Bill Gates Just Warned a New Bioweapon Will Take Out 30 Million

By The Rundown Live

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Bitcoin, Gold, Silver and USD On The Rise! Bubble or Boom?

By The Rundown Live

In this video, Luke Rudkowski interviews Consultant & Derivatives Trader in the realm of Economics, Finance, Blockchain & Bitcoin Tone Vays. The two discuss the recent rise of Bitcoin, silver, gold and the USD on the economic world market and give you some perspective on what is happening. For more about Tone check out

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How Did The Deepest Part Of The Ocean Get So Polluted?

By The Rundown Live

Scientists have found trash in the deepest parts of the ocean, the Mariana Trench. What does this mean for us and the organisms living there?

What Lives In The Deepest Place On Earth? –
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The Deepest Ocean Trenches Contain High Levels of Pollution
“Deep ocean trenches – considered the most remote places in the world – have levels of toxic, industrial chemicals 50 times higher than a highly polluted river system in China, an analysis of tiny deep-sea animals has found. The discovery, published in today’s Nature Ecology and Evolution journal, highlights the pervasive nature of pollution and destroys the belief these deep-sea wildernesses are largely safe from human degradation.”

Earth Day² – Encounters with Trash
“You may think that working in the deep sea means that we only see pristine environments, but unfortunately that isn’t true. During our 5,000-meter dive in Sirena Canyon, along the Mariana Trench wall, we saw multiple pieces of marine debris. A soda can, a food tin, and a piece of rope all accompanied the fish, corals, and rocks that we imaged as we moved up the slope. We encountered even more trash (nine pieces!) on our dive the following day at Enigma Seamount, including several plastic bags and a piece of clothing.”

Bioaccumulation of persistent organic pollutants in the deepest ocean fauna
“The legacy and reach of anthropogenic influence is most clearly evidenced by its impact on the most remote and inaccessible habitats on Earth. Here we identify extraordinary levels of persistent organic pollutants in the endemic amphipod fauna from two of the deepest ocean trenches (over 10,000 metres).”


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What is the “Deep State?” with Kyle Rearden (LUA Podcast #23, 2/26/17)

By Liberty Under Attack

On this episode of Liberty Under Attack, I am joined by our creative consultant, Kyle Rearden. Herein, we further try to understand what the hell this so-called “Deep State” is, why it’s all of a sudden such a hot topic of discussion, the influence of the news cycle on the alternative media, and some major issues with folks discussing and propagating this “State within a State”–namely, the lack of even an operational definition. I also read some emails from folks who are “experts” on the subject, which, unfortunately, don’t help us out too much.

This will be an ongoing series, as I will be having one of those “experts” on the podcast in the near future.

Show Notes:
Anarcho-Trumpism and the Deep State (LUA Podcast #22)
Wikipedia Page on the Deep State

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The post What is the “Deep State?” with Kyle Rearden (LUA Podcast #23, 2/26/17) appeared first on Liberty Under Attack.

Does China Run Hollywood?

By The Rundown Live

Why The U.S. Needs China –

With China’s market for movies expanding at an insane rate, Hollywood now has a powerful new audience to consider.

Learn More:
China is on track to surpass U.S. as world’s biggest movie market by 2017

China Box Office Flatlines in 2016

18 Hollywood movies that pandered to China’s giant box office

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Publishers struggle as Amazon continues to allow counterfeit sales – Ark Midnight #38

By The Rundown Live

John B interviews Richard Alan Miller and LA Marzulli – Ark Midnight Episode 38

Richard Alan Miler talks about his frustration as Amazon seems to allow bootlegging?

LA Marzulli reveals information about his upcoming projects – First time on Ark Midnight!

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News & Politics

What a Sad, Sorry Week for Liberty…

By The Rundown Live

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Mark Cuban vs. Mark Dice – Debate Over Fake News

By The Rundown Live

Mark Cuban and Mark Dice argue over Fake News, and wild accusations fly from the billionaire Dallas Mavericks owner, only to have him later retreat to his safe space after stepping up to YouTube’s most popular conservative news analyst.

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Federal Taxation & the Sixteenth Amendment (U.S. Constitution Annotated)

By Kyle Rearden

Today’s article is composed of annotations excerpted out of the United States Constitution Annotated (CONAN). Federal taxation (Art. I § 2 cl. 3, Art. I § 8 cl. 1, Art. I § 9 cl. 4, & Art. I § 9 cl. 5), including the Fourteenth & Sixteenth Amendments that modified it, are the actual constitutional clauses by which taxes are collected by the central government. Footnotes have been removed from these annotations for ease of reading, yet, they are still viewable in their original form from the Library of Congress.

Three-fifths [Apportionment] Clause (Art. I § 2 cl. 3)


The Census Requirement

The Census Clause “reflects several important constitutional determinations: that comparative state political power in the House would reflect comparative wealth; that comparative power would shift every 10 years to reflect population changes; that federal tax authority would rest upon the same base; and that Congress, not the states, would determine the manner of conducting the census.” These determinations “all suggest a strong constitutional interest in accuracy.” The language employed – “actual enumeration” – requires an actual count, but gives Congress wide discretion in determining the methodology of that count. The word “enumeration” refers to a counting process without describing the count’s methodological details. The word “actual” merely refers to the enumeration to be used for apportioning the Third Congress, and thereby distinguishes “a deliberately taken count” from the conjectural approach that had been used for the First Congress.

Finally, the conferral of authority on Congress to “direct” the “manner” of enumeration underscores “the breadth of congressional methodological authority.” Thus, the Court held in Utah v. Evans, “hot deck imputation,” a method used to fill in missing data by imputing to an address the number of persons found at a nearby address or unit of the same type, does not run afoul of the “actual enumeration” requirement. The Court distinguished imputation from statistical sampling, and indicated that its holding was relatively narrow. Imputation was permissible “where all efforts have been made to reach every household, where the methods used consist not of statistical sampling but of inference, where that inference involves a tiny percent of the population, where the alternative is to make a far less accurate assessment of the population, and where consequently manipulation of the method is highly unlikely.”

Although the Census Clause expressly provides for an enumeration of persons, Congress has expanded the scope of the census by including not only the free persons in the states, but also those in the territories, and by requiring all persons over eighteen years of age to answer an ever-lengthening list of inquiries concerning their personal and economic affairs. This extended scope of the census has received the implied approval of the Supreme Court, and is one of the methods whereby the national legislature exercises its inherent power to obtain the information necessary for intelligent legislative action.

