Tom Cooley writes in about his experience with tax resistance:

I have been under the poverty level for the last 10 years in protest of the way my government chooses to spend money. It was not until recently, however, that I started looking into the current legal deductions and ways to increase my income without owing federal income tax; I was shocked to find that I can now make up to 35k a year as a single person with no dependents under 65 with good eyesight (say 25k a year without self employment income). According to my math, I can put 7k into a SEP (or 17k into a self employed 401k) 3k into an IRA leaving me with 15k which the government says is ok not to owe any taxes on because of the new retirement savers contributions credit. Of course, I’m sure there are other legal deductions which can make these figures even higher, but since I am currently not at a stage where my income is in danger of going over these ceilings, I am not too concerned with finding every possible deduction.

I’m not an expert on these matters, but I’ll try to unravel some of these acronyms. A 401k is a tax-deferred retirement plan where your employer deducts some money from your paycheck (and may add in a little extra money) which is then held in an investment account set up by the employer (or, more likely, by some company that specializes in such things that your employer hires for this purpose). You have some limited control over where the money that you’ve put in this plan is invested (usually you can select from a handful of funds). You are not taxed on any of this money as it is being put into the plan, but you will be taxed after retirement when you start withdrawing the money (if you try to withdraw before retirement, you pay taxes and penalties). Typically you can put up to 15% of your income into a 401k.

An IRA is also a tax-deferred retirement plan (however there are also forms of IRA in which the tax is paid up-front, rather than at withdrawal time). You put the money into the account yourself, rather than having your employer do it by deducting money from your paycheck. Because you set up the account yourself, you have a lot more control over your investment options. You’re allowed to put $3,000 per year into a tax-deferred IRA (this number can change from year to year as the tax law changes).

An “SEP” is like a 401k plan in that your employer puts (typically up to 15%) of your paycheck in to this plan. However it’s more like an IRA in that you set up the account and have more control over the investment options.

The “new retirement savers contribution credit” is this “miracle form 8880” that I mention in the FAQ. In short, it gives you a tax credit if you’ve got a low income and still manage to put money into retirement accounts like the ones discussed above. The credit is meant as an incentive for poor people to save up for when they’re old and the Social Security system goes belly-up. The credit is at its maximum for people with an “adjusted gross income” below $15,000. If you can get your adjusted gross income down to that point, and you’ve put at least fifteen hundred dollars or so into one of these retirement accounts, you’re almost certainly 100% in the clear tax-wise. And your “adjusted gross income” is calculated after you’ve already deducted your contributions to tax-deferred retirement accounts from your income, so you get a double bonus.

There’s still the question of how your money gets taxed when you finally get around to withdrawing it at retirement time. I believe it gets taxed at whatever rate you’re paying then — so if you’ve planned well and are still comfortable living below the tax line then, you can withdraw funds at a slow enough trickle so that you will continue not paying taxes on them. I’m not sure if that’s the way the law works, though, so correct me if I’m wrong. And in any case, the law is subject to change and so it’s hard to predict how vulnerable these retirement funds are to future taxation.

Not much to report today. I’ve been working on the how-to guide a bit more — adding some links to info on the IRS’s web site and elsewhere and prettying-up the formatting.

A reader clued me in to the fact that the IRS will let you claim your IRA contribution before you actually make the contribution — as long as you actually do contribute the money before the tax deadline of April 15^th. So it’s possible to claim your maximum $3,000 deduction when you file your taxes in February, but wait until you get your refund check to actually contribute to your IRA.

I changed my “example” in the how-to to reflect this.

Over at the tax law blog Start Making Sense, Daniel Shaviro shares the inside scoop from one of his informants:

[T]he Bush “tax reform” plan is likely to have three main elements: (1) make the tax cuts permanent, (2) fix the alternative minimum tax problem, and (3) enact enlarged (say, $7,500 per person per year) Roth IRA style tax-free savings accounts, including large incentives to convert from existing IRAs, 401(k) plans, and the like that were deductible up front.

The first one is no big surprise, and neither is the second one. Number three isn’t too new either, except for that “large incentives to convert” twist.

With traditional IRAs and 401(k) plans, you can deposit untaxed money that is taxed when you withdraw it later in life. With Roth IRAs, you deposit money that has already been taxed, and then when you withdraw it later, it’s tax-free.

