How you can resist funding the government →
about the IRS and U.S. tax law/policy →
corporate / municipal / wealthy tax dodgers
A friend sent me
this article from
TomPaine.com about one of the ways big corporations like Toys “Я” Us, Burger King, Gap, Home Depot, Staples and such evade their taxes.
It reminds me of some of the personal tax-avoidance strategies I’ve heard about lately.
They sound kind of shady and dishonorable when done as an individual, but when a giant shareholder-owned corporation tries ’em, it just sounds like good business sense.
, I wrote about the various constitutional challenges and other fringe legal theories that some tax protesters use in their battle against the IRS, and how they don’t appear to be valid legal arguments.
But I acknowledged that these schemes “really work — if only in the sense that the IRS certainly loses more revenue from the adherents of these theories than it is able to recover from those it defeats in court.”
, the US Senate’s Finance Committee is holding hearings about fraudulent corporate tax shelters.
According to an article in the New York Times (link— requires registration and will probably go stale soon):
A consultant’s report, prepared for the I.R.S., but kept secret by the agency until now, is expected to show that corporate tax cheating in cost the government $14 billion to $18 billion.…
[M]any businesses and individuals are breaking the law because their risk of detection is small and even if they are caught they are unlikely to be punished or even made to pay the taxes.
Instead of voting for more funds to enforce the law, Congress has tightly restricted I.R.S. spending on auditors, criminal investigators, training and new technology while many of the agency’s most qualified auditors have left in .…
About eight of 10 known [emphasis mine] tax cheats are let go without having to even pay the taxes, interest or penalties.
…complex transactions that involve companies paying lump sums to foreign towns and cities to lease bridges, dams, subways and other infrastructure.
They then lease the property back to the town or city for the sole purpose of cutting their U.S. tax bill by depreciating the asset.
No lease payments are ever made and the town or city is in no danger of losing control of the subway or other asset…
Participants include major U.S. banks and Fortune 500 companies…
“This scheme is so pervasive that much of the old and new infrastructure throughout Europe has been leased to, and leased back from, American corporations”…
[T]he tax shelter scheme has been so successful that U.S. cities are now doing the same, with the subway systems of Boston, Chicago and Washington having been leased back to U.S. corporations.
He said he had reason to believe that New York and Chicago water authorities were about to lease the waterlines under their streets.
You’ve seen the stories before:
Huge US corporations making billions and yet somehow getting out of their taxes, or even getting refunds.
They’re occasions for brief flashes of righteous anger on the op-ed pages.
But I’m happy to see these companies being so clever — putting their accountants and lawyers to work outwitting the tax man — maybe even coming up with a dodge that the little guys can use from time to time.
I wrote about a neat little tax dodge that some companies were using: They hunt up a government or other organization that’s got some big hunk of stuff that’s depreciating without giving them any tax benefit.
They take that big hunk of stuff off of their hands, for a fee, and then lease the big hunk of stuff back, for a somewhat lesser fee, while writing off the expense of their new asset on their tax forms so as to lower their taxes (presumably by somewhat more than that somewhat lesser fee).
Our local newsweekly covers what happened when San Francisco’s Municipal Railway tried this trick in .
It seemed like a great idea:
[T]he agency received $43 million in a complex “lease/lease-back” deal that allowed private investors to depreciate (that is, to write off the wear and tear suffered by) 118 rail cars for federal income tax purposes.
Muni paid out $10 million to lawyers and financial consultants to prepare the deal, and kept $33 million.
The investors gained a tax advantage that presumably was valued far in excess of the $43 million that Muni received…
But then things got sticky.
The US Treasury Department started complaining to Congress about scams like this.
Now it looks like they’re going to make them illegal, and send auditors out to shut down the ones that have already been concocted.
And it looks like the tax-evading investors had better lawyers than did SF Muni:
In entering the tax-shelter deal, Muni signed a contract that, as interpreted by a tax expert I spoke with, would make San Francisco responsible for the benefits of the tax break to the private investors for the 25-year life of the deal, should the IRS ever disallow the shelter.
And if something has to go, something else has to inflate to fill its gap:
In this case, highway funding.
The White House budget allocated $256 billion over six years for highway funding.
That didn’t last long in the Red-ink Republican Congress — the Senate just passed a bill more than $50 billion fatter.
(The version of the bill being prepared in the House is another $50+ billion fatter than that!)
Interesting post.… engaged in a bit of direct action there, yourself, it seems.…
violating social conventions to actually discuss a method of non-violent civil disobedience.
If a meeting advertises for revolutionaries, it should not be surprised when at least one shows up.
You could still be a wingnut, but such people are often useful, and do not forget your “history of the demise of slavery postings.”
All that change probably required a wingnut or two to leaven things.
Yes, you are a wingnut, and yes you accurately and meaningfully challenged to idiocy with which you were faced at the New College panel.
Isn’t it possible for both choices to be true at the same time?
On I noted that the General Accounting Office had found that the U.S. government had been writing checks to defense contractors who cumulatively owed $3 billion in back taxes.
Now the GAO has taken a look at the non-military contractors, and they look to be running neck-and-neck:
At Animal Person, Mary Martin shares a poignant story about an ex-boyfriend who was a tax resister.
They broke up because she couldn’t see how her dreams of starting a family could mesh with his principles that put him in what she assumed was dangerous conflict with the state.