Although taking an enlarged view of its census power, Congress has not always complied with its positive mandate to reapportion representatives among the states after the census is taken. It failed to make such a reapportionment after the census of 1920, being unable to reach agreement for allotting representation without further increasing the size of the House. Ultimately, by the act of June 18, 1929, it provided that the membership of the House of Representatives should henceforth be restricted to 435 Members, to be distributed among the states by the so-called “method of major fractions,” which had been earlier employed in the apportionment of 1911, and which has now been replaced with the “method of equal proportions.”

Following the 1990 census, a state that had lost a House seat as a result of the use of this latter formula sued, alleging a violation of “one person, one vote” rule derived from Article I, § 2. Exhibiting considering deference to Congress and a stated appreciation of the difficulties in achieving interstate equalities, the Court upheld the formula and the resultant apportionment. The goal of absolute population equality among districts “is realistic and appropriate” within a single state, but the constitutional guarantee of one Representative for each sate constrains application to districts in different states, and make the goal “illusory for the Nation as a whole.”

Although requiring the election of Representatives by districts, Congress has left it to the states to draw district boundaries. This has occasioned a number of disputes. In Ohio ex. rel. Davis v. Hildebrant, a requirement that a redistricting law be submitted to a popular referendum was challenged and sustained. After the reapportionment made pursuant to the 1930 census, deadlocks between the governor and legislature in several states produced a series of cases in which the right of the governor to veto a reapportionment bill was questioned. Contrasting this function with other duties committed to state legislatures by the Constitution, the Court decided that it was legislative in character and subject to gubernatorial veto to the same extend as ordinary legislation under the terms of the state constitution.

Taxing [Spending] Clause (Art. I § 8 cl. 1)


Scope of the Taxing Power

Article I, § 8, cl. 1 grants Congress the broad authority “to lay and collect Taxes, Duties, Imposts, and Excises…” The Court has often emphasized the sweeping character of congress’ taxing power by saying, from time to time, that it “reaches every subject,” that it is “exhaustive,” or that it “embraces every conceivable power of taxation.” The power would appear to be textually limited by only one exception and two qualifications: articles exported from any state may not be taxed at all, direct taxes must be levied by the rule of apportionment, and indirect taxes are governed by the rule of uniformity.

As explored below, this power was for a time curtailed by judicial decisions based on the subject matter of the taxation. For instance, the Supreme Court was initially inclined to find limits on the taxing power arising from other portions of the Constitution. Thus, in Evans v. Gore and Miles v. Graham, the Court found that imposing an income tax on he salaries of federal judges violated the constitutional mandate that the compensation of such judges should not be diminished during their continuance in office, even if the tax at issue was applied generally. These cases, however, were subsequently repudiated in O’Malley v. Woodrough. Other theories suggesting limits on the taxing power have also proven to be of only limited duration or effect.

Limits on Federal Taxation of States and Their Interests – Federalism concerns, most often found in the regulatory arena, have also arisen in the context of the power to tax. Beginning with the seminal decision of McCulloch v. Maryland, the Court has consistently found limits on the power of states to tax federal operations or instrumentalities. However, the converse question – whether Congress can use its power under Article I, § 8 to tax the states and their interests – has not been so easily resolved.

Early on, the Court found that the Constitution contained significant restrictions on federal taxation of the states. For example, in an 1871 decision, Collector v. Day, the Court held that the salary of a state officer was immune from federal income taxation. This case was decided while the country was still in the throes of Reconstruction and, as later noted by Chief Justice Stone, the Court had not yet determined how far the Civil War Amendments had broadened federal power at the expense of the states. The fact that the taxing power had recently been used with destructive effect upon notes issued by state banks, however, suggested the possibility of a similar attack by the federal government upon the existence of the states themselves. Two years later, the Court took the next logical step of holding that the federal income tax could not be imposed on income received by a municipal corporation from its investments.

Twenty-two years after that, a far-reaching extension of this immunity to non-governmental actors was granted in Pollock v. Farmers’ Loan & Trust Co., where interest received by a private investor on state or municipal bonds was held to be exempt from federal taxation. However, as the apprehension of the Reconstruction era subsided, the doctrine of these cases was pushed into the background. Only once since the turn of the 20th century has the national taxing power been further narrowed in the name of federalism. In 1931 the Court held that a federal excise tax was inapplicable to the manufacture and sale to a municipal corporation of equipment for its police force. Justices Stone and Brandeis, however, dissented from this decision, and it is doubtful whether it would be followed today.

In the interim between these cases, the Court began to routinely uphold federal taxation of state interests. In 1903 a succession tax upon a bequest to a municipality for public purposes was upheld to a municipality for public purposes was upheld on the ground that the tax was payable out of the estate before distribution of the legatee. Looking to form and not to substance, a closely divided Court declined to “regard it as a tax upon the municipality, though it might operate incidentally to reduce the bequest by the amount of the tax.” When South Carolina embarked upon the business of dispensing alcoholic beverages, its agents were held to be subject to the national internal revenue tax, the ground of the holding being that in 1787 such a business was not regarded as one of the ordinary functions of government.

Another decision marking a clear departure from the logic of Collector v. Day and Flint v. Stone Tracy Co., in which the Court sustained an act of Congress taxing the privilege of doing business as a corporation, the tax being measured by the income. The argument that the tax imposed an unconstitutional burden on the exercise by a state of its reserved power to create corporate franchises was rejected, partly because of the principle of national supremacy, and partly on the ground that the corporate franchises were private property. This case also qualified Pollock to the extent that it allowed interest on state bonds to be included in measuring the tax on the corporation.

Subsequent cases sustained an estate tax on the net estate of a decedent, including state bonds and excise taxes on the transportation of merchandise in performance of a contract to sell and deliver it to a county; on the importation of scientific apparatus by a state university; on admissions to athletic contests sponsored by a state institution, the net proceeds of which were used to further its educational program; and on admissions to recreational facilities operated on a nonprofit basis by a municipal corporation. Similarly, income derived by independent engineering contractors from the performance of state functions; the compensation of trustees appointed to manage a street railway taken over and operated by a state; and profits derived from the sale of state bonds or from oil produced by lessees of state lands; have all been held to be subject to federal taxation despite a possible economic burden on the state.

