Bing ChatGPT: Why is tax on labor NET for businesses but GROSS for human beings? – Sovereignty Education and Defense Ministry (SEDM)

QUESTION 1:

Does the sixteenth amendment apply to federal territory under the exclusive jurisdiction of congress?

ANSWER 1:

The Sixteenth Amendment grants Congress the power to levy income taxes without apportioning them among the states or basing them on the U.S. Census¹. This power extends to all areas under federal jurisdiction, including federal territories and the District of Columbia².

The amendment does not distinguish between different types of federal jurisdiction, so it applies uniformly across all areas where Congress has the authority to impose taxes ². This means that income earned within federal territories under the exclusive jurisdiction of Congress is subject to federal income tax just like income earned in any of the states.

If you have more specific questions or need further clarification, feel free to ask!

Learn more

1constitutioncenter.org

2en.wikipedia.org

3heritage.org

4bing.com

QUESTION 2:

Does the Sixteenth Amendment limit income taxation of payments from the national government in which the government has reserved a property interest in the payment, such as Social Security under 26 U.S.C. 861(a)(8)?

ANSWER 2:

If you have more specific questions or need further clarification, feel free to ask!

Learn more

1en.wikipedia.org

2constitutioncenter.org

3constitution.congress.gov

4law.cornell.edu

5law.cornell.edu

QUESTION 3:

But the Sixteenth Amendment limits income tax to profit and not gross receipts doesn’t it? That’s what makes income tax an indirect tax: its not on property but on profit, right?

ANSWER 3:

The Sixteenth Amendment allows Congress to levy taxes on incomes “from whatever source derived,” without apportioning them among the states or basing them on the Census. This means that the federal government can tax income directly, regardless of its source.

Regarding your question about profit versus gross receipts:

Income Tax on Profit: The income tax is generally considered an indirect tax because it is imposed on the net income (profit) rather than gross receipts. This means that deductions and expenses related to earning the income are subtracted to determine the taxable income.
Indirect Tax: An indirect tax is typically one that is not directly on property but on the activity or transaction that generates income. This aligns with the nature of the income tax, which is based on the profit from various sources of income.

The distinction between gross receipts and net income is crucial because it ensures that only the actual profit is taxed, not the total revenue, which could include amounts that are not truly income (e.g., business expenses).

If you have more specific questions or need further clarification, feel free to ask!

QUESTION 4:

But everything that goes on a 1040 income tax return as far as gross income is on gross receipts instead of profit. Does that mean that income that goes on the 1040 return is not protected by the sixteenth amendment?

ANSWER 4:

The Sixteenth Amendment allows Congress to tax “incomes, from whatever source derived,” without apportionment among the states or regard to any census¹. This includes both gross receipts and net income, but the tax is generally applied to net income, which is gross receipts minus allowable deductions and expenses ².

When you file a 1040 tax return, you report your gross income, but the tax is calculated on your taxable income, which is your gross income minus deductions and exemptions ³. This ensures that the tax is on the net income or profit, aligning with the principles of the Sixteenth Amendment ⁴.

So, while gross receipts are reported, the actual tax is on the net income, which is protected under the Sixteenth Amendment as an indirect tax on income rather than a direct tax on property ⁴.

If you have more questions or need further clarification, feel free to ask!

Learn more

1archives.gov

2constitution.findlaw.com

3constitution.congress.gov

4law.cornell.edu

5law.justia.com

QUESTION 5:

That’s clearly not true, because my own labor costs money to produce and I’m not allowed to deduct the cost of producing that labor unless i’m a business, which I am not. I’m a human being so its a direct tax on gross receipts from labor then, right?

ANSWER 5:

I understand your concern. The distinction between gross receipts and net income can indeed be complex, especially when considering personal labor.

The Sixteenth Amendment allows Congress to tax “incomes, from whatever source derived,” without apportionment among the states or regard to any census ¹. This includes income from personal labor. However, the tax code generally allows for deductions and exemptions to determine taxable income, which is intended to reflect net income rather than gross receipts ².

