"We
learn that employment for lawful gain is a 'natural' or 'inherent' or 'inalienable'
right, and not a 'privilege' at all. But natural rights, so called, are
as much subject to taxation as rights of less importance.
6 An excise is not limited to vocations
or activities [301 U.S. 548, 581] that may be prohibited
altogether. It is not limited to those that are the outcome of a franchise.
It extends to vocations or activities pursued as of common right. What the
individual does in the operation of a business is amenable to taxation just
as much as what he owns, at all events if the classification is not tyrannical
or arbitrary. 'Business is as legitimate an object of the taxing
power as property.' City of Newton v. Atchison, 31 Kan. 151, 154, 1 P. 288,
290, 47 Am.Rep. 486 (per Brewer, J.). Indeed, ownership itself, as we had
occasion to point out the other day, is only a bundle of rights and privileges
invested with a single name. Henneford v. Silas Mason Co., Inc. (March 29,
1937)
300 U.S. 577 , 57 S.Ct. 524, 527. 'A state is at liberty, if it pleases,
to tax them all collectively, or to separate the faggots and lay the charge
distributively.' Id. Employment is a business relation, if not itself
a business. It is a relation without which business could seldom be carried
on effectively. The power to tax the activities and relations that constitute
a calling considered as a unit is the power to tax any of them.
The whole includes the parts. Nashville, C. & St. L. Ry. Co. v. Wallace,
288 U.S. 249, 267 , 268 S., 53 S.Ct. 345, 349, 350, 87 A.L.R. 1191
"The
subject-matter of taxation open to the power of the Congress is as comprehensive
as that open to the power of the states, though the method of apportionment
may at times be different. 'The Congress shall have Power to lay and collect
Taxes, Duties, Imposts and Excises.' Article 1, 8. If the tax is a direct
one, it shall be apportioned according to the census or enumeration. If
it is a duty, impost, or excise, it shall be uniform throughout the United
States. Together, these classes include every form of tax appropriate to
sovereignty. Cf. Burnet v. Brooks,
288 U.S. 378, 403 , 405 S., 53 S.Ct. 457, 464, 465, 86 A.L.R. 747; Brushaber
v. Union Pacific R.R. Co.,
240 U.S. 1, 12 , 36 S.Ct. 236, L.R.A.1917D, 414, Ann.Cas.1917B, 713.
Whether the tax is to be [301 U.S. 548, 582] classified
as an 'excise' is in truth not of critical importance. If not that, it is
an 'impost' (Pollock v. Farmers' Loan & Trust Co.,
158 U.S. 601, 622 , 625 S., 15 S.Ct. 912; Pacific Insurance Co. v. Soule,
7 Wall. 433, 445), or a 'duty' (Veazie Bank v. Fenno, 8 Wall. 533, 546,
547; Pollock v. Farmers' Loan & Trust Co.,
157 U.S. 429, 570 , 15 S.Ct. 673; Knowlton v. Moore,
178 U.S. 41, 46 , 20 S.Ct. 747). A capitation or other 'direct' tax
it certainly is not. 'Although there have been, from time to time, intimations
that there might be some tax which was not a direct tax, nor included under
the words 'duties, imposts, and excises,' such a tax, for more than 100
years of national existence, has as yet remained undiscovered, notwithstanding
the stress of particular circumstances has invited thorough investigation
into sources of revenue.' Pollock v. Farmers' Loan & Trust Co.,
157 U.S. 429, 557 , 15 S.Ct. 673, 680. There is no departure from that
thought in later cases, but rather a new emphasis of it. Thus, in Thomas
v. United States,
192 U.S. 363, 370 , 24 S.Ct. 305, 306, it was said of the words 'duties,
imposts, and excises' that 'they were used comprehensively to cover customs
and excise duties imposed on importation, consumption, manufacture, and
sale of certain commodities, privileges, particular business transactions,
vocations, occupations, and the like.' At times taxpayers have contended
that the Congress is without power to lay an excise on the enjoyment of
a privilege created by state law. The contention has been put aside as baseless.