So there’s this pool of money out there in traditional IRAs and 401(k) accounts that is due to be taxed sometime but hasn’t been taxed yet. If the Dubya Squad can come up with some way to convince people to let him tax it now instead of later, he can have more of our money to play with today without having to actually raise taxes. This follows the Dubya Squad modus operandi of spending freely today and sticking tomorrow with the bill.

Pretty sneaky, eh? How are they going to do this? Carrot or stick. Probably carrot — they might give a discount on the tax people pay when they transfer funds from a traditional IRA or 401(k) to a Roth or Roth-like IRA.

Here’s an example of how someone might be convinced to transfer their money from a tax-deferred account to a taxed account — I did it last year: In 2004, I earned about $18,000. I ran the numbers and determined that I could have earned as much as $25,000 and still be under the federal income tax line. So I transferred $6,500 from my traditional IRA to a Roth IRA. That $6,500 is considered part of my income for 2004 (I left some wiggle room: $18,000 + $6,500 = $24,500).

This sort of transfer is legal, and there’s no penalty (as there would be if I just withdrew the money from the traditional IRA rather than transferring it to a Roth IRA) — but I do have to pay the tax on that $6,500 now instead of later. However, I pay that tax at my current rate of taxation, which, because my total income is so low, is 0%. So that $6,500 went from being money that I was due to be taxed on eventually to being money that was never taxed and never will be. (Although if the people who want to replace the federal income tax with a federal sales tax get their way, all that careful planning on my part will be wasted.)

This sort of transfer is sensible not only for those of us with a little space in our 0% zone, but for anyone who thinks that they’ll be in a higher income tax bracket when they retire than they are today. Of course, this is just guesswork, but in a case like mine where today’s rate is 0%, it’s a no-risk no-brainer. Depending on the incentives that the Dubya Squad tax reform plan offers in the future, though, this option may come to make more sense to even more tax resisters.

The blog fivecentnickel has a thorough and useful overview of the various technicalities and caveats to keep in mind if you’re thinking of converting some of your traditional IRA to a Roth IRA.

This can be a useful strategy for tax resisters who follow The DON Method (see The Picket Line 14 January 2005).

Kay Bell at Don’t Mess With Taxes answers a question I’ve been wondering about: when I reach retirement age and have to start withdrawing money from my IRAs and other tax-deferred retirement accounts, is there anything I can do to avoid the tax hit?

Here’s an idea for people who are faced with this situation today:

[A] provision of the Pension Protection Act that was signed into law in August, allows taxpayers who are [at least as old as] 70½ to directly transfer money from an IRA to a charitable organization. By doing so, these filers don’t have to include the transferred money in taxable income.

This provision only lasts through next year, though, unless Congress renews it:

[T]his year and in 2007, if you don’t need the IRA money, you can instead shift it — as much as $100,000 each year — directly to your favorite charity. That way it doesn’t count as taxable income to you since you never got your hands on it. The drawback: You can’t deduct the gift [as an itemized deduction].

Bell goes on to discuss the circumstances in which you might want to transfer funds to charity this way, and other circumstances in which you might want to withdraw funds from the accounts and then donate them (which would add to your income, but which would allow you to take an itemized deduction).

A few miscellaneous things that caught my eye recently:

• Ask the Advisor has a good run-down of retirement plan options for the self-employed. It gives the rundown of Simplified Employee Pensions, Keough Plans, Roth and Spousal IRAs, and another variety of account I only learned about recently: the “solo 401(k)” — here’s where I first learned about those.
• Those of you who enjoyed the flashback to the Yugoslav genocide of the 1990s that I treated you to during my recent review of Evil and Human Agency may be interested to know that Serbian vampire hunters drove a three-foot-long wooden stake through the heart of the corpse of Slobodan Milosevic in order to prevent him from returning to life and haunting the country.
• Among the IRS’s many tangential tasks is terrorist-hunting. That is, they use “a manual process and a limited terrorist watch list to identify instances in which charitable and other nonprofit organizations may be linked to individuals and/or entities whose assets have been frozen because they have committed or pose a significant risk of committing acts of terrorism.” The Treasury Inspector General for Tax Administration checked in to see how well this was going. Not too well, as it turns out. They haven’t spotted a terrorist yet, though their methods seem sound: Max Baucus, who chairs the Senate Finance Committee, notes that “IRS personnel told TIGTA that they primarily look for ‘Middle Eastern sounding names’ when considering which tax filings to flag for further review.”
• Speaking of names worthy of further review, a few more details have leaked about the revoltingly cozy relationship between the Blairs & Bushes of the world and their counterparts in the Saudi monarchy. In short: “$100 billion a year flows into Saudi Arabia’s coffers to pay for their oil. The US and UK make sure that, rather than the money staying there and being spent for the people of Saudi Arabia, it returns to us to pay for weapons Saudi Arabia doesn’t need. To make this happen, arms dealers bribe the Saudi royal family with hundreds of millions of dollars, all with the knowledge and approval of the British government.”
• “In the first 4½ months of 2007, American aircraft dropped 237 bombs and missiles in support of ground forces in Iraq, already surpassing the 229 expended in all of 2006, according to U.S. Air Force figures obtained by The Associated Press.”
• Meanwhile… “[P]residential candidates Hillary Clinton and Barack Obama are, at present, competing with each other in their calls for the expansion of the Armed Forces. Both are supporting manpower increases in the range of 80,000 to 100,000 troops, mostly for the Army and the Marines.… This atop a military that has already grown to gargantuan levels, and is spending like there’s no tomorrow (which strikes me as one of those self-fulfilling prophecies):

