I am dismayed at the implication of the allegations of deception and impropriety in the arena of academic standards. The severity of censure must in the circumstances be severe. However, it is to be hoped that a reasonable explanation may be forthcoming.
At least one of the employers named in the Times article has written a letter to the IRS Commissioner requesting a meeting to discuss the matter. Excerpts from that letter is presented below.
Nick Jesson's (NTD Electronics') demand for dialogue was UNANSWERED by the IRS, so he is now going public. The IRS's failure to respond follows a series of attempts to get government officials, including the IRS, Congress and the White House, to participate in conferences to publicly explain findings and refute allegations by numerous tax researchers and former IRS agents such as the allegations made at the top of this message.
Tax researchers recognize that the actions of the employers are supported by provisions in the Tax Code. For example: A withholding agent is only required to withhold from foreigners (Code Sections 7701, 1461, 1441-3). Tax researchers have noted for years that a statement of citizenship given to an employer/withholding agent precludes the withholding of tax, as there is no authority in the Code to withhold money from a citizen or resident of the U.S. unless that person authorizes it. If the worker submits a statement of citizenship, the employer, as a withholding agent, is relieved of duty to withhold income taxes, since those apply to nonresident aliens.
Tax researchers have asserted there is no law that a U.S. citizen must have a social security number (SSN) or that an employer must have an employer identification number (EIN), or that either of them must participate in the social security program ( i.e., employment or FICA taxes under Subtitle C). An employer who does participate in the social security program is required to give a W-4 form to a worker, but is not required to get it back, and the worker is not required to fill it out and return it, unless that worker wants to participate in the social security program. Absent a W-4 signed by the worker, an employer is not authorized by law to withhold and submit to the IRS money from the worker for employment taxes. Further, a person without a SSN number would have no taxable income. All this has been well-documented and verified by numerous letters from any number of Social Security Administration officials.
Section 1441(a) and (b) state that interest, dividends, rent, salaries, wages, profits, etc., are "income" when received on behalf of, or paid to, a nonresident alien or other foreign entity. And courts have ruled that profits of corporations are "income." But there is no provision in the Code stating that receipts of citizens or residents of the country are "income." Thus, a citizen's own receipts are not "gross income" and are not, therefore, "taxable income" under the Code. Income refers to property derived from activity involving the exercise of a government-granted privilege.
Section 61 of the Code has the definition of gross income as "all income from whatever source derived," and then a list of 15 "items." Tax researchers have recognized that the "items" listed are not the same as "sources" of income that are taxable. The sources are actually to be found in a more remote part of the Code at Section 861 (or section 1.861-8(f)(1) of the regulations). They consist of five "foreign" sources. In previous versions of the Code, the relationship and distinction between the "items" and the "sources" was not disguised or separated by distance in the Code. This part of the Code is an important aspect of the position taken by the employers who have stopped withholding.
I think that wins the argument for the good guys, if not; I feel these points need further consideration:
The income tax laws in the Civil war were on wages. While most wage earners were exempted because the average yearly wage was less than the $600 threshold for taxes. The tax was on wages which are also known as salaries.
http://www.tax.org/Museum/1861-1865.htm
To the unskilled Laborer in 1862, $600 equates to $88,981.13 in 2005 Dollars(Source). Obviously, the Tax was intended for business, NOT the every day worker.(Even in 1909; $600 represented $56,819.28 which is clearly not your average laborer).
The act exempted businesses worth less than $600 from value added and receipts taxes. Taxes were withheld from the salaries of government employees as well as from dividends paid to corporations (the same method of collection later employed during World War II). In addition, the "sin" excise taxes imposed in the 1862 act were designed to fall most heavily on products purchased by the affluent.
Thaddeus Stevens lauded the progressivity of the tax system:
"While the rich and the thrifty will be obliged to contribute largely from the abundance of their means . . . no burdens have been imposed on the industrious laborer and mechanic . . . The food of the poor is untaxed; and no one will be affected by the provisions of this bill whose living depends solely on his manual labor."
That is pretty clear is it not?