Martin wonders how to find that workable medium between quiet guilty compliance on one hand, and quixotic martyrdom on the other.
If you’re a Picket Line regular, you’ve probably read a thing or two about the “underground economy.”
But have you heard about the “underground government?”
According to Hans Sennholz, just as some people escape into the underground economy so as to have an income off-the-books, the government has been creating vast numbers of off-the-books government functions so as to evade budgetary restrictions and hide the true size of government and depth of government debt.
Fannie Mae and Freddy Mac were examples of these — ostensibly private corporations, they could take on huge debts and liabilities without any nominal impact on the federal budget, at least until the recent judgment day.
David Little, one of the rare examples of an anti-abortion tax resister, is profiled in the Globe & Mail.
Excerpts:
“A portion of every cent I give them is going to kill babies. I don’t care
how infinitesimally small it is,” he said, as the conversation ranged from
biblical parables to speaking in tongues, from miracles to modern-day saints.
“When I finally took the decision to embrace courage and fight the federal
government, it was because I could no longer look myself in the mirror and
ask the question: Who am I to pray for life and pay for death?”
“This is an issue where I appear to be the sole person in the entire country
who’s decided that he will never co-operate for the filing of income tax, as
long as it is going to be used to kill innocent human beings.”
There would be widespread support among Catholics for his form of civil
disobedience, he believes, were not anti-abortion groups and the church
afraid of angering the government by advocating it.
Probably to nobody’s surprise, the rich dodge their taxes more than other folks.
This seems to be mostly a matter of opportunity: ordinary folks get most of their income from wages, the taxes on which are harder to escape, while rich folks get a lot of their lucre from capital gains and business income, where it’s easier to get creative.
Good luck with this one: An aide to the Governor of New York is in trouble for having not filed his taxes for years, to the extent that he’s now in the hole to the tune of about three hundred thousand dollars.
His attorney suggests that his client may be suffering from “non-filers syndrome.”
I hope its contagious.
The idea of a tax strike by the titans of industry — a la Atlas Shrugged — is mostly a thing of fiction, but there have been some exceptions.
Here’s an example from the Milwaukee Journal:
Industries Refuse to Pay Pension Tax
By cable to the United Press
Buenos Aires — Efforts of the government to work out a plan to make effective the national pensions law, which would grant a life pension to all persons who have labored in the country 25 years, met with new difficulties as leading industrialists announced they will refuse any payments to the pensions fund.
The industrialists adopted a resolution denouncing the pensions law as economically and financially unsound and pledged themselves to close down their factories before paying the pensions tax.
More than 1,500 leading firms were represented at the meeting.
The action of the industrialists came in the face of a statement by President Alvear that the government does not intend to abandon the law, but that its enforcement will be postponed 15 days, during which time congress will be asked to reform the measure.
Meantime the country was gradually returning to normal after the week’s general strike and lockout called by labor and employers as a protest against the law.
Some bits and pieces from here and there:
Tax Day action reports are starting to trickle in.
This year, the TEA Party presence seemed way down, or at least the news media has gotten tired of covering it.
There were many reports of liberals engaged in various creative protests designed to shine some light on profitable corporations who somehow manage to rake in government subsidies and get away without paying taxes, and a couple of reports of anti-war activists trying to inform the public about the bloated military budget.
Some folks have taken to submitting an affidavit along with their tax returns declaring that they are only filing “under threat, duress and coercion… because I fear retaliation by the IRS… to avoid going to jail, not because I believe there’s a legitimate obligation; I am terrified of the IRS… and being attacked by them if I don’t comply with them.”
They hope to make explicit the threat of government violence that is largely implicit at tax time and to preempt silly people like Senate Majority Leader Harry Reid who insist we have a “voluntary” tax system.
The Greek “Don’t Pay” movement has organized as a political party that is competing in the elections. The video they have created to support their campaign, shown below, is a great collection of shots of the direct action campaign:
From the archives, here’s a photo that appeared (without an accompanying article) in the Yonkers, New York Herald Statesman in :
In earlier Picket Line entries, I’ve attempted to translate sections from the latest edition of the Spanish Handbook of Economic Disobedience
(see
,
,
,
,
,
and
).
Today I’ll continue:
Collective Actions
The free collectives in the face of current law
We define “free collectives” as that association of people constituted with
an aim of transforming society through its social, economic, and political
activity. These collectives encompass all types of organizations so long as
their purpose is transformative; but in this article we will focus on those
free collectives dedicated to the production of goods and services. The name
matters less than the fundamentals of the collective. And keep in mind that
these days the name cooperative often obscures a capitalist enterprise, while
hiding behind a corporation can be an authentic cooperative.
The State regularly encourages cooperatives with subsidies and tax
preferences. And the secret of this permissiveness is in the laws that
regulate the functioning of cooperatives, in which the self-management
fundamentals have been largely replaced by capitalist intentions.
The law concerning cooperatives permits private ownership of the means of
production, and not only collective ownership. And that law accepts the
subsequent division of a sort between the owning members of the cooperative
and the non-proprietary salaried workers. The counterrevolutionary action of
the false cooperatives, that is of the capitalist enterprises incorporated
under the Cooperatives Law, has come to discredit the revolutionary work of
the authentic cooperatives in many associationist circles, dissuading many
producers from the sincere practice of this transformative path.
