This report summarizes my seventh year of tax resistance. In some places I’ve put links to previous Picket Line entries that expand on some of the topics I mention. You can follow these links by clicking on the diamond (♦) symbols.
Picket Line Annual Report
, the U.S. invasion of Iraq began. For me, this was the last straw and so I quit my job to begin an experiment in tax resistance.♦
A review of my goals
My primary goal was to stop financially supporting the U.S. government. I hoped to do this legally by reducing my federal income tax burden to zero — lowering my income below the tax line by taking legitimate deductions and credits.
In I missed my goal of avoiding all federal income tax, but in each of the following tax years I succeeded. However, I have had a self-employment tax assessment during most of these years (this is different from the income tax). In I decided to stop voluntarily paying this tax as well, and so I have been charged penalties & interest in addition to the assessed tax. The IRS has periodically attempted to levy bank accounts to seize these back taxes, with mixed success.♦♦
This two-track strategy of legally avoiding the federal income tax while illegally refusing to pay the self-employment tax is an awkward and perhaps untenable compromise, but for me it currently seems to be the best alternative.
I owed about $1,350 in federal taxes, all from the self-employment tax.
The IRS has seized about $6,200 of the total of about $12,000 that I have refused to pay. I don’t have a fail-safe plan to hide my assets, so I expect that the IRS will continue to seize money when they can find it. I have applied to the War Tax Resisters Penalty Fund to get some relief from the penalties & interest and to help distribute the credit for my tax resistance among more people. Last year they sent me a reimbursement check.♦
Although excise taxes are a very small part of what the government tries to get me to pay, I’ve adopted avoidance techniques here as well: for instance, I long ago gave up owning a car, so I pay very little federal excise tax on gasoline (at least directly), I don’t smoke and so I don’t pay tobacco taxes, and I homebrew beer, hard cider, and sake so as to avoid the federal excise tax on alcoholic beverages. (I’ve recently adopted the habit of drinking no taxed alcoholic beverages unless I’m at someone else’s home or on those rare occasions when I’m at a bar or restaurant.)
I want to resist taxes over the long term, and so it is important that my expenses remain low enough that my tax-free income is also a good and sustainable one.♦♦ , like , was lean income-wise, but I managed to keep my spending in line with my income.
My regular expenses for things like rent, utilities, food, transportation, and such come to about $1,250 per month. Because I’m self-employed, my health insurance premium is a deductible expense that doesn’t count toward the $16,000 tax-free disposable income that I’m allowed to use under my DON Method of tax resistance (in addition, I use a Health Savings Account so my health insurance deductible is also tax-free).
Not included in the above pie chart are any work expenses that I can deduct or my self-employment tax assessment (half of which I can deduct). My yearly living expenses, therefore, take about $15,000 out of that $16,000. If I budget-in the imposed self-employment tax, which I don’t intend to voluntarily pay, but which I expect may be seized, that would come to another $4,000 or so, at least in a year in which I earn more and don’t have good refundable tax credits, half of which also counts against the $16,000 and would leave me above-the-line.
So things are tight, and I’ve adopted some more measures to reduce my costs in reaction to this accounting, including trimming my drinks-of-vice budget, having my hair cut by my sweetie instead of by the local barber, scaling back our Netflix subscription, and other such nickle-and-dime things that add up over the course of the year.
My 1040: A walkthrough
Here’s how my 1040 worked out this year. First, my Total Income:
My business income came from two sources: my contract work and sales of my books. The capital losses are attributable to sales of mutual funds and stocks.
The “IRA distributions” line-item is a neat trick I first used in .♦ Since I didn’t earn as much as I could have earned tax-free last year, I slid $6,500 over from my traditional IRA into a Roth IRA. In order to do this, I have to pay taxes on that money this year at my current rate of taxation (that’s why it counts as part of my “Total Income” above). But because my tax rate is negligible, that’s not a problem. And because I’m theoretically paying the tax on that money now, I shouldn’t have to pay any taxes on it when I withdraw the money on retirement.
Now on to my Adjusted Gross Income:
|Adjusted Gross Income||$11,595|
|½ self-employment tax||−$761|
|Self-employed health insurance deduction||−$1,942|
, because I earned so little, I didn’t put any money into retirement accounts or into my Health Savings Account, so I have fewer deductions here than usual and I’m not using the retirement savings tax credit as I have been in past years.