Congress may tax the transmission of property by inheritance or will, though
the states and not Congress have created the privilege of succession. Knowlton
v. Moore, supra,
178 U.S. 41 , at page 58, 20 S.Ct. 747. Congress may tax the enjoyment
of a corporate franchise, though a state and not Congress has brought the
franchise into being. Flint v. Stone Tracy Co.,
220 U.S. 107, 108 , 155 S., 31 S.Ct. 342, Ann.Cas.1912B, 1312. The statute
books of the states are strewn with illustrations of taxes laid on
[301 U.S. 548, 583]
occupations pursued of common right. 7
We find no basis for a holding that the power in that regard which belongs
by accepted practice to the Legislatures of the states, has been denied
by the Constitution to the Congress of the nation."
[Chas.
C. Steward Machine Co. v. Davis, 301 U.S. 548 (1937)]
The Social Security Act,
which is part of Title 42 of the United States Code, was enacted in 1935
as a U.S. government sponsored, voluntary pension program for the benefit
of individuals who wished to VOLUNTARILY participate in the program. The
Act is administered by the Social Security Administration which handles
the administration and payment of benefits under the provisions of the law.
The tax upon which the old age
benefits is based is collected by the Internal Revenue Service under the
provisions of Title 26 of the United States Code, otherwise known as the
Internal Revenue Code (IRC).
Monies collected by the IRS
are not sent to the Social Security Administration to fund their administrative
and disbursement activities but rather end up in the general fund along
with other taxes collected. An accounting "gimmick" is created
to lead the public to believe that the monies paid in are held in a "trust
fund".
There is no provision in the
United States Constitution for the federal government to be in the insurance
business. Although it may be technically correct that a so-called "trust
fund" exists, the truth is that it contains no monies or other assets, only
governmental I.O.U.'s promising to pay money to itself.
Social Security is NOT a contract
as some allege, but a political promise upon which Congress could renege
at any time. Monies disbursed by SSA must be appropriated by Congress each
year as needed. Since no contractual obligation exists for the payment of
any benefits, technically the benefits could be terminated at any time if
Congress did not appropriate the funds.
This A.L.E.R.T. deals primarily
with those statutes relative to the imposition and collection of the tax.
References to Code sections are those found within Title 26 of the
United States Code, which is a codification of the Statutes at Large as
enacted by the Congress of the United States. All Code sections
shown herein are copied directly from Title 26, United States Code precisely
as printed therein.
All Internal Revenue taxes,
including the personal and corporate income taxes, self-employment taxes,
as well as the so‑called Social Security tax, are imposed and collected
under Title 26, United States Code, also known as the Internal Revenue Code
(IRC).
The Social Security tax is imposed
by the Code sections in chapter 21, subtitle C of the IRC titled: "FEDERAL INSURANCE CONTRIBUTIONS ACT".
Before examining the actual
wording contained in these sections, it is important to understand that
courts have repeatedly held that a statute means only that which is stated
in the statute and nothing more.
Southerland's Rules of Statutory
Construction, an authoritative legal guidebook, under section 66.01 titled
"Strict Construction of Statutes Creating Tax Liabilities" explains the
limited application of tax laws. The guidebook refers to the U.S. Supreme
Court decision of Gould v. Gould, 245 U.S. 151, which states:
"In the interpretation of
statutes levying taxes it is the established rule not to extend their provisions
by implication beyond the clear import of the language used, or to enlarge
their operation so as to embrace matters not specifically pointed out. In
case of doubt, they are construed most strongly against the government and
in favor of the citizen."
So the Supreme Court
tells us that IRC sections mean only that which is stated; nothing else
can be added to that which is stated in the Code section.
With this Supreme Court ruling
in mind, lets look at the wording of sections 3101(a) and 3111(a) which
are imposition statutes for the (so-called Social Security) FICA tax --
section 3101(a) applying to employEES and 3111(a) to employERS respectively.
(CAPITALIZATION for emphasis
is added to certain phrases, Code sections and court decisions in this article.)
Sec. 3101. Rate of Tax.
(a) Old-Age, survivors, and disability Insurance. In addition to other
taxes, there is hereby imposed on the income of every individual a tax EQUAL
TO THE FOLLOWING PERCENTAGES OF THE WAGES (as defined In section 3121(a))
received by him with respect to employment (as defined in section 3121(b))-
Sec. 3111. Rate of Tax.
