How you can resist funding the government → about the IRS and U.S. tax law/policy → IRS incompetence → enforcement effort/results → civil forfeiture abuse

So if you ever have the opportunity to deposit $10,000 or more in the bank, you must fill out some extra paperwork or in some way notify the government about the deposit. And don’t think you can just deposit $5,000 today and then come back tomorrow and deposit the other $5,000 as a way of getting around it — the prosecutors call this “structuring transactions” and it’s illegal.

But what if you just happen to be depositing $5,000 today and another $5,000 tomorrow? How do they know the difference?

Well, it turns out they play hunches… and they sometimes end up beating down some poor schmuck who wasn’t trying to get away with anything but just happened to be making a bunch of smaller deposits.

The IRS can and does seize bank accounts from people it suspects of structuring deposits, and then it’s an uphill fight to get the money returned.

Civil-forfeiture procedures allow mere suspicion to justify such mischief. Under the rules of civil procedure, an accused is presumed guilty and must prove his innocence. These are rules directly opposite from criminal procedures, where the accused is presumed innocent until proved guilty. Constitutional rights, such as the right to due process and a speedy trial, do not apply.

This can ruin people who have done nothing wrong, as some recent cases have shown. Gas station owner Mark Zaniewski had $70,000 seized by the IRS, which forced him to close down his station. He was lucky enough to get some help from the legal team at Institute for Justice, since once all your money has been seized, it’s hard to afford a lawyer, and the courts won’t appoint one for you to fight a civil case. The IRS backed down once he got lawyered up.

In another case, supermarket owner Terry Dehko had $35,650 stolen from him by the IRS. He tried to explain: “My clerks routinely deposited cash earned at Schott’s at a bank right across the street. It’s never a good idea to risk letting too much money accumulate on-site. Like many other small businesses, my store’s insurance policy specifically limits coverage for cash losses to $10,000.” The IRS went through his books and found that he wasn’t trying to hide anything, but they tried to keep the money anyway. He got help from the Institute, and eventually got his money back too. But an Institute spokesperson complained:

“The IRS should not be raiding the bank accounts of innocent Americans, and it should not take a team of lawyers to put a stop to this behavior… Our constitutional lawsuit against the federal government seeks to rein in the shameful practice of civil forfeiture.”

In another recent case, the government was forced to return $136,000 it had seized from a Chinese restaurant because the IRS missed a court filing deadline (perhaps we can chalk this up to the effects of the government shutdown).

Some bits and pieces from here and there:

War Tax Resistance

• Erica Weiland notes that while there may not be an ongoing military draft conscripting soldiers in the U.S., if you are a U.S. taxpayer, you have already been drafted.
• Peg Morton writes of the opportunity she had to help the war tax resistance of John Lindsay-Poland through her participation in the War Tax Resisters Penalty Fund.
• The Bulletin of the Atomic Scientists published an interview with long-time anti-nuclear activist Frances Crowe. In that interview, she touches on her war tax resistance:

  I no longer pay federal taxes, but I do file. I set up a trust, and put everything in my children’s names, so I own nothing. But the government does take money out of my social security, and I donate a sum equivalent to my federal taxes to charity.

  So, I try to put a third of my “tax money” into repairing the damages of war — I’ve been helping a woman go to school in Afghanistan, and I gave a thousand dollars for her to pay for tuition this year. I do things like that, and help this cancer clinic in Iraq. And a third goes to peace centers in this country. It costs me money, but it’s worth it for my conscience.

• American Quaker war tax resister Joseph Olejak explains how he came to take his stand, and how his Meeting supported him when he went to jail for it:

• Henry Braun, a poet and Vietnam-era war tax resister, died recently. “In the 1960s, he organized poetry readings against the Vietnam war and participated in the War Tax Resistance movement. He was convicted of tax evasion because he chose to give a portion of his taxes to the Philadelphia Veterans Hospital and to the city’s public schools.”
• War tax resisters who hope to get some legal blessing for their stand have traditionally appealed either to the legislature (by lobbying for something like a “peace tax fund” bill), or to the courts (by trying to get conscientious objection to military taxation recognized as a protected right). But Leigh Osofsky, an Associate Professor of Law at the University of Miami, reminds us that the executive branch, too, has discretion in how it enforces the tax law — refusing to enforce some parts of it and enforcing other parts of it in selective or spotty ways.

