How you can resist funding the government → a survey of tactics of historical tax resistance campaigns → choose a small, easy, high-participation tax to resist → phone tax resistance → the death of the long distance phone service excise tax → the refund program

If you’re paying the federal excise tax on long-distance or cellular telephone service, it’s way past time to stop. For one thing, it’s an easy tax to resist and I’m sure you don’t want me to start in on my rant about why you should resist paying something.

But for another thing, a number of circuit courts have ruled that the IRS has been collecting this tax erroneously all along! A while back, the Secretary of the Treasury said if they lost in court again they’d give up. They lost again.

And the Wall Street Journal reports that sure enough, they’re giving up. They’re even considering handing out refunds — but what are the odds those refunds will ever end up back in your pocket? They’ll probably just go back to the phone companies. You’re better off just cutting ’em off now.

Update: I was too cynical. The IRS did come up with a plan to give some of this miscollected tax back to us as income tax refunds. See The Picket Line for 25 May 2006.

The flat-rate long distance excise tax, which has been declared unlawful in every jurisdiction whose courts have taken it up, but which has been stubbornly enforced by an IRS sticking its fingers in its ears and singing “tra-la-la” is finally dead, and it’s taking the tax on other varieties of long-distance phone service with it.

The IRS today formally gave up the fight (PDF).

Not only will they stop collecting the tax, but they plan to refund the tax collected over the last three years — $15 billion — with interest, even. They’re still working on the details, but there will be a line on your 1040 next year on which you can apply for a refund. If you didn’t save all of your phone bills for the last three years, they’ll even have a formula you can use to estimate how much they owe you absent the documentation.

This does not apply to the excise tax on local phone service. But when he announced this change of policy, Treasury Secretary John Snow took the opportunity to “call on Congress to terminate the remainder of this antique tax by repealing the excise tax on local service as well.”

Time to open up my Big Vat of Miscellany:

Catholics approve of torture somewhat more than Protestants and Evangelicals, while “secular” people are more likely to think it’s never justified. Sometimes I think they like those crosses a little too much.
Howell Jackson takes a look at The Structure of Federal Spending and determines that a lot of what gets spent, and a lot of what the government has committed to spend, never seems to get reflected in the budget. So not only is federal spending soaring, but a lot of it is hidden or deferred, so that, as the USA Today put it last week: “Taxpayers owe more than a half-million dollars per household for financial promises made by government.”
A few more details about the long distance telephone excise tax refunds that’ll be coming up next year: “Chairman Charles Grassley, R-Iowa, said he plans to act as soon as possible to move legislation eliminating the [local telephone service] remainder of the tax.… The Congressional Budget Office has estimated that the government expected to collect $52 billion over a decade from telephone excise taxes, including charges on local and long-distance calling. ¶ Individuals can use one of two methods next year for calculating a refund. Those who have records of the taxes they’ve paid between March 2003 and July 2006 can add them up and request their money back. ¶ Those who did not retain their records can use a simplified method under development by the Treasury Department and Internal Revenue Service, which will be announced later. ¶ The IRS will also develop a special form to deliver the refund to individuals who do not have to file a tax return.”
Susan Pace Hamill, a law professor at the University of Alabama, has spent a lot of time trying to persuade people that Jesus (yes, the Jesus) had a strong opinion about tax policy that just happens to coincide for the most part with the sentiments of liberal Democrats. Seriously. Check this out:

I… provide a complete theological framework that can be applied to any tax policy structure.… I prove that tax policy structures meeting the moral principles of Judeo-Christian ethics must raise adequate revenues that not only cover the needs of the minimum state but also ensure that all citizens have a reasonable opportunity to reach their potential. Among other things, reasonable opportunity requires adequate education, healthcare, job training and housing.… I also establish that flat and consumption tax regimes which shift a large part of the burden to the middle classes are immoral. Consequently, Judeo-Christian based tax policy requires the tax burden to be allocated under a moderately progressive regime. I discuss the difficulties of defining that precisely and also conclude that confiscatory tax policy approaching a socialistic framework are also immoral.

Inspired perhaps by the mighty guffaw that Hamill’s scholarship gave me, I decided to take another look at what Jesus actually said about tax policy. I wasn’t able to find the verse where he says “give unto Cæsar what Cæsar needs to provide job training and housing to those of his subjects in Judaea who need an opportunity to reach their potential” but I’m no biblical scholar.
In 2000 in Bolivia, a Jehovah’s Witness named Alfredo Díaz Bustos was drafted into the military and attempted to avoid military service as a conscientious objector. The authorities, recognizing no conscientious objector exemption, granted him an exemption certificate that classified him as unqualified for service, but demanded a special “military tax required of persons declared exempt from military service.” He asked to be released from this requirement for the same reasons of conscience that did not allow him to serve the military directly. This was denied. Bustos then appealed to international law, in this case the American Convention on Human Rights. Incredibly, it worked! The government of Bolivia backed down and released Bustos from any obligation either to serve in the military or to pay the exemption tax. Furthermore, the government agreed to formally recognize the right to conscientious objection to military service.
Brigitte Schön asks us to step back in time and imagine a world in which the internet was the opiate of the activists: “Instead of hundreds of thousands of East Germans chanting ‘We are the people!’ every single day for weeks against the leaders of their People’s Republic (hence the chant), they launch a massive e-mail-campaign demanding freedom and liberties hitherto not granted in East Germany from their Politburo. Your best bet: Would the Berlin Wall have come down as a result?”
With that in mind, I noted a handful of confrontational real-world protests that seem to be reaching for new tactics and new targets, and which seem worth keeping an eye on:
And finally, a historical note about one of the first tax rebellions in the United States: Libertarians, Socialists, and the Whiskey Rebellion.

