April 14, 2024

Posts Mislead on Legal Basis for Paying Federal Income Taxes

Posts Mislead on Legal Basis for Paying Federal Income Taxes

Quick Take

The U.S. Constitution established Congress’ right to impose federal income taxes, and the Internal Revenue Service administers the laws that require payment of taxes. Yet social media posts falsely claim there is no law that requires U.S. residents to pay taxes.


Full Story 

When it was ratified in 1788, the U.S. Constitution gave Congress the power to establish and collect taxes in Article 1, Section 8, Clause 1.

It says, “The Congress shall have Power to lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defence and general Welfare of the United States; but all Duties, Imposts and Excises shall be uniform throughout the United States.”

In response to a Supreme Court ruling in 1895, Congress proposed the 16th Amendment to the Constitution in 1909 to clarify its right to impose a federal income tax. The states ratified the amendment in 1913.

“The 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,” the amendment reads. 

The federal tax laws were compiled in 1939 into the Internal Revenue Code, which was revised in 1954 and 1986. The Internal Revenue Service administers the tax laws in the code.

But as the annual income tax deadline draws closer, posts on social media spread the false claim that there is no law that binds citizens to pay income taxes. 

A viral TikTok video shared on Feb. 15 features clips from “America: Freedom to Fascism,” a 2006 film by Aaron Russo that claims there is no law that requires citizens to pay federal income taxes.

In the roughly seven-minute TikTok video, several individuals who are identified as IRS agents or attorneys say they searched for a law that made a person liable to pay taxes and did not find one. The TikTok received more than 40,000 likes and 11,000 shares.  

The first individual in the clip — identified as a tax attorney named Peter Gibbons — misleadingly says that in 1894 and 1913 the Supreme Court ruled it was unconstitutional for Congress to enact an income tax. “There is no constitutional basis for a tax on the wages of Americans,” Gibbons claims.

A Feb. 26 post on Facebook shared the TikTok video with the caption, “If there’s no law that binds us to paying taxes. The question I have is, why are we?” The post was shared more than 2,000 times. 

But the claim that there’s no law requiring citizens to pay taxes is false.

Allen Madison, a professor of federal tax law at the University of South Dakota, told us in an email that the information in the social media posts is false, not helpful to American citizens and wastes the government’s resources.

“Mr. Gibbons is speaking of real cases but knowingly and blatantly misrepresenting them,” Madison said. “He suggests that the Supreme Court held that the federal government has no right to impose tax on individuals. He is wrong.”

Amendment Nullified Court Ruling

The 16th Amendment was passed after the 1895 Supreme Court decision in Pollock v. Farmers’ Loan & Trust Co. 

In order to comply with the Wilson-Gorman Tariff Act of 1894, which created a 2% tax on incomes of at least $4,000, the Farmers’ Loan & Trust Company informed stockholders that it planned to pay federal taxes on its profits, including income derived from its real estate holdings. Charles Pollock, a company shareholder, sued the company in a lawsuit that went all the way to the Supreme Court.

The high court acknowledged Congress had a right to impose a “direct” income tax, but held that the tax on property was unconstitutional because it wasn’t “levied by the rule of apportionment” — meaning states should be equally taxed based on population, as required by the Constitution.

Pollock invalidated the tax on property as the Supreme Court was persuaded that the tax on property violated the apportionment requirement. Contrary to what Mr. Gibbons implies, the Supreme Court in Pollock did not invalidate the income tax on individuals on moral, apportionment, or any other grounds,” Madison said.

The 16th Amendment was ratified to address the court’s decision and allowed Congress to impose direct federal income taxes without apportionment.

“In 1913, the 16th Amendment removed the apportionment requirement as it applied to a tax on income. This barrier removal paved the way for Congress to impose an income tax that included individuals and property. That same year, 1913, Congress enacted an income tax that is the direct ancestor of our current income tax. In 1916, the Supreme Court decided Brushaber v. Union PacificBrushaber upheld the constitutionality of the 1913 income tax,” Madison explained.

“Contrary to Mr. Gibbons’ assertions, there is no reasonable legal dispute that this [is] the current state of the law,” Madison added.

Christine Speidel, a law professor at Villanova University and the director of the Federal Tax Clinic, also told us in an email that the social media claims are false. 

“Unfortunately as a tax lawyer, I regularly meet people who don’t believe in taxes. The legal basis for federal taxes is the Constitution, and also the Internal Revenue Code, which is made up of laws passed by Congress,” Speidel said. 

“Essentially, tax protesters take lines from the opinion out of context, and claim that the Supreme Court said the opposite of what it actually held,” Speidel said.