In the 1988 decision which finally overruled this aspect of Pollock, the Court stated that the rule on which Pollock had been based – that the federal and state governments could not tax income derived from a contract with another government – had already been rejected in numerous decisions involving intergovernmental immunity. “We see no constitutional reason for treating persons who receive interest on government bonds differently than persons who receive income from other types of contracts with the government, and no tenable rationale for distinguishing the costs imposed on States by a tax on state bonds interest from the costs imposed a tax on the income from any other state contract.”

Current Scope of State Immunity from Federal Taxation – While the specific ruling of Collector v. Day has been overruled, the principle underlying that decision – that Congress may not lay a tax that would impair the sovereignty of the states – is still recognized as retaining some vitality. Although there have been sharp differences of opinions among members of the Supreme Court in cases dealing with the tax immunity of state functions and instrumentalities, the Court has stated that “all agree that not all of the former immunity is gone.”

Twice, the Court has made an effort to express its new point of view in a statement of general principles by which the right to such immunity shall be determined. In Helvering v. Gerhardt, where, without overruling Collector v. Day, it narrowed the immunity of salaries of state officers from federal income taxation, the Court announced “two guiding principles of limitation for holding the tax immunity of state instrumentalities to its proper function. The one, dependent upon the nature of the function being performed by the state or in its behalf, excludes from the immunity activities thought not to be essential to the preservation of state governments even though the tax be collected from the state treasury…The other principle, exemplified by those cases where the tax laid upon individuals affects the state only as the burden is passed on it by the taxpayer, forbids recognition of the immunity when the burden on the state is so speculative and uncertain that if allowed it would restrict the federal taxing power without affording any corresponding tangible protection to the state government; even though the function be thought important enough to demand immunity from a tax upon the state itself, it is not necessarily protected from a tax which well may be substantially or entirely absorbed by private persons.”

The second attempt to formulate a general doctrine was made in New York v. United States, although the failure to muster a majority to concur with any single opinion leaves the standard in doubt. In New York, on review of a judgment affirming the right of the United States to tax the sale of mineral waters taken from property owned and operated by the State of New York, the Court reconsidered the right of Congress to tax business enterprises carried on the by the states. Justice Frankfurter, speaking for himself and Justice Rutledge, made the question of discrimination vel non against state activities the test of the validity of such a tax. They found “no restriction upon Congress to include the States in levying a tax exacted equally from private persons upon the same subject matter.” In a concurring opinion in which Justices Reed, Murphy, and Burton joined, Chief Justice Stone rejected the criterion of discrimination. He repeated what he had said in an earlier case to the effect that “the limitation upon the taxing power of each, so far as it affects the other, must receive a practical construction which permits both to function with the minimum of interference each with the other; and that limitation cannot be so varied or extended as seriously to impair either the taxing power of the government imposing the tax…or the appropriate exercise of the functions of the government affected by it.”

Justices Douglas and Black dissented in an opinion written by the former on the ground that the decision disregarded the Tenth Amendment, placed “the sovereign States on the same plane as private citizens,” and made them “pay the Federal Government for the privilege of exercising powers of sovereignty guaranteed them by the Constitution.” In a later case dealing with state immunity the Court sustained the tax on the second ground mentioned in Helvering v. Gerhardt – that the burden of the tax was borne by private persons – and did not consider whether the function was one which the Federal Government might have taxed if the municipality had borne the burden of the exaction.

Articulation of the current approach may be found in South Carolina v. Baker. The rules are “essentially the same” for federal immunity from state taxation and for state immunity from federal taxation, except that some state activities may be subject to direct federal taxation, while states may “never” tax the United States directly. Either government, “even though the financial burden falls on the [other government], as long as the tax does not discriminate against the [other government] or those with which it deals.” Thus, “the issue whether a nondiscriminatory federal tax might nonetheless violate state tax immunity does not even arise unless the Federal Government seeks to collect the tax directly from a State.”

Uniformity Requirement – Under Article I, § 8, clause 1, “all Duties, Imposts, and Excises” must be imposed uniformly throughout the United States. These types of taxes are commonly referred to as “indirect taxes,” and they are distinguished from “direct taxes,” which must be apportioned among the states according to the census taken pursuant to Article I, § 2. The rule of uniformity for indirect taxes is generally easy to obey. It requires only that the subject matter of a levy be taxed at the same rate wherever found in the United States; or, as it is sometimes phrased, the uniformity required is “geographical,” not “intrinsic.” Even the geographical limitation appears to be a loose one. In United States v. Ptasynski, the Court upheld an exemption from a crude-oil windfall-profits tax of “Alaskan oil,” defined geographically to include oil produced in Alaska (or elsewhere) north of the Arctic Circle. What is prohibited, the Court said, is favoritism to particular states in the absence of valid bases of classification. Because Congress could have achieved the same result, allowing for severe climactic difficulties, through a classification tailored to the “disproportionate costs and difficulties…associated with extracting oil from this region,” the fact that Congress described the exemption in geographic terms did not condemn the provision.

The Uniformity Clause therefore places no obstacle in the way of legislative classification for the purpose of taxation, nor in the way of what is called progressive taxation. Furthermore, a taxing statute does not fail of the prescribed uniformity because its operation and incidence may be affected by differences in state laws. For example, a federal estate tax law that permitted deduction for a like tax paid to a state was not rendered invalid by the fact that one state levied no such tax.

Regulation by Taxation

Congress has broad discretion in methods of taxation, and may, under the Necessary and Proper Clause, regulate business within a state in order to tax it more effectively. For instance, the Court has sustained regulations regarding the packaging of taxed articles such as tobacco and oleomargarine, ostensibly designed to prevent fraud in the collection of the tax. It has also upheld measures taxing drugs and firearms, which prescribed rigorous restrictions under which such articles could be sold or transferred, and imposed heavy penalties upon persons dealing with them in any other way. These regulations were sustained as conducive to the efficient collection of the tax though, in some respects, they clearly transcended this ground of justification.

