Subject: National Sales Tax Analyzed. Date: Wed, 1 Mar 2000 10:52:55 -0800 From: "otto" Otto Skinner analyzes a national sales tax plan. Will such a plan result in more bad consequences than people realize? Are people who want such a plan just looking for a quick fix, without understanding basic principles of constitutional taxation and without realizing the negative consequences? Will the world money powers happily benefit from a national sales tax plan? Otto Skinner thinks so. Analysis by Otto Skinner of National Sales Tax plan in accordance to Life Without the IRS, a book written by Sherman Unkifer and which is promoted by Americans for Constitutional Action. AREAS OF AGREEMENT. 1. The proponents of the National Sales Tax plan want to abolish all taxes which require individuals to have withholding or any requirement to keep books and records. This is good. This is an excellent goal. 2. They are for abolishing "income" taxes, gift taxes, inheritance taxes, corporate excise taxes and other excise taxes. This is good with the exception of the corporate excise tax. Doing business in a corporate capacity is clearly a government granted privilege and a legitimate subject of taxation for revenue purposes. The government virtually grants corporations (artificial entities) the privilege of "life everlasting" and the stockholders a shield of liability protection. These are privileges a natural individual does not have. However, the tax should be measured by gross receipts and/or amount of wages paid, rather than "income" or "net earnings". Measuring a tax by either of the last two methods provides too much room for loopholes. 3. They want all taxes to be transparent so that people can see what government is costing them. This is good. I agree that most taxes should be abolished. I also agree that whatever taxes are imposed should be simple, not intrusive into private lives, and the amount of the tax collected should be apparent rather than hidden. I disagree with the proponents of the National Sales Tax plan as to the best source of necessary revenue. (See The Biggest "Tax Loophole" of All, pages 321-322, by Otto Skinner.) The proponents of the National Sales Tax plan may have their hearts in the right place, but they do not seem to understand the basic principles of constitutional taxation. PROBLEMS WITH THE NATIONAL SALES TAX PLAN. 1. Taxing Labor. The proponents of the National Sales Tax plan want to tax sales relating to business, but what will be considered business? They want the national sales tax to be on all goods and services (with the exception of food, medical and housing), but they do not seem to realize that to tax services, is in effect, taxing labor. For example, if Mike mows lawns for his neighbors, will Mike be required to keep books and records and pay taxes on the sales of his services? Will all the people who paint or re-roof houses, and the many other individuals who do various jobs for others, be required to keep books and records and pay taxes on the sales of the services which they perform? Will this not be taxing labor? Is this not invading their freedoms, liberty and privacy, if they must report how much money they earn? At least to this extent, will this not nullify some of the goals of the proponents of the National Sales Tax plan which is to save people from a requirement to keep books and records and from a loss of privacy? There are many individuals who offer services and who either work alone or hire a few people to help them. This will add up to a lot more than just "a few hundred thousand businesses" as suggested by the National Sales Tax plan people. Under the plan to tax services, many so-called "self-employed" will not have privacy or liberty. And there will still be an enforcement agency to keep track of these individuals, regardless if it is called the IRS or the Dalton Robbery Service. The IRS agents would just transfer over to the agency with a new name. Would we really be getting rid of the IRS? 2. Other things the National Sales Tax proponents do not seem to understand. a) They do not seem to know the difference between direct taxes and indirect taxes. (For a correct definition of an indirect tax, see The Best Kept Secret, page 3, or The Biggest "Tax Loophole" of All, page 9.) b) They seem to think that the "income" is the thing being taxed. They do not seem to know that the name of the tax (such as "income" tax) is immaterial. "The name by which the tax is described in the statute is, of course, immaterial." Dawson v. Kentucky, 255 U.S. 288, 292 (1921). They do not seem to understand that the thing being taxed by the Corporate Excise Tax is not the "income". It is the activity of doing business in a corporate capacity, with the "income" merely being used to measure the tax. (See The Biggest "Tax Loophole" of All, pages 12-14.) There can be no intelligent discussion regarding a tax until all concerned can clearly and accurately state whether the thing being taxed is in the category of people, property or activity. They do not seem to understand