Other Links of Interest

• Colin Donoghue’s meditation on “The Root Injustice, & A Real Way Forward to a Sustainable Society” tries to unravel the tangle that happens when people try to promote progressive ends by means of an inherently inegalitarian, coercive, privilege-entrenching institution like government.
• The latest numbers suggest that a record number of people will renounce their U.S. citizenship in 2014.
• After a New York Times exposé about the IRS’s use of civil forfeiture to seize money from innocent people, the agency released a statement announcing that it would be reforming its use of the practice.

Some bits and pieces from here and there:

• Remember that Litopia After Dark podcast I was on a few days back? Co-host Peter Cox tried to spark some controversy by calling war tax resistance an “elitist” stand. I wasn’t quite sure what he was going on about, but I think he was implying that it’s elitist to prioritize your own ethical limits on how you want your money spent over the government’s determination of where it thinks people’s money should be spent (particularly, perhaps, when the government has some degree of democratic legitimacy). Erica Weiland responds at War Tax Talk to the question: “Is War Tax Resistance Elitist?” …and wonders if some people are afraid of becoming better people because they don’t want others to think of them as “holier than thou.”
• Have you got any protest plans this coming Tax Day? If so, NWTRCC wants to know about it. They compile a list of such actions for their annual Tax Day press release, which can help you get a little more buzz.
• In a fairly repulsive bit of political theater, Congress is raking the IRS over the coals for its use of civil forfeiture to seize money from people without convicting them — or even charging them — with a crime. What makes this repulsive is that it’s Congress that designed the civil forfeiture authorization, fully intending that it be abused in this way. It’s entirely in their power to pass a less-unjust law, but they chose to pass a more-unjust one instead… and now they pretend to be champions of civil liberties, pontificating about how unfair the IRS is being by using the law as it was designed.
• When I was in Colombia two years ago I learned a bundle about the struggles of conscientious objectors to military service there. I was happy to hear recently that the Constitutional Court there has made a decisive ruling meant to protect the rights of conscientious objectors. The Colombian military is almost an independent branch of government in Colombia, and hasn’t shown much respect for the law in the past, and so it may drag its heels over submitting to the court’s ruling. But activists there are hailing this as an important step, and it was certainly the product of a lot of hard and patient work on their part.
• Scott London, Sheriff of Eddy County, New Mexico, intervened to stop the IRS and federal marshals from seizing property of county resident Kent Carter. Carter has refused to pay hundreds of thousands of dollars the IRS says he owes; Carter, apparently under the influence of the “show me the law” school of tax protesters, denies he owes anything.
• I’ve never been a fan of Al Sharpton, but I may have to change my mind. According to a report at National Review Online, “Every Sharpton business known has been dissolved for failure to comply with tax rules” and Sharpton “also personally owes New York State nearly $596,000, according to active tax warrants.”
• Sure enough, last year a record number of Americans renounced their citizenship or dropped their residency status.

IRS follies are piling up fast:

• Remember how the IRS was caught seizing money from people and businesses without bothering to give them any sort of due process — using asset forfeiture powers and transaction structuring rules to commit brazen theft? Congress held hearings in which they pretended to be outraged at the agency’s use of the laws Congress had passed specifically to encourage such crimes. The agency promised they would stop. But stop they did not. They were caught once again, this time stealing $107,000 from a businessman, offering to give half of it back as a compromise, and threatening him if he went public about it. He lawyered up and contacted the Institute for Justice (like the ACLU but less likely to trip over politically-correct nonsense) and they helped him get all of his money back from the thieves.
• The IRS was also caught illegally trying to shake down tax preparers by inventing a requirement to be licensed by the agency. 89,000 tax preparers paid $116 apiece to take a competency test devised by the agency before a court ruled that the IRS had no legal authority to establish this requirement. Now the agency has been forced to refund the $10 million ill-gotten gains from the scheme.
• An IRS worker decided to call in to Howard Stern’s radio show while on the job. He was put on hold, and decided to take a call from a taxpayer while he was waiting. Then: “When the radio show took the IRS representative’s call off hold, it apparently wasn’t made clear to the IRS representative — who just kept talking. That conversation was broadcast on air.”

  How did the woman find out? Her phone started buzzing as she received numerous calls and texts from all over the country. Her personal phone number had been broadcast along with part of the conversation.

  The woman told a local news outlet that the incident has been “devastating” and she has not been able to eat because of the stress. Of course, she’s considering lawyering up.