Even where a tax is coupled with regulations that have no possible relation to the efficient collection of the tax, and no other purpose appears on the face of the statute, the court has refused to inquire into the motives of lawmakers and has sustained the tax despite its prohibitive proportions. “It is beyond serious question that a tax does not cease to be valid merely because it regulates, discourages, or even definitely deters the activities taxed…The principle applies even though the revenue obtained is obviously negligible…or the revenue purpose of the tax may be secondary…Nor does a tax statute necessarily fall because it touches on activities which Congress might not otherwise regulate. As was pointed out in Magnano Co. v. Hamilton, 292 U.S. 40, 47 (1934): ‘From the beginning of our government, the courts have sustained taxes although imposed with the collateral intent of effecting ulterior ends which, considered apart, were beyond the constitutional power of the lawmakers to realize by legislation directly addressed to their accomplishment.’ ”

In some cases, however, the structure of a taxation scheme is such as to suggest that Congress actually intends to regulate under a separate constitutional authority. As long as such separate authority is available to Congress, the imposition of a tax as a penalty for such regulation is valid. On the other hand, where Congress had levied a heavy tax upon liquor dealers who operated in violation of state law, the Court held that this tax was unenforceable after the repeal of the Eighteenth Amendment, because the National Government had no power to impose an additional penalty for infractions of state law.

Discerning whether Congress, in passing a regulation that purports to be under the taxing authority, intends to exercise a separate constitutional authority, requires evaluation of a number of factors. Under the Child Labor Tax Case, decided in 1922, the Court which had previously rejected a federal prohibition of child labor laws as being outside of the Commerce Clause, also rejected a tax on companies using such labor. First, the Court noted that the law in question set forth a specific and detailed regulatory scheme – including the ages, industry, and number of hours allowed – establishing when employment of underage youth would incur taxation. Second, the taxation in question functioned as a penalty, in that it was set at one-tenth of net income per year, regardless of the nature or degree of the infraction. Third, the tax had a scienter requirement, so that the employer had to know that the child was below a specified age in order to incur taxation. Fourth, the statute made the businesses subject to inspection by officers of the Secretary of Labor, positions not traditionally charged with the enforcement and collection of taxes.

More recently, however, in National Federation of Independent Business (NFIB) v. Sebelius, the Court upheld as an exercise of the taxing authority a requirement under the Patient Protection and Affordable Care Act (ACA) that certain individuals maintain a minimum level of health insurance. Failure to purchase health insurance may subject a person to a monetary penalty, administered through the tax code. Chief Justice Roberts, in a majority holding, found that the use of the term “penalty” in the ACA to describe the enforcement mechanism for the individual mandate was not determinative, and used a functional approach in evaluating the authority for the requirement. The Court found that the latter three factors identified in the Child Labor Tax Case (penal intent, scienter, enforcement by regulatory agencies) were not present with respect to the individual mandate. Unlike the child labor taxation scheme, the tax level under the ACA is established base on traditional tax variables such as taxable income, number of dependents and joint filing status; there is no requirement of a knowing violation; and the tax is collected by the Internal Revenue Service.

The majority, however, did not appear to address the first Child Labor Tax Case factor: whether the ACA set forth a specific and detailed course of conduct and imposed an exaction on those who transgress its standard. The Court did note that the law did not bear characteristics of a regulatory penalty, as the cost of the tax was far outweighed by the cost of obtaining health insurance, making the payment of the tax a reasonable financial decision. Still, the majority’s discussion suggests that, for constitutional purposes, the prominence of regulatory motivations for tax provisions may become less important than the nature of the exactions imposed and the manner in which they are administered.

In those areas where activities are subject to both taxation and regulation, the taxing authority is not limited from reaching activities otherwise prohibited. For instance, Congress may tax an activity, such as the business of accepting wagers, even if it prohibited by the laws of the United States or by those of a state. However, congress’ authority to regulate using the taxing power “reaching only existing subjects.” Thus, so-called federal “licenses,” so far as they relate to topics outside congress’ constitutional authority, merely express (the purpose of the government not to interfere…with the trade nominally licensed, if the required taxes are paid.” In those instances, whether the “licensed” trade shall be permitted at all is a question that remains a decision by the state.

Direct Taxes Clause (Art. I § 9 cl. 4)


The Hylton Case

The crucial problem under clause 4 is to distinguish “direct” from other taxes. In its opinion in Pollock v. Farmers’ Loan & Trust Co., the Court declared: “It is apparent…that the distinction between direct and indirect taxation was well understood by the framers of the Constitution and those who adopted it.” Against this confident dictum may be set the following brief excerpt from Madison’s Notes on the Convention: “Mr. King asked what was the precise meaning of direct taxation? No one answered.” The first case to come before the Court on this issue was Hylton v. United States, which was decided early in 1796. Congress has levied, according to the rule of uniformity, a specific tax upon all carriages, for the conveyance of persons, which were to be kept by, or for any person, for his own use, or to be let out for hire, or for the conveying of passengers. In a fictitious statement of facts, it was stipulated that the carriages involved in the case were kept exclusively for the personal use of the owner and not for hire. The principal argument for the constitutionality of the measure was made by Hamilton, who treated it as an “excise tax,” whereas Madison, both on the floor of Congress and in correspondence, attacked it as “direct” and therefore void, because it was levied without apportionment. The Court, taking the position that the direct tax clause constituted in practical operation an exception to the general taxing powers of Congress, held that no tax ought to be classified as “direct” that could not be conveniently apportioned, and on this basis sustained the tax on carriages as one on their “use” and therefore an “excise.” Moreover, each of the judge advanced the opinion that the direct tax clause should be restricted to capitation taxes and taxes on land, or that, at most, it might cover a general tax on the aggregate or mass of things that generally pervade all the states, especially if an assessment should intervene, while Justice Paterson, who had been a member of the Federal Convention, testified to his recollection that the principal purpose of the provision had been to allay the fear of the Southern states that their Negroes and land should be subjected to a specific tax.

From the Hylton to the Pollock Case

The result of the Hylton case was not challenged until after the Civil War. A number of the taxes imposed to meet the demands of that war were assailed during the postwar period as direct taxes, but without result. The Court sustained successively, as “excises” or “duties,” a tax on an insurance company’s receipts for premiums and assessments, a tax on the circulating notes of state banks, an inheritance tax on real estate, and finally a general tax on incomes. In the last case, the Court took pains to state that it regarded the term “direct taxes” as having acquired a definite and fixed meaning, to wit, capitation taxes, and taxes on land. Then, almost one hundred years after the Hylton case, the famous case of Pollock v. Farmers’ Loan & Trust Co. arose under the Income Tax Act of 1894. Undertaking to correct “a century of error,” the Court held, by a vote of five-to-four, that a tax on income from property was direct tax within the meaning of the Constitution and hence void because not apportioned according to the census.

