Time: Fri Nov 14 06:30:17 1997
	by primenet.com (8.8.5/8.8.5) with ESMTP id GAA16350;
	Fri, 14 Nov 1997 06:03:35 -0700 (MST)
	by usr01.primenet.com (8.8.5/8.8.5) with SMTP id GAA24079;
	Fri, 14 Nov 1997 06:02:05 -0700 (MST)
Date: Fri, 14 Nov 1997 06:02:31 -0800
To: (Recipient list suppressed)
From: Paul Andrew Mitchell [address in tool bar]
Subject: SLS: State Taxation a Fraud (fwd)

>                  State Taxation of Federal Obligations
>     Frankly, although we have great respect for the FTB legal staff, we're 
>     puzzled as to why they think that the U.S. laws and Constitution do not 
>     apply to California.  So..., we have written to the FTB asking for the 
>     reasons why 31 USC Section 3124(a) and the U.S. Constitution are 
>     subordinate to California [tax codes].  - Speidell's California 
>     Taxletter, 8/1/88
>As the King of Siam said, "'tis a puzzlement".  We would add to Speidell's 
>statement the question, "Why does the FTB think that California law does not 
>apply to them?"
>     Gross income does not include income which this State is prohibited
>     taxing under the Constitution or laws of the United States of
>     California Revenue and Taxation Code 17133
>     ... obligations of the United States Government are exempt from
>     by a State or political subdivision of a State.  The exemption applied 
>     to each form of taxation that would require the obligation, the
>     on the obligation, or both,..  31 USC 3124(a)
>The controlling revenue law in California, and the Franchise Tax Board is 
>violating state law as well as Federal law in their depredations on the 
>citizens of this state.
>The bureaucratic agencies, not the people, not the people's representatives 
>who write the laws in Sacramento, rule here in California.  The never-to-be-
>sufficiently-damned 1982 Dauberger Opinion of the California State Board of 
>Equalization (BOE), cited Smith v. Davis, 3323 US 111 (1944), Julliard v. 
>Greenman, 110 US 421 (1884), and former 31 USC 425 (current 31 USC 5154) as 
>their authority to tax United States currency (Federal Reserve notes are 
>Federal obligations under 18 USC 8 and 12 USC 411).  This opinion is 
>administrative drivel; a piece of a code here, a piece of case law there.  
>The chutzpah of the board was blatant when it did not cite all the words of 
>31 USC 425.  It is basic Supreme Court case law that all of the words of a 
>statute or code have significance.  Those who have studied the authorities 
>cited in "Dauberger" already know that they do not lend any credence to the 
>contention of the BOE that the FTB is acting lawfully in collecting state 
>income taxes from individuals.  The statute,
>     ... circulating notes of national banking associations and United
>     legal tender notes and other notes and certificates of the United
>     payable on demand and circulating or intended to circulate as currency 
>     and gold, silver, or other coin shall be subject to taxation as money
>     hand or on deposit under the laws of any State or Territory...  (Aug. 
>     13, 1894 ch.281, 28 Stat. 278)
>from which 31 USC 425 was created, is a specific waiver of the tax exempt 
>status of Federal obligations which the Georgia State property tax upheld in 
>the Smith v. Davis case fit like a glove.  It is important that Smith v. 
>Davis was a case involving a Georgia State property tax, a type of tax that 
>comes within the meaning of the specific waiver, unlike a State income tax 
>which does not.  Before the 1894 statute, U.S. currency was totally exempt 
>from State taxation; see Julliard v. Greenman, 110 US 421, 448, 449
(1884), a 
>case cited by the BOE which does not support the BOE opinion; and New York
>Supervisors, 74 US 26 (1869).
>The status of a money on hand tax is provided for in section 212, in part 2 
>(property taxes) of the California Revenue and Taxation Code.  The State 
>income tax is provided for under part 10 of the Revenue and Taxation Code.  
>They are two different animals.
>Smith v. Davis was cited by the BOE as authority that federal tax exempt 
>status applies only to interest-bearing notes.  This is based on statements 
>taken out of context.  The full context of the case vitiates the
>Looking at Smith v. Davis 323 US 111 (1944), on page 116 of the case, at 
>footnote 6 at the bottom of the page, the Court states:
>The only Treasury notes that could be included within the section 3701 [of 
>the Revised Statutes, which was the predecessor to current 31 USC 3124] are 
>interest-bearing ones in light of the provisions of the Act of Aug. 13,
>28 Stat 278 Chap 281, 31 USC 425, [current section 5154] allowing notes and 
>certificates payable on demand and circulating as currency to be taxed by
>In 1944, a note was either payable on demand, or interest-bearing.  The
>had not conceived of the type of "note" that is now circulating.  Under the 
>wording and intent of the statute the exempt status of current notes have
>been waived at all, and if they were redeemable in specie, they still would 
>not be subject to a state income tax under the terms of the waiver.  At 