Back in May the IRS threw in the towel, decided to stop trying to enforce the federal excise tax on long-distance phone service, and said it would issue refunds for the tax it had improperly collected over the past three years.

Today, some of the same taxpayers who fought to repeal the tax in the first place are calling foul on the IRS’s refund plan, saying it “will effectively deny refunds to and shortchange American taxpayers entitled to refunds by billions of dollars.”

There appear to be three main parts to their beef:

The IRS is not refunding all of the taxes they improperly collected, but only three years’ worth.
The IRS is requiring individuals to apply for their refund as part of the tax return they file in 2007. Millions of people who do not file tax returns (typically senior citizens and people with very low incomes) will not be able to get refunds this way.
Small businesses are required to document the exact amount of this tax that they paid over the years in order to get a credit, which is a hurdle almost all small business will be unable to overcome.

“For no stated reason and with no legal authority to do so, the IRS unilaterally acted to sharply cut the payback of taxpayers’ own money,” said Jonathan Cuneo, one of the attorneys. “It is simply unfair to exclude millions of non-filers from the payback and force small ‘mom and pop’ businesses to expend hours and hours collecting and analyzing over years of records in order to receive their own money.”

When the IRS announced that it was finally giving up on trying to illegally collect an excise tax on flat-rate long distance telephone service, it said that it would be refunding several years’ worth of improperly-collected taxes, with interest, and that individual taxpayers could apply for these refunds using their 1040 forms in 2007.

What about people who don’t file a yearly tax form (millions of poor and retired people do not need to file) — how do they get their refunds?

The IRS said it is developing a “very simple, straightforward form” for low-income people to file next year to get a refund.
“We recognize there are many people who have no filing requirements and we want to make sure that these people get the refund they deserve,” the IRS said in a statement.

The IRS has lifted the veil from its plan to refund the excise tax on long distance telephone service that it has been collecting illegally from everyone with a phone for years now.

The agency plans to issue refunds in the form of $30 to $60 tax credits to people who file their 1040s next year, with the amount depending on the number of exemptions. If you do not file a 1040, you can instead file a new form — a 1040EZ-T — that is only for requesting the refund.

If you’re a particularly pack-rattish record-keeper, or you’re willing to track down all of the phone bills you’ve received since March, 2003, you can choose to apply instead for the actual amount of excise tax you have paid on long distance phone service.

As I mentioned last month, though, there’s a lawsuit in the works that challenges the IRS’s authority to single-handedly decide how it’s going to pay people back for all those taxes it’s illegally collected over the years.

The IRS estimates that it will be returning about $10 billion using its refund plan, but the government has collected several times that amount of incorrectly assessed tax from individual taxpayers over the years.

So this may not be the end of the story.

Remember how the IRS planned to refund all of that $40 billion or so of long-distance telephone excise tax it had been incorrectly collecting all those years?

Actually, they kind of fudged on that. They said they would only refund that portion of the tax they’d been illegally collecting for the past three years: about $15 billion.

But they plan they came up with — letting people take a credit on their 2006 1040 forms — was one that they estimated would only give back $8 billion.

Well, it turns out that their estimates were a bit off. They only returned about $3.8 billion, and only refunded anything at all to about half of those people who were eligible.

This new figure comes from a new report from TIGTA.

Another TIGTA report confirms my suspicions from earlier this month: That long distance telephone excise tax that the IRS illegally collected all those years? The one they kept collecting as one by one, district courts across America told them it was illegal? They one they finally said they’d refund when they relented and read the writing on the wall?

Well, as it turns out, “a significant amount of the telephone excise tax overcollected from individual taxpayers may never be refunded.”

Perhaps this will help the folks who launched a lawsuit last year after predicting just such a result from allowing the IRS to design its own remedy.

Some news-in-brief:

The Tax Foundation notes that the IRS is going to spend $200 million dollars of taxpayer money to let us all know that they’re going to be sending us “stimulus” checks and then to mail us the checks (not counting the value of the stimulus payments themselves). That kind of money “would have bought 74 Super Bowl commercials, which is more than the 63 that were shown at the last Super Bowl”
Some taxpayers challenged the way the IRS handled last year’s refund of the erroneously-collected federal excise tax on long-distance telephone service, and they sued. Their suits have been dismissed.
William Giunta suggests that you take a page from Dubya’s playbook and add a signing statement to your tax return. “Back it up by stopping payment of federal income taxes.”

So, as you may remember from the many times The Picket Line has tuned in to this particular soap opera, for years the IRS — without legal authorization — charged an excise tax on certain phone plans that were billed by the minute regardless of the geographical distance of the call.

They kept insisting they could tax these calls, various lawyers kept up with the great tax protester refrain of “show me the law!”, and, various district courts agreed with the protesters that the IRS was taking people’s money illegally.

The agency eventually capitulated — sort of. They stopped collecting the tax, admitted they were wrong to have been collecting it in the first place, and volunteered to come up with a method for refunding the money they had been illegally collecting all these years (well, at least going as far back as the statute of limitations — they’re no fools).

Naturally, the method they concocted for giving refunds ended up returning to taxpayers only a fraction of what had been illegally stolen from them in the first place. So some of these taxpayers fought back in the courts.

The District of Columbia circuit court sided with the taxpayers, saying the suit can go through. Here’s how the court summarizes the case:

In sum, the IRS unlawfully expropriated billions of dollars from taxpayers, conceded the illegitimacy of its actions, and developed a mandatory process as the sole avenue by which the agency would consider refunding its ill-gotten gains.

Ouch!