Restriction of the Pollock Decision

The Pollock decision encouraged taxpayers to challenge the right of Congress to levy by the rule of uniformity numerous taxes that had always been reckoned to be excises. But the Court evinced a strong reluctance to extend the doctrine to such exactions. Purporting to distinguish taxes levied “because of ownership” or “upon property as such” from those laid upon “privileges,” it sustained as “excises” a tax on sales on business exchanges, a succession tax which was construed to fall on the recipients of the property transmitted rather than on the estate of the decedent, and a tax on manufactured tobacco in the hands of a dealer, after an excise tax had been paid by the manufacturer. Again, in Thomas v. United States, the validity of a stamp tax on sales of stock certificates was sustained on the basis of a definition of “duties, imposts and excises.” These terms, according to the Chief Justice, “were used comprehensively to cover customs and excise duties imposed on importation, consumption, manufacture and sale of certain commodities, privileges, particular business transactions, vocations, occupations and the like.” On the same day, in Spreckels Sugar Refining Co. v. McClain, it ruled that an exaction, denominated a special excise tax, that was imposed on the business of refining sugar and measured by the gross receipts thereof, was in truth and excise and hence properly levied by the rule of uniformity. The lesson of Flint v. Stone Tracy Co. was the same. In Flint, what was in form an income tax was sustained as a tax on the privilege of doing business as a corporation, the value of the privilege being measured by the income, including income from investments. Similarly, in Stanton v. Baltic Mining Co., a tax on the annual production of mines was held to be “independently of the effect of the operation of the Sixteenth Amendment…not a tax upon property as such because of its ownership, but a true excise levied on the results of the business of carrying on mining operations.”

A convincing demonstration of the extent to which the Pollock decision had been whittled down by the time the Sixteenth Amendment was adopted is found in Billings v. United States. In challenging an annual tax assessed for the year 1909 on the use of foreign built yachts – a levy not distinguishable in substance from the carriage tax involved in the Hylton case as construed by the Supreme Court – counsel did not even suggest that the tax should be classed as a direct tax. Instead, he based his argument that the exaction constituted a taking of property without due process of law upon the premise that it was an excise, and the Supreme Court disposed of the case upon the same assumption.

In 1921, the Court cast aside the distinction drawn in Knowlton v. Moore between the right to transmit property on the one hand and the privilege of receiving it on the other, and sustained an estate tax as an excise. “Upon this point,” wrote Justice Holmes for a unanimous Court, “a page of history is worth a volume of logic.” Having established this proposition, the Court had no difficulty in deciding that the inclusion in the inclusion in the computation of the estate tax of property held as joint tenants, or as tenants by the entirety, or the entire value of community property owned by husband and wife, or the proceeds of insurance upon the life of the decedent, did not amount to direct taxation of such property. Similarly, it upheld a graduated tax on gifts as an excise, saying that it was “a tax laid only upon the exercise of a single one of those powers incident to ownership, the power to give the property owned to another.” Justice Sutherland, speaking for himself and two associates, urged that “the right to give away one’s property is as fundamental as the right to sell it or, indeed, to possess it.”


The power of Congress to levy direct taxes is not confined to the states represented in that body. Such a tax may be levied in proportion in the District of Columbia. A penalty imposed for nonpayment of a direct tax is not a part of the tax itself and hence is not subject to the rule of apportionment. Accordingly, the Supreme Court sustained the penalty of fifty percent, which Congress exacted for default in the payment of the direct tax on land in the aggregate amount of twenty million dollars was levied and apportioned among the states during the Civil War.

Export Taxation Clause (Art. I § 9 cl. 5)


The prohibition on excise taxes applies only to the imposition of duties on goods by reason of exportation. The word “export” signifies goods exported to a foreign country, not to an unincorporated territory of the United States. A general tax laid on all property alike, including that intended for export, is not within the prohibition, if it is not levied on goods in course of exportation nor because of their intended exportation.

Continuing its refusal to modify its export clause jurisprudence, the Court held unconstitutional the Harbor Maintenance Tax (HMT) under the export clause insofar as the tax was applied to goods loaded at United States ports for export. The HMT required shippers to pay the uniform charge on commercial cargo shipped through the Nation’s ports. The clause, said the Court, “categorically bars Congress from imposing any tax on exports.” However, the clause does not interdict a “user fee,” which is a charge that lacks the attributes of a generally applicable tax or duty and is designed to compensate for government supplied services, facilities, or benefits; and it was that defense to which the government repaired once it failed to obtain a modification of the rules under the clause. But the HMT bore the indicia of a tax. It was titled as a tax, described as a tax in the law, and codified in the Internal Revenue Code. Aside from labels, however, courts must look to how things operate, and the HMT did not qualify as a user fee. It did not represent compensation for services rendered. The value of export cargo did not correspond reliably with the federal harbor services used or usable by the exporter. Instead, the extent and manner of port use depended on such factors as size and tonnage of a vessel and the length of time it spent in port. The HMT was thus a tax, and therefore invalid.

Where the sale to a commission merchant for a foreign consignee was consummated by delivery of the goods to an exporting carrier, the sale was held to be a step in the exportation and hence exempt from a general tax on sales of such commodity. The giving of a bond for exportation of distilled liquor was not the commencement of exportation so as to exempt from an excise tax spirits that were not exported pursuant to such bond. A tax on the income of a corporation derived from its export trade was not a tax on “articles exported” within the meaning of the Constitution.

In United States v. IBM Corp., the Court rejected the government’s argument that it should refine its export-tax-clause jurisprudence. Rather than read the clause as a bar on any tax that applies to a good in the export stream, the government contended that the court should bring this clause in line with the Import-Export Clause and with formant-commerce-clause doctrine. In that view, the Court should distinguish between discriminatory and nondiscriminatory taxes on exports. But the Court held that sufficient differences existed between the export clause and the other two clauses, so that its bar should continue to apply to any and all taxes on goods in the course of exportation.