On the part of these free collectives, deceit has historically been resorted
to defensively, a necessary camouflage strictly necessary for survival. Since
the beginning of the struggles for social emancipation, the free collectives
have seen the need to operate in the shadows and to change their identity in
order to evade the State’s persecution. The first syndicates were posing as
relief societies; the anarchist collectives, as cooperative societies.
Whether revolutionary or ordinary, as collectives we must put our ideals into
practice. It does not matter that those who join to work together are few,
because what matters above all is to test the effectiveness of the idea in
practice.
Twenty industrial workers, or fifteen farmers, for example, want to come
together and work in common. Who can prevent this? If the capitalist regime
prohibits collectivism, we can build a production cooperative. What does
the name matter‽ The interesting thing is to work collectively.
What is it if not a Limited Liability Corporation? We know of collective
businesses that, with the name of production cooperatives, have functioned
miraculously.
They have overcome the capitalist system and have conquered it even in the
field of commerce. What if there is no revolution? It doesn’t matter. The
collective must be created, whatever the number of collectivists and the
social environment in which it will reveal itself.
In historical periods like the present, in which the correlation of forces
between the collectives and the State is so unbalanced on the side of the
latter, it is the most important time to be familiar with the law so as to
find the points of weakness that permit us to conquer it at the lowest cost.
This section has been written with the aim of offering practical information
to protect self-managed collectives from the predatory action of the State.
From here, the Handbook takes a close look at the law as it currently exists in
Spain… something that probably has limited interest to the English-speaking
audience (and also something that requires a more legalistically-tuned
translation apparatus), so I’ll skip over it.
Part of what it covers are the advantages and disadvantages of legally
incorporating, compared to those of being an unofficial, unregistered
association. It discusses the varieties of forms of legal corporations, and how
they compare.
It also warns readers not to choose their legal form of corporation based on
its name. In many cases the official forms for, say, a cooperative or a labor
union have been designed to neuter those types of organizations rather than to
facilitate or empower them, so such groups might be better off choosing another
form of organization. And the “non-profit” designation may sound appealing, but
can be more restrictive and less useful even to groups that have no interest in
turning a profit.
“Legal persons” and limited liability corporations are good ways to shield
conspiracies of individuals from the repercussions of their collective criminal
acts, say the authors, and they think that capitalists shouldn’t be the only
ones who get to play that game.
The handbook covers a few varieties of legal corporate structures in depth and
talks about their possible advantages for providing cover for cooperative
economic disobedience, and gives some pointers as to what to look out for
whichever path you choose.
While I was working my way through the Spanish Handbook of Economic Disobedience and trying my hand at some amateur translation, interesting links were accumulating in my bookmarks.
I’ll share some of these today:
The erosion of the IRS budget and the expansion of its responsibilities has led to a drop in revenue from its collections/enforcement branch.
“Diminished enforcement could also affect voluntary compliance over time,” according to the Treasury Inspector General for Tax Administration report that revealed the numbers.
The IRS has shed about 8,000 jobs , the report said.
It comes as the IRS is taking on big new responsibilities implementing President Barack Obama’s new health care law, with congressional Republicans wanting to cut the agency’s budget even more.
Dublin household and water charge strikers are fighting back against government attempts to install water meters that would enforce the new tax.
This video demonstrates how resisters have poured concrete blocks to prevent the installation of the meters:
War tax resister Ed Hedemann appeared on Breaking The Set to explain “how Americans can stop financially supporting the military industrial complex by withholding taxes”:
Congress has engaged in its traditional year-end brinkmanship, passing a set of
retroactive extensions of popular tax breaks. These also included some changes
that may be of interest to tax resisters. For example:
Tax penalties for failure to file and failure to pay will now be indexed
for inflation, as of .
Congress has created a new variety of tax-advantaged savings accounts,
designed to help people fund accounts for disabled people. If I’m
interpreting what I’ve read about this correctly, the tax advantages are
modest: deposits to these trust funds are not deducted from taxable income,
but any investment gains on the amounts in the funds, as well as the
principle, are not taxable to the disabled person they are given to if they
are withdrawn for the purposes of paying the qualified expenses of that
person.
Meanwhile, the IRS has begun pronouncing doom and gloom as a result of the latest cuts to its budget.
Quick to appeal to American’s bottom-line, IRS Commissioner John Koskinen said that people may experience delays in getting their income tax refunds.
With any luck this will encourage more people to reduce their withholding so they aren’t owed refunds at tax filing time.
Koskinen says the cuts will hurt the IRS enforcement arm:
“In some ways,” he said, “these budget cuts are really a tax cut for tax cheats.
Because to the extent we have fewer people to audit and enforce the tax code, that means some people cutting corners on their taxes or not complying are going to get away with it.”
Disobedience.eu is born, a consultancy designed to resist the Troika
An old guy on my block used to say: “If you’re going to steal, steal big.
Because if you stay small, you’re just a thief, but if you steal big you’ll be a millionaire.
All it takes to be rich is to skim a little from everybody.”
“You make a lot of sense!”
I thought.
But the old guy never stole, at least not on a grand scale, and to me, frankly, the proof is in the pudding.
The world is an unfair place, sir, and what are you going to do?
He who has the most pays the least, and this, at least when it comes to taxes, goes without saying: all of the companies in the IBEX 35 — those that are publicly traded and have the most liquidity in Spain — are located in tax havens and pay minuscule amounts to the Treasury in comparison to their earnings.
Citizens, small- and medium-sized businesses, aren’t so fortunate with the tax collector.