The IRS says in a publication titled “The Truth About Frivolous Tax Arguments” that “numerous courts have both implicitly and explicitly recognized that the Sixteenth Amendment authorizes a non-apportioned direct income tax on United States citizens and that the federal tax laws are valid as applied.”

Referring to the social media posts, Garrett Watson, a senior policy analyst at the Tax Foundation, told us in an email, “These types of arguments are common among tax protestors and have been circulating for decades.”

Watson said the claims have no basis in law. He also directed us to several tax laws in the U.S. Code that show individuals are required to pay income taxes.

“Tax liability is imposed under 26 U.S. Code Chapter 1, which spells out normal taxes and tax liability for individuals and corporations. Other places within the U.S. Code that show a requirement to file and pay income tax are in 26 U.S.C. Section 6012 (filing income tax returns), 26 U.S.C Section 6151 (requirement to pay tax), and defining gross income in 26 U.S.C. Section 61,” Watson said.

“On voluntary tax compliance, tax protestors often misapply the term as used in tax law to mean that one is not legally required to remit taxes,” Watson said.

But that is not what the term voluntary means, Watson said. “Instead, the term means that taxpayers are expected to comply with tax law, but that they do so without the IRS directly compelling them to do so. The alternative misapplication was described by the Tax Court as ‘arrogant sophistry’ in 1984 when this topic was litigated.”

The IRS publication explains the benefit of taxes and what the Constitution and law say about paying taxes. 

“The tax law is found in Title 26 of the United States Code. Section 6012 of the Code makes clear that only individuals whose income falls below a specified level do not have to file returns. While our tax system is based on self-assessment and reporting, compliance with tax laws is mandatory. State citizenship does not negate the applicability of the Code on individuals working and residing in the United States,” the IRS explains. 

“There have always been individuals who argue taxes are illegal,” the IRS publication also says. “They use false, misleading, or unorthodox tax advice to gain followers. The courts have repeatedly rejected their arguments as frivolous and routinely impose penalties for raising such frivolous arguments.”

Penalties for Not Paying Taxes

Steven Fromm, a tax attorney for more than 40 years, told us in an email that tax protesters continue to challenge the federal tax code, even though there is “no basis to claim that taxes are not legal or unconstitutional.” 

“There have been many cases where this has been tried and taxpayers never win such arguments,” Fromm said. “The penalties both monetary and criminal can be quite harsh.”

The IRS says civil and criminal sanctions can apply to those who violate tax laws in a publication titled “Why Do I Have to Pay Taxes?” 

Punishment for not paying taxes can include a 5% penalty charge on the unpaid taxes for each month they are late or a sentence of five years in prison.

“To add insult to injury, some tax protesters often succeed in convincing others to join them in protest,” Madison, the federal tax law professor, wrote in a 2014 paper published in the Thomas Jefferson Law Review.

He noted actor Wesley Snipes was sentenced in 2008 to three years in prison and fined $5 million for failure to file taxes, after being convinced by tax protesters Eddie Ray Kahn and Doug Rosile that he didn’t owe federal taxes because he didn’t earn money from sources in the U.S.

Several people featured in the film “America: Freedom to Fascism” — including Sherry Peel Jackson, Joseph R. Banister and Larken Rose — faced civil or criminal penalties for breaking tax laws.


Editor’s note: FactCheck.org is one of several organizations working with Facebook to debunk misinformation shared on social media. Our previous stories can be found here. Facebook has no control over our editorial content.

Sources

National Constitution Center. “Blame Abraham Lincoln for the nation’s first national Income Tax.” 5 Aug. 2022.  

Britannica. “Pollock v. Farmers’ Loan and Trust Company.” Accessed 1 Mar 2023. 

United States Census Bureau. “Title 26, U.S. Code.” Accessed 1 Mar 2023. 

Internal Revenue Service. “Why Do I Have to Pay Taxes?” Accessed 1 Mar 2023. 

Congress.gov. “Amdt16.2 Historical Background on Sixteenth Amendment.” Accessed 1 Mar 2023. 

National Archives. “16th Amendment to the U.S. Constitution: Federal Income Tax (1913).” Accessed 1 Mar 2023. 

America: Freedom to Fascism.” IMDb. Accessed 1 Mar 2023. 

Steven J. Fromm. Steven J. Fromm & Associates. Email interview with FactCheck.org. 28 Feb 2023.

Garrett Watson. Senior policy analyst, Tax Foundation. Email interview with FactCheck.org. 3 Mar 2023.

Allen Madison. Professor of federal tax law, University of South Dakota. Email interview with FactCheck.org. 4 Mar 2023.

Christine Speidel. Law professor and director of the Federal Tax Clinic. Email interview with FactCheck.org. 3 Mar 2023.