that "income" is not, and cannot be, the subject of either a direct tax or indirect tax. This is a fact that seems especially difficult for people to understand without being provided a thorough analysis. (See The Biggest "Tax Loophole" of All, page 33.) c) They do not understand the Sixteenth Amendment. They think it should be repealed. They do not understand that it conferred no new power of taxation, and did not extend the taxing power to new or excepted subjects and that it only prevented the courts from considering or enforcing a so-called "income" tax as a direct tax. (See Brushaber, Stanton and Peck & Co. cases in The Biggest "Tax Loophole" of All.) d) They think "income" taxes and "payroll" taxes are different. They think "payroll" taxes (perhaps meaning Social Security & unemployment taxes) are flat taxes, but in which category do they place "income" tax withholding? e) They state that the term "income" is defined in the Code in many different ways; when, in fact, the Code does not define the term at all. The courts have ruled: "The general term 'income' is not defined in the Internal Revenue Code." United States v. Ballard, 535 F.2d 400, 405 (8th Cir. 1976). f) The proponents of the National Sales Tax plan state that a national sales tax will cost "taxpayers" nothing to file. However, they do not know the definition of the term "taxpayer" as defined in the Internal Revenue Code, which is, "any person subject to any internal revenue tax." Unfortunately, they refer to everyone as a "taxpayer", which is not the way the term is defined in the Code. The term "taxpayer" is an appellation that is incorrect for persons who ARE NOT subject to a revenue tax. (Gosh, if people would just know what they are talking about before they start talking, we would all be better off.) g) They expect the States to collect the federal national sales tax, but they do not understand that the federal government cannot force the States to perform federal functions. (See the United States Supreme Court case of Sheriff Printz and Sheriff Mack regarding the Brady Bill, Printz v. United States, ___ U.S. ___ (1997) (95-1478 and 95-1503) and New York v. United States, 505 U.S. 144 (1992).) h) They think Social Security is a contract. They do not seem to know that the individuals who have paid Social Security taxes have no contractual interests in Social Security benefits. And they do not seem to know that Social Security benefits are paid under the general welfare clause of the Constitution. They do not seem to know that an individual's payments "into" Social Security has been considered by the United States Supreme Court to be a "special" "income" tax, and that these funds go into the general fund, not earmarked in any way. (This is not what the government will tell you, but see the United States Supreme Court cases cited in The Best Kept Secret, pages 111-144, and The Biggest "Tax Loophole" of All, pages 113-114, 124.) i) They suggest forced savings accounts (like Chile), but where in the Constitution does Congress have the right to force individuals into contracts? Also, this would require an enforcement agency, it would be an invasion of individual liberty, and privacy, and it would be an unconstitutional exercise of power. How much would this plan cost in sales tax and Social Security payments? They estimate the required sales tax for all needed revenue would be 15-20%, plus the forced "privatized" Social Security payments. The costs are adding up. And just because it might start out a 15-20% does not mean that Congress couldn't raise it every year or so. j) They do not know what a "dollar" is. For example, they talk about the 1939 dollar being worth 100 cents and the 1996 dollar being worth only 8 cents compared to the 1939 dollar. Yet, Black's Law Dictionary defines a "dollar" as 100 cents and defines a "cent" as 1/100th of a dollar. While Black's merely defines a "dollar" as 100% of itself (thus, not defining it at all), a "dollar" can never be worth only 8 cents. The buying power of a so-called "dollar" might be reduced to 8% of what it was, due to an increase in the supply of these units which are merely called "dollars", but a "dollar" can never be worth only 8 cents. They are confusing Federal Reserve Note units with "dollars", as if units created out of nothing are "dollars". And they do not seem to know that Congress has never declared a Federal Reserve Note unit to be a "dollar", and could never (constitutionally) make such a declaration. (See the very top of a $1.00 bill, or a 5 or a 10 or a 20, etc.) What is a dollar" (See The Biggest "Tax Loophole" of All, pages 165-174.) There can be no intelligent discussion using the term "dollar" until all concerned can clearly and accurately define the noun "dollar" as that term is used in the Constitution. And Congress has no constitutional authority to adopt its own definition of a term which is used in the Constitution. The proponents of the National Sales Tax plan also do not seem to know who owns the Federal Reserve Banks or that Congress