True Nature of the Withholding Tax and the 1040 Form circa 1942

IT IS CONSIDERED A LOAN TO THE GOVERNMENT AND IS APPLIED TO TAXPAYERS AND NONTAXPAYERS ALIKE.

I have been privy to this material since Billie Murdock found this in late 1980’s and take no claim to finding this, but I am bringing it to you this October 2005. What I do want to say is that this was known to the so called patriots in 1990 and for a few years thereafter. Yes, as normal no “patriot” took this and ran with it and no group did either so it sat in my files for all these years. I decided to give it another shot and put this online for all to see again and fall back to sleep, as did the previous generation. The below was at the end of Billie’s find and she deserves the credit. This shows that the 1040 return is a claim for a refund. So all you people using a refund claim form are using it the wrong way because of the fraud the private IRS has put upon you as well as the Congress and is why the Congress will not answer any questions put to them by various groups and certain men that have asked. This is why their courts will never allow you to win. In case you cannot contact Billie Murdock at the location listed, for I have not talked to her in 10 years and do not know if she is alive or at the address. I do have the 147 page document and I also have the Legislative history of the Current Tax Payment Act of 1943 all 28 pages.

The Informer

“DECLASSIFIED”

“WITHHOLDING TAX,

HEARING BEFORE A SUBCOMMITTEE OF THE COMMITTEE ON FINANCE, UNITED STATES SENATE” and “LEGISLATIVE HISTORY OF THE CURRENT TAX PAYMENT ACT OF 1943”

Patriot researcher
Billie Murdock,
P.O. Box 151127,
Salt Lake City, UT 84115

….in her never ending desire for the truth is uncovering many government violations of the Constitution.

These two documents are a very small part of her many findings. As you read statements, “mopping up purchasing power” and “siphoning off purchasing power into the Treasury from a day to day”, makes one take notice how far public serpents will go to control our lives. You will find how Social Security was used to condition people for withholding.

How it was decided to call withholding a “Victory Tax” to condition the public for accepting the withholding tax system.

These documents have been transcribed from photo copies of micro fiche for easier reading.

A true photo copy of the micro-fiche is available from Billie.

“An unconstitutional act is not law; it confers, no right; it imposes no duties; affords no protection; ‘it creates no office; it is in legal contemplation, as inoperative as though it had never been passed.” Norton vs. Shelby County, 118 US 425 p. 442

SUMMARY

OF THE WITHHOLDING TAX HEARING BEFORE A SUBCOMMITTEE OF THE COMMITTEE ON FINANCE

UNITED STATES SENATE

SEVENTY-SEVENTH CONGRESS

SECOND SESSION

ON

DATA RELATIVE TO WITHHOLDING PROVISIONS
OF THE 1942 REVENUE ACT

AUGUST 21 AND 22, 1942

CONTENTS

Statement of
Friedman, Milton, Division of Tax Research, Treasury Department
Hardy, Charles O., of Brookings Institution,
Jacobstein, Meyer, of Brookings Institution
Paul, Randolph E., Treasury Department

Overview
Because the war effort resulted in increased production and employment, which caused a sudden large influx of money into circulation, the Federal Government and Federal Reserve System had to find a method of “mopping up excess purchasing power” thereby control inflation and obtain immediate funds for the Treasury. Several plans were put forth before the House ways and Means Committee and the Senate Committee on Finance to accomplish this purpose.

The following points were made by the Senators and those testifying before the committee:

  1. The overall purpose was to obtain immediate money for the war effort to control inflation and to get the income tax on a current basis instead of being one year behind.

  2. To accomplish this goal, it was recognized that a scheme was needed to reach the largest number of people.

  3. That the scheme, regardless of whether it was a “coupon,” “stamp” or “withholding of income tax at source,” would constitute a “forced loan” [page 101] to the Federal Government and it would apply to taxpayers and nontaxpayers alike. [page 104].

  4. Where an individual had money withheld and ultimately no tax liability, the individual would file an income tax return and that income tax return would constitute an automatic claim for refund [page 141].

  5. The proposed plan was an emergency war time measure.

HEARING EXCERPTS
Beginning at Page 99

STATEMENT OF MEYER JACOB STEIN, OF BROOKINGS INSTITUTION
Mr. Jacobstein. We were called * * *.

It is obvious that it is necessary to mop up the excess purchasing power of the community, not only because of its effect on the price situation but because the Treasury needs the money and needs it quickly. Obviously if the Treasury can collect from the consumers as the purchases are made the Treasury has the use of those funds long before it would obtain them by the income-tax method.

Now, there are many ways, of course, of mopping up this surplus purchasing power. * * *

Page 100

Then, there is the withholding tax at the source based on pay rolls.

* * *

Senator Clark. Doctor, what this plan is, it is essentially a compulsory savings plan based on sales tax methods, is it not?

Mr. Jacobstein. I should say that is a fair description of it yes. It is the use of a sales tax method without being a tax.

Senator Clark. So far as the impact on the public is concerned, it is precisely the same as a sales tax, except you give the money back sometimes.

Mr. Jacobstein. That is right. That is a very fair statement I think. Senator Danaher used the word “self-assessment.” If I buy a dollar necktie I pay $1.10 under his plan.

