I’m really going to take it in the shorts vis a vis federal and state taxes next year because I have to start taking the minimum required distribution from my IRA this year or pay a fucking 50% penalty. Are you shitting me? 50%?
I don’t need the money, but no-o-o-o, Uncle Sammy needs more taxes to spend on Obama phones. God forbid I should leave the money to my spouse and other responsible heirs who will use or invest it wisely. Or not use it at all and pass it on. Gasp. What a concept.
Brian
April 16, 2015 9:43 pm
If you’re interested in the relationship between taxation and money, this is one of the most important Supreme Court cases to learn about, whether private banks are issuing their own money (in which case the note-issuance IS subject to taxation), or Congress, our “sovereign,” is issuing money directly in the form of U.S. Notes and coins (in which case the coin and note-issuance IS NOT subject to taxation).
Although the Veazie Bank case doesn’t specifically refer to the bank-note-regulating income tax mentioned in Springer v. United States (1881), Veazie Bank is the legal bedrock upon which the “Springer income tax” rests, as well as the legal bedrock upon which the current income tax on our use of Federal Reserve Notes rests.
No significant tax (e.g., LVT) or monetary reform (e.g., the NEED Act) is possible without understanding the relationship between U.S. money, and taxes used to regulate its distribution.
In Veazie Bank, the Court refers to three time periods in U.S. monetary/tax history: (1) the state banking era prior to the Civil War, (2) a period at the start of the Civil War when Congress began issuing its own notes, and (3) the national banking era, which essentially converted state banks into federal or national banks.
Era #1: State bank notes
This “state free banking” era quickly ended after the Civil War began, but it was marked by instability. Congress was issuing its own coins, but there was no national taxation of bank notes, or other regulation by Congress, and no attempt by Congress to compete with state bank notes (by issuing U.S. Notes).
The Supreme Court states:
“At the beginning of the rebellion, the circulating medium consisted almost entirely of bank notes issued by numerous independent corporations variously organized under state legislation, of various degrees of credit, and very unequal resources, administered often with great and not infrequently with little skill, prudence, and integrity. The acts of Congress then in force prohibiting the receipt or disbursement, in the transactions of the national government, of anything except gold and silver, and the laws of the states requiring the redemption of bank notes in coin on demand, prevented the disappearance of gold and silver from circulation. There was, then, no national currency except coin; there was no general regulation of any other by national legislation, and no national taxation was imposed in any form on the state bank circulation.”
Era #2: Congress’s own notes
The main point here is that since Congress is our sovereign, and there is no monetary authority higher than Congress, the use of its notes and coins (what I call “Treasury-direct lawful money of the United States” or “TDLMUS”) is not taxable because the whole point of the tax penalty on private note issuance is to compel or encourage loyalty to Congress and the authority of the U.S. Constitution. No more can be asked of a citizen than to use, exclusively, Congress’s own notes and coins.
This is why the Supreme Court states, in the final paragraph, that coins or notes issued directly by Congress “could not, obviously, be a proper object of taxation.”
The Supreme Court states:
“The first act authorizing the emission of notes by the Treasury Department for circulation was that of July 17, 1861. The notes issued under this act were Treasury notes, payable on demand in coin. The amount authorized by it was $50,000,000, and was increased by the Act of February 12, 1862, to $60,000,000.
On the 31st of December, 1861, the state banks suspended specie payment. Until this time, the expenses of the war had been paid in coin or in the demand notes just referred to, and for some time afterwards they continued to be paid in these notes, which, if not redeemed in coin, were received as coin in the payment of duties.
Subsequently, on the 25th of February, 1862, a new policy became necessary in consequence of the suspension and of the condition of the country, and was adopted. The notes hitherto issued, as has just been stated, were called Treasury notes, and were payable on demand in coin. The act now passed authorized the issue of bills for circulation under the name of United States notes, made payable to bearer but not expressed to be payable on demand, to the amount of $150,000,000, and this amount was increased by subsequent acts to $450,000,000, of which $50,000,000 were to be held in reserve, and only to be issued for a special purpose and under special directions as to their withdrawal from circulation. These notes, until after the close of the war, were always convertible into, or receivable at par for bonds payable in coin, and bearing coin interest, at a rate not less than five percent, and the acts by which they were authorized declared them to be lawful money and a legal tender.
This currency, issued directly by the government for the disbursement of the war and other expenditures, could not, obviously, be a proper object of taxation.”
Era #3: National bank notes
Here the Court is describing the destruction of the state bank note system, and the creation of the federal or national banking system in 1863 (which eventually consolidated into one huge banking entity under the Federal Reserve Act of 1913, issuing one private national bank note, the Federal Reserve Note).
The Supreme Court states:
“But on the 25th of February, 1863, the act authorizing national banking associations was passed, in which for the first time during many years Congress recognized the expediency and duty of imposing a tax upon currency. By this act a tax of two percent annually was imposed on the circulation of the associations authorized by it. Soon after, by the Act of March 3, 1863, a similar but lighter tax of one percent annually was imposed on the circulation of state banks in certain proportions to their capital, and of two percent on the excess, and the tax on the national associations was reduced to the same rates.