It’s unfair, but legal.
They bask in the sun on a private beach, and to the rest of us they leave only a miserable puddle to splash around in.
Is there really nothing that can be done?
Beyond complaining, there’s a new plan — a yet untried option: drag our towels and camping chairs onto the private beach to say, “Hello, buenos días, good morning, guten morgen, we are also in the club.”
, Disobedience.eu, the first tax rebellion consultancy meant for the common people, was launched.
It all began when the artist Núria Güell contacted Enric Duran, the activist known as the “Robin Hood of the banks” for swindling — or expropriating, you might say — some half a million euros from various financial institutions in , with the motive of finding a way to buck the Troika.
From there a small tax advisor emerged, the Troika Fiscal Disobedience Consultancy.
A score of European activists, and Duran from the underground, launched what may come to be the largest hack of the financial system in Europe, at least on the part of the citizenry.
“It starts by resisting the Troika through financial strategies, by playing with the law in the same ways as the neoliberal corporations,” says Güell.
The idea is to imitate Apple, Google, and Banco Santander — not for personal gain, but “to stop paying an illegitimate debt and to start financing the common good.”
“The Troika is dedicated to commandeering and privatizing the commons, it has a colonizing nature: all the countries that are subjected to it, like Spain, Ireland, or Greece, lose their sovereignty.
We must create a parallel financial system.”
Fiji, the Cayman Islands, Liechtenstein, your home
If we were to do a math problem, it might go as follows: Say that John has a balance last trimester that comes to 2,000 euros VAT.
John sends an email to Disobedience.eu with the amount he wants to resist (2,000 euros) and they will supply him with an invoice for that amount.
John will pay 8% for the service: management fees (1%) and a contribution to a common fund (7%).
“The rest (92%), although recorded as paid, will not actually be charged.
As far as I know, to forgive a debt is not a crime,” says Güell.
So John has an invoice that states that he has made a tax payment in Spain, although in reality no such thing happened.
“In the EU there is free trade, but in practice there is no common fiscal policy, and the justice system is not coordinated.
The countries as a result have trouble obtaining information from one another.
The big companies benefit from this, and now the little guy can do so as well.
It would be very difficult for the administration of the country where he is consulting to know who has not claimed the income.”
John has evaded taxes, mimicking the techniques of the big multinationals, but for another purpose.
“92% of the money is yours.
The idea is that you can dedicate it to projects for the common good, which are increasingly privatized or abandoned by the state.”
For example, a support network for refugees or school libraries.
Desobedience.eu was inspired by the Coperativa Integran Catalana and the Right of Rebellion Collective, and will be linked to the international Fair Coöp collective.
For this reason, Güell expects there will be a rapid increase of clients, projects, and affinity groups: “The assignment of the funds is up to each client.
Nobody will be monitoring or checking on where it is going.”
Isn’t this a do-gooder form of tax evasion?
How can you prevent “dishonest” evaders from using this tool?
Activists will sift the clients: “If a capitalist business wants to use this service to evade taxes, it will be turned down.
On the other hand, a group of lawyers with a social focus have already been accepted.”
Gandhi versus Starbucks
The tax disobedience initiative has sparked interest, but also an understandable fear of possible legal problems. Güell asserts that the activists involved have everything sorted out: “The only people who run a real risk are those who put in their names to form the company, but they are insolvent and that protects them.”
Throughout history there are numerous examples of economic disobedience.
“From the Boston Tea Party in to the Salt March of Mahatma Gandhi in .”
Though there are also much more recent examples:
In the residents of Crickhowell, a town in Wales, grew tired of paying much more in taxes than Starbucks and decided to declare themselves a tax-free town and to create a company in the Cayman Islands: “They initiated a collective action of tax resistance, and since then the State has not done anything.”
With the activists of Disobedience.eu there is more resolution to attack the core of the system than fear of the possible repercussions.
Furthermore, for Güell, economic disobedience is better politics than voting in democratic elections.
“If we do not have autonomy with respect to the Troika and the markets, there is no way to advance the many initiatives that we put forward.
They are the obstacle, because they are above democracy.
The dictator is only a dictator if he has subjects; disobedience is the only way remaining to us.
Furthermore, disobedience is intrinsic to democracy.”
The real hurdle is to go beyond the environmental activists and the more politicized minorities and to extend the initiative across the whole population.
“Workplace exploitation; inability to make ends meet; a rainbow assortment of pills for depression; daily suicides from eviction, foreclosure, or meaninglessness; and murderous barbed-wire over some fictitious dividing lines.
Why dedicate your life to feed this machinery that only benefits a minority?” asks Güell.
“You just need to open your eyes to notice that Europe is at a dead-end, caught between the technocrats of the Troika and the anti-immigration nationalists.
The European Union is no more than a financial plan for plundering social wealth and impoverishing the workers, a set of legalized financial crimes that act to transfer the income of citizens to the banks and large corporations.”
And as such, the response should be collective and in the financial sphere.
As Aristotle told us, politics does not manage the public sphere, rather our everyday actions are what create policy.
The actual mechanism by which the tax evasion happens is left a little obscure by this article, but as best I can gather it’s something like this:
In Europe there is a value-added tax, which is something like a sales tax.
It is added to the price of the good as it increases in value during its manufacturing stages, but intermediate goods that are sold to other sellers (for instance, goods purchased by merchants for resale) do not have more tax added to them.
