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Saturday, July 07, 2007


About a year ago, we wrote about a very interesting D.C. Court of Appeals case. In that case, the Court had declared that treating damages arising from emotional distress as taxable was unconstitutional since it was not an "accession to wealth." This was exciting stuff – for a Federal appeals court to declare that the Constitution prohibited some aspect of the U.S. income tax is a very rare and unusual event.

Alas, the excitement is gone. The D.C. Court of Appeals is now saying oops, we made a mistake because the government didn't raise the proper arguments, and that such damages are subject to income tax since they are not physical injuries within the exclusion allowed under Code Section 104. In terms of the Constitution, the Court found that even if not authorized by the Sixteenth Amendment to the Constitution (authorizing the income tax), this tax was an authorized excise tax that Congress has the power to impose since it was uniformly imposed.

There is speculation that the Court changed its position in fear that it would be opening the floodgates to constitutional challenges to various taxes.

Murphy v. IRS (CA DC 07/03/07), No. 05-5139, 100 AFTR 2d ¶2007-5019

1 comment:

Sheldon Richman said...

The court said that taxing the income from property (human capital) is not the same as taxing the property itself. But that is the opposite of what the 1895 Pollock court ruled when it struck down an income-tax law. If the new ruling stands, Pollock is effectively overturned, meaning the 16th Amendment is entirely moot. Repealing it would make not one iota of difference.