• Does the name Lois Lerner ring a bell? She’s the bête noire of the IRS targeting scandal that the American right-wing can’t stop turning with their pitchforks. But you might have missed this angle: Lois Lerner was also apparently the go-to person for the Japanese whaling industry which was lobbying to get the agency to revoke the 501(c)3 charity status from the anti-whaling Sea Shepherd Conservation Society.
• So much money is being made through identity theft by filing for bogus tax refunds by impersonating U.S. taxpayers, I suppose it was inevitable that those with the best access to taxpayer identifying information — IRS employees themselves — would try to get in on the action. And try they have. We only hear about the ones that get caught, of course, but they’re likely only the tip of the iceberg.
• Identity thieves used the IRS’s “Get Transcript” service (by which taxpayers could get copies of their tax returns and other data from their IRS files) to get the tax info from 100,000 taxpayers. With this information, the thieves will be better able to impersonate that unlucky 100,000 for a variety of scams, and will be able to file very authentic-seeming amended returns going back several years to efficiently steal millions of dollars back from the agency.
• Is it any surprise that only 31% of Americans trust the IRS to enforce the tax laws fairly?

Some links of interest:

• Waging Nonviolence interviews Alycee Lane, author of Nonviolence Now! Living the 1963 Birmingham Campaign’s Promise of Peace on the subject of why Martin Luther King’s pledge of nonviolence matters today. Excerpts:

  The Birmingham campaign pledge was a commitment card that, according to Martin Luther King, all volunteers were “required” to sign in order to participate in the movement. I came across the pledge in King’s work, “Why We Can’t Wait,” a book in which he talks about the Birmingham campaign. The card consisted of ten commandments, including: “1) meditate daily on the teachings and life of Jesus. 2) remember always that the nonviolent movement in Birmingham seeks justice and reconciliation — not victory. 3) walk and talk in the manner of love, for God is love. 4) pray daily to be used by God in order that all men might be free. 5) sacrifice personal wishes in order that all men might be free. 6) observe with both friend and foe the ordinary rules of courtesy. 7) seek to perform regular service for others and for the world. 8) refrain from the violence of fist, tongue or heart. 9) strive to be in good spiritual and bodily health. 10) follow the directions of the movement and of the captain of a demonstration.”

  With its emphasis on the importance of taking up a daily practice of (for example) courtesy, love, service, meditation and prayer, the pledge really offered to volunteers an opportunity to embrace nonviolence as a way of life. The commandments in effect constitute a daily practice of nonviolence, and as such, it conveys that nonviolent direct action is not merely or solely public protest and organizing. It is also (and perhaps more importantly) speaking, thinking, acting and engaging the world — even at the most mundane level — from an ethic of nonviolence, so that we actually become nonviolence.

  It is strategic, I think, for those who are activated to choose not to emulate the very people whom we hope to disarm, to refuse to exchange tit for tat, to withdraw our cooperation with and complicity in creating our culture of violence. It is strategic to demonstrate by word and deed that there is another way to walk in this world and to engage others. It is strategic, in other words, to disarm ourselves and one another just as surely as it is to disarm the state.

  It saddens me when folk who are doing righteous work to confront, say, police brutality or economic inequality or environmental exploitation, express the kind of venom they themselves receive because of the work that they do. It saddens me when I say belittling and dehumanizing things about folks with whom I disagree. In those moments, we become allies in nurturing an atmosphere of conflict, hate and violence. We also reveal the extent to which our emotional and spiritual lives have been colonized.

• Increasingly in the U.S., traffic enforcement is not about safety but about generating revenue for the government. This makes our roads less safe, our fiscal processes less transparent, our law enforcement more corrupt, and contributes to the criminalization of poverty.
• Americans spend more money on taxes than on food, housing, and clothing combined.
• Another example of a “suspicious package” causing an evacuation of an IRS office.
• The IRS has been defeated in another case in which they stole money from someone on the pretext that they had been depositing the money in the bank in periodic small amounts in order to avoid the bank’s requirement to report large deposits to the agency. A judge further ordered the agency to pay interest to the victim based on how long they held on to his money. Another triumph of the Institute for Justice, which has been doing some great work helping the little guy stand up to government.

