Not Written for You: The Income Tax Hidden in Plain Sight
Part 2 of 13
Who Is the "Employee"?
From Part 1, we know that when Congress uses the word "includes" in a definition, the listed items create a class. Only things within that class are covered.
Now let's read the definition that controls all of payroll withholding.
Read the listed items slowly. An officer of the United States. An employee of the United States. An elected official of the United States. The same three categories, repeated for a State, for political subdivisions, for D.C., and for any agency of any of the above. The final sentence adds an officer of a corporation — which, in the context of the class established by the preceding items, refers to officers of government corporations and federally chartered entities, not officers of private companies.
Every item describes a person working for a government entity. Not one describes a person in the private sector. The class is government workers under the legislative jurisdiction of Congress.
A side note: "State" here does not mean Ohio or Texas. Congress defines "State" for employment taxes at § 3121(e)(1) to mean D.C., Puerto Rico, the Virgin Islands, Guam, and American Samoa. Federal territories. When Congress wants to include the 50 states, it knows how. Here, it didn't.
The Question Nobody Asks
If that is the definition of "employee" that controls payroll withholding, why is the company you work for withholding from your paycheck?
Because no one there has ever read this definition.
Try it yourself. Ask the person who runs payroll at your company to cite the statute that requires withholding. They will tell you it's the law. Ask them to show you where. They will not be able to. Walk them to § 3401(c) and ask them to read it out loud. Then ask a single question: can you find anything in this definition that describes a private-sector worker?
Expect a long pause. The person who has been withholding from your pay for years has never once read the statute that supposedly commands it.
Employer and Wages Follow
Now the definition of "employer":
The first clause is the operative one: an employer is the person for whom someone works "as the employee of such person." There is no independent definition. The meaning of employer rests entirely on the meaning of employee, which we just read. If the employee is a government worker, the employer is a government entity. The second clause addresses a narrow circumstance where the person paying the wages is not the same as the person directing the work, but it does not change the class.
And "wages":
Wages are pay to an "employee" from his "employer." Both terms are already defined. Substitute the actual definitions and wages become: remuneration paid by a government entity to its government workers.
Three definitions. Each depends on the others. Together they form a closed loop. Not one word in that loop describes a welder in Ohio or a nurse in Texas working for a private company.
Some will point to a Treasury regulation, 26 CFR § 31.3401(c)-1, that appears to broaden the definition. A regulation cannot overrule the statute it serves. That is not a controversial legal principle. It is the most basic one.
Next: All three of those definitions point in one direction. Treasury Decisions 8734 and 8881 confirm where. Both deal exclusively with income paid to foreign persons.
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