1862:  First "Tax" on Officers of the U.S.

DERIVED FROM SOURCE:  IRS Humbug, Frank Kowalik, pp. 18-21.

The impairment of the Federal Government employee employment contracts began with the kickback program that Congress promulgated as law in the year 1862.  Once the Federal Government kickback program was well established by forced acceptance, employees and employers in the private sector were forced to believe that the terms of the Federal Government employment agreements applied to them.  Here is how it all happened.

Up until year 1862, Federal Government employees worked under the same kind of employment agreement as anyone who agrees to exchange their time and talent for the personal property of an employer.  Then, in 1862, the Thirty-seventh Congress passed Ch. 119, 12 Stat. 472.  Section 86 of that Public Law reads as follows:


Sec. 86.  And be it further enacted, That on and after the first day of August, eighteen hundred and sixty-two, there shall be levied, collected, and paid on all salaries of officers, or payments to persons in the civil, military, naval, or other employment or service of the United States, including senators and representatives and delegates in Congress, when exceeding the rate of six hundred dollars per annum, a duty of three per centum on the excess above the said six hundred dollars;  and it shall be the duty of all paymasters and all disbursing officers, under the government of the United States, or in the employ thereof, when making any payments to officers and persons as aforesaid, or upon settling and adjusting the accounts of such officers and persons, to deduct and withhold the aforesaid duty of three percentum, and shall, at the same time, make a certificate stating the name of the officer or person from whom such deduction was made, and the amount thereof, which shall be transmitted to the office of the Commissioner of Internal Revenue, and entered as part of the internal duties; and the pay-roll, receipts, or account of officers or persons paying such duty, as aforesaid, shall be made to exhibit the fact of such payment.  ...[Balance of section 86 applied to passports]

Click here for the original law above from the Statutes at Large, 12 Stat. 472 (128 KBytes)

First, you will note that it only applied to persons who received compensation for their services as an employee of the United States.  Secondly, although Congress placed this into a Tax Act, and implies it is an indirect tax by the use of the word "duty," it cannot be a tax.  A tax on labor would necessarily fall into the class of a direct tax that needs apportionment to be constitutional.

Note also that the only persons required to make an accounting of the kickback in section 86 were the officers who made the deductions and the Commissioner of Internal Revenue, not the Federal Government employee.  As you continue to read, you will see that this is also true today.

The effect of section 86 identifies what it really is--a kickback of part of the property agreed under contract to be paid for labor of Federal Government employees [see chapter 1, footnote 3].  With this Act, the amount of compensation agreed to be paid was diminished by one party to the agreement (Congress) without the consent of the other (the Federal Government employee).  A unilateral change in the employment contract of all persons then employed by the Federal Government was not legal just because Congress promulgated it as a law, and the conduct of U.S. judges proved this.  The result of arranging for the withholding of 3 percent of the compensation due Federal Government employees under existing contracts was deprivation of liberty and property without due process of law, which is violative of the Fifth Amendment to the U.S. Constitution.

The facts presented above were expressed by the Supreme Court in Pollock v. Farmers' Loan & Trust Co., 157 U.S. 429 (1895), where they said:

Subsequently, in 1869, and during the administration of President Grant, when Mr. Boutwell was Secretary of the Treasury and Mr. Hoar, of Massachusetts, was Attorney General, there were in several of the statutes of the United States, for the assessment and collection of internal revenue, provisions for taxing the salaries of all civil officers of the United States, which included, in their literal application, the salaries of the President and of the judges of the United States.  The question arose whether the law which imposes such a tax upon them was constitutional.  The opinion of the Attorney General thereon was requested by the Secretary of the Treasury.  The Attorney General, in reply, gave an elaborate opinion advising the Secretary of the Treasury that no income tax could be lawfully assessed and collected upon the salaries of those officers who were in office at the time the statute imposing the tax was passed, holding on this subject the views expressed by Chief Justice Taney.  His opinion is published in volume XIII of the Opinions of the Attorneys General, at page 161.  I am informed that it has been followed ever since without question by the department supervising or directing the collection of the public revenue.  [emphasis added]

This "kickback" program illegally forced a 3 percent debt obligation upon Federal Government employees working under an existing employment agreement in 1862.  However, the "kickback program" established by section 86 was legal when applied to the salary of persons who took employment with the Federal Government after that Act was passed because they were on notice that a 3 percent kickback was part of their employment agreement.  Thus illegal and legal kickbacks existed then and, though they have changed in form, they exist today.

"Kickback" is defined in Webster's Dictionary as "a return of a part of a sum received often because of confidential agreement or coercion."  Was not a "kickback" coerced from Federal Government employees when Congress promulgated a change in their employment agreement as if it were a tax when, in essence, it was, and is, a kickback program?

By presenting the "kickback" program in the form of "law,"  Congress (the legislative branch of government) provided the implied authority of law needed to get Federal Government employees in the executive branch of government (the IRS) to act illegally in depriving other Federal Government employees of property rightfully due them under existing contracts.

U.S. Supreme Court Judges understood this, and were legally and morally obligated to correct any illegal action of Congress or the IRS for all Federal government employees.  The primary function of the Supreme Court is to provide opinions of public importance.  Instead they chose, by misdirection and silence, to cooperate with Congress in the implementation of this kickback which forced a debt obligation upon all Federal Government employees except U.S. judges and the U.S. President.  This was accomplished when Federal judges allowed the contracts of fellow Federal Government employees to be illegally impaired while seeing to it that their employment contracts remained intact.  Does not such conduct demonstrate that the U.S. judges were partial to assuring that the illegal kickback scheme was implemented?  Does not such indifference and cooperation violate their duty?  Does their conduct not raise the question of concealment?[1]

[1]  The U.S. Supreme Court said in Boyd v. U.S., 116 U.S. 616 (1885) "...it is the duty of the courts to be watchful for the constitutional rights of the citizens, and against stealthy encroachment thereon."

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Last revision: August 14, 2009 08:07 AM
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