SOURCE: IRS Humbug, Frank Kowalik, pp. 22-23.
The Revenue Act of 1918, c. 18, 40 Stat. 1065, enacted by Congress on February 24, 1919, specifically placed the compensation for personal services of Federal judges and the U.S. President under the definition of "gross income" in an attempt to bring them into the existing kickback program. That statute reads:
Sec. 213. That for the purposes of this title...the term "gross income"-
( a) Includes gains, profits, and income derived from salaries, wages, or compensation for personal service (including the case of the President of the United States, the judges of the Supreme and inferior courts of the United States, and all other officers and employees, whether elected or appointed, of the United States, Alaska, Hawaii, or any political subdivision thereof, or the District of Columbia, the compensation received as such), of whatever kind and in whatever form paid, or from professions, vocations, trades, businesses, commerce, or sales, or dealings in property, whether real or personal, growing out of the ownership or use of or interest in such property; also from interest, rent, dividends, securities, or the transaction of any business carried on for gain or profit, or gains or profits and income derived from any source whatever....[emphasis added]
Click here to view the original enactment at 40 Stat 1065 through 1066 (264 Kbytes)
You will note that Congress is making reference to gross income where the U.S. Government is the source of that income. Again making it clear that ONLY the compensation for personal services for the labor of Federal Government employees is includible in "gross income." The compensation of a person working in the private sector or for a state or local government, which includes state judges, is not included. Therefore, the subject matter "gross income" in the I.R. Code only applies to Federal Government employees. Income not derived from the U.S. Government is not subject to the I.R. Code Laws. The sections of the current I.R. Code that provide this notice will be discussed in detail later.
The U.S. Government, like any other employer, can establish the terms of its own employment agreement. Legally the U.S Government cannot unilaterally impose new conditions or terms to existing employment agreements with Federal Government employees, which is confirmed by the stand the judges have taken and expressed in court opinions. Also, Congress cannot legally establish the terms of an employment agreement in the private sector or make the U.S. Government a party to such agreements.