8 votes

Is State Income Tax Unconstitutional?

I don't know if this has ever been challenged, but it seems that the states have no constitutional authority to collect income tax.

The Constitution for the United States of America says:

Article 6:
"This Constitution ... shall be the supreme Law of the Land ... any Thing in the Constitution or Laws of any State to the Contrary notwithstanding."

10th Amendment:
"The powers not delegated to the United States by the Constitution ... are reserved to the States ..."

16th Amendment:
"The Congress shall have power to lay and collect taxes on incomes ..."

Since the Constitution prohibits the states from passing any laws contrary to the Constitution, and prohibits them from having any powers that are delegated to the federal government, and since the federal government has been delegated the power to lay and collect taxes on incomes (assuming the 16th was properly ratified, etc.), then it follows that the law of the land prohibits any state from instituting an income tax.

Anyone know if this has ever been challenged?

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It is not technically a State tax, but rather a revenu sharing

agreement with the Feds.

Look at your state laws.

If you aren't liable for the Federal so-called "income tax" you aren't liable for your "state" version of the tax.

That isn't a coincidence - it's the same tax, passed under the same authority. Notice your state AGI is adjusted by the amount of Federal Tax paid? That isn't to be "nice" it is to avoid tax upon tax issues.

Some states choose not to collect it.

Property tax collected by

Property tax collected by your community government is a violation of the 5th Amendment's " nor shall private property be taken for public use, without just compensation." clause, by the same logic....

"Ehhh, What's ups Doc?" B.Bunny "Scwewy Wabbit!"E. Fudd
People's Awareness Coalition: Deprogramming Sequence

Property tax

is the most vile form of all taxation and is a violation of liberty.

concurrent jurisdiction

two entities taxing the same activity

Let's keep this simple, people

I don't want to argue about what constitutes income because we all know that it will be whatever suits the government.

Anyhow, on topic, the 14th amendment grants the fed the power to levy taxes but does not prohibit the states from doing so. So, all it does is expand the power of the fed but does nothing to reduce the power of the state.

my 2 cents

Denise B's picture

I have a question for you...

and it must be answered first, before your question can be accurately addressed. What is income? I don't mean the ordinary meaning of income, I mean the legal definition of the term as it is used in the 16th Amendment. Since the claimed authority to tax "income" is derived from the passage of the 16th Amendment, this is a relevant and critical question. Clearly, income is not gross receipts, because corporations pay the income tax only on their net profits, after all costs of sale and expenses are deducted. Does it mean one thing for a corporation and another for an individual? Can a term have two different legal definitions? So, in legal terms, what is income? Where can I find it defined? Provide a legal definition for that term and then your question can be adequately answered. (Hint: answering the question correctly, will in turn provide the correct answer to the question that you ask).

Income, per the SCOTUS, in the 16th has the same definition it

had in the 1907 Corporate Tax Act.

This is because THIS is the definition that was in the public mind at the time they ratified the 16th, and so their rules of construction dictate that unless another amendment is added, "income" will forever have this definition - and Congress is NOT allowed to redefine it to mean anything they want.

There is even an early SCOTUS case on this exact question, I believe from either 1915 or 1922, I don't recall exactly.

Sorry I don't have citations handy, but someone here should be able to find them.

It's a profits tax ...

... but to understand it, we have to have the context of history.

Before the 20th century, most businesses had a legal structure of either sole proprietorship, partnership, or trust. Corporations were not used like they are today because many states did not recognize them and of those that did, many had laws restricting what they could do.

This is why the term "Massachusetts Business Trust" comes up sometimes. Massachusetts had a law forbidding corporations from owning real estate, so people used trusts instead.

The terms "trust busting" and "anti-trust" were used by the statists when they wanted to break up Standard Oil Company, which was a series of business trusts, not corporations.

Sometimes in the liberty movement we run across terms like "pure trust." This term was uttered by the United States Supreme Court in the case of Morrissey vs. Commissioner (1935) when they determined how business trusts or, they called it a "pure trust," would be taxed.

This is the court case where the term "an association taxable as a corporation" comes from. This is why the IRS has a "check the box" form (Form 8832). They MUST abide by the Morrissey case, but they don't want to, which is why there is a lot of propaganda out there.

Anyway ...