If you’re buying something for resale, rather than paying the tax at the time you buy it, you indicate to the seller that you’ll be adding the tax to the price of the goods at the time you resell it, and then whoever sells the goods to you sells you the goods tax-free.
An exchange of invoices allows the tax agencies, in theory, to follow the supply chain to whoever is responsible for collecting and remitting the tax.
But this process is frequently gamed.
For instance, if the final seller is a sort of Potemkin business that vanishes before taxes are due, then the taxes never have to get paid.
Or, apparently, if that seller is officially domiciled outside the European Union — say, in the Cayman Islands or something.
So what the Consultancy seems to be doing is to be providing invoices saying that they’re responsible for paying any value-added tax that ordinarily would be paid by a resisting small business.
They charge the business for the cost of the goods, but they don’t bother to collect most of the money.
So the business is off the hook for the tax, the Consultancy doesn’t generate any income that might make it liable, and everyone walks away a little happier.
Something like that, anyway.
They also seem to be doing some of their transactions (the percent of the invoice they do intend to collect, for instance) in “FairCoin” — a bitcoin-like currency.
I’m not sure what advantages if any this gives to the Consultancy or the businesses that use it, but it seems like something that could boost the value of FairCoin as a currency, and maybe that’s the point.
In a proposal similar to the “comprehensive disobedience” movement that was pioneered by Spanish activists, a group in the United Kingdom has inaugurated a “Golden Rule Tax Disobedience” campaign.
In their words:
The latest tax scandal is bringing the erosion of our democracy into ever
sharper focus. Britain suffers under an enormous democratic deficit due to
state capture by “free”-market neoliberal fundamentalism and its associated
corporate and financial interests, in aggressive ascendancy
. Notwithstanding the
financial crisis, this capture of the state
has remained unaddressed, with successive governments shamefully complicit in
it. Despite copious corroborative research and endless petitioning and
protesting, all we’ve seen is disingenuous hand-wringing and political
evasion.
Our collusion with this apology for a “democracy” must stop. We, the
citizenry, are therefore taking matters into our own hands — with a “Golden
Rule Tax Disobedience” whose intention is grassroots mobilisation against
systemic injustice, favouring far greater equality, shared and stable
prosperity, enhanced quality of life and, most importantly, an environmentally
sustainable future.
The evidential rationale for this action is overwhelming. Not least, £93bn of
“corporate welfare” is given as handouts annually to businesses operating in
our allegedly “free” market; and the government spends £26bn subsidising
harmful fossil fuels, yet a mere £3.5bn subsidising renewables. “Free”-market
fundamentalism has been an astonishing failure for the vast majority.
Our Golden Rule Tax Disobedience initiative asks citizens to withhold a small
amount of tax (through
VAT or their tax
return — everyone can join in), and then donate it to conducive campaigning
groups. This principled modelling of a redistributive ethos intends to shame
our politicians into taking effective action.
Principled tax activism has a long and distinguished history in circumstances
where the state has shown itself incapable of defending the public interest.
With no serious attempt by government to correct Britain’s massive democratic
deficit, our initiative is an idea whose time has come. We ask you to join
with us in taking back power in order to create a fairer and more sustainable
society.
Dr Gail Bradbrook — Director, Compassionate Revolution
Richard Wilkinson and Kate Pickett — Co-authors of The Spirit Level
George Barda — Social justice and Occupy campaigner, Compassionate Revolution
Leon Rosselson — Writer/musician
David Drew — Former Labour MP for Stroud
Polly Higgins — Lawyer advocating for Ecocide Law
Joel Benjamin — Debt Resistance UK and People vs PFI
Professor Andrew Samuels — Analytical psychology, University of Essex
Professor Karín Lesnik-Oberstein — Critical theorist
Rev Paul Nicolson — Taxpayers Against Poverty
Dr Richard House — Chartered psychologist, education campaigner, Stroud
Liam Barrington-Bush — Co-founder, More Like People
Max Graef — Broadcast engineer, company director
Andrea Halewood — Chartered psychologist
Ben Jarlett — Digital media consultant
Martin Large — Publisher and author
Jojo Mehta — Environmental campaigner
Beatrice Millar — Steering group, Psychotherapists and Counsellors for Social Responsibility (PCSR)
Gabriel Millar — Teacher, Stroud
Alice Murray — Political activist and campaigner, Stroud
Aliyah Norrish — Digital content associate
Mark Nurse — NHS paramedic, Stroud
Councillor Brian Oosthuysen — Gloucestershire
Maja Passchier — Cellist and cello teacher
Hazel Raee — Mobile digital champion, Isle of Skye
Aline Sitoe Diatta was, says Wikipedia, “a Senegalese heroine of the opposition to French colonialism, often called the Joan of Arc or the Marianne of Senegal.”
When the French colonial administrators of the region where the Diola people lived began conscripting locals to fight in European wars and to engage in confiscatory taxation of rice and cattle, the Diola resisted.
Aline Sitoe Diatta was one of the leaders of this resistance, and also a martyr: she was arrested and tortured, and died while imprisoned in exile.
Emitai is a film about these uprisings from the Senegalese point of view.
Sieglinde Baumert has spent two months in prison for her refusal to pay a €17½ monthly television tax to support the government-run station.
The tax, which formerly was based on the number of televisions in a household, is now assessed on everyone in Germany whether or not they have a television.