no longer controls the "creation" of "money" for our nation. They seem to think interest rates just happen as a result of economic events, rather than knowing that it is a group of individuals independent of government who set the interests rates at will; thus, totally controlling the economy. (This is true no matter what Bill Clinton tries to take credit for.) The discussion on the dollar may be confusing to many, but that is because the public "fool" system has failed to teach the facts. I know of a little girl who, at the age of 9, was able to successfully explain the issue to her teacher. So it really isn't all that complicated. You just need the documented facts. k) They talk about debt prisons and that people go to jail for not paying taxes. But this is not really true. One does not go to prison for simply not paying. One can go to prison for willfully failing to make a "required" tax return (a report of his earnings), and for willfully attempting to evade a tax, and for willfully failing to pay a tax. But there is no law that will put a person in prison if he simply cannot pay a tax; as opposed to willfully failing to pay a tax. Broad, inaccurate statements may be great for hype and selling a plan, but they are dangerous to people who are seeking the truth. l) The proponents of the National Sales Tax plan acknowledge that the plan would have to be very carefully crafted to prevent special interest groups from creating a multitude of exceptions and loopholes. The fact is, the people at the grass roots level will have very little, if anything, to say in the final drafting of such a bill or any changes that will be made in the law in later years. The final draft of such a bill, as well as the inevitable amendments which will be written later, will all be written by non-elected individuals in "think tanks". Few, if any, of the congressmen who vote for such legislation will ever read the entire package. m) The idea that people will have a choice to buy the product or not with a national sales tax plan might work if a sales tax is only imposed regarding certain products. But if the sales tax applies to almost all products and services, the people will not have much choice of whether to pay or not. One reason that most people do not save much today is that there is not much left over to be saved after living expenses and taxes are paid. A national sales tax, which will almost inevitably get higher and higher over the years, as most taxes do, will not really help people save. n) Many Americans are accepting the national sales tax idea because it seems like the lesser of two evils. It may or may not turn out to be so. SUMMARY As promoted, the National Sales Tax plan has much appeal for the average "employed" American who has been provided very little information as to the correct principles of constitutional taxation. Credit for this lack of knowledge can be given to the public "fool" system, the news media, the politicians and whatever special interest groups are pulling their strings. Nevertheless, the final sales tax plan will be much more complex, and it will cost much more to collect national sales taxes than is presently envisioned. Contrary to popular belief, there will indeed be some agency and its agents (by whatever name) to enforce the compliance of the laws regarding every sale and service rendered by various Americans who are merely trying to earn a living. There will also be an agency (by whatever name) to enforce the keeping of books and records for whatever portion of the "special" "income" tax called Social Security is left in the laws, as well as an agency and its agents to enforce the keeping of books and records for the proposed forced savings plan of every individual. This is not my idea of freedom, liberty or privacy. A fact seldom presented to the American people is that the burden of all taxes is eventually passed on to the final user and/or consumer of the property or service; regardless of how rich or poor, and regardless whether the tax is in the class of direct taxes or indirect taxes. The idea of imposing taxes whereby individual Americans obtain the maximum in freedom, liberty and privacy is not only an honorable goal, but a goal entirely possible to achieve. I truly believe that a broad plan to tax the sales of almost all goods and services IS NOT the way to accomplish this honorable goal. I believe that an organization, such as Americans for Constitutional Action, could successfully promote a much simpler and more constitutionally acceptable plan which would be extremely acceptable to the majority of Americans. Such a revenue raising plan can be had by employing one or more of the following three methods. 1. Impose an excise tax on the activity of exercising specifically named government granted privileges, such as the doing of business in a corporate capacity. Always measure such a tax by the gross receipts, or gross product or gross wages paid. (Such a tax should never be measured by net earnings. A tax measured by "net earnings" invariably becomes complex and loaded with loopholes.) The cost of such a tax should always be clearly visible on all invoices and sales receipts so that the final purchaser of the goods and services can see the cost of the taxes. 