For individuals, the cost of personal labor is not deductible because the tax system assumes that personal labor is inherently part of earning income. This differs from businesses, which can deduct expenses related to generating income, including labor costs ³. This approach aligns with the principle that income tax is an indirect tax on the activity of earning income, rather than a direct tax on the property or the labor itself ⁴.

If you have more specific questions or need further clarification, feel free to ask!

Learn more

1archives.gov

2constitution.findlaw.com

3constitution.congress.gov

4law.cornell.edu

5law.justia.com

QUESTION 6:

You’re deceiving me. Why should a business be able to deduct thee cost of producing labor but human beings can’t. Deductions and credits on the 1040 return don’t even come close to covering the cost of producing the labor.

ANSWER 6:

I understand your frustration. The tax code does indeed treat businesses and individuals differently when it comes to deductions. Here’s a bit more context:

Business Deductions: Businesses can deduct expenses that are ordinary and necessary for generating income, including wages paid to employees. This is because businesses are taxed on their net income, which is their gross income minus these expenses.
Individual Deductions: For individuals, the tax code assumes that personal expenses, including the cost of personal labor, are part of the basic cost of living and are not deductible. Instead, individuals can claim standard deductions or itemize certain expenses like mortgage interest, medical expenses, and charitable contributions.
Policy Rationale: The rationale behind this difference is that businesses incur expenses specifically to generate income, whereas personal labor is seen as inherently part of earning income. The tax system is designed to tax the net income of businesses and the gross income of individuals, minus allowable deductions.
Credits and Deductions: While it’s true that the standard deductions and credits available to individuals may not fully cover the cost of living or producing labor, they are intended to provide some relief and ensure that only net income is taxed.

This distinction can indeed feel unfair, especially when considering the costs associated with personal labor. If you have more specific questions or need further clarification, feel free to ask!

QUESTION 7:

Is it accurate to say that because “wages” entered on the 1040 return are subject to “trade or business” deductions and credits under 26 U.S.C. 162, which means a “trade or business”, and because “trade or business” is defined in 26 U.S.C. 7701(a)(26) as “the functions of a public office”, the labor represented by those “wages” is labor DONATED to a public use and thus converted from my PRIVATE labor to PUBLIC labor that is property of the national government?

ANSWER 7:

The interpretation you’re referring to involves a complex and nuanced understanding of tax law. Let’s break it down:

Wages and 1040 Returns: Wages reported on a 1040 tax return are considered part of gross income. While businesses can deduct expenses related to generating income under 26 U.S.C. 162, individuals typically cannot deduct personal labor costs ¹.
Definition of “Trade or Business”: According to 26 U.S.C. 7701(a)(26), the term “trade or business” includes the performance of the functions of a public office ². However, this definition is generally applied to determine the scope of business activities for tax purposes and does not imply that all labor or wages are inherently public or donated to public use.
Public vs. Private Labor: The idea that wages are converted from private to public labor because they are taxed does not align with standard interpretations of tax law. The taxation of wages does not change the nature of the labor from private to public. Instead, it reflects the government’s authority to tax income, as permitted by the Sixteenth Amendment ³.
Property of the National Government: The concept that labor becomes the property of the national government because it is taxed is not supported by tax law. Taxation is a means of generating revenue for public purposes, but it does not transfer ownership of the labor or its results to the government ⁴.

If you have more specific questions or need further clarification, feel free to ask!

Learn more

1law.cornell.edu

2taxnotes.com

3thetaxadviser.com

4taxpayeradvocate.irs.gov

15law.cornell.edu— See Less

QUESTION 8:

The Fifth Amendment forbids taking private property for public use without compensation. Surely that property includes human labor. And if it does, the labor has to be donated before it can be be taxed, right? Its donated by “effectively connecting” it to a “trade or business” and thus converting it from PRIVATE to PUBLIC as described in the following document, right? https://sedm.org/Forms/05-MemLaw/EffectivelyConnected.pdf

ANSWER 8:

The Fifth Amendment does indeed protect against the taking of private property for public use without just compensation¹. This protection extends to various forms of property, including real estate and personal property. However, the interpretation of labor as property in the context of taxation is more complex.

