Correction Mr. Schiff - The Income Tax is an Indirect Tax!Submitted by Law In Simple Terms on Fri, 06/29/2012 - 02:54
I love what Mr. Schiff is saying, and agree with everything except his statement that the income tax is a Direct Tax. That is incorrect. Read “cdistasio's” post under Mr. Schiff’s video blog on the main page for a detailed legal explanation supported with U.S. Supreme Court Citations, he is absolutely correct.
But, here’s the layman's explanation: (I hope)
The Constitution provides for two types of taxing authority in this country, “Direct and Indirect taxes”. An Indirect Tax is based upon an act, like buying and selling in commerce. A Direct tax is apportioned between the states.
The Direct Tax is applied like this example: The US goes to war and expends 2 billion dollars. Upon the end of hostilities, the bill for that war comes to the central government. This is where the census comes in. Each state, based upon its population is billed a pro rata amount of the 2 billion. Example, California would pay vastly more than Rhode Island, because of the disparate population between the two states. So this one is simple. The amount of the Direct Tax must be a previously determined amount in order for it to be "equally apportioned among the states". How can such a Tax be equally apportioned between the states, if we don’t know the amount?
The Indirect Tax is applied to the exercise of a taxable activity, like buying or selling Alcohol, Tobacco, and Firearms, to name a few. (I don't agree that these are taxable activities, but they do.) Also, the Indirect Tax must be avoidable. You must be able to avoid the tax to make it indirect. You can't avoid a Direct Tax, but you must be able to avoid an Indirect Tax. Believe it or not the government considers "making income" a taxable activity. However, the Income Tax may be avoided, by not making Income. A sales tax is another good example of an Indirect Tax. You can avoid it by not buying and selling in commerce. Example, buy a gun at a gun show, pay the tax and wait the time. Buy a gun at the same gun show through a private person, and pay no tax and wait no time. (I know they are currently trying to encroach on private sales as well, but that's another story.)
Therefore, the Income Tax is an Indirect Tax, because it is not apportioned equally to everyone regardless of income. It is a tax on the amount of Income you make. If you make no Income, you pay no Income Tax. Also, everyone pays a different amount. You can also avoid the Income Tax by deliberately not making income. Easier said than done I know. But, if you’re unemployed for a year living off previously taxed savings, you will owe no Income Tax for that year, because you made no Income. The Direct Tax on the other hand, may not be avoided. It is a Capitation Tax. A Tax on your "Head".
The Income Tax is an Indirect Tax. So says the U.S. Supreme Court.