The self-employment tax deduction works like this: When you work for someone else, your employer pays half of your FICA and the other half comes out of your paycheck. This is just silly accounting for the most part, but it does mean that half of your FICA doesn’t count as your income and so you don’t pay income tax on it (isn’t that rich — they charge you income tax on money you never saw because it was taken as your contributions to social security — and then they may charge you income tax again on your social security benefits if you’re lucky enough to live so long!). If you’re self-employed, you pay both halves and it’s all considered income, so the IRS lets you take half of your self-employment tax as a deduction here to even things out (yes, even if you’re refusing to pay it like I am).
I wasn’t as concerned about the $16,000 ceiling , because that has to do with the retirement savings tax credit, which I’m not using. But as it turns out, my earned income was so low that even if I did owe some small amount of income tax, my total tax (income tax + self employment tax) was bound to be small. (I’m treating the Making Work Pay credit as though it were deducted from the income tax, though it really applies to either or both of the income and self-employment taxes.)
Now we go from Adjusted Gross Income to Taxable Income:
|Adjusted Gross Income||$11,595|
And from there, my tax owed:
|Making Work Pay credit||−$400|
Hopefully I got it right the first time this time around. , the IRS made three corrections to my tax return, two of which were screw-ups on my part (the other one I still don’t understand). These corrections were in my favor (I didn’t end up owing more), but were embarrassing nonetheless.♦
I hope to encourage other people to consider tax resistance as a tactic and I hope that The Picket Line is a good resource for people doing tax resistance and for those considering it. I keep trying to make it more useful.
I published Against War and War Taxes, a slim volume of classic American Quaker writings promoting war tax resistance. It was meant as a less-expensive and more focused companion to the larger and more expansive American Quaker War Tax Resistance.♦ My Don’t Owe Nothin’ how-to guide was published also, though not under my direction.♦♦
I have also spread the word elsewhere. I’ve sent many an email to people I thought I might be able to nudge into resistance, I’ve injected the tax resistance meme into discussions online and off, and I agitate for tax resistance at peacenik gatherings and even Tea Party events. I’ve also done a bit of one-on-one counseling to help new resisters hit the ground running.♦♦
I volunteered for the VITA program again, helping people get their tax refunds.♦
At the Spring NWTRCC National Gathering in Virginia I helped convince the group not to endorse the fatally flawed Religious Freedom Peace Tax Fund Act.♦ I’ve also put in a lot of time trying to bring the nwtrcc.org site into the 21st century (this project is still in progress but we’re hoping for a roll-out later ).
The state of the world and the tax resistance movements
The wars drag on, and the new administration is maintaining America’s repulsive policies on war, Big Brotherish snooping, impunity for torturers, and so forth. The thievery and mendacity of the politicians and the wizards of financial corruption that eat from the same troughs in Washington seems to know no bounds.
The war tax resistance movement (and the anti-war movement in general) is in the doldrums, deflated by the election of Obama who, though he has surrounded himself with hawks in his cabinet, increased the size and expense of the military, quickly ramped up the Afghanistan war, endorsed the Patriot Act, and given a free pass to the nation’s torturers, seems to still be the darling of many of the progressives who make up the bulk of the ostensible peace movement. That said, the less-intoxicated anti-war progressives are starting to reach out to their paleocon and libertarian counterparts in the hopes of birthing a real alternative to the militarist consensus — a new development I’m keeping a close eye on.
While much of the peace movement has become complacent about supporting the government now that the Democrats are in charge, tax resistance has started bubbling up from other quarters. I’m hearing a lot more talk about tax resistance by people in the pro-life movement and by people who just feel like the government isn’t spending their hard-earned money wisely at a time when families are being forced to cut back. The “TEA Party” could at some point surprise us by returning to its grassroots and becoming a tax resistance movement rather than a Republican campaign commercial.
Prospects for the coming year
Assuming no major unexpected expenses, and assuming the tax law doesn’t undergo any radical changes, I’m well-positioned to have another year of living comfortably and well under the income tax line, though I will “owe” SECA again . I’ve budgeted for the possibility that the IRS will continue to seize money from me for unpaid back taxes, so in case this happens, it won’t slow me down.
I continue to research historical examples of tax resisters and tax resistance campaigns, and, some time when I’m not so busy with paying gigs and hunting for more of the same, I may try to distill what I’ve learned into a book of advice for tax resistance organizers, in the hopes that the campaigns of tomorrow can learn from the successes, failures, and challenges of those that came before.
On to of what is looking less and less like an experiment and more and more like a lifestyle.