This page summarizes . (Links to previously posted Picket Line pages expand on things I mention. You can follow these links by clicking on the “♦” symbols.)
Picket Line Annual Report
, the U.S. attacked Iraq. For me this was the last straw, so I started what I then called “an experiment” in tax resistance so that I would no longer feel as complicit.♦ My goal was to stop financially supporting the U.S. government.
I hoped at first to do this legally by lowering my income below the federal income tax line, so I quit my job to start my own small business and I began taking advantage of additional legal tax deductions and credits. This has turned out to be a successful method of legally avoiding federal income tax, as well as a rewarding way of making a living, and I continue to operate this way today. (Also, as I work from home by default, I’ve been less impacted than many by the recent pandemic measures.)
However, I have been assessed a self-employment tax most of these years (this is different from the income tax but it also goes to the federal government). In I decided to stop paying this tax as well. I have not found a useful way to do this legally, and so I have simply refused to write the check. Because of this I have been accumulating an unpaid tax bill which, along with penalties & interest added by the IRS (minus a bit that they’ve managed to seize from me over the years, and some that is uncollectible due to the statute of limitations) now adds up to something in the neighborhood of $75,000.
My two-track strategy of legally avoiding income tax while non-legally refusing to pay self-employment tax is somewhat awkward to explain, but has been working for me so far.
Over the years, the IRS has on a few occasions levied bank accounts, with some success: They have seized about $6,000 of the total of about $86,000 that I have refused to pay. I don’t have a fail-safe plan to hide my assets, so I expect that the IRS may continue to seize money when they find it, though lately they haven’t shown much enthusiasm for the hunt. They haven’t taken anything at all from me in several years, or even seem to have tried, though they still send me pleading letters from time to time.♦♦♦♦
Their recent lack of action may mean they’ve run out of easy seizure targets, or it may mean my overdue amount falls under the threshold at which they start trying harder (budget cuts and other crises have caused them to back off on their enforcement).♦ They may also just be biding their time, as the statute of limitations deadline on the oldest remaining unpaid amount doesn’t run out .
In , the IRS filed a formal tax lien against me in our local court system. They updated that lien last year, and again this year.♦♦ The lien has not yet had any practical effect on my life or my resistance.
The total amount I owe at this point is well over the threshold at which the IRS is supposed to notify the State Department that I ought to be forbidden a passport and perhaps ought to have my passport revoked. It took the agency longer than I expected, but they finally submitted this notification.♦ This means that the State Department could revoke my passport at any time, and in any case is not supposed to allow me to renew it when it expires.
My 2019 Federal Tax Resistance
After all the dust settled, it turned out that I “owed” and refused to pay $5,631 in federal self-employment tax.
I want to continue to resist taxes over the long term, so it is important (if I want to stick to my below-the-tax-line method) that my expenses remain low enough that my income-tax-free income is sustainable. was a good year for me income-wise. I brought in more than $39,000 in profit from my business.
However, my expenses have risen somewhat in recent years. Rents in my part of California have been rising fast, and rent now amounts to over 60% of my annual expenses. More than half of the taxable dollars I spend go just to keeping a roof over my head. I didn’t do the sort of close, day-by-day look at my spending as I have done in years past, but as best as I can estimate, my regular expenses for things like rent, utilities, food, and transportation that I must pay for out of below-the-tax-line income came to about $1,525 per month, or over $18,000 a year:
Not included in the above pie chart are any business expenses that I can deduct from my taxable income, most healthcare expenses (which I pay from my pre-tax Health Savings Account), my self-employment tax assessment (half of which I can deduct), or money I’m saving for retirement (which I do in tax-deferred accounts).
My transportation budget is very low because where I live it’s pretty easy to get around on bike and so I don’t own a motor vehicle and rarely need to use one. I’ve been learning to do my own bike repairs and maintenance at the local “bike kitchen,” which also keeps the costs low.
