Protesters see income tax as scam

Protesters see income tax as scam
By MARGOT SANGER-KATZ
Monitor staff
June 11. 2006 10:00AM

In 1993, a friend of Christopher Gronski's gave him a book that changed his life. Gronski, of Wolfeboro, was a glass cleaner: a law-abiding, tax-paying citizen. But Vultures in Eagle's Clothing: Lawfully Breaking Free from Ignorance Related Slavery, he said, showed that the government was pulling the wool over his eyes -that the law didn't require him to pay taxes, and that government officials were keeping this and other injustices from most Americans.

"I read it, and I was outraged. We were filing and paying as anyone is, and I talked to my wife and said, 'What are we going to do? Here's the truth of this,'" he said. "We began this journey, and we've been in correspondence with the IRS ever since."

These days, Gronski is the New Hampshire coordinator for a national organization called We The People, which encourages its members to spread the word about what it considers the legal vulnerabilities of tax law. It's one of dozens of groups across the country that believe the law doesn't require most people to pay the federal income tax and that the government is conspiring to keep that knowledge from being widely disseminated.

"Fear, tradition and ignorance are really what compel people to file and pay," Gronski said.

An IRS agent knocked on Gronski's door once to ask some questions, but so far Gronski has escaped punishment. That's not true of all tax protesters. Lynne Meredith, who wrote the book that persuaded Gronski, was convicted of several tax crimes last year and is serving a 10-year sentence.

Closer to home, Ed and Elaine Brown, a Plainfield couple who have been vocal in their opposition to the income tax, were recently indicted on a series of conspiracy and tax evasion charges. Their trial is scheduled for July 18.

It's hard to track the numbers of people who do not file tax returns for ideological reasons. In part, that's because the IRS is barred by law from tracking protesters and because many non-filers keep their financial matters private. Nationally, experts say, there may be as many as 200,000 people who share these beliefs, or as few as tens of thousands.

"For every one of those individuals who is prosecuted criminally, who publicly advocates their opposition to the income tax on the same ground - for every one person like that, there are 7 to 10 people who agree with the same philosophy but who are just too chicken to break the law," said Daniel Levitas, who chronicled the history of the movement in his book The Terrorist Next Door: The Militia Movement and the Radical Right. "One thing about the tax protest movement is it is not a fringe movement composed of a small segment of fanatics. It has the ability to recruit a large number of people."

In New Hampshire, the mix of traditional distrust of the federal government, dislike of taxation, and the new influx of anti-tax residents through the Free State Project have made it receptive to tax protest ideology, experts say. Using Levitas's reasoning, Granite State protesters could number in the hundreds, if not thousands. Gronski said We The People events in New Hampshire have drawn more than 300 participants. On an internet discussion board at Nhfree.com, a website oriented toward libertarians and free-staters, a thread called "Is it time to stop paying federal taxes?" includes 117 posts, with most writers saying either that they don't pay or are considering stopping.

Of course, not everyone who doesn't pay taxes does so for the same reasons. Some people don't pay for purely selfish reasons, hoping to pocket the money and evade detection. Others choose not to pay because they have moral objections to U.S. policy. According to Peggy Riley, an IRS spokeswoman, the number of nonpaying objectors usually increases during a war.

Dave Ridley, an editor from Keene who moved to New Hampshire as part of the Free State Project, said he pays his taxes, though he finds it tough to stomach some of the federal programs his dollars support.

"Whatever else you can or cannot say about Ed Brown, he is not paying for torture," Ridley said. "He is not paying for shooting people in Iraq. He's not paying for the welfare state. And 60 percent of us are, painfully, paying for those things."

Tax protesters are usually drawn into the movement through some combination of greed and political protest, but they differ from other non-filers in believing that they have a legal right not to pay. They use a variety of theories to explain their position. Some common contentions are:

• The income tax is "voluntary,"because of language on the 1040 instruction booklet.

• State citizens are not U.S. citizens under the constitution and need not pay.

• Federal reserve notes don't count as income because our currency is not backed by gold or silver.