Stamp Taxes

A stamp tax imposed on foreign bills of lading, charter parties, or marine insurance policies, was in effect a tax or duty upon exports, and so void; but an act requiring the stamping of all packages of tobacco intended for export in order to prevent fraud was held not to be forbidden as a tax on exports.

Apportionment of Representatives Clause (Fourteenth Amendment § 2)


With the abolition of slavery by the Thirteenth Amendment, African-Americans, who formerly counted as three-fifths of a person, would be fully counted in the apportionment of seats in the House of Representatives, increasing as well the electoral vote, and there appeared the prospect that the readmitted Southern states would gain a political advantage in Congress when combined with Democrats from the North. Because the South was adamantly opposed to African-American suffrage, all the congressmen would be elected by whites. Many wished to provide for the enfranchisement of African-Americans and proposals to this effect were voted on in both the House and the Senate, but only a few Northern states permitted African-Americans to vote and a series of referenda on the question in Northern States revealed substantial white hostility to the proposal. Therefore, a compromise was worked out, to effect a reduction in the representation of any state that discriminated against males in the franchise.

No serious effort was ever made in Congress to effectuate § 2, and the only judicial attempt was rebuffed. With subsequent constitutional amendments adopted and the use of federal coercive powers to enfranchise persons, the section is little more than a historical curiosity.

However, in Richard v. Ramirez, the Court relied upon the implied approval of disqualification upon conviction of crime to uphold state law disqualifying convicted felons for the franchise even after the service of their terms. It declined to assess the state interests involved and to evaluate the necessity of the rule, holding rather that because of § 2 the Equal Protection Clause was simply inapplicable.

Income Tax Clause (Sixteenth Amendment)


History and Purpose of the Amendment

The ratification of the Sixteenth Amendment was the direct consequence of the Court’s 1895 decision in Pollock v. Farmers’ Loan & Trust Co. holding unconstitutional Congress’s attempt of the previous year to tax incomes uniformly throughout the United State. A tax on incomes derived from property, the Court declared, was a “direct tax,” which Congress, under the terms of Article I, § 2, and § 9, could impose only by the rule of apportionment according to population. Scarcely fifteen years earlier the Justices had unanimously sustained the collection of a similar tax during the Civil War, the only other occasion preceding the Sixteenth Amendment in which Congress had used this method of raising revenue.

During the years between the Pollock decision in 1895 and the ratification of the Sixteenth Amendment in 1913, the Court gave evidence of a greater awareness of the dangerous consequences to national solvency that Pollock threatened, and partially circumvented the threat, either by taking refuge in redefinitions of “direct tax” or by emphasizing the history of excise taxation. Thus, in a series of cases, notably Nicol v. Ames, Knowlton v. Moore, and Patton v. Brady, the Court held the following taxes to have been levied merely upon one of the “incidents of ownership” and hence to be excises: a tax that involved affixing revenue stamps to memoranda evidencing the sale of merchandise on commodity exchanges, an inheritance tax, and a war revenue tax upon tobacco on which the hitherto imposed excise tax had already been paid and that was held by the manufacturer for resale.

Under this approach, the Court found it possible to sustain a corporate income tax as an excise “measured by income” on the privilege of doing business in corporate form. The adopted of the Sixteenth Amendment, however, put an end to speculation whether the Court, unaided by constitutional amendment, would persist along these lines of construction until it had reversed its holding in Pollock. Indeed, in its initial appraisal of the Amendment, it classified income taxes as being inherently “indirect.” “[T]he command of the Amendment that all income taxes shall not be subject to apportionment by a consideration of the sources from which the taxed income may be derived, forbids the application to such taxes of the rule applied in the Pollock Case by which alone such taxes were removed from the great class of excises, duties and imports subject to the rule of uniformity and were placed under the other or direct.” “[T]he Sixteenth Amendment conferred no new power of taxation but simply prohibited the previous complete and plenary power of income taxation possessed by Congress from the beginning from being taken out of the category of indirect taxation to which it inherently belonged…”

Income Subject to Taxation

Building upon definitions formulated in cases construing the Corporation Tax Act of 1909, the Court initially described income as the “gain derived from capital, from labor, or from both combined,” inclusive of the “profit gained through a sale or conversion of capital assets”; in the following array of factual situations it subsequently applied this definition to achieve results that have been productive of extended controversy.

Corporate Dividends: When Taxable – Rendered in conformity with the belief that all income “in the ordinary sense of the word” became taxable under the Sixteenth Amendment, the earliest decisions of the Court on the taxability of corporate dividends occasioned little comment. Emphasizing that in all such cases the stockholder is to be viewed as “a different entity from the corporation,” the Court in Lynch v. Hornby, held that a cash dividend equal to 24 percent of the par value of the outstanding stock and made possible largely by the conversion into money of assets earned prior to the adoption of the Amendment, was income taxable to the stockholder for the year in which he received it, notwithstanding that such an extraordinary payment might appear “to be a mere realization in possession of an inchoate and contingent interest…[of] the stockholder…in a surplus of corporate assets previously existing.” In Peabody v. Eisner, decided on the same day and deemed to have been controlled by the preceding case, the Court ruled that a dividend paid in the stock of another corporation, although representing earnings that had accrued before ratification of the Amendment, was also taxable to the shareholder as income. The dividend was likened to a distribution in specie.

Two years later, the Court decided Eisner v. Macomber, and the controversy that the decision precipitated still endures. Departing from the interpretation placed upon the Sixteenth Amendment in the earlier cases, i.e., that the purpose of the Amendment was to correct the “error” committed in Pollock and to restore income taxation to “the category of indirect taxation to which it inherently belonged,” Justice Pitney, speaking for the Court in Eisner, indicated that the Sixteenth Amendment “did not extend the taxing power to new subjects, but merely removed the necessity which otherwise might exist for an apportionment among the States of taxes laid on income.” The decision gave the term “income” a restrictive meaning.

