While no one can say our U.S. government is perfect, this country for the most part goes very far in treating its citizens with fairness, justice, and respect for human dignity. For this reason, I have no problem filing my yearly income tax return and paying my fair share of tax for the support of government. Where reform of bad income tax law is needed, I firmly believe it should not be done through defying the law but through responsible legal and/or political action.
Having stated this disclaimer, in my effort to promote tax law reform I now turn my attention to the scandalous way in which income tax law is imposed on working Americans. Concerning the area of income tax law reform that has taken up my attention for several decades, and by way of providing important background, I must begin this discussion with considering the legal status and nature of the human labor workers sell to employers in exchange for a wage or salary.
My final objective is to demonstrate how, through a fictitious definition of human labor under income tax law, American workers are denied the right to deduct living expenses from their gross income. By living expenses, I mean expenses for such things as food, shelter, clothing, and proper health maintenance. I am aware that there are varying opinions as to whether or not it makes sense to allow these deductions. But the real issue (or question) being raised here is why does our government have to rely on a legal fiction to achieve its end of denying workers the benefit of these deductions.
As a commodity, human labor can be given away in humanitarian service or sold in the capitalist market in exchange for monetary compensation. Because such labor has exchangeable value, it comes under the legal definition of “property” that can be owned. The following are a few among numerous legal authorities that confirm the truth of this statement:

1. The 1979 edition of Black’s Law Dictionary defines property as everything that can be owned, “corporeal or incorporeal, tangible or intangible, visible or invisible, real or personal; everything that has an exchangeable value” (Black’s Law Dictionary, 1979 ed., s.v. “Property”).

2. In the late 1980s, Alvin H. Brown was Service Director of the Operations
and Maintenance Department of the Chattanooga City School System. Under him were city workers who provided repair and maintenance work for school buildings. Brown was convicted of embezzling city property and served jail time for his crime. The city “property” Brown embezzled was the labor of his workers that was purchased by the city of Chattanooga in exchange for the wages the city was paying them. Following is how the Tennessee Court of Criminal Appeals described Brown’s crime of embezzling city workers labor property:

“The time and labor provided by the employees of the Chattanooga City School System were purchased with public funds and thus became property, with an easily determined value, which belonged to the city. The appellant converted the proceeds of those public funds to his own use to repay favors and create a more comfortable home for himself and his girl friend. The statute was sufficiently clear to have placed the appellant, or any other public official, on notice that the embezzlement of the labor of employees of the State of Tennessee, or any county or municipality therein, is a criminal act.” State v. Brown, 791 S.W. 2d 31, 32 (1990).

4. Citing Adam Smith (1723-1790), the renowned Scottish economist who wrote the classic work on capitalism, Wealth Of Nations (1776), U.S. Supreme Court Justice Field expressed the following relative to human labor in a concurring opinion: “It has been well said that, ‘The property which every man has in his own labor, as it is the original foundation of all other property, so it is the most sacred and inviolable. The patrimony of the poor man lies in the strength and dexterity of his own hands . . .’” Butchers’ Union v. Crescent City Livestock, 111 U.S. 746, at 757 (1884).

With these authorities as background, we now consider Section 212 of income tax law that refers to “property” used for the production of income. This section of the Tax Code provides as follows:

“EXPENSES FOR PRODUCTION OF INCOME. In the case of an individual, there shall be allowed as a deduction all the ordinary and necessary expenses paid or incurred during the taxable year—
(1) for the production or collection of income;
(2) for the management, conservation, or maintenance of property held for the production of income; or
(3) in connection with the determination, collection, or refund of any tax.”

In the late 1970s, William and Beverly Reading of O’Fallon, Missouri, decided to challenge in U.S. Tax Court an IRS claim of income tax due for 1975. The Readings essentially claimed that they had a legal right to deduct their living expenses (such as food, shelter and proper health maintenance) to arrive at a calculation of taxable income. They based this on the idea that these expenses were necessary to make them mentally and physically fit to labor in the production of income. As such, these were their “costs of doing labor,” similar to the “cost of goods sold” concept that is recognized in commercial sales transactions.
The Tax Court filed its ruling in this case on April 21, 1978. Since then, the ruling has come to represent the inauguration of an affirmative commitment on the part of the federal courts to deny all American workers the ability to avail themselves of what Section 212 of the Tax Code provides.
Why should this be so? After all, we have already seen that there is solid legal precedent affirming the property nature of labor. Since every employed American worker sells their labor property for the production of income, and living expenses are ordinary and necessary expenses “for the production of income” and for “the conservation, or maintenance of property held for the production of income,” then why are workers denied the benefits of the law at Section 212 (1) and (2)?
The Reading Tax Court agreed that, in itself, it is not unreasonable to claim that living expenses are ordinary and necessary for the maintenance and conservation of labor to produce income. The court said, “Of course we recognize the necessity for such items as food, shelter, clothing, and proper health maintenance. They provide both the mental and physical nourishment essential to maintain the body at a level of effectiveness that will permit its labor to be productive” (Reading v. Commissioner, 70 T.C. at 733-734). So what’s the problem?
In answer, the Tax Court said that by comparing their cost of doing labor with the cost of goods sold concept, the Readings indicated a “failure to acknowledge the difference between people and property” (70 T.C. at 733). Thus, the court first began by erroneously defining the problem. The issue being raised in the case was not people in relation to property but, instead, labor in relation to property.
In any case, the court finally concluded that the reason why workers, such as the Readings, could not avail themselves of the benefits of Section 212 was because “the sale of one’s labor is not the same creature as the sale of property” (70 T.C. at 734). Giving his own private definition that stripped human labor of its legal nature as property, the Tax Court Judge wrote that human labor, not being property, is merely “behavior performed by human beings in exchange for compensation” (70 T.C. at 733).
Obviously, either through ignorance, incompetence, or questionable ethical practice, the court did not trouble itself to explain why an abundance of legal authorities contradict this bizarre and fictitious definition of labor as non-property “behavior.” Yet, this is the legal fiction that is being used by our government to deny workers, from janitors to high level executives, the right to deduct their living expenses.