I had a lot of health expenses last year (surgery to have an artificial disc put in my spine), which maxed out the deductible on my high-deductible insurance plan. But because I had been making the maximum tax-free contribution to my Health Savings Account every year, I was able to tap that money to pay for it without having to modify my budget elsewhere. My non-insured health-care expenses are mostly for my tiny Obamacare premium and my YMCA gym membership.
My yearly living expenses take most of my “under the tax line” budget, leaving me about $1,000 in wiggle room for unexpected expenses or splurging. If I were to 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 $5,600 or so of expenses, half of which also counts against the under the tax line budget (and would put me over my limit).
My 1040: A walk-through
I haven’t filed my taxes yet, as the IRS still (less than a month from the filing deadline, and a month and a half after the official opening of tax filing season) hasn’t produced all of the necessary forms! But I do my tax returns on a spreadsheet before I fill them out, so I have a pretty good idea of what they’ll look like. Here’s how my 1040 worked out this year. First, my Total Income:
My business income came from two sources: my contract work as a technical writer, and sales of my books.
Now on to my Adjusted Gross Income:
|Adjusted Gross Income||$19,120|
|½ self-employment tax||−$2,816|
|Obamacare tax credit||−$12|
, I put away $14,408 for retirement and $3,500 for future medical spending (or for retirement, if I stay healthy). Together, those savings represent almost 45% of my earned income.
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 the half paid by your employer 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 of the tax, so the IRS lets you take half (roughly) of your self-employment tax as an income tax deduction to even things out (even if you’re refusing to pay that tax like I am).
My Adjusted Gross Income is below the $19,250 threshold that allows me to get the maximum rate on the Retirement Savings Contributions Credit. This is the target I try to hit in order to get my federal income tax down to zero.
Now we go from Adjusted Gross Income to Taxable Income:
|Adjusted Gross Income||$19,120|
|Qualified Business Income deduction||−$1,384|
In past years there was both a standard deduction and a personal exemption. The last big tax law doubled the standard deduction and eliminated the personal exemption (so in practical terms, for me anyway, changed very little). But the law also added a new 20% Qualified Business Income deduction: 20% of that portion of my income that comes from self-employment (but capped at 20% of what my taxable income would be without the deduction).
This is meant to level the playing field for those of us who are self-employed or run small businesses and declare our business earnings on our personal income tax forms. The last big tax law cut corporate income taxes dramatically, so it was thought that we non-corporate business entities needed a break, too.
But it means that I get a bit of a tax break that my employee-brethren, who are doing much the same sort of work that I’m doing as an independent contractor, don’t qualify for. That doesn’t make a whole lot of sense to me, but it works in my favor. (The law does have a provision that eliminates the credit for service providers like myself, but that provision does not apply until I reach a certain minimum income threshold, which I’m not close to.)
Anyway, from there, my tax owed:
|Retirement Savings Contributions Credit||−$553|
As I usually do, I will file my tax return showing these accurate amounts, but I will not include a check for the tax due.
I hope to encourage people to resist taxes and I try to make The Picket Line a good resource for people who are resisting or considering it. I’ve also been doing a little one-on-one tax resistance counseling as part of NWTRCC’s network of counselors.
Last year I wrote up “Aristotle’s Guide to Anarchy” in which I tried to imagine how Aristotle might extend his Politics to cover the anarchist polis.
Much of my activism of late has become much less focused on “politics” and on the national/global scale, and much more focused on direct action at the local scale. I’ve been volunteering regularly for the local food bank’s gleaning project at one of our farmers’ markets, doing in-custody programming for people imprisoned at the local jail through a local non-governmental charity, and helping to supervise a mobile shower trailer program serving homeless people in our community. (All of this is much easier for me because of the reduced and more-flexible work hours that are part of my tax resistance, and so can be seen as another form of tax redirection.♦) Alas, all of these programs are now on hold because of the ongoing pandemic.