  How astonishing are the budgetary numbers? Consider the trajectory of U.S. defense spending over the last nearly two decades. From the end of the Cold War into the mid-1990s, defense spending actually fell significantly. In constant 1996 dollars, the Pentagon’s budget dropped from a peacetime high of $376 billion, at the end of President Ronald Reagan’s military buildup in 1989, to a low of $265 billion in 1996. (That compares to post-World War Ⅱ wartime highs of $437 billion in 1953, during the Korean War, and $388 billion in 1968, at the peak of the War in Vietnam.) After the Soviet empire peacefully disintegrated, the 1990s decline wasn’t exactly the hoped-for “peace dividend,” but it wasn’t peanuts either.

  However, since September 12^th, 2001, defense spending has simply exploded. For 2008, the Bush administration is requesting a staggering $650 billion, compared to the already staggering $400 billion the Pentagon collected in 2001. Even subtracting the costs of the ongoing “Global War on Terrorism” — which is what the White House likes to call its wars in Iraq and Afghanistan — for FY 2008, the Pentagon will still spend $510 billion. In other words, even without the President’s two wars, defense spending will have nearly doubled since the mid-1990s.

At his blog, Pax Americana, “NTodd” has, among other things, been going through Gene Sharp’s list of 198 Methods of Nonviolent Action one-by-one, with a goal of blogging on each one in detail and providing some up-to-date commentary.

His latest is #86: Withdrawal of bank deposits, and he shares the story of how he’s withdrawn the money from his IRAs in support of his tax resistance.

…the IRA system is part of the whole IRS structure and allows me another chance to take money that I can refuse to pay taxes (and penalties) on now as protest. Sure, when they catch up with me it adds to my pile of infractions, but that’s part of the point, and I’ll have pulled even more of my consent from the matrix of control and war enabling the government’s revenue represents.

Part of my strategy for keeping my money out of the government’s hands has been to use tax-deferred retirement accounts like the IRA. One of the unintended consequences of this is that I now have a retirement nest egg that may hatch into a sitting duck for IRS seizure.

Under the rules of the game, (with some exceptions) I can’t withdraw this money until retirement-time. Meanwhile it sits in a brokerage account, vulnerable to government seizure, and there’s precious little I can do to protect it. If I were to withdraw all the money, NTodd-like, the IRS would add a big hunk of taxes due and penalties to what I’m already deciding not to pay voluntarily.

I suppose I could do this, or at least try to do it (I’m worried that there may be some automatic-withholding process that gets triggered when you try to cash in an IRA early and all at once). Then I could keep the money in a mattress, metaphorically-speaking, and safe from the grasp of the IRS. This is a bigger commitment than I’m prepared to make just now, but I’m considering it.

If you put money into a traditional IRA or 401k, that much of your income is sheltered from taxes — until you retire, and then you have to include withdrawals from your retirement accounts as potentially-taxable income.

But if you put money into a Roth IRA or 401k, it’s the other way around. You pay taxes on the money you earned and put into the accounts in the year you earn it, but then, when you withdraw from your Roth accounts in retirement, you get the money tax-free.

At least, that’s how it’s supposed to work. In setting things up this way, Congress made an implicit promise that the Congresses of the future won’t change the law to tax all of your Roth money a second time when you withdraw it. And Congress doesn’t have the power to bind future Congresses like that. Future Congresses are going to be scrambling to find money to pay off all the wars, bailouts, benefit programs, and so forth that today’s Congresses are authorizing but neglecting to fund.