(a) Old-age, survivors, and disability insurance. In addition to other
taxes, there Is hereby imposed on every employer an excise tax, with respect
to having individuals in his employ, EQUAL TO THE FOLLOWING PERCENTAGES
OF THE WAGES (as defined In section 3121(a)) paid by him with respect to
employment (as defined In section 3121(b))-
The popular mistaken belief is that the FICA tax, which is imposed
on the income of "employees" under section 3101(a), is a "wage" tax. However,
a reading of section 3101(a) shows clearly that the tax is not, in fact,
a WAGE tax but rather is imposed on "income" which is MEASURED by "wages".
Hence, the FICA tax is simply another INCOME tax.
However what is of vital importance
in both these sections is the limited application of the terms "wages" (as
defined in section 3121(a)) and "employment" (as defined in section 3121(b)).
The definitions of these terms create a TERRITORIAL limitation on the application
of the tax as we will see.
Section 3121 states:
Sec. 3121. Definitions.
(a) Wages. For purposes of this chapter, the term "wages" means all remuneration for EMPLOYMENT, including the cash value of all remuneration (including
benefits) paid in any medium other than cash; except that such term shall
not include –
Note that the term "wages"
identifies monies paid for the activity identified by the term "employment"
which is defined in section 3121(b) the essential part of which is reproduced
as follows:
Sec. 3121 (b). Employment.
For purposes of this chapter, the term "employment" means any service,
of whatever nature, performed (A) by an EMPLOYEE for the person employing
him, irrespective of the citizenship or residence of either,
(I) WITHIN THE UNITED STATES,
or
(II) on or in connection with an American vessel or American aircraft
under a contract of service which is entered into WITHIN THE UNITED STATES
or during the performance of which and while the employee Is employed on
the vessel or aircraft It touches at a port in THE UNITED STATES....
As shown, the term "employment"
means a service performed by one Identified by the term "employee" within
the "United States ...". United States is also a term used in this chapter
as defined in section 3121(e)(2)
Sec. 3121(e)(2).
For purposes of this chapter
--
(2) United States. The term "United States" when used in a geographical
sense includes the Commonwealth of Puerto Rico, the Virgin Islands, Guam
and American Samoa.
The definition of the term "United
States" lists those areas in which the activity described by the term "employment"
takes place. The definition lists ONLY the Commonwealth of Puerto Rico,
the Virgin Islands, Guam and American Samoa as the areas in which the tax
imposed by this chapter applies. Before examining the provisions of this
law, it is essential to understand the use of words as "terms' when used
in laws.
When words are used as legal
terms in order to establish their clear and unambiguous meanings, precise
definitions of those terms are always included in the law. These definitions
explain the exact meanings of terms used in the IRC. As quoted earlier in
this article, the Supreme Court in the decision of Gould v. Gould
established that, in taxing statutes, definitions of terms used in the statutes
cannot be expanded by implication. Nothing can be added to the definition
of a term; it means only that which is stated, regardless of any belief
to the contrary.
At first, it may be hard to
believe that the definition of the term "United States" could be limited
to mean ONLY the four island possessions of Puerto Rico, the Virgin Islands,
Guam and American Samoa. But that is exactly what this definition means
because statutes mean ONLY that which is stated, nothing more, as set forth
by the Supreme Court in Gould v. Gould, already discussed. Also,
there are other decisions where the U.S. Supreme Court has addressed the
principle of the limited meaning of statues.
The U.S. Court of Appeals (9th
Circuit) explained two such decisions as follows:
"We begin our interpretation
by reading the statutes and regulations for their plain meaning. The plain
meaning rule has its origin in U.S. v. Missouri Pacific Railroad,
278 U.S. 269 (1929). There the Supreme Court stated that "where the language
of an enactment is clear and construction according to its terms does not
lead to absurd or impracticable consequences, the WORDS EMPLOYED ARE TO
BE TAKEN AS THE FINAL EXPRESSION OF THE MEANING INTENDED" ... The principle
was more recently affirmed in Dickinson v. New Banner Institute,
Inc., 460 U.S. 103,103 S.C. 986, 74 L.Ed.2d 845 (1983), rehearing denied,
461 U.S. 911,103 S.C. 1887,76 LEd.2d 815 (1983), where the Court stated,
"In determining the scope of a statute, one is to look first at its language.