I’ve also been putting a lot of energy over the past several months into getting a peer-supported personal growth group up and running, one that is inspired by Aristotelean virtue ethics, but I haven’t written up my results here yet. It’s been encouraging, but also slow to build momentum. I hope to have something to share hereabouts before too long.
The state of the world and the tax resistance movements
Trump is certainly the president America deserves. All of the things that prompted me to turn my back on the government and refuse its demands for help are getting worse day by day. I’m astonished at how willing Americans seem to be to go along with it, or to just indulge in complaining about it, without questioning their loyalty to the system.
I remain hopeful that the empire of the United States will self-destruct under the idiocy and incompetence of its rulers and the narcotic complacency of its subjects. Trump may very well be the last president this country has to suffer through, and if he finally puts a bullet through the skull of this old rabid republic it may not be pleasant, but you can’t say it’s premature.
The IRS continues to be troubled by greater responsibilities but reduced funding, making the agency ever less capable and more deserving of contempt.♦♦♦ This and other factors, such as the Trump family’s own notorious evasion of taxpaying, are leading to the collapse of the credibility of the federal tax system, and there is hope that the long-standing norm of taxpayer compliance will come to an end.♦
It’s hard to know at this stage what the effects of the ongoing pandemic and reactions to it will be. Certainly U.S. government revenue will take a big hit. The talk of Trump’s last tax package “paying for itself” through increased prosperity was never very convincing even back when it looked like there was going to be some increased prosperity. And now the politicians are desperate to “stimulate” the economy by injecting money into it and taking less money out of it. However they go about it, this will increase the debt, and the proportion of the budget that goes to service that debt (though plummeting interest rates may soften the blow). I haven’t done the math, or noticed anywhere smarter and better-informed people are doing it for me, and of course there are still many unknowns, but it seems safe to say that the government will likely come out of this in a financially weaker position.
Tax resistance movements
Good-hearted Americans are alarmed and disgusted by Trumpism, and some even allow themselves to consider tax resistance as a response, whether in protest, in nonviolent resistance, or in conscientious objection. As yet, this is largely a simmering chorus of “why we oughta” tweets, but it could yet coalesce into something real. Few people with stature seem to want to lead this parade, though, and those without stature seem to be waiting for a leader to follow, so things are currently stalled. And I expect most progressive activism to be diverted onto the worthless electoral politics track until that travesty is behind us.
The American war tax resistance movement is limping along and only occasionally shows signs of life. Last year the Mennonite Church U.S.A. voted to reinvigorate a war tax resistance redirection fund for its resisters.♦
Globally, however, tax resistance is more vibrant. The gilets jaunes movement in France has been remarkably powerful. It forced the government there to rescind a new tax, and has destroyed about three-quarters of the automated traffic-fine-generating machines in the country.♦ The heartening outbreak of traffic ticket machine destruction spread across Europe and has now claimed thousands of robot bandit victims. Spanish war tax resisters won a legal battle when a court agreed they had no criminal intent and so should not have been subject to criminal charges for their refusal.♦ Nicaraguan tax resistance leader Irlanda Jerez was released from prison and is continuing to agitate from exile.♦ American anti-abortion tax resister Michael Bowman got the courts to concede that it’s no crime to make it less convenient for the IRS to seize your money.♦ Other tax strikes have broken out from Hong Kong to Congo, Lebanon to Pakistan, and I’ve kept on top of them as best I can from this side of the language barrier.
Prospects for the coming year
Assuming no major unexpected expenses or windfalls, and assuming no more big changes to the tax law, I’m well-positioned to live comfortably and well under the income tax line , though I will likely again “owe” (and refuse to pay) self-employment tax.
I’ve budgeted for the possibility that the IRS may try to seize money from me for unpaid back taxes, so in case this happens, it won’t be a disaster.
So on to of what no longer seems like an experiment so much as a way of life.