Specifically, the Court held that a stock dividend was capital when received by a stockholder of the issuing corporation and did not become taxable as “income” until sold or converted, and then only to the extent that a gain was realized upon the proportion of the original investment that such stock represented. A stock dividend, Justice Pitney maintained, “[f]ar from being a realization of profits of the stockholder,…tends rather to postpone such realization, in that the fund represented by the new stock has been transferred from surplus to capital, and no longer is available for actual distribution…We are clear that not only does a stock dividend really take nothing from the property of the corporation and add nothing to that of the shareholder, but that the antecedent accumulation of profits evidenced thereby, while indicating that the shareholder is richer because of an increase of his capital, at the same time shows [that] he has not realized or received any income in the transaction.” But conceding that a stock dividend represented a gain, the Justice concluded that the only gain taxable as “income” under the Amendment was “a gain, a profit, something of exchangeable value proceeding from the property, severed from the capital however invested or employed, and coming in, being ‘derived,’ that is, received or drawn by the recipient (the taxpayer) for his separate use, benefit and disposal;– that is income derived from property. Nothing else answers the description,” including “a gain accruing to capital, not a growth or increment of value in the investment.”

Although the Court has not overturned the principle it asserted in Eisner v. Macomber, it has significantly narrowed its application. The Court treated as taxable income new stock issued in connection with a corporate reorganization designed to move the place of incorporation. The fact that a comparison of the market value of the shares in the older corporation immediately before, with the aggregate market value of those shares plus the dividend shares immediately after, the dividend showed that the stockholders experienced no increase in aggregate wealth was declared not to be a proper test for determining whether taxable income had been received by these stockholders. The Court viewed the shareholders as essentially exchanging a stock in the old corporation for stock in the new corporation. By contrast, the Court held that no taxable income resulted form the mere receipt by a stockholder of rights to subscribe for shares in the new issue of capital stock, the intrinsic value of which was assumed to be in excess of the issuing price. The right to subscribe was declared to be analogous to a stock dividend, and “only so much of the proceeds obtained upon the sale of such rights as represents a realized profit over cost” to the stockholders was deemed to be taxable income. Similarly, on grounds of consistency with Eisner v. Macomber, the Court has ruled that a dividend in common stock paid to holders of preferred stock, and a dividend in preferred stock paid to holders of common stock, because they gave the stockholders an interest different from that represented by their prior holdings, constituted income taxable under the Sixteenth Amendment.

Corporate Earnings: When Taxable – On at least two occasions the Court has rejected as untenable the contention that a tax on undistributed corporate profits is essentially a penalty rather than a tax or that it is a direct tax on capital and hence is not exempt from the requirement of apportionment. Because the exaction was permissible as a tax, its validity was held not to be impaired by its penal objective, which was “to force corporations to distribute earnings in order to create a basis for taxation against the stockholders.” As to the added contention that, because liability was assessed upon a mere purpose to evade imposition of surtaxes against stockholders, the tax was a direct tax on a state of mind, the Court replied that while “the existence of the defined purpose was a condition precendent to the imposition of the tax liability…[did] not prevent it from being a true income tax within the meaning of the Sixteenth Amendment.” Subsequently, in Helvering v. Northwest Steel Mills, this appraisal of the constitutionality of the undistributed profits tax was buttressed by the following observation: “It is true that the surtax is imposed upon the annual income only if it is not distributed, but this does not serve to make it anything other than a true tax on income within the meaning of the Sixteenth Amendment. Nor is it true…that because there might be an impairment of the capital stock, the tax on the current annual profit would be the equivalent of a tax upon capital. Whether there was an impairment of the capital stock or not, the tax…was imposed on profits earned during a definite period – a tax year – and therefore on profits constituting income within the meaning of the Sixteenth Amendment.”

Likening a cooperative to a corporation, federal courts have also declared to be taxable income the net earnings of a farmers’ cooperative, a portion of which was used to pay dividends on capital stock without reference to patronage. The argument that such earnings were in reality accumulated savings of its patrons that the co-operative held as their bailee was rejected as unsound because, “while those who might be entitled to patronage dividends have…an interest in such earnings, such interest never ripens into an individual ownership…until and if a patronage dividend be declared.” Had such net earnings been apportioned to all of the patrons during the year, “there might be…a more serious question as to whether such earnings constituted ‘income’ [of the cooperative] within the Amendment.” Similarly, the power of Congress to tax the income of an unincorporated joint stock association has been held to be unaffected by the fact that under state law the association is not a legal entity and cannot hold title to property, or by the fact that the shareholders are liable for its debts as partners.

Whether subsidies paid to corporations in money or in the form of grants of land or other physical property constitute taxable income has also concerned the Court. In Edwards v. Cuba Railroad, it ruled that subsidies of lands, equipment, and money paid by Cuba for the construction of a railroad were not taxable income but were to be viewed as having been received by the railroad as a reimbursement for capital expenditures in completing such project. On the other hand sums paid out by the Federal Government to fulfill its guarantee of minimum operating revenue to railroads during the six months following relinquishment of their control by that government were found to be taxable income. Such payments were distinguished from those excluded from computation of income in the preceding case in that the former were neither bonuses, nor gifts, nor subsidies, “that is, contributions to capital.” Other corporate receipts deemed to be taxable as income include the following: (1) “insiders profits” realized by a director and stockholder of a corporation from transaction in its stock, which, was required by the Securities and Exchange Act, are paid over to the corporation; (2) money received as exemplary damages for fraud or as the punitive two-thirds portion of a treble damage antitrust recovery; and (3) compensation awarded for the fair rental value of trucking facilities operated by the taxpayer under control and possession of the government during World War II, for in the last instance the government never acquired title to the property and had not damaged it beyond ordinary wear.

Gains: When Taxable – Although “economic gain is not always taxable as income, it is settled that the realization of gain need not be in cash derived from the sale of an asset.” Thus, when through forfeiture of a lease, a landlord became possessed of a new building erected on his land by the outgoing tenant, the resulting gain to the former was taxable to him in that same year. “The fact that the gain is a portion of the value of the property received by the…[landlord] does not negative its realization…It is not necessary to recognition of taxable gain that…[the landlord] should be able to sever the improvement begetting the gain from his original capital.” Hence, the taxpayer was incorrect in contending “that the Amendment does not permit the taxation of such [a] gain without apportionment amongst the states.” Consistent with this holding, the Court has also ruled that, when an apartment house was acquired by bequest subject to an unassumed mortgage, and several years later was sold for a price slightly in excess of the mortgage, the basis for determining the gain from that sale was the difference between the selling price, undiminished by the amount of the mortgage, and the value of the property at the time of the acquisition, less deductions for depreciation during the years the building was held by the taxpayer. The latter’s contention that the Revenue Act, as thus applied, taxed something that was not revenue, was declared to be unfounded.

