Oh, what a tangled web we weave,
When first we practise to deceive! — Sir Walter Scott
No one would claim that the language of the law is simple. Never the less, the language of most tax laws is pretty clear about what is being taxed and who pays.
Nobody goes to jail because of a faulty interpretation of gasoline tax laws. No one is doing time for misreading the tobacco and liquor tax laws. There is no cottage industry of authors with theories about the tax on air fares.
The history of the income tax, on the other hand, is littered with prisoners who thought they had figured out the real meaning of the income tax. To anyone who with an understanding of the American Constitution, the income tax just doesn’t feel right.
The income tax is unique in its deeply confusing, tortuous, absurdly complex presentation of what should be a simple tax. There are over 3.4 million words in the income tax code. No other tax generates a fraction of the contention, debate or wild extremes of interpretation that the income tax does. No other tax has put so many would-be interpreters behind bars. No other tax enforcement agency (except perhaps the BATF) has the mad-dog reputation for abuse and lawlessness enjoyed by the IRS.
Why is that? Why is the income tax written the way it is? Why is it such a tangled web? Other tax laws are not hard to understand. Why don’t any of the hundreds of other federal taxes spawn whole industries devoted to interpretation, compliance and resistance?
It is only deception that requires the famous tangled web. The greater the deception the more tangled the web must be. The greater the deception the more terrifying the penalties must be for resisting the scheme.
The method of the deception is complex. My treatment of it here is limited by space. But basically, it is the Humpty Dumpty, “words of art” technique that perpetrates the fraud. Humpty Dumpty tells Alice that he makes words “…mean exactly what I choose them to mean.” So do the authors of the income tax code.
They rely on “words of art” to maintain a careful deception. They apply special definitions to common words for the purposes of the law. The special definitions become part of the law, but the common meanings are what most people understand. Thus are Americans tricked into paying taxes they do not owe on non-taxable rights that are deceptively redefined in the code as privileges.
For an example of legal “words of art” that were not intended to deceive consider the gun laws in Title 26. Those of us familiar with firearms ownership rules in the U.S. know that there is no central registry of firearms. A law abiding citizen may own a pistol or rifle without reporting it to any government agency. However, in Subchapter E of Title 26 of the Internal Revenue Code we find these words in section 5841,
“(a) Central registry
The Secretary shall maintain a central registry of all firearms in the United States which are not in the possession or under the control of the United States.”
Yikes, I better call someone. I own quite a few unregistered guns.
But when we keep reading we find this in section 5845,
For the purpose of this chapter—
The term “firearm” means:
There follows a long list of modified and unusual weapons, including short barreled shotguns and rifles, shotguns and rifles modified to less than 26” in length, machine guns, grenades, silencers and other odd ball weapons taxed under the National Firearms Act of 1934. I don’t own any of those. But if I had not found the special definition of firearms I would have to believe the law requires all firearms to be registered.
Keep this use of a special definition in mind. Imagine you are a legislative draftsperson. Your mission is to use the tax code to maximize revenue without writing laws that would be unconstitutional or tax that which cannot be taxed. How could you make someone believe there was a tax on his wages as an employee of a private company without placing a tax on untaxable private earnings?
You do what Humpty Dumpty would do: Define “wages” as the earnings of an “employee.” Define “employee” as someone who works for an “employer.” Then define “employer” as anyone performing the duties of a public office.
Place a perfectly legitimate excise tax on the “wages” of “employees” working for public sector “employers.” Do not direct the reader of the law to the special definitions of those terms. Bury the definitions thousands of pages away from the imposition of the tax. Obfuscate further with vague ambiguous legal language in the definitions. Many private sector employees will mistakenly read the law and not the definitions. Many millions of tax dollars will flow to the Treasury.
Want to include the self-employed? Define the words “trade or business” to mean the performance of any service for the government. Then tax income that comes from the conduct of a “trade or business.” Once again, bury the definition deep in the millions of words of the law and cleverly include the phrase “trade or business” wherever it is necessary for your purposes. Obfuscate. Misdirect. Omit. But don’t actually lie.
Use propaganda. Hoist the flag. Call those who notice something fishy about the tax scofflaws, tax protestors or crackpots. Accuse them of a selfish unwillingness to pay their “fair share.” Threaten, bully and extort. Throw people in jail. Enlist private employers and financial institutions to do your dirty work with phony non-judicial summonses, liens and levies. Do this for many years.
Libertarian author and legal researcher Peter Hendrickson believes this is exactly what has been done. He allows that perhaps at first there was no intent to deceive. Before WWII no more than 3% of Americans filed income tax returns. But after the political class had a taste of the “voluntary” withholding of the Victory Tax during that war, eventually the fraud became too lucrative to resist. Each successive revision of the law buried the truth deeper in “words of art” and legal history.
For a thorough, detailed, although often difficult read on the issue I recommend Mr. Hendrickson’s book, “Cracking the Code” (available online at www.losthorizons.com). Mr. Hendrickson recently won his court battle against IRS attempts to ban his book. After having unraveled the code both he and his wife filed corrected returns and have received full refunds of all taxes withheld from them for the last three years. Many others have as well. He may be just another Income Tax crackpot, but then again, maybe he’s cracked the code.
Humpty Dumpty had it right. Whoever decides what words are to mean decides “which is to be master,” but only until the slaves figure out the meaning of the words.