• Filing a return violates the Fourth Amendment's guarantees against unlawful searches.

• Filing a return might violate a filer's Fifth Amendment guarantee against incriminating himself.

• The 16th Amendment, which authorizes the federal income tax, is invalid because it was improperly ratified.

They also tend to share a view the government entraps people into paying, though they have different ideas about how to avoid liability. Some protesters say it's okay to file a tax return filled with zeros, or to claim so many exemptions that an employer doesn't have to withhold payroll taxes. Others say the simple act of filling out a tax return means you're entering a contract with the government. (They avoid filing any forms but instead send letters filled with questions and objections to the IRS.) These competing theories are reconciled inside the movement by an agreement that tax law has been made needlessly complex in an effort to keep people from investigating and finding the holes.

"I have looked at all that stuff, too, and the deeper you dig, the less it makes sense," said Russell Kanning, an editor of the Keene Free Press, who said he doesn't pay federal income taxes or the school portion of his property tax bill. Kanning said he initially stopped filing because he objected to the Iraq war, but now he's beginning to think his behavior is legally, as well as morally, correct. "They let us all be misinformed."

If the IRS is in the right, many protesters argue, why won't officials answer their legal questions? Ed Brown said he'd be willing to pay if the IRS provided a persuasive response to the questions he's been sending over the last decade. Gronski also said his letters have gone unanswered.

Robert Seaman, a We The People member from Concord, said he's been investigating tax laws for nearly 20 years and he's troubled by the government's unwillingness to answer questions. He files and pays his taxes, he said, because he's not sure whether he's legally obliged to do so, but he suspects that he may be exempt.

"Obviously, there's something they don't want the general public to know about," he said.

But tax lawyers and other experts say none of the tax protest arguments has a firm legal basis. The tax code may be long and confusing, they say, but it's clear that state citizens can be taxed, that labor can be taxed and that the system isn't voluntary. They say there's plenty of evidence in court decisions and in IRS publications to answer protester questions, but activists simply reject most evidence that doesn't support their views.

Daniel Evans, a Philadelphia estate lawyer who's made a hobby of following tax protest cases, said it's nearly impossible to persuade protesters their arguments may be flawed. He maintains a website with common tax protest arguments and explanations about why they aren't true.

"I spend a certain amount of time trying to argue with these people one-on-one, and it's like trying to nail Jell-O to the wall," he said. "It's just one argument after another after another, and after awhile, you wonder if there are that many arguments, if the income tax is so defective, if there are 20 or 30 reasons - what is the reason that it has survived for the last 100 years?"

IRS officials dismiss tax protest arguments as "frivolous." The agency has published a 66-page document reviewing common claims and attempting to refute them using case law.

"We try to explain the tax law to these people, but some of them still don't believe that the tax laws do apply to them," said Riley, of the IRS.

For believers, there's a wealth of published material supporting tax protest views. Information on the "truth" about the income tax abounds on the internet. Many sites rely on detailed legal or historical analysis, and some are penned by former IRS agents or lawyers. There are also several popular books, such as Meredith's. A new film, which premiered at the Cannes film festival this year, challenges the legitimacy of the federal income tax and is being screened across the country before receptive audiences.

Most protesters do a tremendous amount of research, said Chip Berlet, a senior analyst at the Cambridge, Mass., think tank Political Research Associates. And the nature of their views - namely, that the establishment is hiding the truth - make them suspicious of any information from establishment sources.

"There's a tremendous amount of literature that these people rely on for their beliefs, and the fact that it's been debunked doesn't matter,"he said. "Because the debunking is part of the conspiracy."

One thing tax protest leaders can't say anymore is that the government never prosecutes their peers. In the late 1990s, the IRS enforcement budget was slashed, after well-publicized Senate hearings decried the "Gestapo" nature of agency investigations. The resulting slack enforcement meant many prominent tax protesters could say they hadn't been filing for years and had never been arrested. But the Bush administration has significantly boosted the agency's enforcement budget.