So there’s good reason to expect that they’ll play the ol’ switcheroo. In fact, they’re already plotting:

The U.S. Congress has created a situation in which, after 2010, there may be a significant number of taxpayers holding an enormous amount of wealth the return on which they will claim should be permanently exempt from tax. This paper examines the policy choices available to Congress should it come to regret having allowed the creation of these tax-prepaid accounts. It focuses first on the general nature of traditional retirement accounts, and the ways in which Congress has and could be expected in the future to alter the terms of these accounts. It concludes that Congress should feel free to change the tax treatment and other terms of these accounts in ways that might significantly affect the value of existing accounts, just as it should feel free to change the tax treatment of any other asset or investment position. It then considers whether there is anything different about the tax pre-paid IRAs, especially those that are converted traditional IRAs. It concludes that although the claims of the holders of these accounts are qualitatively different from the holders of other tax-preferred investments, they should not be viewed as sufficiently different to render such accounts immune from any change. Nevertheless, the potential power of these claims suggests that Congress should avoid creating them in the first place.

Don’t say I didn’t warn you.

The good news is that I’ve got a paying gig that’s keeping me very busy. The bad news is that I’ve been very busy, and haven’t been able to update The Picket Line as much as I’d like.

Today: a bunch of links I thought were interesting enough to share but that I’ve given up hope about being able to weave in with some original commentary.

• Michael Kinsley tactlessly wonders where the buck stops on the torture policy.
• The European Court of Human Rights has denied an attempt by The Peace Tax Seven to establish that a country’s unwillingness to allow people to legally refuse to pay for military spending is a violation of the rights and freedoms set out in the European Convention.
• Craig Hancock caught me on film at the San Francisco Tea Party rally. Twice.
• The number and percentage of Earned Income Tax Credit claims that are fraudulent — those in which the person claiming the credit doesn’t qualify for it — has increased exponentially in recent years, and the IRS hasn’t been able to keep up.
• Isaac Stanfield is reading David Beito’s Taxpayers in Revolt: Tax Resistance During the Great Depression and is blogging his observations along the way.
• Winslow Wheeler tells us what to expect from the upcoming military budget and what deceptions and spin you’ll be seeing in the news coverage about it.
• Beware of religions whose symbol is a man being tortured to death.
• Vargarquista at anarkismo.net writes about Smuggling as a strategy of tax resistance (Spanish). This is a particularly urgent subject in countries that rely more on sales and value-added taxes than on taxes like poll taxes and income taxes that individuals can more directly resist. If the “FairTax” scheme that some are pushing in the United States ever came to pass, this would become more of an issue in the U.S. as well. (“Smuggling” is my best translation of “el contrabando,” but the author seems to include a lot of different sorts of underground-economy activity under that term.)
• Here’s another article about the Basque country war tax resistance activists who have been making noise recently: Colectivos antimilitaristas y de mujeres promueven la objeción fiscal a los gastos militares en la campaña de IRPF (Antimilitarist and women’s groups to promote war tax resistance in income tax season)
• David John Marotta has an intriguing idea about manipulating the timing of traditional-to-Roth IRA transfers and recharacterizations so as to maximize your tax-free capital gains. It’s somewhat complex but very clever. Basically, you do a traditional-to-Roth conversion into several different Roth accounts using as many different investment strategies. Then file tax extensions so that you extend the amount of time in which you can recharacterize those conversions. Wait and see which of your new Roth accounts appreciate the most; keep those (if any) as Roth accounts in which the appreciation will remain tax free and pay the taxes on the principle now. For the rest, recharacterize them as traditional IRAs again, and avoid paying taxes on them now. Follow the link for details and a more leisurely and clearer explanation.
• Radley Balko at The Agitator reminds us of this section from Dubya’s address to the nation on March 17^th when he was launching the Iraq War:

  And all Iraqi military and civilian personnel should listen carefully to this warning: In any conflict, your fate will depend on your actions. Do not destroy oil wells, a source of wealth that belongs to the Iraqi people. Do not obey any command to use weapons of mass destruction against anyone, including the Iraqi people. War crimes will be prosecuted, war criminals will be punished and it will be no defense to say, “I was just following orders.”

  I love the smell of moral clarity in the morning.

