added]

     Unfortunately for  Justice White,  most of  the language  he
chose to  write the  majority's opinion,  and the resulting logic
contained therein,  are tortuously  convoluted and almost totally
unintelligible, even  to college-educated English majors.  In his
wonderful tour  de force  entitled Tax  Scam, author  Alan  Stang
quips that Justice White:

     ... turned  himself into a pretzel trying to justify the new
     tax without totally junking the Constitution.
                                                        [page 45]


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     Stang's book  is a  must, if  only because his extraordinary
wit  is   totally  rare   among  the  tax  books  listed  in  the
Bibliography (Appendix  N).  Other legal scholars and experienced
constitutional lawyers  have published  books which  take serious
aim  at  one  or  more  elements  of  White's  ruling.    Jeffrey
Dickstein's  Judicial  Tyranny  and  Your  Income  Tax  and  Vern
Holland's The Law That Always Was are two excellent works of this
kind.   Both authors  focus on  the  constitutional  distinctions
between direct  and indirect taxes, and between the apportionment
and uniformity rules.

     Dickstein does  a masterful  job of  tracing  a  century  of
federal court  decisions,  with  an  emphasis  on  the  bias  and
conflict  among   federal  court  definitions  of  the  key  word
"income".   He exercises  rigorous logic  to demonstrate  how the
Brushaber ruling  stands  in  stark  contrast  to  the  important
Supreme Court  precedents that  came before and after it in time.
For example,  after  a  meticulous  comparison  of  Pollock  with
Brushaber, Dickstein is forced to conclude that:


     Justice White's  indirect attempt  to  overturn  Pollock  is
     wholly  unpersuasive;     he   clearly  failed  to  state  a
     historical, factual or legal basis for his conclusion that a
     tax on  income is an indirect, excise tax.  It is clear that
     Mr.  Brushaber   and  his  attorneys  correctly  stated  the
     proposition  to   the  Supreme   Court  that  the  Sixteenth
     Amendment relieved  the income  tax, which was a direct tax,
     from  the   requirement  of   apportionment,  and  that  the
     Brushaber Court failed miserably in attempting to refute Mr.
     Brushaber's legal position.

                  [Judicial Tyranny and Your Income Tax, page 60]
                                                 [emphasis added]


Dickstein also  proves that  an  irreconcilable  conflict  exists
between the  Brushaber decision  and a subsequent key decision of
the Supreme Court, Eisner vs Macomber, 252 U.S. 189:


     There is  an irreconcilable  conflict between  the Brushaber
     case, which  holds the  income tax  is an  indirect tax  not
     requiring apportionment,  and the  Eisner case,  which holds
     the income tax is a direct tax relieved from apportionment.

                           [Judicial Tyranny and Your Income Tax]
                                           [footnote on page 141]


Going back  even further  in  American  history,  Holland  argues
persuasively that  "income" taxes  have always  been direct taxes
which must be apportioned even today, Brushaber notwithstanding:



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     It results, therefore: ...

     4.   That  the   Sixteenth  Amendment   did  not  amend  the
     Constitution.   The United States Supreme Court by unanimous
     decisions determined  that the  amendment did  not grant any
     new powers  of taxation;    that  a  direct  tax  cannot  be
     relieved from  the constitutional  mandate of apportionment;
     and the  only effect  of the  amendment was  to overturn the
     theory advanced in the Pollock case which held that a tax on
     income, was  in legal  effect, a  tax on  the sources of the
     income. ...

     6.   [T]hat a  General Tax  on Income levied upon one of the
     Citizens of the several States, has always been a direct tax
     and must be apportioned.

                              [The Law That Always Was, page 220]
                                           [emphasis in original]


     There  are,   however,  two   additional  lessons  from  the
Brushaber decision  which have been entirely lost on most, if not
all of  the authors  who have  published  any  analysis  of  this
important ruling.   These  are the  dual  issues  of  status  and
jurisdiction, issues  which it  is my intention to elevate to the
level  of  importance  which  they  have  always  deserved.    An
understanding of  status and  jurisdiction places  the  Brushaber
ruling in  a new  and different  light, and  solves a  number  of
persistent mysteries  and misunderstandings  which have  grown up
around an  income tax  law which now includes some 2,000 pages of
statute and 6,000 pages of regulations.

     Obviously, without  a comprehensive  paradigm with  which to
navigate such a vast quantity of legalese, particularly when this
legalese is  only slightly  more intelligible than White's verbal
pretzels, it  is easy  to  understand  why  professors,  lawyers,
CPA's, judges,  prosecutors, defendants  and juries  consistently
fail to  fathom its  meaning.   In the Republic envisioned by the
Framers of  the Constitution, a sophisticated paradigm should not
be necessary  for the  ordinary layman to understand any law.  In
and of  itself, the  need  for  a  sophisticated  paradigm  is  a
sufficient ground  to nullify  the law  for being  vague and  too
difficult to  understand in  the first  place.  Nevertheless, the
remainder of  this book  will show  that status  and jurisdiction
together  provide   a  comprehensive   paradigm  with  sufficient
explanatory power not only to solve the persistent mysteries, but
also to  provide vast  numbers of  Americans with  the tax relief
they so desperately need and deserve.




                             #  #  #



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