Both acts also imposed taxes on capital and deposits, which need not be noticed here.
At a later date, by the Act of June 3, 1864, which was substituted for the Act of February 25, 1863, authorizing national banking associations, the rate of tax on circulation was continued and applied to the whole amount of it, and the shares of their stockholders were also subjected to taxation by the states; and a few days afterwards, by the Act of June 30, 1864, to provide ways and means for the support of the government, the tax on the circulation of the state banks was also continued at the same annual rate of one percent as before, but payment was required in monthly installments of one-twelfth of one percent, with monthly reports from each state bank of the amount in circulation.
It can hardly be doubted that the object of this provision was to inform the proper authorities of the exact amount of paper money in circulation, with a view to its regulation by law.
The first step taken by Congress in that direction was by the Act of July 17, 1862, prohibiting the issue and circulation of notes under one dollar by any person or corporation. The act just referred to was the next, and it was followed some months later by the act of March 3, 1865, amendatory of the prior internal revenue acts, the sixth section of which provides:
‘That every national banking association, state bank, or state banking association shall pay a tax of ten percent on the amount of the notes of any state bank or state banking association paid out by them after the 1st day of July, 1866.’
The same provision was reenacted, with a more extended application, on the 13th of July, 1866, in these words:
‘Every national banking association, state bank, or state banking association shall pay a tax of ten percent on the amount of notes of any person, state bank, or state banking association used for circulation and paid out by them after the first day of August, 1866, and such tax shall be assessed and paid in such manner as shall be prescribed by the Commissioner of Internal Revenue.’
The constitutionality of this last provision is now drawn into question, and this brief statement of the recent legislation of Congress has been made for the purpose of placing in a clear light its scope and bearing, especially as developed in the provisions just cited. It will be seen that when the policy of taxing bank circulation was first adopted in 1863, Congress was inclined to discriminate for, rather than against, the circulation of the state banks, but that when the country had been sufficiently furnished with a national currency by the issues of United States notes and of national bank notes, the discrimination was turned, and very decidedly turned, in the opposite direction.”
I’m really going to take it in the shorts vis a vis federal and state taxes next year because I have to start taking the minimum required distribution from my IRA this year or pay a fucking 50% penalty. Are you shitting me? 50%?
I don’t need the money, but no-o-o-o, Uncle Sammy needs more taxes to spend on Obama phones. God forbid I should leave the money to my spouse and other responsible heirs who will use or invest it wisely. Or not use it at all and pass it on. Gasp. What a concept.
If you’re interested in the relationship between taxation and money, this is one of the most important Supreme Court cases to learn about, whether private banks are issuing their own money (in which case the note-issuance IS subject to taxation), or Congress, our “sovereign,” is issuing money directly in the form of U.S. Notes and coins (in which case the coin and note-issuance IS NOT subject to taxation).
Although the Veazie Bank case doesn’t specifically refer to the bank-note-regulating income tax mentioned in Springer v. United States (1881), Veazie Bank is the legal bedrock upon which the “Springer income tax” rests, as well as the legal bedrock upon which the current income tax on our use of Federal Reserve Notes rests.
No significant tax (e.g., LVT) or monetary reform (e.g., the NEED Act) is possible without understanding the relationship between U.S. money, and taxes used to regulate its distribution.
In Veazie Bank, the Court refers to three time periods in U.S. monetary/tax history: (1) the state banking era prior to the Civil War, (2) a period at the start of the Civil War when Congress began issuing its own notes, and (3) the national banking era, which essentially converted state banks into federal or national banks.
Era #1: State bank notes
This “state free banking” era quickly ended after the Civil War began, but it was marked by instability. Congress was issuing its own coins, but there was no national taxation of bank notes, or other regulation by Congress, and no attempt by Congress to compete with state bank notes (by issuing U.S. Notes).
The Supreme Court states:
“At the beginning of the rebellion, the circulating medium consisted almost entirely of bank notes issued by numerous independent corporations variously organized under state legislation, of various degrees of credit, and very unequal resources, administered often with great and not infrequently with little skill, prudence, and integrity. The acts of Congress then in force prohibiting the receipt or disbursement, in the transactions of the national government, of anything except gold and silver, and the laws of the states requiring the redemption of bank notes in coin on demand, prevented the disappearance of gold and silver from circulation. There was, then, no national currency except coin; there was no general regulation of any other by national legislation, and no national taxation was imposed in any form on the state bank circulation.”
Era #2: Congress’s own notes
The main point here is that since Congress is our sovereign, and there is no monetary authority higher than Congress, the use of its notes and coins (what I call “Treasury-direct lawful money of the United States” or “TDLMUS”) is not taxable because the whole point of the tax penalty on private note issuance is to compel or encourage loyalty to Congress and the authority of the U.S. Constitution. No more can be asked of a citizen than to use, exclusively, Congress’s own notes and coins.