Taxi drivers in Quebec, upset at being outcompeted by upstarts like Uber, are threatening to stop paying taxes if the government doesn’t act to protect their industry against competition.
Have you caught the tax evasion bug?
The recent leaks of the “Panama Papers,” with their details of how the 1% stash their money in shell companies in tax havens, have increased perceptions that the tax system is gamed by the rich and powerful — and have decreased the willingness of the average joe to continue getting fleeced.
[IRS chief] Koskinen
says the main factor that drives ordinary Americans to stop paying their
taxes, or to try to cheat on their taxes, is the perception that others
are doing the same. If you think that your neighbors are not paying their
fair share, you’re just a little less likely to pay your own tax bill in
full or in part.
Today I’ll share some links about tax policy and tax resistance in the United States that have caught my attention recently.
First, though: I’ve started a Wikipedia page on Tax resistance in the United States that covers how theories about tax resistance have shaped (and been shaped in) the U.S., and how tax resistance in practice has played out in the country.
Wikipedia is an open, collaborative project that anyone can help to edit, so I encourage you to learn what it’s all about and how to help make it better.
Now on to the links:
Tax Evasion
The New York Times got its hands on a trove of financial documents concerning the real estate empire of Fred C. Trump, Donald Trump’s father, and published a well-done exposé on what they found.
From the point of view of today’s political squabbles and tomorrow’s history lessons, the takeaway is that Donald Trump’s brand, in which he is represented as a self-made business prodigy, is a laughable con job.
From our vantage, however, what’s interesting is the extent to which the Trump family used legal, effectively-legal, and illegal methods to evade taxes.
They paid a fraction of what they owed, again and again.
This may help bolster the widespread feeling that rich people commonly get away with tax evasion, sticking it to the little guy.
This in turn erodes “tax morale” which causes voluntary tax compliance to fall.
Another bit of journalism hammering on this theme (though more free-wheeling and not as methodically precise) comes from GQ: “How Puerto Rico Became the Newest Tax Haven for the Super Rich”.
Apparently if you can convince the IRS that you’ve become a permanent resident of the U.S. Territory of Puerto Rico, you’ll find yourself in “the only place on U.S. soil where personal income from capital gains, interest, and dividends are untaxed.”
General Government Failure
“The federal government could soon pay more in interest on its debt than it spends on the military, Medicaid or children’s programs.”
Thus begins a New York Times article on the growing federal government debt.
“Within a decade, more than $900 billion in interest payments will be due annually, easily outpacing spending on myriad other programs. Already the fastest-growing major government expense, the cost of interest is on track to hit $390 billion next year, nearly 50 percent more than in 2017, according to the Congressional Budget Office.”
The more the federal government is reduced to being a collection agency for bondholders, the less mischief it can get up to elsewhere.
Far from addressing this problem, today’s policymakers are exacerbating it, so we have more such headlines to look forward to.
The National Taxpayer Advocate says that the IRS is cooking the books when they report their numbers on how their phone “customer” service is doing just fine.
For one thing, they don’t measure the phone numbers with the worst service.
For another, they don’t count getting tangled up in an unhelpful “press X for Y” phone menu and then hanging up in frustration as an unsuccessful call.
For another, they count merely talking to an IRS operator as a successful call, whether the operator was able to resolve the problem or not.
Republicans are prone to complain about the percentage of U.S. households who are so poor they don’t have to pay income tax (remember Mitt Romney’s revealing “47%” comments way back when?
Or the Wall Street Journal’s “lucky duckies” editorials?).
But that didn’t stop them from crafting their major tax legislation (the recent “Tax Cuts and Jobs Act”) in such a way that it will increase the percentage of American households who pay no federal income tax.
The Tax Policy Center estimates that fully 44% of American households will pay no federal income taxes at all (2% more than ).
About 25% will pay no payroll tax either, or their payroll tax will be offset by a refundable income tax credit.
“Millennials” (says the New York Times)
are joining together to swap techniques for quitting the rat race and retiring early, in something called “the FIRE movement.”
They begin to live more frugally, squirrel things away, take greater care of their investment decisions, and eye an early modest retirement or semi-retirement.
Most of the examples in the article are of pretty well-off people who really just needed to stop living at or above the lifestyle they could afford.
But it’s people like them who pay the taxes, and by stepping off the treadmill, they stop doing so or at least stop doing so much.
So if you know anyone in that category, send them a link.
About ten years ago the number of Americans renouncing their U.S. citizenship began to shoot up, from what had been a normal range of two to eight hundred people a year to a high of 5,409 people in .
But things seem to have leveled off since then.
Why?
Your guess is as good as mine, maybe better.
Before the U.S. federal government “shutdown,” back in , I ordered a batch of this year’s tax forms from the IRS.
I like to file on paper, rather than electronically, in part because if we all did that we’d bring the IRS to its knees.
But anyway… during the “shutdown” the IRS sent me a letter saying it had gotten my order but would not be able to fulfill it right away.
Here we are in mid-February, three weeks after the “shutdown” ended, and I’m still waiting.
That’s just a superficial indication of the chaos that’s roiling the already-overtaxed (ha!) agency.
Years of increasing responsibilities, budget cuts, blows to employee morale, and ever-more-dilapidated IT infrastructure (“profoundly archaic”, one recent report put it, and risking a “catastrophic systems collapse”) have taken their toll.
Hiring freezes have led to a graying workforce that is retiring in droves.
