Clues the (Underground) Economy is Thriving

Some bits and pieces from here and there:

  • There’s “something fishy” in the latest economic statistics. Paychecks are down (thanks to a boost in the payroll tax), incomes haven’t been rising in other ways to make up for it, bank account savings aren’t rising, and people aren’t charging more on their credit cards or taking out more loans… and yet, consumer spending is doing just fine, as if somehow the money was materializing anyway. What’s the trick? Bernard Baumohl of the Economic Outlook Group thinks it’s the underground economy:

    Severe recessions have historically driven jobless Americans into the shadow economy, We suspect the destructive nature of the last downturn and the prolonged weak recovery pushed a record number of people into that murky world of cash transactions.

  • While the IRS tries in vain to convince Congress not to cut its budget (after all, they whine, we’re the part of the government that brings in money for y’all to spend!), members of Congress are enjoying one of their favorite sports: pretending they’re on the side of the little guy against the wasteful government bureaucrats in the tax office. Lately this has taken the form of House Ways and Means Oversight Subcommittee chairman Charles Boustany, Jr., demanding that the IRS turn over for the subcommittee’s investigation copies of training videos the agency produced in its own presumably extravagant production studio — “a Star Trek parody and a skit based on the television sitcom Gilligan’s Island.”
  • Hostility towards the IRS can provoke auto-immune complications that are as disruptive as overt threats. Case in point: In Bloomington, Illinois, an IRS distribution center was cordoned off while a bomb squad of state and Department of Homeland Security specialists navigated a robot through the parking lot to retrieve and inspect two suspicious packages. The process took five hours, and eventually revealed that the suspicious packages contained… tax forms.
  • You may have heard that the island nation of Cyprus is the latest nation whose government has resorted to drastic measures to try to raise money from a reluctant population to pay off international creditors. That government took the odd step of proposing the simple and arbitrary step of shaving a percentage off of every bank account in the nation and using that money to pay for the bailout. Cypriots reacted by storming the ATMs to try to withdraw their money.

From the Binghamton Press, :

Pacifist Must Pay U.S. Taxes

by Robert E. Hoyt
Special Press Correspondent

 The U.S. tax court says you have to pay income taxea even if you are a pacifist.

The court has ordered Abraham J. Muste of New York, ordaneed Presbyterian minister and member of the Society of Friends, or Quakers, to pay up $1,165 in back taxes and $407 in penalties for .

Muste contended that the First Amendment protected his religious beliefs — including opposition to war — and that he therefore was not required to pay taxes that would pay for atomic bombs, armies, and other war-making potential.

The First Amendment says: “Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof…”

Group Official

From , when he retired, Muste was executive secretary of the Fellowship of Reconciliation, a group opposed to participation in, or preparation for, war.

Muste made no secret of his failure to pay taxes. Prior to he paid, although he had “qualms of conscience.” In he decided that emphasis on such things as hydrogen bombs made it “irrational” for him — against his conscience — to pay money to the government when he estimated that about 60 per cent of all tax funds were being used to prepare for war.

Once his personal decision was made, Muste informed the Internal Revenue Service. He wrote each year, just before filing deadline. In , he wrote in part:

“I am impelled to take this course — by my Christian convictions, by conscience, and by my love of country…

Held Incompatible

“I would… have to reject war as a means, even if the end seemed saner and worthier than that with which the world is today confronted. I am unable to regard participation in war… as compatible with the teaching and spirit of Christ, to whom… I owe an allegiance prior to my allegiance to any… state…

“The budget and energies and policies of the Federal Government are today being rapidly sucked info a total commitment to war preparation. I fear that as the drive toward war gathers momentum, less and less weight attaches to the… protests…

“I consider, therefore, that I am obligated to withdraw… from… the war-making aspects of the state, to make as nearly total a protest as possible…”

Earned $16,543

His earnings over totaled $16,543.

The tax court ruled that there is no contradiction of the First Amendment in Muste’s case.

It quoted from a Supreme Court decision that said, in part: “The power to tax is the one great power upon which the whole national fabric is based… It is not only the power to destroy, but it is also the power,to keep alive…”

The court noted, also, that conscientious objectors are exempt from military service because of an act of Congress, not on constitutional grounds.

Rejected by Court

In his brief, Muste also contended that he could not be compelled to pay war-purpose taxes “by virtue of the Nuremberg principles of international law” which, he said, would make him — as an individual — liable for a violation of international law.

The court said “there is no principle of international law which… relieves citizens from their tax obligations… or which imposes upon them individual responsibility for the use made of tax revenue.”

IRS had assessed Muste an additional $652 for alleged fraud. The court held there was no evidence of fraud. The court did allow assessments under revenue code sections covering “willful neglect” of the duty of paying taxes.

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