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U.S. v. Connor

filed: March 21, 1990.


On Appeal from the United States District Court for the Western District of Pennsylvania, D.C. Criminal No. 88-156.

Sloviter, Becker and Stapleton, Circuit Judges

Author: Sloviter


SLOVITER, Circuit Judge.

Appellant Walter A. Connor, Jr., who worked as a transport driver for the Braun Baking Company, did not file an income tax return for any of the years 1982 through 1986 and paid no income tax in those years on his wages, on some interest he received, and on payments from the Teamsters Union related to his service as the local vice-president.*fn1 Connor was charged in a five-count indictment with income tax evasion in violation of 26 U.S.C. § 7201 for each of those five years. The indictment charged that he failed to file an income tax return in each of the five years and that he provided his employer in 1982 through 1985 with a fraudulent W-4, Employee's Withholding Certificate, on which he falsely claimed to be exempt from federal income taxes, and in 1986 with a fraudulent affidavit in lieu of a W-4.

After a jury trial, he was found guilty on all of the counts. He was sentenced on Count 1 to one-year imprisonment on a work release program, and on Counts 2, 3, 4 and 5 to a suspended five-year imprisonment term with the sentence on Counts 3, 4 and 5 to run concurrently with the sentence on Count 2. He was placed on probation for five years to commence upon release from confinement as imposed under Count 1.

Connor raises two issues on this direct appeal. He contends that because of the Sixteenth Amendment wages are not taxable income within the meaning of the federal income tax laws and that filing a W-4 exemption is not an overt act to conceal income in an attempt to evade taxes on his income as a matter of law.


Wages Are Income

Connor argues that a tax on wages is a direct tax subject to the provision of Article 1, Section 2, Clause 3 of the Constitution which requires that direct taxes be apportioned by population. He makes this claim despite the specific language of the Sixteenth Amendment that:

The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several states, and without regard to any census or enumeration.

Connor purports to find authority for his argument in Eisner v. Macomber, 252 U.S. 189, 64 L. Ed. 521, 40 S. Ct. 189 (1920), a case patently inapposite because it held merely that a stock dividend made to shareholders in their proportionate interests against profits accumulated by the corporation was not income. As the Supreme Court later explained in Commissioner v. Glenshaw Glass Co., 348 U.S. 426, 430-31, 99 L. Ed. 483, 75 S. Ct. 473 (1955), the Eisner Court held that the distribution of a corporate stock dividend changed only the form of the taxpayer's capital investment, and that because the taxpayer received nothing out of the company's assets for his separate use and benefit, the distribution was not a taxable event. Glenshaw reiterated that Congress intended to use the full measure of its taxing power in creating the income tax. Id. at 429, citing, inter alia, Helvering v. Clifford, 309 U.S. 331, 334, 84 L. Ed. 788, 60 S. Ct. 554 (1940).

Congress exercised its power to tax income by defining income as, inter alia, "compensation for services, including fees, commissions, fringe benefits and similar items." 26 U.S.C. § 61(a)(1) (Supp. II 1984). Every court which has ever considered the issue has unequivocally rejected the argument that wages are not income. See, e.g., Coleman v. Commissioner, 791 F.2d 68, 70 (7th Cir. 1986); Connor v. Commissioner, 770 F.2d 17, 20 (2d Cir. 1985) (per curiam); Perkins v. Commissioner, 746 F.2d 1187, 1188 (6th Cir. 1984) (per curiam); Funk v. Commissioner, 687 F.2d 264, 264 (8th Cir. 1982) (per curiam).

Moreover, Connor's argument has already been rejected by this court. In Sauers v. Commissioner, 771 F.2d 64 (3d Cir. 1985), cert. denied, 476 U.S. 1162, 90 L. Ed. 2d 727, 106 S. Ct. 2286 (1986), the taxpayer argued, inter alia, that wages are property and therefore are not taxable income. Id. at 66 n. 2. This court agreed with the Tax Court that the taxpayer's "legal contentions were patently frivolous," id. at 66, and affirmed the decision of the Tax Court awarding the Commissioner damages for a frivolous claim under 26 U.S.C. § 6673. Id. at 67-70. We take this opportunity to reiterate that wages are income within the meaning of the Sixteenth Amendment. Unless subsequent Supreme ...

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