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, and 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 entirely legally by lowering my income below the federal income tax line. So I quit my job to start my own small business where I could closely regulate my income, 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. (As I work from home by default, I’ve also been less impacted than many by the pandemic measures, so that’s been a nice bonus.)
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 $80,000.
My two-track strategy of legally avoiding income tax while non-legally refusing to pay self-employment tax is somewhat awkward to explain, but it has been working for me so far.
Over the years, the IRS has on a few occasions levied my bank accounts, with some success: They seized about $6,200 of the total of about $94,500 that I have refused to pay. I don’t have any fail-safe plan to hide my assets, so 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 each year thereafter.♦♦ The lien has not yet had any practical effect on my life or my resistance; it has so far mostly meant getting a lot of junkmail from companies promising they can settle my tax debt on the cheap. I requested copies of my credit reports this year to see if the tax lien registered there, and to my surprise, there was no mention of it at all.
, when another year of my tax debt become uncollectible due to the statute of limitations, I wrote a check for that amount to the local food bank as a charitable donation, to celebrate.♦
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. So far they have not revoked my passport.
My 2020 Federal Tax Resistance
After all the dust settled, it turned out that I “owed” and refused to pay $5,374 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 $38,000 in profit from my business. On the other hand, my most steady client over the past several years cut me loose, spooked by a new California law that threatens companies who contract out to consultants like myself rather than doing work in-house. So I’m on the hunt for new clients and have not had much income in the past several months. I applied for and received two of the federal government’s Paycheck Protection Program forgiveable loans (and I also got two of the “stimulus” payments, with a third apparently on the way), which helped.♦ It’s a little astonishing that the government is willing to fork over money to a tax scofflaw like me, but I’m not complaining. (This additional money is also not taxable income, so you won’t see it in the accounting below.)
“In fact, I quietly declare war with the State, after my fashion, though I will still make use and get what advantages of her I can, as is usual in such cases.” ―Thoreau, Resistance to Civil Government
My day-to-day expenses stayed pretty steady through most of last year. Rents in my part of California are high, and rent 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. 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 $1,500 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).
I’ve just finished moving to a new place across town. At my new home many of the utilities are bundled into the rent, whereas before almost none of them were. So I had been spending about $112/month on utilities, and now that’s around $52. This makes it difficult to compare years over time. In different years more or less of my utility budget has been hidden in my rent budget.
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 high health expenses last year (ankle surgery), 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. However, high health expenses in the past two years have tapped most of that account, so I no longer have enough in it to meet my deductible. If I’m unlucky enough to have high health expenses again this year, I might have to dip into the rest of my budget to pay for them. But, thank goodness, I managed to stay out of Covid’s clutches until I was able to get vaccinated.
My yearly living expenses take most of my “under the tax line” budget, leaving me about $1,400 in wiggle room for unexpected expenses (this year, moving expenses took a hunk of that) or splurging. This year, with tax-free PPP loans and stimulus payments, I had a lot of extra wiggle room on top of that, but that’s not something I can count on regularly.
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 $5,500 or so of expenses, half of which also counts against the under the tax line budget. I’ve adopted the practice of making charitable donations to match the amount of my back taxes that become uncollectible due to the statute of limitations, but I cannot do that within my budget: I have to dip into savings and may ultimately have to prematurely tap my Roth account if I want to keep that up year after year. If my oldest tax debt is voided by the statute of limitations next month, I hope to write a check for $3,856 to some charity or other to celebrate.
My 1040: A walkthrough
Here’s how my 1040 worked out this year. First, my Total Income:
My business income came mostly from two sources: my contract work as a technical writer, and sales of my books. (I also sold a couple of limericks to the Center for a Stateless Society, meaning I can check off “become a professional poet” on my bucket list.)♦
Now on to my Adjusted Gross Income:
|Adjusted Gross Income||$18,815|
|½ self-employment tax||−$2,693|
|Obamacare tax credit||−$12|
|new above-the-line charity giving deduction||−$300|
, I put away $12,750 for retirement and $3,550 for medical spending. Together, those savings represent a third 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 $19,500 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||$18,815|
|Qualified Business Income deduction||−$1,283|
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||−$513|
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 researched and wrote the article “Can You Keep War Bonds Out of Your Socially-Responsible Investments?” for American war tax resisters.
I also gave a talk on how tax resistance campaigns succeed by deploying a variety of tactics for the #MoneyRebellion project of the Extinction Rebellion environmental activist group in the U.K.
Much of my activism of late has become much less focused on “politics” on the national/global scale, and much more focused on direct action at the local scale. I’d been volunteering regularly for the local food bank’s gleaning project at one of our farmers’ markets and doing in-custody programming for people imprisoned at the local jail through a local non-governmental charity, but both of those programs went into hibernation during the pandemic. However, I’ve been helping to supervise a mobile shower trailer program serving homeless people in our community, and that’s still going strong. (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.♦)
I continue to explore virtues-based interventions as ways to improve our political situation:
I think the longer, harder, more subtle project of helping people improve is a more reliable path to a better future than trying to impose wise policies on them from on high. If people become braver, wiser, more just, and more honorable, public policy will follow their lead. If people become more cowardly, foolish, grasping, and disreputable, conniving politicians will lead them by the nose.
To this end, I’ve been doing write-ups on a variety of virtues with the aim of learning what makes them valuable, how they interact, and, most importantly, how to go about becoming more skillful in practicing them.
The state of the world and the tax resistance movements
Trump was certainly the president America deserves, and, without taking anything away from him in the evil-and-incompetent department, I’ve got to give him kudos for doing more to discredit and damage the U.S. government than I could do in my wildest dreams.
The IRS continues to be troubled by greater responsibilities but reduced funding, compounded by the difficulties the pandemic has caused for everyone, making the agency ever less capable and more deserving of contempt.♦ The agency put nearly all of its enforcement processes on hold for months, and still hasn’t really gotten back up to what-passed-for-speed.♦ These 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.
Tax resistance movements
Good-hearted Americans were alarmed and disgusted by Trumpery, but hardly any were willing to actually resist it in ways more vigorous than voting or complaining. These days I hear threats of civil disobedience and tax resistance coming from the crazy Trumpist cult of personality more than from the left — though still, it’s only noise so far and may just amount to letting off steam the same way the #Resistance twitter-toyed with the idea of tax refusal without being willing to commit. In a way, though, I think it would be hilarious if after four years of listening to progressives wring their hands about Trump being the Next Hitler™, we finally see a grassroots resistance campaign emerge from the fantasy Qniverse of the increasingly unhinged American right-wing in response to… supervillain Joe Biden, the hapless, middle-of-the-road empty suit who promises to make evil banal again.
The American war tax resistance movement is limping along and only occasionally shows signs of life. Globally, however, tax resistance is more vibrant. For example, the gilets jaunes movement in France was inspirational, and the impetus it gave to the grassroots campaign of destroying roadside tax machinery — not just in France, but across Europe and indeed around the world — has been a weirdly-neglected story of mass noncompliance and successful direct action.♦
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 prepared 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. And, if they fail again, I’m also prepared to dip into my savings to give to charity in celebration.
So on to of what no longer seems like an experiment so much as a way of life.