Some bits and pieces from here and there:

• Taxpatriate satyagrahi Jeff Knaebel has a new (to me, anyway) website, Gandhi Swaraj Padyatra to accompany his thousand-kilometer padyatra (a sort of walking pilgrimage) to promote Gandhi’s philosophies.
• The Obama administration is floating the idea of trying to require people to convert some of their 401(k) and IRA plans into annuities. The publicly-stated theory behind this is that it would make retirement income more durable and predictable, and avoid the problems for retirees caused by stock-market collapses. Some folks suspect there’s more to it — that the government is hoping to force people to invest their retirement savings in government bonds as a way of keeping the deficit-spending catastrophe limping along. Some versions of the plan being floated by lawmakers would eliminate tax-deferred retirement accounts and replace them with a mandatory, parallel Social Security system with individual accounts that would be invested in special government bonds.
• The Philadelphia Daily News carried an obituary for long-time tax resister George Willoughby. “The Willoughbys were also tax-resisters, withholding their federal taxes to protest their use for military purposes. The IRS tapped their bank accounts to pay the taxes, but when the accounts ran dry, agents seized their 1966 Volkswagen. Friends, brandishing balloons, party horns, cookies and lemonade, invaded the IRS office in Chester and bought the car back for $900.”
• From the looks of it, tax resistance is the national pastime in Argentina. This time, it’s shopkeepers in San Juan, who have announced a tax resistance campaign to protest the fact that the street vendors who compete with them for customers are untaxed. The mayor says it’s all a bluff, and that in fact the shopkeepers frequently divert goods to the street vendors in an attempt to evade taxes. The shopkeepers are paying their taxes into a fund that they say they will only relinquish to the government when it begins to crack down on street vendors.

Some bits and pieces from here and there:

• The Obama administration announced a few days ago that it would interpret the somewhat ambiguous existing law in such a way that would allow it to seize money from “Thrift Savings Plan” accounts to settle tax debts. These plans are a variety of 401k-like retirement savings account that are available to employees of the federal government.
• The big health industry legislation that passed a while back included a little-noticed (at the time) provision that would dramatically expand the requirements of businesses to file 1099 forms to report their payments to other businesses. The IRS recently announced that, for now anyway, it plans not to require quite as much paperwork as the law at first glance seems to require.
  
  “We plan to use our administrative authority to exempt from this new requirement business transactions conducted using payment cards such as credit and debit cards,” said IRS Commissioner Douglas Shulman. “These transactions will already be covered by reporting requirements on payment card processors, so there is no need for businesses to report them as well. So, whenever a business uses a credit or debit card, there will be no new burden under the law.”
• The federal government also is expanding its use of direct deposit for payments it makes, and hopes to mostly phase out sending checks to people. From here on out if you want your Social Security, unemployment insurance, veterans benefits, railroad retirement, and so forth, you’ll either have to give Uncle Sam your routing and account numbers or you’ll have to settle for getting your money in the form of a debit card. This is being billed as a cost-saving measure (how expensive to mail all those checks!) but mailing out those plastic cards can’t be any cheaper, so I suspect it has more to do with being able to keep a closer eye on people’s money so as to narrow the size of the underground economy and make it easier to seize funds from people.

Some links that have graced my browser in recent days:

• The Troika Fiscal Disobedience Consultancy is “building a European network of companies which support a European tax disobedience movement.” In short, they’re trying to use the same bag of tricks that multinational corporations use to evade taxes on their profits in order to build an alternative economic network of European dissidents. Fair.coop also has some commentary on the campaign.
• The Scotsman looks back at the Poll tax protest [of] 1990: When Strathclyde council issued 250,000 warrants.
• Abolitionist Quakers from Philadelphia pioneered “fair trade” ideas with their attempts to build a network of producers, merchants, and consumers to support alternatives to slave-produced products. Here’s a look at the experiments they tried and the challenges they faced.
• Italian pacifist Turi Vaccaro climbed up a satellite dish at a U.S. military base near Niscemi, Italy, and, over the course of about 34 hours, with manual hand tools, did about €800,000 in damage.
• 24 Greek toll-hike protesters were acquitted of charges related to a protest action they participated in last April.

The Satyagraha Foundation for Nonviolence Studies recently came to my attention. It has a few pages that touch on tax resistance, including:

• An interview with Kathy Kelly. Excerpts:

  Street Spirit

  Did the U.S. government ever press charges against Voices in the Wilderness for violating the sanctions?