If the language is unambiguous, ... IT IS TO BE REGARDED AS CONCLUSIVE UNLESS
THERE IS A CLEARLY EXPRESSED LEGISLATIVE INTENT TO THE CONTRARY."
United States v. Varlet, 780 F2d 758 on P.761 (9th Cir.) (1986)
Also, Code section 3121(e)(2) uses the term "includes" which, in law, is
a word of CONFINEMENT and not EXPANSION. This is exactly what
the U.S. Supreme Court said in the decision of Montello Salt v. Utah,
221 U.S. at page 455 wherein they stated:
"'Include' or the participial form thereof,
is defined 'to comprise within'; 'to hold'; 'to contain'; 'to shut up'; and synonyms are 'contain'; 'enclose'; 'comprise'; comprehend'; 'embrace';
'involve"'.
This U.S. Supreme Court decision
and others in support of its ruling that "includes" is a word of limitation
also support the Court's decision in Gould v. Gould that there can
be no broadening of the statute by implication. Legislative drafters in
the Internal Revenue Service who write the tax bills know very well this
"plain meaning rule" of statutory interpretation.
If the term "United States"
could constitutionally include the 50 STATES OF THE UNION, they would have
specifically included them. As an example of this, Code section
4612, which relates to a tax on crude oil, defines the term "United States"
as: "the FIFTY STATES, the District of Columbia, the Commonwealth
of Puerto Rico, any possession of the United States, the Commonwealth of
the Northern Mariana Islands and the trust territory of the Pacific Islands."
This shows that when the term
"United States" means the fifty states of the union, it says so.
Consequently, it is very clear that the term "United States", when
used to describe the areas where the "Social Security" tax applies, means,
and IS LIMITED TO, the four island possessions which are the only areas
listed in the term's definition. Therefore, according to the wording of
the law itself, the FICA tax does not apply within the fifty states of the
Union.
This makes sense when one understands
the limitations of the direct taxing authority of the Federal government
as contained in the Constitution under
Article
I, Section 2, Clause 3 and
Article
I, Section 9, Clause 4, both of which prohibit any Federal direct tax
within the states of the union other than those laid on the 50 state governments
in proportion to their respective populations.
The FICA tax is administered
by the IRS as if it were a direct tax on individuals. To be constitutional,
any direct tax on individuals must be imposed by law ONLY OUTSIDE the 50
states of the Union: i.e., only in the four listed island
possessions despite the IRS' deception of the public into falsely believing
the tax applies WITHIN the 50 states of the union.
IRC section 7655 also supports
the limited meaning of the term "United States" as respects both the self‑employment
tax imposed in chapter 2 of the IRC as well as the FICA tax imposed in chapter
21. Section 7655 states:
Sec. 7655. Cross references.
(a) Imposition of tax in
possessions. For provisions imposing tax in POSSESSIONS, see -
(1) Chapter 2, relating to
self-employment tax;
(2) Chapter 21, relating
to the tax under the Federal Insurance Contributions Act.
Clearly this section
also shows the application of both the self‑employment tax and the FICA
tax imposed under chapters 2 and 21 to be limited to "possessions" (Puerto
Rico, Virgin Islands, Guam, and America Samoa, as listed in IRC section
3121(e)(2) defining the TERM "United States").
26 U.S.C. SECTION 1402(d) -- THE KEY TO UNDERSTANDING
THE GEOGRAPHICAL LIMITATIONS OF CHAPTER 24 –-
WITHHOLDING OF TAX
In the Code, there are
many definitions that are limited in their applications by words such as
"for purposes of this chapter", "for purposes of this sub-chapter" and "for
purposes of this sub-part". In contrast, section 1402 contains definitions
of terms upon which there are NO SUCH LIMITATIONS upon their application,
so the definitions therein apply THROUGHOUT the ENTIRE IRC.
Section 1402(d) states as follows
Sec. 1402(d). Employee and
wages.
The term "employee"
and the term "wages" shall have the same meaning as when USED in chapter
21 (sec. 3101 and following, relating to Federal Insurance Contributions
Act).
