Monday, April 23, 2007

Siegel Loses Debate!

The debate is over, the votes are in, and the result is clear: 89.1% of those voting thought convicted criminal Larken Rose bested law professor Jon Siegel in their radio debate over whether there is a law requiring most Americans to pay income tax!

Vox populi, vox Dei. I guess I learned my lesson.

Actually, the show's producer was kind enough to point out that the voters were not exactly a random sample of Americans. Rose e-mailed his fan base and told them to listen in. It was noticeable that all the calls were from people who believed in his fringe theories.

What is still striking, though, is the number of fans he and other tax protestors have. What drives so many people to believe in these crazy theories? Since I started my income tax web pages I've had all kinds of e-mail correspondence with people who seem to believe fervently that there is no law requiring most Americans to pay income tax. It's amazing the amount of energy some of these people have spent on learning intricate and arcane details of obscure income tax regulations, the history of the 16th Amendment, or fragments of what the Supreme Court said about income tax in century-old cases. If only that same energy could be redirected to some real-world goal -- trying to get Congress to lower or repeal income tax, say -- imagine what could be accomplished!

It reminds me of what it's like to read up on astrology or other pseudo-scientific topics. I'm always amazed at how careful some devotees are in their research into exactly what it supposedly means when the moon is in Pisces or whatever other bit of arcana they're pursuing, and I can't help but think what could be accomplished if the same time and energy were devoted to studying actual medicine or engineering or some other real topic.

Anyway, if you care to listen, the podcast of the debate is here. The debate starts after about 15 or 20 minutes of discussion of another topic -- the Imus affair -- which you can skip if you click on the word "podcast" rather than on the "play" icon (at least, in my browser).


Anonymous said...

Isn't it frustrating arguing with these tax protesters?

Jon Siegel said...

Yes, a bit. That's why the real target market for my tax web pages is not hard-core tax protestors, but people who have seen tax protestor information and are somewhat tempted to believe in it, but who are still open to reason.

Anonymous said...

From Jon's Page

Income Tax Myths

"Wages are not income."

Some people like to say that wages are not income because wages represent an "equal exchange" of a sum of money for its value in labor, or because income includes only returns to capital, or because the Supreme Court has defined income so as to exclude wages.
This incorrect argument can be addressed several ways.

Statutory Answer

Whatever the attraction of this economic theory of wages, Congress has taken a different view. Section 63 of the tax code, 26 U.S.C. § 63, defines your taxable income to be “gross income minus the deductions allowed” by the tax code. Section 61 of the tax code, 26 U.S.C. § 61 which defines “gross income,” provides:
26 U.S.C. § 61
[G]ross income means all income from whatever source derived, including (but not limited to) the following items:(1) Compensation for services, including fees, commissions, fringe benefits, and similar items; . . .
Thus, the tax statutes specifically provide that your wages (“compensation for services”) are part of your gross income. Since no provision of the code allows you to deduct the value of your services from the compensation you receive, they are also part of your taxable income. So the tax laws do impose a tax on wages, regardless of whether anyone thinks they should.

Anonymous says...

Compensation for services does not include wages, although compensation for services can be paid in the “form” of wages or salaries.

Substantially, wages are compensation for labor (employment).

What most people erroneously believe is that labor, which is also known as “service”, falls under the umbrella of “services”.

From Black’s Law Dictionary – Sixth Ed.

Labor - normally refers to work for wages as opposed to work for profits; though the word is sometimes construed to mean service rendered or part played in the production of wealth.

Laborer – one who works for another.

Services - things purchased by consumers, which have no physical characteristics (services of doctors, lawyers, dentists, repair personnel)

Therefore labor is employed; it is never purchased (slavery is outlawed in this country).

To purchase something involves the transfer of ownership. The laborer at no time surrenders ownership of himself. He may quit at any time.