The point is that before the 20th century, corporations were not used all that much. Some, but not like today. But as they were becoming more and more common, more and more states were passing laws allowing their creation. Since they are creatures of the state, they must follow the state's laws.

Congress passed the Corporation Excise Tax of 1909, which taxed the "privilege" of "doing business in corporate form," and it was a tax on net profits. The law said:

"That every corporation, joint stock company or association, organized for profit and having a capital stock represented by shares ... now or hereafter organized under the laws of the United States or of any State ... shall be subject to pay annually a special excise tax with respect to carrying on or doing business by such corporation ... equivalent to one per centum on the entire net income over and above five thousand dollars received by it from all sources during such year...."

This was upheld as constitutional by the SCOTUS in Flint vs. Stone Tracy (1911).

Right after that, Congress passed the 16th Amendment and the Income Tax Act of 1913. The 16th was never properly ratified and should not be a part of the Constitution, but the law business is corrupt.

In 1926, the SCOTUS ruled in the Bowers v. Kerbaugh-Empire case that:

"The Sixteenth Amendment declares that Congress shall have power to levy and collect taxes on income, 'from whatever source derived' without apportionment among the several states, and without regard to any census or enumeration. It was not the purpose or effect of that amendment to bring any new subject within the taxing power. Congress already had power to tax all incomes. But taxes on incomes from some sources had been held to be 'direct taxes' within the meaning of the constitutional requirement as to apportionment. Art. 1, 2, cl. 3, 9, cl. 4; Pollock v. Farmers' Loan & Trust Co., 158 U.S. 601 , 15 S. Ct. 912. The Amendment relieved from that requirement and obliterated the distinction in that respect between taxes on income that are direct taxes and those that are not, and so put on the same basis all incomes 'from whatever source derived.' Brushaber v. Union Pac. R. R., 240 U.S. 1, 17 , 36 S. Ct. 236, 241 (60 L. Ed. 493, L. R. A. 1917D, 414, Ann. Cas. 1917B, 713). 'Income' has been taken to mean the same thing as used in the Corporation Excise Tax Act of 1909 (36 Stat. 112), in the Sixteenth Amendment, and in the various revenue acts subsequently passed. Southern Pacific Co. v. Lowe, 247 U.S. 330, 335 , 38 S. Ct. 540; Merchants' L. & T. Co. v. Smietanka, 255 U.S. 509, 219 , 41 S. Ct. 386, 15 A. L. R. 1305. After full consideration, this court declared that income may be defined as gain derived from capital, from labor, or from both combined, including profit gained through sale or conversion of capital. Stratton's Independence v. Howbert, 231 U.S. 399, 415 , 34 S. Ct. 136; Doyle v. Mitchell Brothers Co., 247 U.S. 179, 185 , 38 S. Ct. 467; Eisner v. Macomber, 252 U.S. 189, 207 , 40 S. Ct. 189, 9 A. L. R. 1570. And that definition has been adhered to and applied repeatedly. See, e. g., Merchants' L. & T. Co. v. Smietanka, supra, 518 (41 S. Ct. 386); Goodrich v. Edwards, 255 U.S. 527, 535 , 41 S. Ct. 390; United States v. Phellis, 257 U.S. 156, 169 , 42 S. Ct. 63; Miles v. Safe Deposit Co., 259 U.S. 247, 252 , 253 S., 42 S. Ct. 483; United States v. Supplee-Biddle Co., 265 U.S. 189, 194 , 44 S. Ct. 546; Irwin v. Gavit, 268 U.S. 161, 167, 45 S. Ct. 475; Edwards v. Cuba Railroad, 268 U.S. 628, 633 , 45 S. Ct. 614. In determining what constitutes income substance rather than form is to be given controlling weight. Eisner v. Macomber, supra, 206 (40 S. Ct. 189)."