The “shutdown” was further insult to the injuries.
And that, in a year when the agency has had to change its rules and processes to deal with a new tax law and the most radically restructured tax forms in recent memory.
That all requires employee retraining which was supposed to have been happening in the weeks leading up to tax filing season, that is, the time when the agency had to shut its doors and send its seasonal employees home.
The new federal income tax law that goes into effect this filing season was the usual slapdash exercise in political posturing and lobbyist pissing matches.
Naturally a plethora of loopholes and shelters bubbled to the surface after the ooze settled.
A set of tax law experts has made “an effort to supply the analysis and deliberation that should have accompanied the bill’s consideration and passage,“ and they conclude that “[m]any of the new changes fundamentally undermine the integrity of the tax code and allow well-advised taxpayers to game the new rules through strategic planning.”
Details here: The Games They Will Play: Tax Games, Roadblocks, and Glitches Under the 2017 Tax Legislation
After all of the talk of tax cuts, Americans may be surprised at getting fewer, smaller, and later-to-arrive income tax refunds than they’re used to this year.
While that’s not a very meaningful metric in the big scheme of things, it is something that can contribute to the degradation of taxpayer morale, as many taxpayers — subconsciously or merely short-sightedly — see their tax refund as a measure of how generous or costly the government is to them.
The usual stories about massively profitable companies like Netflix or Amazon not paying taxes (or indeed getting tax refunds) are also doing the rounds and eroding taxpayer morale this year.
Susanne Großmann of Pax Christi and Netzwerk Friedenssteuer attempted last week to appeal for a refund of 5% of her taxes, on conscientious objection to military taxation grounds.
The rich already pay high tax rates. The tax code is already progressive.
I hear this all the time from right- and neoliberal-leaning tax blogs and
think tanks. This is usually followed by some graph or statistic showing
that “the top” n% of taxpayers (by adjusted gross income or
some other declared income measure) pay 90% of income taxes, or something
like that: Q.E.D.
But this is sleight-of-hand. To show that the tax rates are
progressive isn’t enough. To make the case that the rich are paying “their
share” of income taxes you have to also demonstrate that they are paying
those rates on all of their income, not just on that portion of income they
haven’t managed to shelter from taxation. So, in this regard, I was
interested in this new paper on
Tax Evasion and Inequality.
It took advantage of a tax haven data leak, and existing records of tax
audits in Scandinavia, to get a snapshot of how the very wealthy avoid
having much of their assets subjected to taxation in the first place. They
may pay high rates on what’s left over, but that isn’t the same as paying
high rates in the first place. “[W]e find that the 0.01 percent richest
households evade about 25 percent of their taxes. By contrast, tax evasion
detected in stratified random tax audits is less than 5 percent throughout
the distribution.”
David Swann, former head of Alberta’s small Liberal Party and former provincial legislator, has announced he is going on tax strike.
His strike is motivated by the news that many Alberta fossil fuel extraction and refining companies are in default on their local taxes, to the tune of hundreds of millions of dollars, and that the Alberta government is letting that slide.
“I am not paying my provincial taxes until these companies pay theirs,” says Swann.
“I urge others to join me.
Our government shouldn’t have one set of rules for their corporate friends, and another for the rest of us Albertans.”
Instead, further tax breaks for these companies are in the works to help keep them afloat.
“This government is saying to corporate Alberta that taxes are optional,” said Swann, “when they’re not optional for the rest of us.
It’s time to… encourage Albertans to indicate that they’re not going to pay their property taxes as long as the government has this double standard…
“I think more and more outraged Albertans are going to say ‘well, we’re going to withhold our taxes then — who knew that paying taxes was optional?”
In other news…
The New York Times reports on how some clever fraudsters used an opaque scheme called “cum-ex trading” to get tens of billions of dollars in double-tax refunds from European countries.
The war on speed radar cameras continues, with recent attacks in France and Italy. The French government is trying to refortify the cameras with designs that are resistant to attack, but these too are being knocked out of service as fast as they are deployed.
A while back I noted that the IRS was in a tussle with some county governments over the fees those governments were charging to file liens (including tax liens). The IRS refused to pay a portion of the fees, and so the counties refused to register the agency’s liens. It looks like the IRS was the one to blink in this stand-off.
In Goma, North Kivu a group calling itself Lutte pour le Changement / LUCHA (“Struggle for Change”), has called on merchants at the Alanine market to stop paying their market taxes in protest against the government’s unwillingness to address unsanitary conditions there.
Some tabs that have slid through my browser in recent days:
As you may have heard, The New York Times finally got ahold of Donald Trump’s tax returns.
They show that he didn’t pay income taxes most years, and when he did in recent years it was token amounts ($750).
This seems to be largely because of grandiose business losses combined with sketchy deductions for business expenses (like $70,000 in annual hair care, or “consulting fees” to his family).
The upshot of this to us here at The Picket Line is that this contributes to the public impression that the rich evade taxes with impunity and that taxpaying is for suckers, thus degrading “taxpayer morale” and the willingness of taxpayers to cough up their tribute voluntarily.
See ♇ 25 November 2012 for more about attacks on the pillars of taxpayer compliance.
Some recent links of note:
As I reported back in July the IRS was refusing to issue stimulus payments to people in prison, and was trying to claw back the payments it had already issued — even though the law did not authorize the agency to do these things.
Now a court has granted an injunction against the IRS, ordering it to release the funds to the unjustly robbed prisoners.