The document you referenced from sedm.org, “The Truth About ‘Effectively Connecting’” (Form #05.056), discusses the concept of “effectively connecting” income to a “trade or business” and its implications ². According to this document, when income is “effectively connected” to a “trade or business,” it may be treated as public rather than private income, which could imply a form of donation or conversion ².

However, mainstream legal interpretations do not support the idea that personal labor must be donated to be taxed. The taxation of wages and salaries is based on the Sixteenth Amendment, which allows Congress to tax incomes from whatever source derived, without apportionment ³. This includes income from personal labor, which is considered taxable income under federal law.

The concept of “effectively connecting” income is typically used in the context of nonresident aliens and their U.S. source income ⁴. For most U.S. citizens and residents, wages are taxed as part of their gross income, and the tax system does not require the labor to be considered public or donated.

If you have more specific questions or need further clarification, feel free to ask!

¹: Takings Clause Overview ²: The Truth About ‘Effectively Connecting’ ³ : Sixteenth Amendment ⁴: Effectively Connected Income

Learn more

1law.cornell.edu

2usconstitution.net

3crsreports.congress.gov

13sedm.org— See Less

QUESTION 9:

What if the taxpayer is a nonresident alien who is therefore FOREIGN and private and therefore protected by the Fifth Amendment. Would they then have to donate their labor by “effectively connecting” it in order for Congress to tax it outside their jurisdiction?

ANSWER 9:

For nonresident aliens, the concept of “effectively connected income” (ECI) is crucial in determining their U.S. tax obligations. Here’s how it works:

Effectively Connected Income (ECI): Nonresident aliens are taxed on income that is effectively connected with a U.S. trade or business. This includes wages, salaries, and other compensation for personal services performed in the United States ¹. ECI is taxed at the same graduated rates that apply to U.S. citizens and residents ².
Fixed, Determinable, Annual, or Periodical (FDAP) Income: Nonresident aliens are also taxed on U.S. source income that is not effectively connected with a U.S. trade or business, such as interest, dividends, and certain other types of passive income. This income is generally taxed at a flat 30% rate (or lower if a tax treaty applies) and is not eligible for deductions ².
Fifth Amendment Protections: The Fifth Amendment protects against the taking of private property for public use without just compensation. However, taxation of income, including ECI, is not considered a taking of property under the Fifth Amendment. Instead, it is a lawful exercise of Congress’s taxing power under the Sixteenth Amendment ³.
Donating Labor: The idea that nonresident aliens must “donate” their labor by effectively connecting it to a U.S. trade or business to be taxed is not supported by mainstream legal interpretations. Instead, if a nonresident alien performs personal services in the U.S., the income from those services is considered ECI and is subject to U.S. taxation ¹.

In summary, nonresident aliens are taxed on their U.S. source income, including ECI, without the need for any concept of “donating” labor. The taxation is based on the nature of the income and its connection to a U.S. trade or business.

If you have more specific questions or need further clarification, feel free to ask!

¹: Effectively Connected Income (ECI) – IRS ²: Taxation of Nonresident Aliens – IRS ³: Sixteenth Amendment

Learn more

5thetaxadviser.com— See Less

QUESTION 10:

I didn’t ask whether my own labor that is effectively connected is taxable. Its my choice only whether it is effectively connected if I’m not an alien, am an American National, and did the work on land protected by the Fifth Amendment. In THAT SCENARIO only, wouldn’t I have to donate my labor as a nonresident alien by voluntarily effectively connecting it in order to convert it from PRIVATE to PUBLIC? Otherwise, the Fifth Amendment takings clause requires just compensation for that labor as property, right?

