This report summarizes . At the end of some sentences, 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 ♦ symbols.
Picket Line Annual Report
, the invasion of Iraq began and this camel’s back broke. I quit my job to start an experiment in tax resistance.♦
A review of my goals
My goal was to wash my hands of financial support for the U.S. government. I hoped to do this by reducing my federal income tax burden to zero legally: lowering my income below the tax threshold by taking legitimate deductions and credits.
Tax Resistance
In I missed my goal of avoiding all federal income tax, but in I have succeeded:
I still haven’t solved the problem of FICA (a.k.a. the “self employment” or “payroll” tax). This year I sent $2,501 to the federal treasury in FICA payments and I owe an additional $770 which is due on . I’m toying with the idea of not voluntarily paying any more, but instead making the IRS try to seize the money.♦
Although excise taxes are a very small part of what the government tries to get me to pay, I’ve adopted avoidance and evasion techniques here as well: I’m homebrewing beer to avoid the federal excise tax on alcoholic beverages and I long ago gave up owning a car, so I pay very little federal excise tax on gasoline.
Sustainability
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 sustainable one. I’m happy to report that I’m living sustainably and well at my below-the-tax-line income, though this year I did dip into savings a little bit.
My regular expenses for things like rent, food, health insurance, transportation, utilities and such come to about $1,160 per month — more than . The increase comes mostly because I moved across the bay to a more expensive area. Electricity and gas bills rose this year, too. ♦ ♦
Because I’m self-employed, my health insurance premium is a deductible expense and doesn’t count toward the $15,000 tax-free disposable income that I’m allowed to use under my DON Method of tax resistance (additionally, I qualify for and use a Health Savings Account so my deductible is also tax-free).
Not included in the above graph are any work expenses that I can deduct, and my FICA payments (only half of which I can deduct). My yearly living expenses, therefore, take about $13,150 out of that $15,000. The imposed FICA taxes cost another $3,271, half of which also counts against the $15K. That leaves me about $215 for unexpected expenses, luxuries, charity or savings. This is not really enough wiggle room, especially since I spent money from my savings on two expensive off-budget items this year: a trip to Mexico and a replacement laptop computer.
My 1040: A walkthrough
Here’s how I trimmed my 1040 this year. First, my Total Income:
| Total Income | $22,863 |
|---|---|
| Business income | $23,147 |
| Taxable interest | $639 |
| Ordinary dividends | $76 |
| Capital gain/loss | −$998 |
My business income came from two sources: my contract work and modest profits from sales of The Annotated Hasheesh Eater. The capital loss is from sales of stock in the company I worked for back in the dot-com bubble days.
Now on to my Adjusted Gross Income:
| Adjusted Gross Income | $14,064 |
|---|---|
| Total Income | $22,863 |
| HSA deduction | −$1,950 |
| ½ self-employment tax | −$1,635 |
| Self-employed health insurance deduction | −$1,214 |
| IRA deduction | −$4,000 |
Here, I’m able to take advantage of the $4,000 I put into my traditional IRA and the $1,950 I put into my Health Savings Account, and I can deduct the complete cost of my health insurance premium as well as half of the imposed FICA tax.
The FICA deduction is because I’m self-employed. 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. If you’re self-employed, you pay both halves and it’s all considered income, so the IRS lets you take half of your FICA tax as a deduction here to even things out.
I came out almost $1,000 under my $15,000 AGI ceiling. Even with all of my spreadsheets and planning, I find that it’s difficult to hit the numbers with any precision, and so, like last year, I erred on the side of caution.
Now we go from Adjusted Gross Income to Taxable Income:
| Taxable Income | $5,864 |
|---|---|
| Adjusted Gross Income | $14,064 |
| Standard deduction | −$5,000 |
| Personal exemption | −$3,200 |
The tax on $5,864 is $586. But by using Form 8880, I got a credit for exactly that much, which reduced my federal income tax to zero, QED.
Other Goals
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. For instance, this year I translated some pages into Spanish. ♦ ♦ ♦
The Picket Line has gotten many good reviews and mentions here and there in blog-land.
I have also spread the word elsewhere. For instance, I’ve helped put on workshops held by Northern California War Tax Resistance, I’ve sent many an email to people I thought I might be able to nudge into resistance, and I’ve injected the tax resistance meme into discussions here and there, online and off. ♦ ♦ ♦
I signed up for the VITA program again , and have helped several low-income families take back thousands of dollars from the U.S. Treasury. ♦
One of my goals from was to get a Health Savings Account, which is a good tax shelter, but which requires that you have a certain type of health insurance to qualify. Mission accomplished.