Is that the answer you were looking for? ;-)

Denise B's picture

It was closer than

I expected, and quite fast too. So then, if it is a "profits" tax, and also falls into the category of an excise tax, and it is levied for the "privilege" of "doing business in corporate form", what does that have to do with taxing a person's wages? The footnote in Doyle V Mitchell Bros. (which also was a case involving a corporation because at that time they were not even yet taxing wages directly) states that "gross income" is what is left after all business expenses were deducted from gross receipts. If that is so, how is it now that the IRS now defines gross income as gross receipts before any deductions? How can taxable income be one thing for a corporation and another for an individual? It can not. The only reason the courts ruled that it was an excise tax and not a direct tax on property is because the "income" was separated from it's sources (the property it may have been derived from) through a profit and loss statement. A tax on a persons wages does no such thing. A person is not allowed, like a business to deduct all of their living expenses to determine if a profit has been made at all, and in most cases, that means no one would even make a profit or have to pay the tax In fact, the 16th Amendment never mentions wages at all, only income, which we both agreed is a corporate profit, which most individuals don't have at all. Which is exactly why the Internal Revenue Code does not define the term...well to be fair they define Gross Income as "all income from whatever source derived", which conveniently still doesn't tell you what income is. That is the deception. Income, as used in the 16th Amendment does not mean wages, yet the IRS pretends that it does. A tax on your wages would be a direct tax, which if levied without apportionment would amount to a new taxing power, which Congress did not previously possess, and the Supreme Court clearly ruled that the 16th Amendment granted "no new power of taxation"...It is a deception and a fraud as it is being imposed by the federal government, and therefore, the same is true for the states because the states that have it simply adopted the federal code, which legally binds them to the same definitions and restrictions which apply to the federal government.

Yes ...

... but I'm taking it one step further than you.

I'm saying that (a) even if the 16th was properly ratified, and (b) even if income is defined as gain (or hell, even if it's not), and (c) even if the states piggyback on the feds to figure out how MUCH to tax "income," then ... STILL ... the states are not allowed to do it because it is a violation of the 10th Amendment and Article 6.

I don't know if its ever been challenged.

Denise B's picture

It certainly is

an interesting legal question, and I have never heard of it being challenged on those terms and it may be worth exploring; however, my only caveat would be the problem of where you would have to challenge it. The courts in this country have been so severely compromised that many of them are little more than kangaroo courts and there are very, very few judges out there that are willing to cut off either state or federal revenue no matter how sound your argument may be. There are really quite a few legal issues to challenge the income tax on, in addition to the ones I and you referenced...there is the 13th Amendment (taking a portion of your wages without your consent technically would fall into the category of involuntary servitude) and there is also 5th Amendment issues, simply because you are forced to sign a document (return) under oath that can be used as evidence against you in a court of law. There is also the "void for vagueness" issue...what is more vague than our income tax laws? The income tax is repugnant to freedom on a number of levels; however, you, still need a court which is willing to uphold the law, and quite often, they will choose securing revenue for the state over the rule of law, hands down. It's called tyranny and it's taken root and won't be uprooted easily. If you do decide to pursue it, please keep us posted.

Want to screw up the works royally?

Sue every state that has an income tax for fraud for failure to pay income tax refunds in gold and silver currency. That would probably amount to close to one TRILLION dollars since the Silver certificate was removed from the systems by the Federal Reserve parasites.

"Powers herein"

not all powers....just those found within.

Think Truth...Trust Truth...Rely on Truth!

State income taxes existed

State income taxes existed both before and immediately after the passing of the Constitution. No one found it unusual. At no time that I am aware of, did people say "hey! States cannot tax people's incomes! It is against the Constitution we just signed!"

Ergo, the Constitution didn't forbid states from collecting taxes.

Plan for eliminating the national debt in 10-20 years:

Overview: http://rolexian.wordpress.com/2010/09/12/my-plan-for-reducin...

Specific cuts; defense spending: http://rolexian.wordpress.com/2011/01/03/more-detailed-look-a

No, that's not quite true ...

... there was no such thing as an "income tax" as we know it today. Not even with the states.

The principle was that any tax that must be paid directly from the citizen to the government is a direct tax, and any tax that was paid through a third party was an indirect tax.

The states could have either type of tax, unless they prohibited it in their own state constitutions.

What many states did was to tax the ownership of property, especially real estate. They came up with all sorts of ingenious ways to do it, such as count the number of windows to determine the tax. This concept goes back to medieval days.

But the states would also tax anything related to the property, such as any income derived from it. So, yes there were taxes on the income associated with ownership of property, but there was no general income tax on wages, salaries, capital gains, etc. as we know it today.

