This report summarizes . I’ve put links to previous Picket Line entries that expand on some of the topics I mention at the end of the paragraphs in which those topics are raised. You can follow these links by clicking on the ♦ symbols.
Picket Line Annual Report
, the invasion of Iraq began and I quit my job to start an experiment in tax resistance. ♦
A review of my goals
My goal was to wash my hands of any financial support for the U.S. government. I hoped to do this by reducing my federal income tax burden to zero, legally, by lowering my income below the tax threshold and by taking legitimate deductions and credits.
Tax Resistance
For , due to an accounting snafu, I missed my goal of avoiding all federal income tax, but in I succeeded:
I still haven’t solved the problem of FICA (the Social Security & Medicare or “payroll” taxes). I sent almost $2,500 to the federal treasury in FICA contributions. ♦
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 am refusing to pay the federal excise tax on my phone bill, and I’m homebrewing beer to avoid the federal excise tax on alcoholic beverages. I long ago gave up owning a car, so at least directly 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. ♦
My regular expenses for things like rent, food, health insurance, transportation, utilities and such come to a little over $900 a month. Because I’m self-employed, the 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. (In very good news, I signed up for a new health insurance plan recently that costs less than half as much as my old plan and, I believe, qualifies for Health Savings Accounts — another useful tax-shelter).
My yearly living expenses, therefore, take about $9,425 out of that $15,000. The FICA taxes I paid cost another $2,500, half of which also counts against the $15K. That leaves me $4,300 for unexpected expenses, luxuries, charity or savings. Which is good, because my bicycle needs repair or replacement, and I’m itching for another vacation south-of-the-border some time soon.
My 1040: A walkthrough
Here’s how I trimmed my 1040 this year. First, my Total Income:
| Total Income | $21,411 |
|---|---|
| Business income | $17,625 |
| Taxable interest | $223 |
| Ordinary dividends | $31 |
| Capital gain/loss | −$2,985 |
| IRA distributions | $6,517 |
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 that I bought in the company I worked for back in the dot-com bubble days.
The “IRA distributions” is a neat trick I tried for the first time . Since I didn’t earn as much as I could have earned tax-free , I slid some money 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 zero, that’s not a problem. And because I’m theoretically paying the tax on that money now, I won’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 | $13,206 |
|---|---|
| Total Income | $21,411 |
| IRA deduction | −$3,000 |
| ½ self-employment tax | −$1,245 |
| Self-employed health insurance deduction | −$3,960 |
Here, I’m able to take advantage of the $3,000 I put into my traditional IRA , and I can deduct the complete cost of my health insurance premium as well as half of what I paid in FICA.
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 payment as a deduction here to even things out.
Even with the traditional-to-Roth IRA swap, I still came out more than $1,500 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.
Now we go from Adjusted Gross Income to Taxable Income:
| Taxable Income | $5,256 |
|---|---|
| Adjusted Gross Income | $13,206 |
| Standard deduction | −$4,850 |
| Personal exemption | −$3,100 |
The tax on $5,256 is $526. 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 also hope to encourage other people to consider tax resistance as a tactic. I hope that The Picket Line is a good resource for people doing tax resistance and for those considering it, and I keep trying to make it more useful. Over the last year, in addition to regular content updates, I’ve redesigned the site’s look & feel, added a search feature, enabled comments, created a comprehensive topic outline, and included a new RSS feed.
The Picket Line has gotten many good reviews and mentions here and there in blog-land, and also got a thumbs-up in Claire Wolfe’s new book The Freedom Outlaw’s Handbook. ♦
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. ♦
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. I have just managed to sign up for such a health insurance plan, but haven’t managed to get a HSA yet, so I’ll have to carry over this goal to . ♦
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. ♦ ♦ ♦
- 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 dilemma. ♦ ♦
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, with little to show for it.
I failed to sign up for the VITA program . My many calls, faxes and emails to the VITA coordinators in my new neighborhood went mostly unanswered, and I have been too lazy and budget-conscious to commute to more needy or well-organized programs outside of my home base. ♦
State of the world
The state of the nation and the world is no more encouraging now than it was . Most discouraging to me has been the revelations about the U.S. torture policy, and the lack of outrage that has resulted. When John Yoo, one of its legal architects, said that the American public had endorsed and ratified the policy by reelecting its authors, I think he was probably right. ♦
The U.S. opposition, such as it is, mostly took off in deference to John Kerry, who, though he is pro-war, thoroughly unconcerned about the torture policy, and wants to expand the military even more than Dubya does, uh, well, there’s a good side too, I think, but I forget what it was supposed to be. Kerry spent his campaign successfully rehabilitating the reputation of the Vietnam War and bragging about how many weapons programs he’d voted to fund, and still lost. ♦
So now the anti-war opposition is trying to scrape the splattered shame from itself and pick up where it left off. There are signs of an emerging campaign of sustained direct action concentrated against military recruitment, which is perhaps the war’s weakest pillar of support. ♦
The U.S. opposition can take heart (and notes) from the emergence of “People Power” movements from Eastern Europe to the Middle East. ♦ ♦
Is the beast beginning to starve? Certainly the national debt is gargantuan, but then again, so is the budget. The beast’s appetite and diet don’t seem much affected by its reduced income and increased debt. As long as Dubya can continue to tour the country promoting a Social Security reform plan that depends on massive borrowing, the beast seems in no danger of imminent collapse, alas.
The war tax resistance movement remains pretty much where it was — a fringe concern, even within the committed anti-war movement. It has been 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 , I’m well-positioned to have another year of living comfortably and well under the income tax line. I will owe FICA , and as yet have no plan to avoid it.
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 turned down an opportunity to apply to be part of the National War Tax Resistance Coordinating Committee’s Administrative Committee, but I may decide to take more organizational responsibilities in a local war tax resistance group. Or I may decide that the best thing I can do for tax resisters is to continue my work on The Picket Line.
I’ve stopped trying to give anything like comprehensive coverage to the U.S. torture policy here at The Picket Line, and plan to return this blog to a tighter focus on tax resistance.
The social security reform and tax reform churn may change the game for folks like me. In particular, if the unlikely becomes actual and the federal income tax is replaced with or supplemented by a consumption tax, then tax resisters will need a new set of strategies.
I plan to move soon from my current low-rent home to some other place nearby. I’m including in my search rooms with higher rents than I’m currently paying, which will change the expenses I’ve reported here (though not by enough to put me at risk of either being non-sustainable or above the tax line).