Note the absence in this Code definition of any words of limitation such
as "for purposes of this chapter" or "for purposes of this subchapter".
This definition means, therefore, that WHENEVER AND WHEREVER the terms "employee"
and "wages" are used ANYWHERE throughout the IRC, their applications are
limited to those people involved in activities within the four island possessions
ONLY, the same as in chapter 21, the FICA tax chapter.
The Internal Revenue Code chapter which relates
to withholding is chapter 24, titled "COLLECTION OF INCOME TAX AT SOURCE".
It Is extremely important to note that this chapter contains NO section
imposing any tax. Rather, the entire chapter is written to establish and
authorize provisions for withholding of tax merely as a method for the payment
of taxes which may be imposed in OTHER sections of the IRC.
Whenever a tax is imposed,
there is always a section containing words such as "there is hereby imposed
a tax ...". But in chapter 24, no such wording exists in any
section; so clearly the entire chapter merely sets forth the PROCEDURES
FOR COLLECTING TAXES IMPOSED ELSEWHERE in the IRC by the withholding methods
described in the Code sections of the chapter. Provisions of
this withholding chapter are applicable only to "employees" as defined in
Code sections 1402(d) shown above and 3401(c) reproduced here:
Sec. 3401(c). Employee.
For purposes of this chapter, the term "employee" includes an officer,
employee, or elected official of the United States, a State, or any political
subdivision thereof, or the District of Columbia, or any agency or instrumentality
of any one or more of the foregoing. The term "employee" also includes an
officer of a corporation.
It is revealing that
this definition INCLUDES the term "State" which is defined in Code section
7701(a)(10) as the District of Columbia (ONLY) Remember that "includes,"
as a word used in laws, is a word of CONFINEMENT, not of ENLARGEMENT according
to the Supreme Court in Montello Salt v. Utah as discussed earlier.
Hence this definition limits the application of the term "employee"
to those working for the Federal government, for the District of Columbia,
for U.S. possessions, and officers or a government owned corporation.
Section 3401(d) identifies
the "employer" as one for whom the "employee" works. This means that the
meaning of the term "employer" is limited to those entitles listed in section
3401(c) -- the U.S. government, District of Columbia, etc.
The term does NOT apply to any non‑government employer or business. On the
basis of these definitions alone, most of the nation's population is not
subject to the withholding provisions in this chapter.
In addition to those
limitations on the application of the term "employee" shown above, section
1402(d) LIMITS the application of the term "employee" and the term "wages"
to activities within the four island possessions ONLY. Therefore, the withholding
provisions of chapter 24 can apply only to those working for the Federal
government or the District of Columbia, etc. within these four island possessions
-- not within the fifty states of the union.
IRC section 3402(a)(1)
contains tricky wording which could readily lead businesses and individuals
into erroneously believing that they are required to deduct and withhold
taxes from the pay of those they hire. It is worded as follows:
Section 3402. Income tax
collected at source.
(a) Requirement of withholding.
(1) In general. Except as otherwise provided in this section, every employer
making payment of wages shall deduct and withhold upon such wages a tax
determined in accordance with tables or computational procedures prescribed
by the Secretary. Any tables or procedures prescribed under this paragraph
shall-...
Note that this section
3402(a)(1) says that the "employer" (Federal government, District of Columbia,
etc.) shall deduct and withhold from "wages" a tax determined in accordance
with the Secretary's tables and computational procedures. We
previously showed that the meaning of the term "wages" is limited by section
1402(d) to payments for activities occurring within the four island possessions
ONLY, the same as provided in chapter 21 imposing the so-called Social Security
(FICA) tax. These "tables and procedures" are authorized to be provided
by the Secretary under section 3402(p)(3):
Sec. 3402(p)(3). Authority
for other voluntary withholding.
The Secretary is authorized
by regulations to provide for withholding-
(A) from remuneration
for services performed by an employee for the employee's employer which
(without regard to this paragraph) does not constitute wages, and
(B) from any other
type of payment with respect to which the Secretary finds that withholding
would be appropriate under the provisions of this chapter, IF THE EMPLOYER
AND EMPLOYEE, OR THE PERSON MAKING AND THE PERSON RECEIVING SUCH OTHER TYPE
OF PAYMENT AGREE TO SUCH WITHHOLDING. Such agreement shall be in such form
and manner as the Secretary may by regulations prescribe. For purposes of
this chapter (and so much of subtitle F as relates to this chapter), remuneration
or other payments with respect to which such agreement is made shall be
treated AS IF THEY WERE WAGES PAID BY AN EMPLOYER TO AN EMPLOYEE to the
extent that such remuneration is paid or other payments are made during
the period for which the agreement is In effect.