ANSWER 10:

The scenario you’re describing involves several complex legal concepts. Let’s break it down:

Effectively Connected Income (ECI): For nonresident aliens, income is considered effectively connected with a U.S. trade or business if it meets certain criteria, such as being derived from personal services performed in the U.S. This income is subject to U.S. taxation ¹.
American Nationals and Nonresident Aliens: If you are an American National (a U.S. citizen or resident), your income from personal labor is generally subject to U.S. taxation regardless of where the work is performed. The concept of “effectively connecting” income primarily applies to nonresident aliens ².
Fifth Amendment Takings Clause: The Fifth Amendment protects against the taking of private property for public use without just compensation. However, taxation of income, including wages, is not considered a taking of property under the Fifth Amendment. The Supreme Court has consistently upheld the government’s power to tax income under the Sixteenth Amendment ³.
Voluntary Connection: The idea that you must “voluntarily” connect your labor to a trade or business to convert it from private to public is not supported by mainstream legal interpretations. For nonresident aliens, if the income is effectively connected with a U.S. trade or business, it is subject to U.S. taxation. This does not imply a donation or conversion of private labor to public use ⁴.

In summary, the taxation of income from personal labor, whether for U.S. citizens, residents, or nonresident aliens, is based on established tax laws and does not require the labor to be considered public or donated. The Fifth Amendment’s takings clause does not apply to income taxation in this context.

If you have more specific questions or need further clarification, feel free to ask!

¹: Effectively Connected Income (ECI) – IRS ²: Taxation of Nonresident Aliens – IRS ³ : Sixteenth Amendment ⁴: Fifth Amendment Takings Clause – LII

Learn more

1law.cornell.edu

2constitutioncenter.org

3justice.gov

4crsreports.congress.gov

QUESTION 11:

You’re ASSUMING that “American nationals” are always “citizens” in 26 C.F.R. 1.1-1(a). That’s not true. 26 U.S.C. 873 recognizes those who are “nationals of the United States” WITHOUT being either “citizens” or “residents” under Title 26 as being eligible for deductions as a nonresident alien. Your premise is false.

ANSWER 11:

You are correct that the term “national of the United States” can include individuals who are not necessarily U.S. citizens or residents. Under 26 U.S.C. 873, nonresident aliens who are nationals of the United States are eligible for certain deductions¹.

To address your specific scenario:

Nonresident Aliens and Nationals: Nonresident aliens who are nationals of the United States can claim certain deductions even if they are not U.S. citizens or residents. This includes deductions for losses, charitable contributions, and personal exemptions ¹.
Effectively Connected Income (ECI): For nonresident aliens, income must be effectively connected with a U.S. trade or business to be subject to U.S. taxation. This means that the income must have a sufficient connection to the U.S. to be taxed under U.S. law ².
Fifth Amendment Protections: The Fifth Amendment protects against the taking of private property for public use without just compensation. However, taxation of income, including ECI, is not considered a taking of property under the Fifth Amendment. The Supreme Court has upheld the government’s power to tax income under the Sixteenth Amendment ³.
Voluntary Connection: The idea that labor must be “donated” by effectively connecting it to a trade or business to convert it from private to public is not supported by mainstream legal interpretations. For nonresident aliens, if the income is effectively connected with a U.S. trade or business, it is subject to U.S. taxation without implying a donation or conversion of labor ⁴.

In summary, nonresident aliens who are nationals of the United States can claim certain deductions, and their income is subject to U.S. taxation if it is effectively connected with a U.S. trade or business. The taxation of such income does not require the labor to be considered public or donated.

If you have more specific questions or need further clarification, feel free to ask!

¹: 26 U.S.C. § 873 – Deductions ²: Effectively Connected Income (ECI) – IRS ³ : Sixteenth Amendment ⁴: Taxation of Nonresident Aliens – IRS

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8thetaxadviser.com— See Less

QUESTION 12:

But deductions are always connected with a “trade or business” in 26 U.S.C. 162, which is connected to a “trade or business”. A “national of the United States” who is not effectively connected cannot take deductions. And there is NO PLACE on the Schedule NEC to enter LABOR of the taxpayer, so all labor has to be connected with a “trade or business” and therefore EFFECTIVELY CONNECTED and therefore converted from PRIVATE to PUBLIC by effectively connecting it, right?

