4. The Nature and Limits of Federal Taxation

4.1 The Origin of the Federal Tax Authority

The federal government’s taxing power is derived from the U.S. Constitution and is limited in both scope and application. Article I, Section 8, Clause 1 of the Constitution grants Congress the power:

“To lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defence and general Welfare of the United States…”

However, direct taxes must be apportioned among the states according to population (Article I, Section 9, Clause 4), and indirect taxes (duties, imposts, and excises) must be uniform throughout the United States.

4.2 The Sixteenth Amendment: Limited Scope

The Sixteenth Amendment states:

“The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several States, and without regard to any census or enumeration.”

This provision did not create new taxing powers, nor did it authorize a direct unapportioned tax on natural persons within the states. It merely clarified that income taxes on corporate profits, which were previously construed as indirect taxes, could be imposed without apportionment.

As confirmed in Eisner v. Macomber, 252 U.S. 189 (1920):

“Congress cannot by any definition it may adopt conclude the matter, since it cannot by legislation alter the Constitution… ‘income’ has always meant gain derived from capital, from labor, or from both combined—provided it is corporate in nature.”

Likewise, in Doyle v. Mitchell Bros. Co., 247 U.S. 179 (1918):

“Whatever difficulty there may be about a precise scientific definition of ‘income,’ it imports…gain or increase arising from corporate activities.”

4.3 The Definition of “Person” in Tax Law

The Internal Revenue Code (IRC) defines “person” narrowly in the context of tax enforcement. For example:

• 26 U.S.C. §6671(b):

  “The term ‘person’…includes an officer or employee of a corporation… who is under a duty to perform the act in respect of which the violation occurs.”

• 26 U.S.C. §7343:

  “‘Person’ includes an officer or employee of a corporation… who… is under a duty to perform the act in respect of which the violation occurs.”

• 26 U.S.C. §6331(a):

  “Levy may be made upon the accrued salary or wages of any officer, employee, or elected official, of the United States…”

These statutes demonstrate that the enforcement provisions apply to federal officers, corporate agents, or those acting in a fiduciary capacity within the federal jurisdiction—not private citizens residing in states of the Union, unless they voluntarily associate themselves with federal privileges.

4.4 Voluntary Nature of Federal Income Taxation

The Flora v. United States, 362 U.S. 145 (1959) decision stated clearly:

“Our system of taxation is based upon voluntary assessment and payment, not distraint.”

Further:

• There is no statute within Subtitle A of the IRC that explicitly makes anyone liable for income taxes.

• The IRS is not an enforcement agency and is not listed under the Undersecretary for Enforcement of the Treasury. [Treasury Org Chart]

• Payroll withholding is voluntary, as confirmed in:

  • 26 U.S.C. §3402(p)

  • 26 C.F.R. §31.3401(p)-1

“Contracts or consent procured under duress are unenforceable.”
—See UCC Battle of the Forms, and the doctrine of “mirror image rule” in contract law.

4.5 The Inviolability of Natural Rights and Labor

The Supreme Court in The Antelope, 23 U.S. 66 (1825) ruled:

“Every man has a natural right to the fruits of his own labor… and no other person can rightfully deprive him of those fruits…”

This principle is fundamental: natural persons cannot be taxed for merely exchanging their labor for compensation—which is a God-given right and not a privilege granted by government.

Likewise, Hale v. Henkel, 201 U.S. 43 (1906) distinguishes between corporate entities and natural individuals:

“The individual may stand upon his constitutional rights as a citizen… His rights are such as existed by the law of the land long antecedent to the organization of the State… He owes nothing to the public so long as he does not trespass upon their rights.”

4.6 Corporations Are Created by Government—And Taxable

Government-created entities such as corporations are subject to taxation, since the power to create includes the power to regulate, tax, or destroy:

“The power to tax is the power to destroy.”
—Chief Justice John Marshall, M'Culloch v. Maryland, 17 U.S. 316 (1819)

A corporation receives privileges and protections under government authority and therefore exists within the federal jurisdiction of privileges. Consequently, its profits (i.e., "income") are subject to federal excise taxation.

Senator Daniel (1909 Congressional Record, 44 Cong. Rec. 4237–4238) clarified:

“A corporate franchise is a distinct subject of taxation, and not as property, but as the exercise of a privilege… It may be taxed by the United States whether created by the United States or a foreign country.”

4.7 Legislative Intent of the Sixteenth Amendment

In the 1909 Congressional Debates, the Sixteenth Amendment was never intended to reach the personal earnings of private citizens:

“The amendment exempts absolutely everything that a man makes for himself… Nothing can be imagined that a man can busy himself about with a view of profit which the amendment as drawn would not utterly exempt.”
—Sen. Brandegee, 50 Cong. Rec. 3839 (1913)

4.8 Summary

• Natural persons in the states of the Union retain all constitutional rights unless they voluntarily waive them.

• The IRS and Subtitle A of the IRC apply only to federal officers, agents, and those receiving federal privileges.

• Income taxation is not enforceable against natural labor or wages derived from private work absent voluntary consent.

• The definition of “person” and “income” in the Code aligns with corporate and federal actors, not private state nationals.

• The Constitution remains the supreme law—no federal statute can override it or compel involuntary servitude contrary to the Thirteenth Amendment.