Some of my other goals might be better classified as “hopes” since I don’t really have a concrete plan of action. I would like to see the following:
- That the U.S. anti-war opposition, and those people who like to think of themselves as part of it, either give up on its fair-weather friends in the Democratic Party entirely or at the very least make its support conditional on reciprocal support for an anti-militarist and anti-war agenda. And that libertarian-minded Americans give up the idea that Republican politicians have any interest in a smaller government. ♦ ♦ ♦ ♦ ♦ ♦
- That the war tax resistance culture learns that the technique of resisting income tax by lowering your income doesn’t have to mean a life of crushing poverty. ♦
- That anti-war left and anti-war libertarian groups learn from each other and join forces against their common enemy. (And that the anti-war left adopt some sensible skepticism about government-based solutions to the problems it identifies.) ♦ ♦ ♦ ♦ ♦
- That the anti-war opposition buckle down, take itself more seriously, tolerate less feel-good bullshit, and take a more active stance, insisting on more direct action (war tax resistance would be a great start) and less pleading and protesting. ♦ ♦ ♦ ♦ ♦ ♦ ♦ ♦ ♦
- That the war tax resistance movement utterly renounce the wrong-headed and counterproductive strategy of advocating a “Peace Tax” legislative non-solution to our collective ethical challenge. ♦ ♦ ♦
- That libertarians stop coddling the constitutionalist tax protesters who think their magic spells will cause the IRS to vanish in a puff of smoke. ♦ ♦ ♦
In support of the goals in that list I have mostly just grumbled and kvetched. I have no position of power or influence in any of the groups I’ve mentioned, and so I am just one opinion among many and my opinion is only as powerful as it is persuasive and available, to which end I have made some effort.
The state of the world and the tax resistance movements
The war drags on, and the U.S. torture policy too, undeterred by law and decency, and only ineffectively and rhetorically opposed for the most part. The alleged opposition to the Dubya Squad still hasn’t recovered from tying John Kerry around its neck, and dithers around hoping the news media will uncover a scandal big enough to do their work for them. ♦
Hurricane Katrina exposed the government to be callous and worthless for even the bare minimum of protection and assistance that citizens of a government ought to be able to expect. You’d think that such a thing would be an effective reductio ad absurdum on the whole idea of government, but no: most people simply used the disaster as an excuse to call for more concentrated government authority. ♦ ♦
The war tax resistance movement remains pretty much where it was — a fringe concern, even within the anti-war movement. It failed to capitalize on the publicity from Cindy Sheehan’s declaration that she would resist her taxes. And it continues to be unable to engage people on a large scale, even for such modest projects as the “Hang Up on War” phone tax resistance campaign. ♦
Prospects for the coming year
Assuming no major unexpected expenses, and assuming the tax law stays roughly the same this year, I’m well-positioned to have of living comfortably and well under the income tax line.
I will owe FICA again , but I’m toying with the idea of resisting it illegally by simply withholding it and forcing the government to attempt to seize it from my bank account. I don’t have a good feel yet for how worthwhile this would be, but I’m investigating.
I may decide to become more active in the War Tax Resistance movement in . I have mixed feelings about this. Part of me wants to work harder to promote tax resistance outside of blog-land and to do more in coordination with other people instead of relying on solo projects. But another part of me suspects that I wouldn’t be a very good match for the war tax resistance groups, since my orientation is not particularly leftish (as theirs often is) and I am very much opposed to the Peace Tax Fund idea, which is popular in the war tax resistance movement. I may decide that the best thing I can do for tax resisters is to continue my work on The Picket Line.
There was a lot of noise about social security reform and tax reform , but nothing came of it. Still, there may be some incremental changes that will affect tax resisters like me. Fortunately, most of the changes being proposed, particularly Dubya’s proposal to expand Health Savings Accounts, will be beneficial to us. ♦
The new home solar and energy efficiency tax deductions and credits are a new tool for the tax avoider — having the double benefit of being an immediate tax advantage and of helping reduce your utility bills and therefore helping you live on a lower income. Unfortunately, there doesn’t seem to be a way for renters like myself to take advantage of these credits — it seems you have to own a home. ♦ ♦ ♦