Employment entails the following:

1). The employer making the offer of employment and setting the value of the employee’s time and determines the amount of time available for employment.
2). The employee calls and accepts the offer.
3). The employer controls and directs how the labor is to be done; the employee may make suggestions.
4). The employer returns a wage to the employee for the value of the time spent under its direction, not for the completion of a job.

Services entail the following:

1). The customer calls the provider of the services. The service provider details the costs and schedules the time available for its service.
2). The customer accepts the conditions.
3). The service provider controls and directs how the service is to be done; the customer may make suggestions.
4). The service provider bills the customer for the job completed, the amount of time spent on the job may or may not be a specific cost in the bill.

Is the employee a provider of services to the employer? NO!!!

Is the employer a customer of the employee? Again, NO!!!

Then when and to whom is compensation for services paid in the form of wages and salaries?
When the employee is also the employer, otherwise known as self-employment.
Self-employment includes all business owners and the officers “of” any corporation.

Back to Jon's page

Theoretical Answer
Moreover, apart from the fact that it's just wrong as a matter of the tax statutes, the argument that you should get to deduct the value of your labor is misdirected as a matter of theory. It shows a fundamental failure to understand how to calculate income. When you get income by selling something, you do not calculate your income by taking the sale price and subtracting the value of the thing sold. You calculate your income by taking the sale price and subtracting the cost to you of the thing sold.

Anonymous says...

Labor is not something you sell.

Back to Jon's page

Here's a simple example that proves this. If you buy a stock for $100 and sell it later for $120, your income from the transaction is $20—your sale price of $120 minus your cost of $100. If you were allowed to subtract the value of the thing sold, your income would be zero. On the day you sold the stock, its value was $120. So if you could subtract the value, your income would be $120-$120 = 0. But that's obviously wrong, because you made $20 on the sale.
The lesson learned from this simple example is that, in a sales transaction:
Seller's Income = Sale Price - Seller's Cost
It would not be correct to say that Seller's Income = Sale Price - Value. That would be zero in our example, and, indeed, if you could subtract the value of the thing sold, you would almost always get zero. Basically, no one would ever have any income from doing anything! Just about every transaction in a free market society involves an "equal exchange" -- the selling of something for an amount equal to its value. If you pay $1 for a newspaper, you get a newspaper worth $1. If you buy a house for $100,000, you get a house worth $100,000. These are all equal exchanges. So if "income" were determined by subtracting the value of the thing sold from the sale price, the result would almost always be zero for every transaction.
So that can't be how it works. Income is generally the difference between the sale price and the cost of the thing sold, not the value of the thing sold. You subtract the cost, not the value.
So getting back to wages, if you could deduct anything from your wages, it would be the cost to you of your labor, not the value of your labor. But you didn't pay anything to own your own labor in the first place. Your basis is zero. So there's nothing to deduct.

Anonymous says...

This would be true if labor was something completely separate from the person, but it is not. You own your own labor because you are the source, not because you acquired it from somewhere else for nothing.

For labor to be a cost to you, you must be the employer of said labor, self-employed.

Back to Jon's page

Actually, a not-so-bad argument would be that you should get to deduct the various costs you pay to be able to perform labor: the costs of your work clothes, transportation to work, the food you need to eat so that you can stay alive and keep working, etc. And some work expenses are indeed deductible. But the tax laws don't allow deduction of many of these expenses, such as the basic cost of commuting to and from work, and certainly they don't allow the basic cost of food as a deduction, even though you need to eat to stay alive and work. (One reason for this is that it would be too difficult to distinguish the business expense of the food you need to eat for work purposes from the personal expense of the food you would eat whether you worked or not.)
In any event, the main point is that you can't deduct the value of your labor, both because the tax statutes don't allow it and because it would be wrong even in theory.

Anonymous says...

The statutes don't allow it because the statute does not even apply to it.

And the theory you apply to all employment is that specific to self-employment.

"Wages are income for a source." They are not however income derived from a source, which is what the income tax attaches to.