Not Written for You: The Income Tax Hidden in Plain Sight
Part 9 of 13
No Chapter for You
The Internal Revenue Code organizes its withholding provisions into chapters. Each chapter addresses a specific collection mechanism for a specific class of persons. This is not accidental. Congress writes chapters the way an architect draws rooms — each one serves a defined purpose.
There are two withholding chapters that name their subject class in the title.
Chapter 3 is entitled "Withholding of Tax on Nonresident Aliens and Foreign Corporations." Its first section, § 1441, commands that all persons having the control, receipt, custody, disposal, or payment of any items of income of any nonresident alien individual shall deduct and withhold a tax. The class is named. The mechanism is specified. There is no ambiguity.
Chapter 4 is entitled "Taxes to Enforce Reporting on Certain Foreign Accounts." It addresses withholding on payments to foreign financial institutions and certain other foreign entities. Again, the class is named.
Then there is Chapter 24. Its title is "Collection of Income Tax at Source on Wages." It does not name its class in the title the way Chapters 3 and 4 do. But the definitions that control it — "employee" at § 3401(c), "employer" at § 3401(d), and "wages" at § 3401(a) — establish the same class we identified in Part 2: government officers and employees paid by government entities. And as we saw in Part 8, the Secretary of the Treasury places § 3402, the operative command of Chapter 24, inside Treasury Decisions that address exclusively the payment of U.S. source income to foreign persons.
What Is Missing
There is no withholding chapter for American citizens earning domestic income in the private sector.
No chapter title names them. No section within any chapter commands withholding from them. No definition within the withholding provisions describes them. No Treasury Decision has ever directed that withholding be performed upon them.
If Congress intended to collect income tax from every working American through payroll withholding, it would have written a chapter — or at least a section — that says so. Congress wrote Chapter 3 for nonresident aliens. It wrote Chapter 4 for foreign accounts. It wrote Chapter 24 for a defined class of employees. It did not write a chapter for the plumber, the teacher, the welder, or the accountant earning a living in the private sector within a state of the Union.
This is not an oversight in a statute that has been amended thousands of times over more than a century. It is the structure of the code operating exactly as written.
The Dog That Didn't Bark
In law, what is not said can be as significant as what is said. Congress knows how to write a statute that applies to every American. When it wants to, it does.
Consider the Selective Service registration statute:
Notice the language. It names the class: "every male citizen of the United States." It separately addresses non-citizens: "every other male person residing in the United States." It states the obligation: "shall...present himself for and submit to registration." No defined terms are needed. No cross-references. No interpretive chain. A citizen reading that sentence knows immediately whether it applies to him.
Now open Chapter 24 of the Internal Revenue Code. The word "citizen" does not appear anywhere in the chapter. The word "American" does not appear. The persons subject to withholding are identified only through defined terms — "employee," "employer," "wages" — and those definitions, as we saw in Parts 2 and 5, describe a closed class of government workers paid by government entities.
When Congress writes a law for American citizens, it says so. In the withholding chapters, it did not.
Every withholding mechanism in the code traces back to the same class of persons: foreign persons with U.S. source income, or those who handle income on their behalf. The absence of a chapter for domestic private-sector Americans is not a gap in the law. It is the law.
Next: If the withholding chapters don't name private-sector Americans, does the return they are told to file? Eleven Treasury Decisions answer that question — and they all say the same thing.
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