* * *

* * * A withholding tax is usually withheld at the source. Here you withhold it not at the manufacturer’s end but at the retailer’s end. You are using the retailer instead of the manufacturer to siphon off several billions of dollars, depending upon the rate of the assessment of a tax.

Page 101

* * * It may be that several systems can be used. Anyone of them might be very useful to the Treasury in accomplishing this purpose. But… for siphoning off purchasing power into the Treasury from day to day, or week to week, or month to month; and it has that advantage.

Now, there is an aspect to this question which was not brought out in the original memorandum which would make the scheme perhaps a little more palatable if certain deductions were made by any method either by the withholding tax method or direct sales tax method or by Senator Danaher’s proposal, . . .

STATEMENT OF CHARLES O. HARDY, OF BROOKINGS INSTITUTION

Mr. Hardy. First,… mainly for the purpose of providing an exemption from the tax or forced loan either one.

Now, as has been stated a moment ago, this is a forced loan * * *. It should be pointed out, I think, that you can do the same thing with the mechanics of any other tax, that is, under the income tax you can give out bonds or coupons redeemable in bonds instead of giving receipts for the income tax. You can do that, as far as I can see, with any tax, for the whole schedule of taxes.

I would like to say . . . that we have to bring about a readjustment of consumption in the country to the amount of consumers’ goods and services that we can spare the resources to produce under war conditions. First, we have got to devote our productive energies to the war. * * *

Page 102

* * * or you can “use the mechanism of the sales tax, as far as I can-see, by mopping up the increased purchasing power that is created by the rising amount they receive in their pay checks. * * * On the other hand, if the money is stored up, whether it is in the form of these stamps or in the form where people haven’t spent it because they have had no way to spend it, in either case if it is too large a proportion you are going to have the problem, whenever you do turn it loose, that you have now in the other case, namely, of having a lot more purchasing power than you have goods and services to make it good with.

That is the answer, I think, to the question that might be raised as to why not carry this principle through and apply it to income tax, corporation tax, and everything else.

* * * Obviously, this has the advantage that this definitely sews up the purchasing power in such a way that it cannot be released until we discover the proper period to release it.

Page 103

* * * I think it has a great advantage over the deficient spending program. This program just postpones the problem of administration, in deciding how much purchasing power is available to release and to what extent it will create the old wartime inflation over again.

Senator Danaher. Let me ask you this question: Considering the withholding tax, . . . simply the Treasury withholds it currently and applies the proceeds against the tax due in a given year. . . .

Mr. Hardy. The deduction from salaries and interest, and so on, at the source?

Senator Danaher. Yes.

Mr. Hardy. Yes

Senator Danaher. That is a currently applied method of withdrawing so much of the consumer purchasing power as is represented by the tax collected or withheld.

Mr. Hardy. That is right.

Senator Danaher. And then applied as against the tax due.

Mr. Hardy. Yes

* * *

The withholding tax provision has the effect of withholding purchasing power at the time the income is realized rather than a year hence through the income tax structure.

Senator Danaher. And if it were in effect only 1 year it would apply only 1 year?

Mr. Hardy. I assume so.

Senator Danaher. Yes. Whereas this proposal is a continuing thing.

* * *

Page 104

Mr. Hardy. It seems to me the essential difference is that the withholding tax plan applies at the point of receipt of income, and this applies at the point of expenditure of income.

Senator Danaher. Of course, you withhold not only from taxpayers but nontaxpayers. (Emphasis added)

Mr. Hardy. Yes. * * *

Page 107

* * *

Some people that I talked to about this plan, Federal Reserve people, have been rather favorable to the idea. * * *

Page 108

Mr. Jacobstein. Don’t you want to add that Mr. Selko pointed out that such difficulties as are encountered in the States are, partially at least, overcome when you have a uniform Federal tax?

* * * Where you have a uniform tax all over the country by one administration, the Federal Government, it is easier to administer than a sum total of 48 States. Now that was Mr. Selko’s conclusion.

Page 141

STATEMENT OF MILTON FRIEDMAN, DIVISION OF TAX RESEARCH, TREASURY DEPARTMENT

Senator Danaher. I have only one other thought on that point. In the event of withholding from the owner of stock and no taxes due ultimately, where does he get his refund?

Mr. Friedman. You thinking of a corporation or an individual?

Senator Danaher. I am talking about an individual.

Mr. Friedman. An individual will file an income tax return, and that income tax return will constitute an automatic claim for refund.
[Emphasis added]

End Page 147


The above information was scanned from:

DECLASSIFIED
SEE EXCHANGE & GIFT DIV.
DECLASSIFICATION FILE NO 100

[CONFIDENTIAL COMMITTEE PRINT]

 

WITHHOLDING TAX

 


HEARING
BEFORE A

SUBCOMMITTEE OF THE
COMMITTEE ON FINANCE
UNITED SENATE


SEVENTY-SEVENTH CONGRESS
SECOND SESSION

ON

DATA RELATIVE TO WITHHOLDING PROVISIONS
OF THE 1942 REVENUE ACT

________________________

AUGUST 21 AND 22, 1942

________________________

Printed for the Use of the Committee on Finance




UNITED STATES
GOVERNMENT PRINTING OFFICE
WASHINGTON 1942