Is The Federal Income Tax Legal?

Does anybody really like paying their taxes? Have you ever known someone who really enjoyed paying in their hard earned money to the government? Federal Income taxes are a way of life here in America. People have been dealing with them for quite a long time. Yet there are some reluctant tax-payers who claim that the Federal income tax is unconstitutional and illegal. These advocates claim that the government doesn’t have the legal right to tax our income. Is this true? Is the Federal Income tax illegal? Or is this just another one of those urban myths?

U.S. Tax Laws

There is no doubt about it. U.S. tax laws are about as confusing as laws can get. They have been re-written and amended so many times that even accountants get confused. This is why if you take your tax form to more than one tax accountant, you will likely get more than one result. So with all the confusion it is easy to see why some people would claim they are illegal. Here’s a little history to prove them wrong.

The U.S. Constitution clearly states that Congress has the power to levy taxes. It is in Article 1, Section 8, Clause 1 of our Constitution that specifies Congress’ power to impose “taxes, duties, imposts, and excises”. Although at the time of the drafting there was no federal income tax, Congress still had the power to create one. In fact, the first income tax was in 1861 as part of the Revenue Act of 1861. The new tax on personal income came about to help pay for the American Civil War. This tax was quickly replaced by a new one in 1862. There were a few attempts at taxing income after that. Congress tried to instill a permanent income tax in 1894 but the Supreme Court ruled it unconstitutional in the famous Pollack case.  So it wasn’t until 1913, with the Ratification of the Sixteenth Amendment, that Congress made the federal income tax official. The Amendment stated that “Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several states, and without regard to any census or enumeration”.  It was all about defining direct versus indirect taxes. It removed the need for income tax to be distributed among the states based on population or census. All states and residents would be taxed equally.

federal-income-taxThere was some argument back in 2007 by a man named William Benson who claimed to have evidence that the Sixteenth Amendment was never ratified. He tried selling his product package to consumers until a federal court ruled that he was guilty of fraud. There was no conclusive evidence whatsoever that the Sixteenth Amendment had never been ratified.

Since the Sixteenth Amendment, there have been regular changes in the tax laws. In 1939, U.S. tax laws were first codified as an integral part of the U.S. code. In 1954, U.S. tax codes were amended. In 1986, the code was completely overhauled. In 2001 saw the Economic Growth and Tax Relief Reconciliation Act which, among other things, placed the burden of income taxes on America’s middle-income. These, along with the yearly changing tax laws, make a decent maze of understanding how the Federal Income Tax works.

Are Income Taxes Legal Or Illegal

There are definitely watch dog groups and self-proclaimed “tax law experts” who claim that mandatory taxation of income is illegal. And don’t get me wrong, they can post some good arguments. Some of the more popular arguments against the income tax are as follows:

  1. By signing a 1040 form, you are waiving your 5th Amendment rights that protect you against self-incrimination.
  2. The United States tax laws are unconstitutional.
  3. Federal tax laws do not apply to wages because the law states that it is income that is taxed and wages are not considered income.
  4. Tax laws are completely voluntary and every citizen has the option to pay or not pay their taxes.
  5. Tax laws are aimed at only resident and non-resident aliens in the U.S. Anyone who was born here does not have to pay taxes.

Despite the arguments these advocates give, each reason has been proven to be false or upheld in a court of law. For instance, the one about federal income tax laws being unconstitutional, the U.S, Supreme Court has ruled in 22 cases that the tax laws are in fact constitutional. As for the tax laws being aimed at resident and non-resident aliens, the U. S. Supreme Court has ruled in nineteen different cases that the tax laws apply to all residents who live within and outside of U.S. borders.

So even though there are arguments against the legality of federal income taxes, the Supreme Court has upheld the tax laws in case after case, verifying that they are indeed legal.