To say the states had income taxes and there was no problem is just not true. Even then, most states didn't even have that type of tax for most of the time after the Constitution was ratified and before 1913.


Where in the world did you come up with that idea. Any supporting evidence?

Because that's is NOT the case

Love Liberty, be Vigilant

"Now the Lord is that Spirit: and where the Spirit of the Lord is, there is liberty" (2 Corinthians 3:17)

Faith in God will prevail all things!

I would

like to see documentation on your claim as well.

To the main poster. Yes, anything taken by force is unconstitutional.
Although, that has not stopped them from taking anything they want.

anything take by force is unconstitutional?

I don't think so.


Income tax is theft, no matter what entity is responsible. This reminds me of the argument democrats (read statists) love to use when they encounter someone defending state's rights. They cry racism and all that nonsense. The Bill of Rights must be respected and upheld by governent at all levels. it should have been common sense that the Bill of Rights when created would by definiton make slavery immoral and illegal. The problem wasn't the Constitution it was the societal norm at the time.

For a good explanation on the 16th Amendment I suggest watching Aaron Russo's America: From Freedom to Fascism. In it he interviews many people with expert knowledge on these cases, particularly the Eisenhower vs Montgomery case. The Supreme Court has determined more than once that the Federal Gov't and the IRS are not granted any new taxing authority from the 16th amendment. Furthermore it has defined income as "gains or profits from corporate activity"

It is in Texas!

We don't have one!

No it's NOT unconstitutional... and here's why...

No! And here is why.

The state income tax is not an additional income tax. It is an extension of the federal income tax. Income tax in general is an excise tax.

So, to understand this one must understand the income tax. The nature of the income tax is that which is mainly an excise tax

So for instance, the state income tax comes into play once federal income tax liability has been established. So in a state where there is a state income tax and there is federally adjusted gross income that means if the transaction occured in a state that has an income tax the state just gets a piece or portion of the transaction in relation to the federal income tax. Its not its own tax all by itself. Its specifically related to the federal income tax.

now, if one wants to understand who is liable for the income tax that's a whole different argument. Just to make a long story short we can just say for the record that personal income tax has nothing to do with the average guy living and working in the private sector in any one of the 50 states of the union. All the personal income tax has ever been even after the 16th amendment is an excise tax. So if one were to read the state statutes pertaining to income tax one with clearly find out very quickly that if there is federally adjusted gross income then there is state income tax liability. Reverse the logic, if there is no federally adjusted gross income then there is no state income tax imposed.

And anyone who knows anything about the income tax in it's most basic form knows that income tax has nothing to do with the average guy but mainly is realated to foreign related Commerce, that's it.

For instance if some guy in France has a transaction here in New Jersey which is a US domestic transaction with a US Person the income tax comes into play on the federal level and New Jersey would just get a portion of the transactions. That's pretty much it in a nutshell

So, the income tax is quite constitutional, it's just most people do not understand what the income taxe is and the way the law actually imposes the income tax. And that can be another argument for another thread where we can discuss what the Income Tax is and why it is that Congress did not have the authority to impose the tax on anyone who just made money. So the argument about the income tax being unconstitutional is actually the wrong argument to make since income taxes are entirely Constitutional.

The problem is with the intentional Misapplication of the tax on the national level to most people who do not even owe the tax and are not aware that they do not owe tax. Anyone who wants to go and read my older posts on income tax on more than welcome to do so to clearly see why this is the case.

if you want to go further in understanding what the income tax actually is then I highly recommend you read a book by Dave champion entitled income tax shattering the myths. It explains in thorough detail the entire nature of the tax and how the government has gotten away with it misapplication over the many decades it has existed.

Love Liberty, be Vigilant

"Now the Lord is that Spirit: and where the Spirit of the Lord is, there is liberty" (2 Corinthians 3:17)

Faith in God will prevail all things!

Well *IF* state income tax ...

... is an extension of federal income tax, then it is a violation of the 10th Amendment. That's how it's done, I know. But it is still a violation of the 10th Amd.

Regarding the foreign aspect, I have checked out Larken Rose's stuff and he makes a compelling case that the original federal income tax section for defining "gross income" morphed into what is today Section 861, which is about foreign source income.

It would be interesting to see who was paying income taxes back in the 1920's or so.