Experts who watch the movement say they've seen a significant crackdown in the past few years, and many national figures, such as Lynne Meredith, have gone to jail. The IRS enforcement website lists dozens of recent arrests and convictions for tax evasion, willful failure to file and other tax crimes. According to the IRS, the agency wins more than 90 percent of its cases.

"In the last two years, the IRS has just smashed tax protesters across the board," said Heidi Beirich of the Southern Poverty Law Center, which monitors hate and extremist groups, including tax protesters. "It's like every two weeks, someone's going down for this type of stuff."

William Morse, the assistant U.S. attorney handling the Brown case, said a handful of New Hampshire anti-tax activists have been successfully prosecuted in recent years. Two years ago, Steven Swan of Auburn, who was showing people how to fill out returns with zeros, was convicted of preparing false returns and sentenced to seven years in prison. Swan tried unsuccessfully to sue the man who taught him the technique, for fraud. Other ideological non-filers have been convicted and sentenced to shorter terms.

But to many protesters, prosecutions aren't evidence that their ideas are incorrect, they're just a sign that the government is trying to intimidate them.

"I have friends, people that I've met in this movement, that are incarcerated," Gronski said. "And it breaks my heart. Because you know it's just immoral. We have people who are whistleblowers against the federal government, and they are being incarcerated for taking a stand "

The experts say the movement is at a crossroads, but it's too soon to tell where it is headed. Despite the ideological commitment of many protesters, previous enforcement crackdowns have been effective, said Beirich.

"They're taking out their leadership one by one," she said. "How are they going to sustain this? They're going to be crippled."

But another historically important force points in a different direction. In periods of heightened government secrecy and surveillance, the numbers of conspiracy theorists has grown. Berlat said that we may be living in such a period, where government policy could feed extremist fantasies.

"I'm seeing more and more people persuaded that there's some kind of massive conspiracy by the government," he said.

Must not have looked too hard

Anti-Tax Law Evasion Schemes - Law and Arguments (Section I)

I. The Voluntary Nature of the Federal Income Tax System

A. Contention: The filing of a tax return is voluntary.

Some assert that they are not required to file federal tax returns because the filing of a tax return is voluntary. Proponents point to the fact that the IRS itself tells taxpayers in the Form 1040 instruction book that the tax system is voluntary. Additionally, the Supreme Court's opinion in Flora v. United States, 362 U.S. 145, 176 (1960), is often quoted for the proposition that "our system of taxation is based upon voluntary assessment and payment, not upon distraint."
The Law: The word "voluntary," as used in Flora and in IRS publications, refers to our system of allowing taxpayers to determine the correct amount of tax and complete the appropriate returns, rather than have the government determine tax for them. The requirement to file an income tax return is not voluntary and is clearly set forth in Internal Revenue Code §§ 6011(a) , 6012(a) , et seq., and 6072(a). See also Treas. Reg. § 1.6011-1(a).
Any taxpayer who has received more than a statutorily determined amount of gross income is obligated to file a return. Failure to file a tax return could subject the noncomplying individual to criminal penalties, including fines and imprisonment, as well as civil penalties. In United States v. Tedder, 787 F.2d 540, 542 (10 th Cir. 1986), the court clearly states, "although Treasury regulations establish voluntary compliance as the general method of income tax collection, Congress gave the Secretary of the Treasury the power to enforce the income tax laws through involuntary collection . . . . The IRS' efforts to obtain compliance with the tax laws are entirely proper."
Relevant Case Law:
Helvering v. Mitchell, 303 U.S. 391, 399 (1938) - The U.S. Supreme Court stated, "[i]n assessing income taxes, the Government relies primarily upon the disclosure by the taxpayer of the relevant facts . . . in his annual return. To ensure full and honest disclosure, to discourage fraudulent attempts to evade the tax, Congress imposes [either criminal or civil] sanctions."
United States v. Tedder, 787 F.2d 540, 542 (10 th Cir. 1986) - The court upheld a conviction for willfully failing to file a return, stating that the premise "that the tax system is somehow 'voluntary' . . . is incorrect."
United States v. Richards, 723 F.2d 646, 648 (8 th Cir. 1983) - The court upheld conviction and fines imposed for willfully failing to file tax returns, stating that the claim that filing a tax return is voluntary "was rejected in United States v. Drefke, 707 F.2d 978, 981 (8 th Cir. 1983), wherein the court described appellant's argument as "an imaginative argument, but totally without arguable merit."
Woods v. Commissioner, 91 T.C. 88, 90 (1988) - The court rejected the claim that reporting income taxes is strictly voluntary, referring to it as a "tax protester type" argument, and found Woods liable for the penalty for failure to file a return.
Johnson v. Commissioner, T.C. Memo. 1999-312, 78 T.C.M. (CCH) 468, 471 (1999) - The court found Johnson liable for the failure to file penalty and rejected his argument "that the tax system is voluntary so that he cannot be forced to comply" as "frivolous."

