http://press-pubs.uchicago.edu/founders/tocs/a1_8_1.html
And some quotes to help you understand better.
...the Court has frequently held that domicile or residence, more substantial than mere presence in transit or sojourn, is an adequate basis for taxation, including income, property, and death taxes. Since the Fourteenth Amendment makes one a citizen of the state wherein he resides, the fact of residence creates universally reciprocal duties of protection by the state and of allegiance and support by the citizen. The latter obviously includes a duty to pay taxes, and their nature and measure is largely a political matter. Of course, the situs of property may tax it regardless of the citizenship, domicile, or residence of the owner, the most obvious illustration being a tax on realty laid by the state in which the realty is located."
[Miller Brothers Co. v. Maryland, 347 U.S. 340 (1954)]
The most telling part (in bold) informs us that our "residence" in their political jurisdiction (not geographical location, see social contract, domicile) is what subjects us to these reciprocal duties of taxation.
Lets get some more quotes in here.....
Accordingly, when returns were filed in Mrs. Morse's name declaring income to her for 1944 and 1945, and making her potentially liable for the tax due on that income, she became a taxpayer within the meaning of the Internal Revenue Code
http://scholar.google.com/scholar_case?case=16882766403791680804&q=morse+v+us+494+f2d+876,880&hl=en&as_sdt=40003
Taxes are voluntary, and when we file returns we agree to be taxpayers, as this case states.
More cases so you can see more of their reasoning........
"The Sixteenth Amendment, although referred to in argument, has no real bearing and may be put out of view. As pointed out in recent decisions, it does not extend the taxing power to new or excepted subjects..."
U.S. Supreme Court, Peck v. Lowe, 247 U.S. 165 (1918);
Who are the excepted subjects? Why they are the non resident aliens of course. The federal government can not tax subjects that are not theirs UNLESS there is a nexus between the foreign subject and a trade or business within the united states. They do this thru the "minimum contact doctrine".
https://law.wustl.edu/sba/firstyearoutlines/civilprocedure/kim/Kim-Civpro2-sp07.pdf
Lets move on........
"[T]he settled doctrine is that the Sixteenth Amendment confers no power upon Congress to define and tax as income without apportionment something which theretofore could not have been properly regarded as income."
U.S. Supreme Court, Taft v. Bowers, 278 US 470, 481 (1929).
This is saying that if it was not considered Income before the amendment, then it was not considered "income" after the amendment.
Now, as to what the definition of income is.....
In Stratton's Independence v. Howbert, 231
"Income may be defined as the gain derived from capital, from labor, or from both combined."
and
" . . . And, however the operation shall be described, the transaction is indubitably 'business' within the fair meaning of the act of 1909; and the gains derived from it are properly and strictly the income from that business; for "income" may be defined as the gains derived from capital, from labor, or from both combined, combined operations and here we have of capital and labor." Id at p. 415
(emphasis added)
Five years later, the Supreme Court in Doyle v. Mitchell Brothers Co., 247 U.S.
"Yet it is plain, we think, that by the true intent and meaning of the act the entire proceeds of a mere conversion of capital assets were not to be treated as income. Whatever difficulty there may be about a precise and scientific definition of "income," it imports, as used here, something entirely distinct from principal or capital either as a subject of taxation or as a measure of the tax; conveying rather the idea of gain or increase arising from corporate activities. As was said in Stratton's Independence v. Howbert, 231 U.S.
(emphasis added)
The Court held that:
". . . Income may be defined as the gain derived from capital, from labor, or from both combined," provided it be understood to include profit gained through a sale or conversion of capital assets, to which it was applied in the Doyle case (pp. 183, 185)."
"Brief as it is, it indicates the characteristic and distinguishing attribute of income essential for a correct solution of the present controversy. The Government, although basing its argument upon the definition as quoted, placed chief emphasis upon the word "gain," which was extended to include a variety of meanings; while the significance of the next three words was either overlooked or misconceived. "Derived — from — capital;" — "the gain — derived — from — capital," etc. Here we have the essential matter: not a gain accruing to capital, not a growth or increment of value in the investment; but a gain, a profit, something of exchangeable value proceeding from the property, severed from the capital however invested or employed, and coming in, being "derived," that is, received or drawn by the recipient (the taxpayer) for his separate use, benefit and disposal; — that is income derived from property. Nothing else answers the description." Id at 207
(italics the Court's, bold emphasis added)
Whether Eisner v. Macomber or Glenshaw Glass, the measure of income is in the GAIN realized.
There is no doubt that had the government contended that all of the treble damage award in Glenshaw was income, the Court would have rejected such a position. Likewise, if the government were to contend that a widget shop owner could only deduct his shop expenses, but not his cost of goods, from his gross revenue, the Court would not stand for that, either, because that would not only be a tax on the income (gain or profit), but on the capital, as well.