It's also interesting to note that most of the high court cases I've come across from the early days of the income tax all have to do either with income related to the government or something foreign.

Even the famous case of Brushaber vs. Union Pacific fit this profile because Union Pacific Railroad was a corporation created by an act of Congress, similar to Fannie Mae or Freddie Mac.

Congress created Union Pacific to finish the railroad in the West (from the Union to the Pacific Ocean), and there were no states out there (it was federal territory). Brushaber was a shareholder and receiving dividends, from which the new income tax was being withheld.

In any case, that argument is a side discussion. If the states are just sponging off the feds on income tax, then it's a clear violation of the 10th Amd.

concurrent jurisdiction

Two entities taxing the same activity.

Im NOT referring to Larken Rose's 861 position

Im NOT referring to Larken Rose's 861 position

Just thought I would point that out.

And there's nothing wrong with the States collecting a portion of a federal tax. Nothing in the Constitution prohibits the "power to lay and collect taxes" relating to an indirect tax, in this case the "income tax" from the States collecting "their share".

It's like this. The States get a portion of the tax from what was transacted in their jurisdiction relating to the "income tax"

There's a really good book, called "Income Tax: Shattering the myths by Dave Champion"

REally really good read. And Dave shoots down Larken's 861 position. Just thought you would like to know.

Love Liberty, be Vigilant

"Now the Lord is that Spirit: and where the Spirit of the Lord is, there is liberty" (2 Corinthians 3:17)

Faith in God will prevail all things!

Well, you can't square "their fair share" ...

... with the 10th Amendment.

The powers NOT delegated to the feds are reserve to the states (or the people).

This is not a commune; it is a republic. ;-)

what power are you referring to?

what power are you specifically referring to that the Fed is exercising in the case of the State income tax?

Love Liberty, be Vigilant

"Now the Lord is that Spirit: and where the Spirit of the Lord is, there is liberty" (2 Corinthians 3:17)

Faith in God will prevail all things!

See my OP.


That's incorrect

The income tax is neither an Indirect tax nor is it a Direct tax. A direct tax must be imposed uniformally across a population. An indirect tax (excise tax) MUST be apportioned. Hence the gasoline tax funds must be used to fund and maintain the federal highway system. A tax which is withheld without consent and is not appropriate is wholly unconstitutional

It is BOTH direct and indirect ...

... depending on the SOURCE, which is why they wrote it that way.

Historically, any tax on the ownership of property was a direct tax, and this included the "income" or "profit" that was "derived from" the ownership of that property. But a different type of tax on income, such as an excise for the privilege of doing business, was an indirect tax.

So, "income" could be EITHER direct or indirect, depending on what type of income it was.

This is why the Supreme Court declared the Income Tax Act of 1894 unconstitutional, because it included taxes on real estate income, for example, which was an unapportioned direct tax.

That's why they worded the 16th the way they did. The "source" has to do with whether the income is generated from ownership of property or something else.

Today, many courts have claimed it is direct and many other courts have claimed it is indirect. This is because most judges don't know what the f&ck they are talking about. It is BOTH.

This is why today, dividends from a US corporation are considered "US source" and dividends from a foreign corporation are considered "foreign source," but capital gains on the sale of the stock of a US or foreign corporation is either US source or foreign source, depending on where the SELLER is located.

See my post above that starts with "It's a profits tax." That includes what I consider the definitive statement by the Supreme Court because, unlike everything else, they actually explain all the cases up to that point, and the concept they laid out has not been overturned.

Of course, it is STILL being collected unconstitutionally, because "income" is a tax on GAIN (as that case explains), but it is not being collected that way today.

Without a doubt it is an INDIRECT TAX

Without a doubt it is an INDIRECT TAX

And, the Brushaber US Supreme Court ruling even stated that the income tax could NOT be a third unknown hitherto power of taxation.

There are Direct Taxes and Indirect Taxes via the US Constitution. The Supremes explicitly said the Income tax can only be one or the other....

THAT MEANS THEY SAID THE 16th Amendment ONLY confirmed that Congress could lay an income tax as an INDIRECT TAX.


Love Liberty, be Vigilant

"Now the Lord is that Spirit: and where the Spirit of the Lord is, there is liberty" (2 Corinthians 3:17)

Faith in God will prevail all things!