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History Of The Federal Income Tax

31st January 2011
By Abraham Williams in Taxes
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Retirement Benefits: As per the revised DTC, the retirement benefits such as gratuity, commuted pension, voluntary retirement compensation and leave encashment will be exempt from tax subject to specified limits. Original Draft DTC had proposed a scheme of deferment of tax on retirement benefits, that is, the retirement benefits would not be taxed if it were invested in a Special Retirement Benefit Account, which would be subsequently taxed in the year of withdrawal. It is worth noting that in the earlier draft, the finance ministry had also proposed that Employer's Contribution to Provident Fund, Superannuation Funds and Pension Schemes would be treated as income for the employees. However, the Revised DTC has done away with this proposal.

The definition of Associated enterprises has been modified and requirement of direct or indirect shareholding has been reduced to 26% to 10%. A loan to other enterprise in book value share has been reduced to 26% from 51%. Power of appoint directors has been reduced to more than half to more than one third. Dependence of raw material has been reduced to two third from 90%. These changes will increase the number of transaction falling under transfer pricing mechanism.


In 1894 Congress enacted another federal income tax. This tax would allow for not only salaries but ANY OTHER compensation that was paid to anyone who was in the privileged sector. The Supreme Court declared that this was unconstitutional because if you tax gains from personal property, then that is just like taxing the property itself, and is therefore a direct tax.

"The 16th Amendment must be construed in connection with the taxing clauses of the original Constitution and the effect attributed to them before the amendment was adopted." EISNER v. MACOMBER, 252 U.S. 189 (1920).

According to the Supreme Court, when you fill out your W-4, you are voluntarily entering into an agreement with the federal government, and claiming that the money you receive is taxable "income". And since you sign this under penalty of perjury, you are also voluntarily waving your 5th amendment right! You just don't realize it.

It must, however, be admitted that India's tax effort since independence has been quite appreciable. The tax to GDP ratio (centre and states together) was 6% in 1950-51. In rose to 11% by 1970-71. Compared to many developing countries, India's record of resource mobilization through taxes has been satisfactory.


The tax honesty movement (THM) is not a person or a single organization. The THM is a belief or way of thinking based upon freedom and accountability. The term "The Tax Honesty Movement" was coined in the mid 1990's, by an unknown author, to describe this growing segment of our society. There are some who have studied tax law, the Constitution, and Supreme Court tax cases, and have come to the conclusion that not everyone is subject to individual income tax. But more to the point is that they desire our government to answer the questions posed to them to show where the law makes the ordinary citizen liable for that tax and where in the Constitution they derive that power. This belief is founded upon the fact that Americans, as the rightful and just sovereigns of this nation, demand an open transparent government that is answerable to them, their creator, "We the People". In particular - honesty by the government on issues relating to taxation of the American people.

People like Robert Schulz of the We the People Foundation have spent much of their own time, money, and hard work to bring the truth of individual taxation to all Americans. Mr. Schulz is taking the government to court and is fighting the battle to force our government to be honest with it's citizens and answer our questions.

Solution: Replacing our current tax system with a constitutional system would have a ripple effect that would require correction to other areas of our government and society. As this article is but a brief overview, we obviously cannot address all the concerns necessary to do this topic justice. However, the basic premise is identified; the task of correcting our governments' system of taxation is large, but it is not insurmountable. In my opinion

The 16th Amendment was passed by Congress in 1909, and was arguably ratified in 1913. This amendment did not repeal any other section of the Constitution. In the 1911 case of Flint V Stone Tracy Co., the court stated the 16th Amendment allowed the Corporate Income Tax to be placed in the category of an excise tax, measured by income, "on the privilege of doing business in corporate form."
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Source: http://www.goinglegal.com/history-of-the-federal-income-tax-1994882.html
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