Note that the Secretary
is authorized to provide for withholding by issuing tables computational
procedures and other instructional material on withholding that apply ONLY
to those who have VOLUNTARILY AGREED to withholding. An agreement exists
only when an individual who is hired voluntarily REQUESTS that money be
deducted and withheld from his pay for payment of taxes and the one for
whom he works completes the agreement by his VOLUNTARY act of collecting
money as an unpaid tax collector for the government.
Despite the general mistaken
belief that the deduction and withholding of money for taxes is required
by law, a simple reading of this Code section shows that such is not the
case. Mandatory withholding would conflict with two key provisions
in the U.S. Constitution: the Fifth Amendment right to due process states
that no person shall be deprived of property (having his pay withheld) without
due process of law (a ruling by a court) and the Thirteenth Amendment prohibition
against slavery or involuntary servitude, such as being forced to be an
unpaid worker (slavery) or an unpaid Federal tax collector.
The use of the words
"the person making" and "the person receiving such other type of payment"
relates to non-federal employers and employees who voluntarily "agree to
such withholding". Federal regulation Number 31.3402(p)(1) states:
Sub-Section 31.3402(p)-1
Voluntary withholding agreements. (T.D. 7096, filed 3-17-71; amended by
TD 7577, filed 12‑19‑78).
(a) In general. An
employee and his employer MAY enter into an AGREEMENT under section 3402(p)
to provide for the withholding OF INCOME TAX upon payments of amounts described
in paragraph (b)(1) of Sub-Section 31.3401(a)-3, made after December 31,
1970. An agreement MAY be entered into under this section only with respect
to amounts which are includible in the gross income of the employee under
section 61, and must be applicable to all such amounts paid by the employer
to the employee. The amount to be withheld PURSUANT TO AN AGREEMENT under
section 3402(p) shall be determined under the rules contained in section
3402 and the regulations thereunder.
(b) Form and duration of
agreement.
(1)
(i) Except as provided
in subdivision (ii) of this subparagraph, AN EMPLOYEE WHO DESIRES TO ENTER
INTO AN AGREEMENT under section 3402(p) SHALL FURNISH to his employer Form
W-4 (Employee's Withholding Allowance Certificate) executed in accordance
with the provisions of section 3402(f) and the regulations thereunder.
The furnishing of such Form W-4 shall constitute a REQUEST FOR WITHHOLDING.
(ii) in the case of
AN EMPLOYEE WHO DESIRES TO ENTER INTO AN AGREEMENT under section 3402(p)
with his employer, if the employee performs services (in addition to those
to be the subject of the AGREEMENT the remuneration for which is subject
to mandatory income tax withholding by such employer, or IF the employee
wishes to specify that the AGREEMENT terminate on a specific date, the employee
shall furnish the employer with a REQUEST for withholding which shall be
signed by the employee, and shall contain -
(a) The name, address,
and social security number of the employee making the REQUEST,
(b) The name and address
of the employer,
(c) A statement that
the employee DESIRES WITHHOLDING of Federal income tax, and, if applicable,
of qualified State individual income tax (see paragraph (d)(3)(i) of Sub-Section
301.6361-! of this chapter (Regulations on Procedure and Administration)),
and
(d) If the employee
desires that the AGREEMENT terminate on a specific date, the date of termination
of the AGREEMENT. If accepted by the employer as provided In subdivision
(iii) of this subparagraph, the REQUEST shall be attached to, and constitute
part of, the employee's Form W-4. An employee who furnishes his employer
A REQUEST FOR WITHHOLDING under this subdivision shall also furnish such
employer with Form W-4 if such employee does not already have a Form W-4
in effect with such employer.
(iii) No REQUEST for
withholding under section 3402(p) shall be effective as an AGREEMENT between
an employer and employee UNTIL THE EMPLOYER ACCENTS THE REQUEST BY COMMENCING
TO WITHHOLD from the amounts with respect to which the request was made.