The human revolt against traffic ticket robots continues, with robots taking casualties from rebels armed with spray paint, an angle grinder, and hot tar in Canada and France in recent weeks.
War tax resister Lindsey Britt reminds readers of the Brattleboro Commons that “our taxes are our legacy.” Excerpt:
Taxes are part of a legacy that each person creates which will shape the world long after their death.
But with a large portion of tax money in the United States directly paying for weapons of death and destruction, all of us owe it to ourselves to consider the legacy that we are creating with our role in the war machine.
The decay of enforcement at the IRS has come to the notice of the very wealthy, who are hiding their wealth from the tax collector with impunity.
This in turn came to the attention of a few economics researchers, who compared the data from a variety of audits of people in the top-earning 1% to show that tax evasion is rampant among the ultra-rich.
And that study has come to the attention of journalists and pundits, who summarize the news in this way: “An underfunded and overworked IRS has enabled a handful of plutocratic tax cheats to live large at the expense of everyone else.” This is the sort of thing that causes “taxpayer morale” to collapse.
The city government of Vic, the capital of the Osona comarca in Catalonia, has decided to stop remitting its taxes to the Spanish federal government, and will instead send those taxes to the Catalan government.
In doing so, they are joining the Catalan nationalist “Jo Pago a Catalunya” tax resistance campaign.
Currently, the Catalan government forwards these taxes to Spain, so this is mostly a symbolic campaign.
But when enough people and institutions pay their taxes through the Catalan government, that government will be empowered to stop forwarding these taxes to the federal government as part of their declaration of independence.
In Defence of Marxism has reprinted Rob Sewell’s recap of the “We Won’t Pay” anti-poll-tax movement that brought down the Thatcher government, from the point of view of the Militant Tendency, which played a major (and controversial) role in that movement.
Groups in the Ituri province of the Democratic Republic of the Congo have launched a tax resistance campaign aiming at forcing the resignation of the governor, who they say has made the security situation worse in the province.
Someone leaked the tax returns of America’s richest people to the independent investigative journalism collective ProPublica.
The upshot, as you might have suspected, is that fabulously rich people pay paltry income tax rates on their growing wealth.
This seems to be largely because much of their wealth does not come in the form of taxable income but in the form of capital gains, which do not get taxed until they are “realized” — which they often never are (instead the wealthy borrow against them, pass them to heirs, or create foundations with them).
Sometimes much of the wealth is donated to charity and so is not taxed for that reason.
This has rekindled outrage about the unfairness of the U.S. tax system.
Some excerpts from a news report based on the tax return leaks:
In 2007, Jeff Bezos, then a multibillionaire and now the world’s richest man, did not pay a penny in federal income taxes. He achieved the feat again in 2011. In 2018, Tesla founder Elon Musk, the second-richest person in the world, also paid no federal income taxes.
Michael Bloomberg managed to do the same in recent years. Billionaire investor Carl Icahn did it twice. George Soros paid no federal income tax three years in a row.
Our analysis of tax data for the 25 richest Americans quantifies just how unfair the system has become.
By the end of 2018, the 25 were worth $1.1 trillion.
For comparison, it would take 14.3 million ordinary American wage earners put together to equal that same amount of wealth.
The personal federal tax bill for the top 25 in 2018: $1.9 billion.
The bill for the wage earners: $143 billion.
Apologists for the rich like Tyler Cowen and the National Review would prefer that we focus on the violation of privacy implications of these tax returns being released to the press.
(Meanwhile, in the real world, us plebs have to cough up our tax transcripts to strangers every time we apply for a loan or try to rent an apartment.)
But the likely effect of this will be to further erode “taxpayer morale” and the willingness of ordinary taxpayers to keep forking over their hard-earned money.
ProPublica plans to release a series of additional reports based on the tax return data it received.
Robert McGee has conducted or supervised many surveys about the ethics of tax evasion in countries around the world.
He has now summarized several of those studies along with a bibliography of additional cross-cultural tax evasion attitude research.
What was sometimes billed as the “Confessions of a Failed Tax Resister” (Rebecca Gordon) did the rounds around Tax Day in the United States this year.
Gordon was a war tax resister in the 1980s but eventually threw in the towel, paying her taxes, penalties, and interest, and returning to being a compliant taxpayer.
“It wasn’t the life decision I’m proudest of, but here’s what happened.”
Meanwhile, Owen Silverman at the University of Connecticut’s student paper put in a plug for conscientious tax resistance, though it sounds like he thinks we should wait for the government to legalize it first or something.
ProPublica has been continuing to do exposés about how the tax system is rigged in favor of the rich at the expense of the little guy.
One of the latest is “If You’re Getting a W-2, You’re a Sucker” which is specifically about how wage-earners get the shaft.
Peter J. Reilly looks at the comparative woes of the 1099 granfaloon and finds them not too bad all things considered.
In other news, Alexis Ferrand did a little Googling to try to hunt up some examples of multinational corporations refusing to pay taxes for ethical or political reasons in particular countries in the aftermath of coups, but in the absence of explicit legal sanctions regimes.
In summary: he didn’t find much, although there are examples of internal (not international) corporations doing this.
Sometimes multinational corporations make other decisions in the aftermath of a coup that result in lower tax revenues to the new government, but a lot of this can be explained as risk avoidance or as taking advantage of political instability to seek out emerging tax avoidance options.