As against the argument of a donee that of stock became a capital asset when received and that therefore, when disposed of, no part of that value could be treated as taxable income to said donee, the Court has declared that it was within the power of Congress to require a donee of stock, who sells it at a profit, to pay income tax on the difference between the selling price and the value when the donor acquired it. Moreover, “receipt in cash or property…not [being] the only characteristic of realization of income to a taxpayer on the cash receipt basis,” it follows that one who is normally taxable only on the receipt of interest payments cannot escape taxation thereon by giving away his right to such income in advance of payment. When “the taxpayer does not receive payment of income in money or property[,] realization may occur when the last step is taken by which has already accrued to him.” Hence an owner of bonds, reporting on the cash receipts basis, who clipped interest coupons therefrom before their due date and gave them to his son, was held to have realized taxable income in the amount of said coupons, notwithstanding that his son had collected them upon maturity later in the year.

Income from Illicit Transactions – In United States v. Sullivan, the Court held that gains derived from illicit traffic were taxable under the act of 1921. Justice Holmes wrote, for the unanimous Court: “We see no reason…why the fact that a business is unlawful should exempt it from paying the taxes that if lawful it would have to pay.” Consistent with that decision, although not without dissent, the Court ruled that Congress has the power to tax as income moneys received by an extortioner, and, more recently that embezzled money is taxable income of an embezzler in the year of embezzlement. “When a taxpayer acquires, lawfully or unlawfully, without the consensual recognition, express or implied, of an obligation to repay and without restriction as to their disposition, ‘he has received income which he is required to return, even though it may still be claimed that he is not entitled to retain the money, and even though he may still be adjudged liable to restore its equivalent.’ ”

Deductions & Exemptions – The authorization contained in the Sixteenth Amendment to tax income “from whatever source derived” does not preclude Congress from granting exemptions. Thus, the fact that, “[u]nder the Revenue Acts of 1913, 1916, 1917 and 1918, stock fire insurance companies were taxed upon their income, including gains realized from the sale of other disposition of property accruing subsequent to March 1, 1913,” but were not so taxed by the Revenue Acts of 1921, 1924, and 1926, did not prevent Congress, under the terms of the Revenue Act of 1928, from taxing all the gain attributable to increase in value after March 1, 1913, that such a company realized from a sale of property in 1928. The constitutional power of Congress to tax a gain being well-established, the Court found Congress competent to choose “the moment of its realization and the amount realized”; and “[i]ts failure to impose a tax upon the increase in value in the earlier years…cannot preclude it from taxing the gain in the year when realized…” Congress is equally well-equipped with the “power to condition, limit, or deny deductions from gross incomes in order to arrive at the net that it chooses to tax.” Accordingly, even though the rental value of a building used by its owner does not constitute income within the meaning of the Amendment, Congress was competent to provide that an insurance company shall not be entitled to deductions for depreciation, maintenance, and property taxes on real estate owned and occupied by it unless it includes in its computation of gross income the rental value of the space thus used.”

Also, a taxpayer who erected a $3,000,000 office building on land, the unimproved worth of which was $660,000, and who subsequently purchased the lease on the latter for $2,100,000 is entitled to compute depreciation over the remaining useful life of the building on that portion of $1,440,000, representing the difference between the price and the unimproved value, as may be allocated to the building; but he cannot deduct the $1,440,000 as a business expense incurred in eliminating the cost of allegedly excessive rentals under the lease, nor can he treat that sum as a prepayment of rent to be amortized over the 21-year period that the lease was to run.

Diminution of Loss – Mere diminution of loss is neither gain, profit, nor income. Accordingly, one who in 1913 borrowed a sum of money to be repaid in German marks and who subsequently lost the money in a business transaction cannot be taxed on the curtailment of debt effected by using depreciated marks in 1921 to settle a liability of $798,144 for $113.688, the “saving” having been exceeded by a loss on the entire operation.

The post Federal Taxation & the Sixteenth Amendment (U.S. Constitution Annotated) appeared first on The Last Bastille Blog.

New Discovery About The Moon’s Age Could Rewrite History

By The Rundown Live

New calculations suggest the moon could be a couple hundred million years older than we previously thought!

Our Moon Might Be Made Up Of Many Smaller Moons –
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The Moon Is Probably Older Than We Thought – and Life Could Be Too
“The moon is older than previously thought, pushing back the clock for when conditions on Earth were suitable for life, research published on Wednesday shows. A new analysis of zircon fragments trapped in rock samples retrieved by the Apollo 14 astronauts shows that the moon is 4.51 billion years old, meaning it formed within 60 million years of the birth of the solar system.”

Scientists pinpoint the exact age of the Moon – and it’s older than we thought
“This suggested age makes the Moon a lot older than some recent estimates, which claim our lunar neighbor is 4.3 or 4.4 billion years old. If the results are accurate, it means the giant impact that created the Moon must have occurred fairly early on in the Solar System’s history. The Moon is thought to have formed from the leftover debris of a high-speed collision between Earth and a smaller planet-like object called Theia – and the timing of this event is important for figuring out when life formed here on Earth, too.”

Early formation of the Moon 4.51 billion years ago
“Establishing the age of the Moon is critical to understanding solar system evolution and the formation of rocky planets, including Earth. However, despite its importance, the age of the Moon has never been accurately determined. We present uranium-lead dating of Apollo 14 zircon fragments that yield highly precise, concordant ages, demonstrating that they are robust against postcrystallization isotopic disturbances.”


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    Liberty Under Attack - Oh, You Think Your Vote Matters in a Presidential Election? That's Cute - 10/23/16

    Liberty Under Attack - Oh, You Think Your Vote Matters in a Presidential Election? That's Cute - 10/23/16Tonight’s broadcast of Liberty Under Attack Radio is titled, “Oh, you think your vote matters in a Presidential election? That’s cute.” Kyle Rearden, our creative consultant, joins us to offer his thoughts and conclusions on the subjects at hand. Namely, the fact that the President is not elected by popular vote (that is, the electorate); rather, the President is chosen by the electors. In other words, your vote especially doesn’t matter in Presidential elections, although that is the one that is the most heavily focused on. We also tell you how government officials in the other two branches of government constitutionally gain [more]

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