2. Possibly impose import duties relating to specific products imported into this country; again keeping the cost of the tax clearly visible for the final purchaser. 3. When necessary, impose a direct tax on real estate, which by constitutional rule must be apportioned among the several States according to population. The machinery (computer records of the property, the evaluation of the property and the property owners) for the collection of this tax is already in place in every State that imposes real estate taxes. For each State, simply calculate the tax according to the State's property evaluations and send the property owner a bill. The burden of this tax will even be passed on to the tenants. Thus, everyone will pay a "fair share" based on the value of the property he or she is using, and which is essentially being protected under our laws. This is the simplest and least expensive tax to collect. (For an example, as well as possible objections, see The Biggest "Tax Loophole" of All.) Miscellaneous, but interesting comments and information by the proponents of the National Sales Tax plan. a) They say Mobile Oil's corporate return is 8 feet tall. [If the tax was simply measured by the gallons sold, the return would be much less than 8 feet tall.] b) They say that redistribution of property occupies two-thirds of the operations of the government. [A basic principle is that the taking of property from one group to give to another group is theft, even though it is done under the guise of taxation.] c) They will allow welfare. [Christ said to give unto the poor, but he was talking to the people, not the government.] d) They talk about gold reserves. [Where are these reserves? How much gold is there? Who, if anyone, has verified the location and the amount?] ++++++++++++++++++++++++++++++++++ NOTE: Most Americans have been provided very little accurate information about the so-called "income" tax and the Sixteenth Amendment. They have also been tremendously misled and misinformed regarding these issues. Even people within what may be termed as the "patriot movement" (or "freedom movement" or "non-filing community") have been provided with a great deal of false information. Confusion and disagreements abound. My first book, The Best Kept Secret, provides the very clearest and best explanation of the so-called "income" tax and the Sixteenth Amendment ever written up to 1997. First written in 1986 and revised in 1996, it probably still provides the very best introduction into these issues, as well as providing a solid foundation for understanding the material provided in my next two books. While there is some duplication of information, not all of the information in The Best Kept Secret is carried over into the next two books. My second book, If You Are the Defendant, digs deeper into the Internal Revenue Code and introduces defense strategy information for those who may eventually be criminally charged for alleged violations of the tax laws. This book provides the important distinction between being charged by "information" as opposed to being indicted. Again, not all of the information in If You Are the Defendant is carried over into the next book. My latest book, The Biggest "Tax Loophole" of All, published in 1997, is two pounds of "dynamite" information. This book digs even deeper into the issues and also explains many of the legally flawed arguments and other items of misinformation that have been perpetrated upon non-filers and the rest of America. This book provides important information regarding summonses for books and records. This book also explains legally insufficient indictments and why they should be legally dismissed. This book also provides a sample motion to dismiss such legally insufficient indictments. Having been involved in these issues for over 19 years, I sincerely believe that individuals should study all three of my books and all 21 past issues of the newsletters, page by page, cover to cover, and in the order they were written. Additionally, I sincerely believe that individuals should study all of the applicable court cases in order to verify for themselves the material contained in my books and newsletters. (Along with other valuable information, the newsletters contain a trial transcript with pleadings, and with my comments and analysis added as the trial moves along.) Individuals who have followed these admonitions have learned a great deal and appreciate the value of thoroughly studying the issues in this manner. I should add that my first two books were entered by a defendant as evidence in a federal criminal trial, with the defendant walking away with not guilty verdicts on all counts. This case involved charges of attempted tax evasion and failure to file tax returns. For more information about the above material, see www.ottoskinner.com