B. Contention: Payment of tax is voluntary.

In a similar vein, some argue that they are not required to pay federal taxes because the payment of federal taxes is voluntary. Proponents of this position argue that our system of taxation is based upon voluntary assessment and payment.
The Law: The requirement to pay taxes is not voluntary and is clearly set forth in section 1 of the Internal Revenue Code, which imposes a tax on the taxable income of individuals, estates, and trusts as determined by the tables set forth in that section. (Section 11 imposes a tax on the taxable income of corporations.) Furthermore, the obligation to pay tax is described in section 6151 , which requires taxpayers to submit payment with their tax returns. Failure to pay taxes could subject the noncomplying individual to criminal penalties, including fines and imprisonment, as well as civil penalties.
In discussing section 6151, the Eighth Circuit Court of Appeals stated "when a tax return is required to be filed, the person so required 'shall' pay such taxes to the internal revenue officer with whom the return is filed at the fixed time and place. The sections of the Internal Revenue Code imposed a duty on Drefke to file tax returns and pay the . . . tax, a duty which he chose to ignore." United States v. Drefke, 707 F.2d 978, 981 (8 th Cir. 1983).
Relevant Case Law:
United States v. Bressler, 772 F.2d 287, 291 (7 th Cir. 1985) - The court upheld Bressler's conviction for tax evasion, noting, "[he] has refused to file income tax returns and pay the amounts due not because he misunderstands the law, but because he disagrees with it . . . . [O]ne who refuses to file income tax returns and pay the tax owing is subject to prosecution, even though the tax protester believes the laws requiring the filing of income tax returns and the payment of income tax are unconstitutional."
Schiff v. United States, 919 F.2d 830, 833 (2d Cir. 1990), cert. denied, 501 U.S. 1238 (1991) - The court rejected Schiff's arguments as meritless and upheld imposition of the civil fraud penalty, stating "[t]he frivolous nature of this appeal is perhaps best illustrated by our conclusion that Schiff is precisely the sort of taxpayer upon whom a fraud penalty for failure to pay income taxes should be imposed."
Packard v. United States, 7 F. Supp. 2d 143, 145 (D. Conn. 1998) - The court dismissed Packard's refund suit for recovery of penalties for failure to pay income tax and failure to pay estimated taxes where the taxpayer contested the obligation to pay taxes on religious grounds, noting that "the ability of the Government to function could be impaired if persons could refuse to pay taxes because they disagreed with the Government's use of tax revenues."
United States v. Gerads, 999 F.2d 1255, 1256 (8 th Cir. 1993) - The court stated that "[taxpayers'] claim that payment of federal income tax is voluntary clearly lacks substance" and imposed sanctions in the amount of $1,500 "for bringing this frivolous appeal based on discredited, tax-protestor arguments."

Note: This page contains one or more references to the Internal Revenue Code (IRC), Treasury Regulations, court cases, or other official tax guidance. References to these legal authorities are included for the convenience of those who would like to read the technical reference material. To access the applicable IRC sections, Treasury Regulations, or other official tax guidance, visit the Tax Code, Regulations, and Official Guidance page. To access any Tax Court case opinions issued after September 24, 1995, visit the Opinions Search page of the United States Tax Court.