  Kathy Kelly

  They would bring us into court with some regularity. It was curious because at one point there was a $50,000 fine. I thought, “What are you going to take — my contact lenses?” I just had to laugh. I mean, I haven’t paid a dime of taxes to the U.S. government as a war tax-refuser since 1980. So there is nothing they could take from me. The people that would go over were in the same boat. So good luck collecting from them!

  Spirit

  But as it turned out, they did fine your group $20,000, didn’t they?

  Kelly

  Yeah, they finally took us into court. And I think Condoleezza Rice inadvertently might have saved us. This is speculation on my part, but this much is true. Chevron settled out of court, acknowledging that they had paid money under the table to Saddam Hussein in order to get very lucrative contracts for Iraqi oil.

  Condoleezza Rice was the international liaison for Chevron while it was paying money under the table to get these lucrative contracts. So when we finally had our day in court, Sen. Carl Levin’s staffers were still digging up this information and it was beginning to become public evidence that Chevron, Odin Marine Inc., Mobil and Coastal Oil had all been paying money for these oil contracts under the table to Saddam Hussein.

  So there were big fish in the pond that broke the sanctions and there were little fish in the pond that broke the sanctions. I think some of the big fish said, “That is one hot potato. You drop that hot potato as fast as you can, and don’t make a big deal because those people are little fish but they’re mouthy little fish.” So they never tried to collect a dime from us. The money was just sitting there.

  Spirit

  Well, what exactly did happen to you when the U.S. government took you to court for violating the sanctions?

  Kelly

  We were found guilty and were fined $20,000. Federal Judge John Bates wrote in his legal opinion that those who disobey an unjust law should accept the penalty willingly and lovingly.

  Spirit

  Unbelievable! A federal judge lectures you about lovingly accepting this unjust fine using the words of Martin Luther King?

  Kelly

  Yes. We said to Judge Bates, “If you want to send us to prison, we will go, willingly and lovingly. We’ve done that before already. But if you think we will pay a fine to the U.S. government, then we ask you to imagine that Martin Luther King would have ever said, ‘Coretta, get the checkbook.’ We are not going to pay one dime to the U.S. government which continues to wage warfare.” At that time, supplemental spending bills appeared every year, sometimes two or three times a year, and congressional representatives and senators continued to vote yes on those spending bills for the military. So we said, “No, we won’t pay a dime of that fine.”

  Spirit

  You have also been a war tax resister for a long time.

  Kelly

  I’m a war tax refuser. I don’t give them anything.

  Spirit

  Oh, you’re not a 50 percent withholder, like many war tax resisters. You’re a 100 percent withholder?

  Kelly

  Yes, I’m a 100 percent withholder. I think war tax resistance is important but I happen to be a refuser. They haven’t got one dime of federal income tax from me since 1980.

  Spirit

  Why did you begin refusing to pay federal taxes entirely?

  Kelly

  I won’t give them any money. I can’t and I won’t. I won’t pay for guns. I don’t believe in killing people. I also don’t want to pay for the CIA, the FBI, the corporate bail-outs or the prison system. But particularly, I began as a war tax refuser. I wouldn’t give money to the Mafia if they came to my door and said, “We’d like you to help pay for our operations.” I’m certainly not going to pay for wars when I’ve tried throughout my adult life to educate people to resist nonviolently.

  Spirit

  How have you gotten away with not paying federal taxes since 1980? Do you keep your income low?

  Kelly

  Many years I have lived below the taxable income. But in 1998, someone from the IRS came to my home. I had in some years claimed extra allowances on the W-4 form. And I just don’t file. I haven’t filed since 1980. Now, that’s a criminal offense and they could put me in jail for a long time for that. If I was earning over the taxable income, I would just calculate how many allowances I have to claim so that no money is taken out of my paycheck. It says in the small print on the W-2 form to put down the correct number of allowances so that the correct amount of tax is taken out. Well, that’s easy. The correct amount of tax to take from me is zero, so I just do the math.

  Spirit

  Why do you think they haven’t come after you?

  Kelly

  Well, they have come to collect taxes. But I don’t have a savings account, and I don’t own anything. The IRS is like my spiritual director [laughs]. I don’t know how to drive a car, and I’ve never owned any place that I’ve lived in. I just don’t have anything to take.

  Spirit

  So has the IRS given up on even trying to collect?