>page117 of the case, the Court says, "It is unnecessary to extend such tax 
>exemption, at least through statutory interpretation, to
>claims or obligations which the United States does not use or need for
>purposes."  The "notes" now circulating are used for credit purposes just as 
>the greenbacks issued during the civil war were issued for credit purposes 
>because they were not payable on demand until January 1, 1879, and the 
>"notes" now circulating are not currently payable on demand.  A note is 
>either payable on demand or it is a credit instrument.  The Congressmen who 
>issued the civil war notes that were not redeemable until years after, and 
>the Congressmen who wrote the 1894 law that was used by the Court in Smith
>Davis to make its determination, understood that fact, Congressmen during
>civil war and who wrote the 1894 statute called the notes issued during the 
>war a "forced loan".  They were credit instruments which the nation used for 
>credit purposes until they became redeemable.  Nor can a statement that 
>Federal Reserve notes are not interest bearing survive close examination.
>USC 5119 (b)(1) is the list of all the non-interest bearing debts of the 
>United States; Federal Reserve notes, in general, are not on that list.
>The state income tax does not fall within the limitations and qualifications 
>of the waiver created by the 1894 statute.  See also Beery v. County of Los 
>Angeles, 116 C.A.2d 290, 296, 299 (1954), 
>     The question is whether the taxes herein were levied in accordance with 
>     the permission granted by the Congress.  The conditions imposed by the 
>     Congress, with respect to permission to tax, were: that the money to be 
>     taxed shall be taxed as money on hand or on deposit... 
>and Hibernia Savings Society v. San Francisco, 200 US 310, 316; and the 
>Congressional Record of July and August, 1894 (H.R. 4326) for further 
>authority explaining this statute.  The Court determinations, the intent of 
>Congress displayed in the Congressional Record, and the wording of the 
>statute itself are clearly in agreement; there is no ambiguity or 
>     The right of taxation, where it exists, is necessarily unlimited in its 
>     nature.  It carries with it inherently the power to embarrass and 
>     destroy.
>     It is well settled that the States cannot exercise this authority in 
>     respect to any of the instrumentalities which the General Government
>     create for the performance of its constitutional functions.  It is 
>     equally well settled, that this exemption may be waived wholly, or with 
>     such limitations and qualifications as may be deemed proper, by the law 
>     making power of the nation; but the waiver must be clear, and every
>     grounded doubt upon the subject should be resolved in faver of the 
>     exemption.  Austin v. Aldermen of Boston, 74 US (7 Wall) 694, 699 
>     (1869).
>31 USC 3124 is the general statement of exemption of Federal obligations
>state taxation, subject to specific waiver.  Waivers of the tax exempt
>of Federal instrumentalities are strictly interpreted.  See Oklahoma v. 
>Barnsdall Corp., 296 US 521.  There is no Congressional waiver of the tax 
>exempt status of United States currency or Federal Reserve notes which
>a state income tax on individuals, and the agencies have yet to cite a 
>general waiver or a specific waiver which allows such a tax.
>We have a much lower respect for the opinions of the legal staffs of the 
>agencies than does `Spidell's' taxletter and we say that any case law they 
>cite in support of their positions on any subject should not be taken at
>value, but should be studied closely to determine whether the agency is 
>citing a case in the correct context and for the force of the reasoning of 
>the justices who made the decision.  It is the natural tendency of
>officials to expand their power at the people's expense.
>The state "taxes" you because they have the power on their side.  The law
>nothing to do with it.  This is nothing more than an exaction in the guise
>a tax.
>[Edited from `American Information Network Newsletter', Sep/Oct 1988]

Paul Andrew Mitchell, Sui Juris      : Counselor at Law, federal witness 01
B.A.: Political Science, UCLA;   M.S.: Public Administration, U.C.Irvine 02
tel:     (520) 320-1514: machine; fax: (520) 320-1256: 24-hour/day-night 03
email:   [address in tool bar]       : using Eudora Pro 3.0.3 on 586 CPU 04
website: http://supremelaw.com       : visit the Supreme Law Library now 05
ship to: c/o 2509 N. Campbell, #1776 : this is free speech,  at its best 06
             Tucson, Arizona state   : state zone,  not the federal zone 07
             Postal Zone 85719/tdc   : USPS delays first class  w/o this 08
_____________________________________: Law is authority in written words 09
As agents of the Most High, we came here to establish justice.  We shall 10
not leave, until our mission is accomplished and justice reigns eternal. 11
======================================================================== 12
[This text formatted on-screen in Courier 11, non-proportional spacing.] 13


Return to Table of Contents for

Supreme Law School:   E-mail