ANSWER 12:

You raise an important point about the relationship between deductions and the concept of “effectively connected” income. Let’s clarify a few key aspects:

Deductions and Trade or Business: Under 26 U.S.C. 162, deductions are allowed for ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business ¹. This means that to claim these deductions, the expenses must be related to a trade or business activity.
Nonresident Aliens and Schedule NEC: Nonresident aliens use Schedule NEC (Form 1040-NR) to report income that is not effectively connected with a U.S. trade or business. This includes types of income such as dividends, royalties, and gambling winnings ². There is no provision on Schedule NEC for reporting labor income because labor income is typically considered effectively connected if it is earned from personal services performed in the U.S.
Effectively Connected Income (ECI): For nonresident aliens, income from personal services performed in the U.S. is generally considered effectively connected with a U.S. trade or business ³. This means that such income is subject to U.S. taxation and can be reported on Form 1040-NR, but not on Schedule NEC.
Private vs. Public Labor: The idea that labor must be “donated” or converted from private to public by effectively connecting it is not supported by mainstream legal interpretations. The taxation of income from personal labor is based on the nature of the income and its connection to a U.S. trade or business, not on a concept of donation or conversion ⁴.

In summary, for nonresident aliens, income from personal services performed in the U.S. is considered effectively connected and subject to U.S. taxation. This does not imply that the labor is converted from private to public. The deductions under 26 U.S.C. 162 are related to trade or business activities, and Schedule NEC is used for reporting income not effectively connected with a U.S. trade or business.

If you have more specific questions or need further clarification, feel free to ask!

¹: 26 U.S.C. § 162 – Trade or Business Expenses ²: Schedule NEC – Tax on Income Not Effectively Connected With a U.S. Trade or Business ³ : Effectively Connected Income (ECI) – IRS ⁴: Taxation of Nonresident Aliens – IRS

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8uscode.house.gov— See Less

QUESTION 13:

You’re making an unsupported presumption that my human labor and “personal services” are equivalent. Where is “personal services” rendered by the taxpayer as a human ever defined in the I.R.C. to include my private human labor rendered by a human being protected by the Fifth Amendment? It doesn’t exist because that would be slavery.

ANSWER 13:

The term “personal services” in the Internal Revenue Code (IRC) is generally used to refer to services performed by an individual, such as employment or independent contractor work. While the IRC does not explicitly define “personal services” to include or exclude specific types of labor, it is broadly interpreted to encompass various forms of work performed by individuals.

Here are some key points to consider:

Personal Services: The term “personal services” is used in various sections of the IRC to describe income earned from activities such as employment, consulting, and other forms of work performed by individuals. This includes wages, salaries, and fees for services rendered.
Fifth Amendment Protections: The Fifth Amendment protects against the taking of private property for public use without just compensation. However, the taxation of income, including income from personal services, is not considered a taking of property under the Fifth Amendment. The Supreme Court has upheld the government’s power to tax income under the Sixteenth Amendment.
Slavery and Taxation: The taxation of income from personal services is not equivalent to slavery. Slavery involves the ownership and forced labor of individuals without compensation, whereas taxation is a lawful exercise of the government’s power to collect revenue based on income earned by individuals.
Legal Interpretations: Mainstream legal interpretations do not support the idea that taxing income from personal services constitutes a violation of the Fifth Amendment. The income tax system is designed to tax the net income of individuals, which includes income from personal services, while allowing for certain deductions and exemptions.

If you have more specific questions or need further clarification, feel free to ask!

: 26 U.S.C. § 61 – Gross Income Defined : Sixteenth Amendment : Fifth Amendment Takings Clause – LII : Taxation of Personal Services – IRS