Gain or profit is, without question, that portion of monies received that is above and beyond what was given up, either in property or expense, in order to receive those funds. Gross revenue less cost and overhead equals profit or gain—income. Neither the Court nor the government gave a thought to whether the compensatory damages were income, having backed those compensated damages out of the equation to begin with. Given the understanding, then, that in order to be income there must first be a gain, or profit, we are prepared to examine whether wages, salaries and fees personally earned (hereinafter referred to collectively as "wages" in the interest of brevity), are income within the meaning of the Constitution.
The Code defines gross income as "income from . . . compensation for services". Since income is gain, profit, then that definition is actually "that portion of compensation for services that is gain or profit." The government's contention is that the gain or profit is everything received for compensation for services, thus with respect to wages the government contends that gross revenue and gross income are the same. Wages are the only revenue that the government treats as equivalent to income.
A tax on gross revenue as opposed to net gain is not an income tax, but a tax on both capital and income. State Tax on R. Gross Receipts, 15 Wall. 284, 21 L. Ed. 164; Philadelphia & S. Mail S. S. Co. v. Pennsylvania, 122 U.S. 326, 30 L. Ed. 1200; Maine v. Grand Trunk R. Co., 142 U.S. 217, 35 L. Ed. 994; and since a tax on gross revenue is taxing both income and capital, insofar as the tax on capital is concerned it is not indirect nor is it 'exempt' from the requirement of apportionment.
The problem with wages is that, unlike every other form of "income" described in the code, the government does not permit the wage-earner to back out what he has given up in order to receive those wages. It has been established that a man's labor is his property, the capital. Thus wages are the purchase price for that property. Any other exchange of property for money must generate a profit before it is considered income, so on what basis does the government contend that all of the money exchanged for his property must be and is profit or gain?
The obvious conflict in the government's assessment of wages as having been paid for nothing is that if that is the case, then the wages are gratuities, gifts, not "income". The government cannot have it both ways, to state that the wage-earner on the one hand realized earnings, or income, but on the other hand received something for nothing, a purely gratuitous gift, is nonsense.
If we attempt to imagine the most "worthless" employment possible, one that required the absolute least amount of expenditure of effort and no knowledge or skill, we would still have to admit that no matter how much or how little such an employment paid, the employee is not paid for nothing. A night watchman, whose only requirement is that he remain in the premises overnight, is still giving up something for his wages. He is not being paid for nothing in exchange.
Example 1: Gains on Capital
Joe places $100,000 in a certificate of deposit earning 6% per annum. Joe gave up his $100,000 for a year and at the end of the year he received $106,000 of which only $6,000 would be income as defined by the act. Joe still has his original $100,000 and can 'rent' it out again for another year, but he pays taxes only on the $6,000 gain.
Example 2: Gains on Sales
Tom buys a widget for $1 and sells it for $2. Tom gave up $1 in order to receive $2, but only the additional $1 is considered income. Tom still has his dollar back and can purchase another widget to sell, but he pays taxes only on the $1 gain
Example 3: Gains on Labor
Bob pays Bill $50 to unplug Mrs. Haversham's drain for which Bob charges Mrs. Haversham $75. Bob gave up $50 in order to receive $75, but only $25 is considered income, his realized gain of $25 on Bill's labor. Bob still has his original $50 that he can use to purchase more labor that he can sell for profit, but he pays taxes only on the $25 gain.
But what about Bill's $50? What has Bill given up? Nothing? Bill gave up a day out of his life, he expended his effort and skill, employed the use of his working tools. Bill no longer has his day or his labor, both are spent. He cannot, even with every penny of his $50, buy another day or recover the effort he expended, yet according to the government, his $50, every bit of it, is profit, gain, accession to wealth and was received in exchange for nothing. What Bill gave up to receive his $50 was not "nothing", it was "'The property which every man has in his own labor, [and] as it is the original foundation of all other property, so it is the most sacred and inviolable. . . .' Adam Smith's Wealth of Nations, Bk. I. Chap. 10." Butchers' Union, supra.
Last couple of quotes came to us from tax freedom dotcom
http://www.tax-freedom.com/WhatIsIncome.htm
Taxes on labor case law here..... http://www.freedomforallseasons.org/TaxFreedomEmail/Case%20law%20your%20labor%20is%20not%20taxable%20income!.htm
Taxes on labor case law here..... http://www.freedomforallseasons.org/TaxFreedomEmail/Case%20law%20your%20labor%20is%20not%20taxable%20income!.htm
As always, question everything, believe nothing, verify, verify, verify.