Note the wording in sub-sections
(b)(1)(ii) and (iii) of this regulation: "...an employee who desires to
enter into an agreement" and "REQUEST for withholding", "DESIRES withholding" and "mutually agree upon", all of which clearly and unambiguously show the VOLUNTARY nature of the entire withholding system. The significance of a
Form W-4 "Employee's Withholding Allowance Certificate" is clearly explained in this regulation which states:
"The
furnishing of such Form W-4 shall constitute a REQUEST FOR WITHHOLDING,"
The printed heading on
the Form W-4 confirms the voluntary nature of withholding; it states "Employee's
Withholding ALLOWANCE Certificate". If withholding were mandatory, why would
the form be called an "Allowance" Certificate? To "allow" means to "permit'
-- if the law REQUIRED the withholding of tax from your pay, no PERMISSION
or request form would be needed! To have a non-deceptive, clear-meaning
heading, the words could be rearranged to "Employee's Certificate ALLOWING
Withholding".
Regulation Section 31.3402(p)(2).
states:
Sec. 3402(p)(2). An
AGREEMENT under section 3402(p) shall be effective for such period as the
employer and employee MUTUALLY AGREE upon. However, EITHER THE EMPLOYER
OR THE EMPLOYEE MAY TERMINATE THE AGREEMENT PRIOR TO THE END OF SUCH PERIOD
BY FURNISHING A SIGNED WRITTEN NOTICE TO THE OTHER. Unless the employer
and employee AGREE to an earlier termination date, the notice shall be effective
with respect to the first payment of an amount in respect of which the AGREEMENT
is in effect which is made on or after the first "status determination date"
(January 1, May 1, July 1, and October 1 of each year) that occurs at least
30 days after the date on which the notice Is furnished. If the employee
executes a new Form W-4, the request upon which an AGREEMENT under section
3402(p) is based shall be attached to. and constitute a part of, such new
Form W-4.
This regulation states
that the AGREEMENT "shall be effective for such period as the employer and
employee MUTUALLY AGREE UPON", and that either the employer or the employee
"MAY TERMINATE THE AGREEMENT prior to the end of such period by furnishing
a signed written notice to the other." Therefore it is obvious that the
withholding must be REQUESTED by the employee, must be AGREED TO by the
employer, and MAY BE TERMINATED BY EITHER BY GIVING WRITTEN NOTICE TO THE
OTHER. The regulations merely state that the notice terminating withholding
must be a signed, written notice -- no particular form is ever required!
HOW NON-GOVERNMENT
EMPLOYERS
ARE DECEIVED AND INTIMIDATED
Because employers have
possession and control over their employees' earnings before the money is
paid over to the employees, the key to the operation of the withholding
scam is the deception and intimidation of the employers to withhold money
from their employees' pay even if their employees object to the withholding.
Most employers, as well
as their accountants and attorneys, have never studied the IRC carefully
enough to understand its complexity. They are not aware of the geographical
and other limitations in the Social Security (FICA) tax and upon the withholding
provisions in chapter 24 of the IRC. They do not understand (as explained
earlier in this article) that the FICA tax and the withholding provisions
apply only within Puerto Rico, the Virgin Islands, Guam and American Samoa;
that under chapter 24 withholding is not mandatory for either the employer
or the employee, and that the withholding provisions apply ONLY to cases
where BOTH the employer and the employee voluntarily agree to the withholding.
If a non-government employer
considers NOT withholding when his employees demand their full pay and consults
his accountant, tax lawyer or the IRS about the matter, his attention is
usually called to IRC section 3403. This section is a psychological bombshell
designed to intimidate the non-government employer into ignoring and defying
any employee's refusal to agree to withholding. IRC section 3403 states:
Sec. 3403. Liability for
tax.
The employer shall be liable for the payment of the tax REQUIRED TO BE DEDUCTED AND WITHHELD UNDER THIS CHAPTER, and shall not be liable to any person for the amount
of any such payment.
This section usually
erroneously convinces non‑government employers that they are personally
liable to pay to the IRS the amount the withholding tables specify EVEN
IF THEY DO NOT WITHHOLD THE MONEY FROM THEIR EMPLOYEES PAY.