Index to Tax Evasion Schemes

Unfortunately, the very complexity of this nation's income tax law invites evasion and question by many by its perceived inequities and uneven treatment.

In review I doubt the nation's current tax law could be designed to be worse, even done deliberately to go out of the the way to aggrevate the American citizen more.

Adam Smith, the father of modern economic thought, had a lot to say about taxation in his still great book Wealth of Nations pp. 561-64. Here is what he had to say about bad taxes:

1. A tax was bad that required a large bureaucracy for administration.
2. A tax was bad that "may obstruct the industry of the people, and discouraged them form applying to certain branches which might give maintenance and employment to great multitudes. While it obliges the people to pay, it may thus diminish, or perhaps destroy, some of the funds which might enable them more easily to do so."
3. A tax was bad that encouraged evasion. "The law, contrary all the ordinary principals of justice, first creates the temptation, and then punishes those who yield to it. "Evasion is also bad, says Smith, because it tends to "put an end to the benefits which the community might have received from the employment of their capitals."
4. A tax is bad that put the people through "odious examinations of the tax-gatherers, and exposes them to much unnecessary trouble, vexation, and oppression...It is in one or other of these four different ways that taxes are frequently so much more burdensome to the people than they are beneficial to the sovereign"

Or do you figure a Quota based on the value of land would be better.

We tossed that one out with the Articles of Confederation with the ratification of the Constitution.

Federalist #21:

The principle of regulating the contributions of the States to the common treasury by QUOTAS is another fundamental error in the Confederation. Its repugnancy to an adequate supply of the national exigencies has been already pointed out, and has sufficiently appeared from the trial which has been made of it. I speak of it now solely with a view to equality among the States. Those who have been accustomed to contemplate the circumstances which produce and constitute national wealth, must be satisfied that there is no common standard or barometer by which the degrees of it can be ascertained. Neither the value of lands, nor the numbers of the people, which have been successively proposed as the rule of State contributions, has any pretension to being a just representative.

It is a signal advantage of taxes on articles of consumption, that they contain in their own nature a security against excess. They prescribe their own limit; which cannot be exceeded without defeating the end proposed, that is, an extension of the revenue. ... Impositions of this kind usually fall under the denomination of indirect taxes, and must for a long time constitute the chief part of the revenue raised in this country.
Those of the direct kind, which principally relate to land and buildings, may admit of a rule of apportionment. Either the value of land, or the number of the people, may serve as a standard. The state of agriculture and the populousness of a country have been considered as nearly connected with each other. And, as a rule, for the purpose intended, numbers, in the view of simplicity and certainty, are entitled to a preference.

Why is there a rebate at all?

Better than leaving open the inevitable wrangle among lobbiests and Congress over what should be taxed and what should be exempted from a retail sales tax.

Tax all new goods and all services, no exceptions. Rebate taxes based on necessity level of expenditure to everyone equally.

and do away with all the "prebates," which adds more bureaucracy to the Social Security administration by issuing out checks every month?

Seeing as the SS administration & VA and other federal programs are doing so through the U.S. treasury quite successufully already, don't see where much additional bureacracy is actually necessary. The only thing SSA need do is validate social security numbers (as they should be doing regards illegal alien employment anyway today) and authorize Treasure to send check or transfer funds electronically to bank accounts as is done now for a broad sector of the population now.

Wouldn't it make more sense to have a strict rate of say 15%

I see, make a retail sales tax at 15% and keep the 15% SS/Medicare tax is better in your view.

That was offered a couple of sessions of Congess ago by Rep. Tauzin. Replace income taxes but left the federal payroll taxes in place. Dropped out of sight, you want to bring that one back again?

Personally I didn't go for it as we wouldn't be able to ultimately prohibit taxation of income by constitutional amendment, if we were to keep any remanant of an income tax around, such as the employee side of the SS/Medicare tax.

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