  Kelly

  Once they came out to collect in 1998 when I was taking care of my dear Dad, who was wheelchair-bound, and a bit slumped over in the chair. Dad liked to listen to opera and I had a really awful old record player playing a scratchy record. I had been in the back of the house and I didn’t know she was coming, so I ran down to answer the door while the record player was making such a horrible noise. The apartment was fine but it only had a few sticks of furniture.

  The woman asked me if I was going to get a job, and I told her I couldn’t leave my father. Then she asked if I had a bank account, and I said no. She said, “And you don’t own a car?” And I told her I didn’t even know how to drive. Then she just kind of leaned toward me and said, “You know what? I’m just going to write you up as uncollectible.” And I said, “That’s a very good idea.” [laughs] They’ve never tried to collect since. There was just nothing to take! Zero. Nothing.

• Correspondence between Bart de Ligt and Mohandas Gandhi. Here’s some of what de Ligt wrote in late 1929:

  On your side, you state that those who set themselves against Western wars pay, nevertheless, taxes, which are used by the State for war and the oppression of the colored peoples. That is quite true. In fact our anti-militarist struggle also is as yet only something very relative, and it must go on extending. But in any case, we have fixed clear and inflexible borders: we refuse absolutely all direct, personal participation in war and in its social and moral preparation. But several of us employ still other means of fighting against it.… Moreover, a few of us have already decided individually to refuse to pay any taxes, whilst the organization of which I am a member has already several times been the propagandist of collective refusal of taxation. But whereas refusal, even on a very restricted scale, to do military service has been morally and socially efficacious, the refusal to pay taxes by a restricted number of citizens only has so far had very little result, as the authorities, in confiscating property and inflicting fines, take possession of sums much larger than a direct payment of taxes would have brought them. From this point of view, your compatriots have already given some impressive examples of collective refusal, although they also were not able to avoid regular unfair demands of the Government.

  I think “the organization of which I am a member” may have been War Resisters International. Gandhi’s response to this point is an interesting one:

  A non-violent man will instinctively prefer direct participation to indirect, in a system, which is based on violence and to which he has to belong without any choice being left to him. I belong to a world, which is partly based on violence. If I have only a choice between paying for the army of soldiers to kill my neighbours or to be a soldier myself, I would, as I must, consistent with my creed, enlist as a soldier in the hope of controlling the forces of violence and even of converting my comrades.

  You can find more of Bart de Ligt’s thoughts on tax refusal, non-violent struggle, and Gandhi’s campaigns in the essay The Effectiveness of Non-Violent Struggle, also on the Satyagraha Foundation site.

And from the academic and related worlds:

• A paper by Jay A. Soled and Kathleen DeLaney Thomas on Revisiting the Taxation of Fringe Benefits notes that many companies are compensating their employees with “a cornucopia of fringe benefits, including frequent-flier miles, hotel reward points, rental car preferred status, office supply dollar coupons, cellular telephone use, home Internet service, and, in some instances, even free lunches, massages, and dance lessons.” Some of these are proving difficult for the government to effectively tax as income.
• Gregg Polsky has come up with a potentially useful way of using Roth IRA conversions to keep money away from the tax collector.
• Cass Sunstein reviews attempts to discover how much money is hidden away by the rich and powerful in “tax havens”
• Benjamin Powell and Edward Peter Stringham present Public Choice and the Economic Analysis of Anarchy: A Survey.
• Richard Lavoie tries to discover the elements that contribute to a “taxpaying ethos”.
• Maciej Bartkowski looks at what causes people to break out of their apathy and join risky movements for social change, in Forming a Movement: Cognitive Liberation.
• Anthony C. Infanti, reviewing Robin Einhorn’s American Taxation, American Slavery looks at Tax As Urban Legend, saying “the stories that we tell ourselves over and over again about taxation and politics in America are little more than the stuff of urban legend.”
• Molly F. Sherlock and Donald J. Marples give us an Overview of the Federal Tax System.
• Peter Boettke tells us all about Elinor Ostrom, Vincent Ostrom, and the Bloomington School.

Can You Keep War Bonds Out of Your So­cial­ly-Re­spon­si­ble In­vest­ments?

I researched the holdings of several of the most popular “socially responsible” mutual funds, including funds that explicitly screen out investments in military contractors and weapons manufacturers. I found that most of them loan money to the Pentagon by including treasury bonds in their holdings. How can war tax resisters invest without inadvertently extending a line of credit to the warfare state?

Read my article at the NWTRCC blog for more details.