Non-government employers
rarely understand that the term "employer" used in this section does not
apply to them because the term "employer" as defined in the withholding
provisions, means ONLY FEDERAL GOVERNMENT RELATED AGENCIES AND INSTRUMENTALITIES
(listed in section 3401(c) quoted earlier in this article).
Even then, withholding
applies ONLY within the four island possessions and then only when there
is a VOLUNTARY MUTUAL AGREEMENT for withholding requested by the "employee"
and agreed to by the "employer". Because of these facts there
is no way a non-government employer within the 50 states can be required
to withhold tax under chapter 24. He cannot be "LIABLE" for payment of the
tax unless he voluntarily acts as an unpaid tax collector for the government.
SUMMARY
The provisions of the Constitution
cited heretofore under
Article
1, Section 2, Clause 3 and
Article
1, Section 9, Clause 4 prohibit any Federal direct tax on the people
or their property within the states of the union. If it were constitutionally
lawful for the Federal government to impose upon us a direct tax on our
wages in the fifty states of the union without being in conflict with these
constitutional limitations why would all the above cited sections clearly
show the VOLUNTARY nature of all withholding?
Why, in fact, would the Federal
government not have a clear and unambiguous single section in the IRC which
would simply say that all of us who work for a living in this country are
required to give Big Brother whatever portion of our earnings it decides
to take? If such a law were constitutional, it would surely
be included in the IRC. Why all the convoluted, complicated
provisions showing geographical and other limitations and voluntary "requests"
for withholding?
The answer is clear:
No such simple taxing statute is possible because it is constitutionally
prohibited to lay a Federal direct tax on the fruits of our labor inside
the fifty states of the union. All the provisions of the IRC and the implementing
regulations am strictly limited in order to be in conformity with these
constitutional limitations.
As shown herein, the FICA tax
imposed on workers under the provisions of section 3101 is a territorial
income tax which applies ONLY in the four island possessions. The regulations
implementing the withholding provisions in the IRC clearly show that all
withholding is voluntary for all individuals, both government employees,
(under 3402(p)(l)(A) and non-government (under 3402(p)(3)) workers.
In order to institute withholding, a voluntary REQUEST must be made
by the employee and ACCEPTANCE must be made by the employer.
After studying these Code sections
carefully, and understanding that they say what they mean and mean what
they say, the complexity of the Code becomes much easier to unravel.
Terms such as "United States", as defined in section 3121(e)(2),
show the restricted meaning of "United States" in chapter 21 to mean the
four island possessions only.
A student of the Code will find
at FIVE other definitions of the term "United States" therein: Sections
638(1), 927(d)(3), 3306(j)(2), 4612(a)(4) and 7701(a)(9), also define the
term "United States" for RESTRICTED USE in various parts of the IRC.
Each definition is different
in one or more ways from the others as to the geographical boundaries included
in the meaning of the term. But as discussed previously, when a particular
Code section intends to include "the fifty states" in its definition, it
says so -- as in section 4612(a)(4). But the term "United States"
as defined in section 3121(e)(2) limits this FICA tax to the four island
possessions.
Because of the dispersed
placement of Code sections defining COMMON, EVERYDAY WORDS THAT ARE USED
AS LEGAL TERMS in the IRC, most people who read the Code without thorough
study are unaware of the unique Code definitions of these terms.
These definitions limit the applications of the tax laws so that
they do not conflict with the Fifth or Thirteenth Amendment or with the
constitutional prohibition against unapportioned direct taxes in the fifty
states.
The highly paid and well-trained
attorneys who write the tax bills which are given to Congress for enactment
are not dummies -- they know very well the necessity of drafting these statutes
in conformity with these Constitutional limitations forbidding direct taxation
of the people within the fifty states.
But, through careful framing
of statutes and the use of confusing and misleading words, terms and definitions,
they make the IRC almost impossible to understand without deep study. Such
actions perpetuate the intentionally created false popular belief that the
Federal government has the constitutional authority to tax us directly in
these 50 united States.
But once these Code sections
are carefully analyzed, one is reminded of the old adage: "Oh what a tangled
web we weave when first we practice to deceive!"
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