This is why the Supreme Court states, in the final paragraph, that coins or notes issued directly by Congress “could not, obviously, be a proper object of taxation.”
The Supreme Court states:
“The first act authorizing the emission of notes by the Treasury Department for circulation was that of July 17, 1861. The notes issued under this act were Treasury notes, payable on demand in coin. The amount authorized by it was $50,000,000, and was increased by the Act of February 12, 1862, to $60,000,000.
On the 31st of December, 1861, the state banks suspended specie payment. Until this time, the expenses of the war had been paid in coin or in the demand notes just referred to, and for some time afterwards they continued to be paid in these notes, which, if not redeemed in coin, were received as coin in the payment of duties.
Subsequently, on the 25th of February, 1862, a new policy became necessary in consequence of the suspension and of the condition of the country, and was adopted. The notes hitherto issued, as has just been stated, were called Treasury notes, and were payable on demand in coin. The act now passed authorized the issue of bills for circulation under the name of United States notes, made payable to bearer but not expressed to be payable on demand, to the amount of $150,000,000, and this amount was increased by subsequent acts to $450,000,000, of which $50,000,000 were to be held in reserve, and only to be issued for a special purpose and under special directions as to their withdrawal from circulation. These notes, until after the close of the war, were always convertible into, or receivable at par for bonds payable in coin, and bearing coin interest, at a rate not less than five percent, and the acts by which they were authorized declared them to be lawful money and a legal tender.
This currency, issued directly by the government for the disbursement of the war and other expenditures, could not, obviously, be a proper object of taxation.”
Era #3: National bank notes
Here the Court is describing the destruction of the state bank note system, and the creation of the federal or national banking system in 1863 (which eventually consolidated into one huge banking entity under the Federal Reserve Act of 1913, issuing one private national bank note, the Federal Reserve Note).
The Supreme Court states:
“But on the 25th of February, 1863, the act authorizing national banking associations was passed, in which for the first time during many years Congress recognized the expediency and duty of imposing a tax upon currency. By this act a tax of two percent annually was imposed on the circulation of the associations authorized by it. Soon after, by the Act of March 3, 1863, a similar but lighter tax of one percent annually was imposed on the circulation of state banks in certain proportions to their capital, and of two percent on the excess, and the tax on the national associations was reduced to the same rates.
Both acts also imposed taxes on capital and deposits, which need not be noticed here.
At a later date, by the Act of June 3, 1864, which was substituted for the Act of February 25, 1863, authorizing national banking associations, the rate of tax on circulation was continued and applied to the whole amount of it, and the shares of their stockholders were also subjected to taxation by the states; and a few days afterwards, by the Act of June 30, 1864, to provide ways and means for the support of the government, the tax on the circulation of the state banks was also continued at the same annual rate of one percent as before, but payment was required in monthly installments of one-twelfth of one percent, with monthly reports from each state bank of the amount in circulation.
It can hardly be doubted that the object of this provision was to inform the proper authorities of the exact amount of paper money in circulation, with a view to its regulation by law.
The first step taken by Congress in that direction was by the Act of July 17, 1862, prohibiting the issue and circulation of notes under one dollar by any person or corporation. The act just referred to was the next, and it was followed some months later by the act of March 3, 1865, amendatory of the prior internal revenue acts, the sixth section of which provides:
‘That every national banking association, state bank, or state banking association shall pay a tax of ten percent on the amount of the notes of any state bank or state banking association paid out by them after the 1st day of July, 1866.’
The same provision was reenacted, with a more extended application, on the 13th of July, 1866, in these words:
‘Every national banking association, state bank, or state banking association shall pay a tax of ten percent on the amount of notes of any person, state bank, or state banking association used for circulation and paid out by them after the first day of August, 1866, and such tax shall be assessed and paid in such manner as shall be prescribed by the Commissioner of Internal Revenue.’
The constitutionality of this last provision is now drawn into question, and this brief statement of the recent legislation of Congress has been made for the purpose of placing in a clear light its scope and bearing, especially as developed in the provisions just cited. It will be seen that when the policy of taxing bank circulation was first adopted in 1863, Congress was inclined to discriminate for, rather than against, the circulation of the state banks, but that when the country had been sufficiently furnished with a national currency by the issues of United States notes and of national bank notes, the discrimination was turned, and very decidedly turned, in the opposite direction.”
Wikipedia summary of the Veazie Bank case: http://en.wikipedia.org/wiki/Veazie_Bank_v._Fenno
Link to the actual case: https://supreme.justia.com/cases/federal/us/75/533/case.html
Long live the Pioneers
Rebels and Mutineers
Go forth and have no fear
Come close, the end is near…
– X Ambassador, Renegades
Can’t wait for the black flag to fly….