Some recent links from here and there related to tax resistance:

International

• Here’s an interview with Tommaso Cerno, who has recently launched a tax strike for gay rights in Italy. “Only one weapon of resistance remains to us: to evade the state that does not recognize our rights at the only place where it does consider us equal: when we pay taxes.”
• Opposition legislators in the Gilgit-Baltistan Legislative Assembly walked out of the assembly to join an anti-tax business strike.
• Businesses in Accra, Ghana’s capital, also launched a brief shutdown to protest oppressive taxes.
• Gold dealers in India have also shuttered their stores and burnt the finance minister in effigy to protest a new excise tax.
• Joshua Browder, a teenaged computer programmer currently attending Stanford University, has developed a free, on-line tool that guides people in the U.K. through the process of fighting their parking tickets. “Since launching in late 2015, it has successfully appealed $3 million worth of tickets.”
• Periodistas por Encargo reviews the arguments for tax resistance and redirection.
• Tax resistance plays a role in the anti-bullfighting movement in Galicia, to pressure the government not to allocate public funds to events that feature bullfighting.
• Businesses in Huatulco have stopped paying taxes because the government has failed to provide adequate security against violent crime.
• The Suepples public employees union in Venezuela, saying that employee salaries have not kept up with tax hikes, made a declaration of tax resistance. “We aren’t just refusing for the fun of it, we refuse because we’re broke,” said finance secretary Adela Otaiza. The government is using astronomical inflation to ratchet up taxes and ratchet down public employee wages to make up for drops in oil revenues and a poorly overmanaged socialist economy.
• Helen Thornley, at Tax Adviser magazine, looks back at the role tax resistance played in the women’s suffrage fight in Britain.

U.S. Tax News

• Procedurally Taxing takes a closer look at the new law that allows the government to deny or rescind passports of people with large tax debts. (My own debt is getting large enough that it may trigger this within a couple of years, so I’m paying close attention.) This article asks if a bankruptcy that removes or reduces your tax debt is sufficient to also remove the passport restrictions. Read the comments, too.
• The Institute for Justice has scored another victory against IRS civil forfeiture, successfully winning back Ken Quran’s life savings that the agency tried to steal from him.
• A judge has declared the automated traffic tickets given to motorists in Chicago to be legally unenforceable because the city didn’t follow its own rules in issuing the tickets, what the judge called “a violation of the fundamental principles of justice, equity, and good conscience.”
• Cash transactions are harder to tax (or to ban) because they don’t leave as much of a trace. So governments have begun floating ideas to discourage or eliminate cash. The latest salvo was a New York Times editorial encouraging the government to eliminate the $100 bill.
• The identity theft hack of the IRS’s online “Get Transcript” service was much bigger than originally announced.

Some bits and pieces from here and there:

• The New England Gathering of War Tax Resisters is going to be held from October 14^th to 16^th in Hardwick, Massachusetts. Details will be posted to the NWTRCC website eventually.
• The Tax Policy Center takes a closer look at those Americans who successfully pay zero income and payroll tax (about 27% of us, they estimate).
• NWTRCC is hiring a field organizer / outreach consultant. If you think you might be interested, you can find the details here.
• Hundreds of separatists in Trieste have stopped paying taxes to the Italian government.
• Erica Weiland, at the NWTRCC blog, examines the sorry set of presidential candidates we’re being asked to choose from and wonders if there’s any reason for a war tax resister to vote.
• Germán Treuz, the curate of Alcira Gigena, Argentina, caused a ruckus when he refused to pay a road toll recently, complaining that the road had not been properly maintained for years and was in poor condition. His act “had a large impact on society because he is a very well-known person,” said the mayor, and other people have come forward saying that they, too, refuse to pay for such a shoddy road. Treuz later told a radio audience: “The tollgate can be raised easily, so I say to the people: don’t pay these thieves.”
• A college student has created a chatbot legal advisor to help people fight parking and traffic tickets in select cities. So far it has successfully overturned $4 million in parking tickets.
• The IRS continues to get spanked for its former policy of stealing money from people it alleged were “structuring” bank deposits — that is, making many deposits of small amounts over time in order to avoid the reporting requirements of large deposits. In one recent development, the agency was forced to return $29,500 from a Maryland dairy farmer. The Institute for Justice did much of the work involved in forcing the IRS to return the money in this and other cases and to change its policies.
• U.C. Irvine law professor Omri Marian expects bitcoins to be the next “super tax havens.” He says:

  From a tax-evasion point of view, they are particularly attractive. Cryptocurrencies possess the two most important characteristics of a traditional tax haven. First, because there is no jurisdiction in which they operate (they are “held” in cyberspace accounts known as online “wallets”), they are not subject to taxation at source. Second, cryptocurrency accounts are anonymous. Users can start as many online “wallets” as they want to buy or mine Bitcoins and trade them without ever providing any identifying information.

  Significantly, Bitcoin (and other cryptocurrencies) offer one additional major advantage to tax-evaders that traditional tax havens do not: the operation of Bitcoin is not dependent on the existence of financial intermediaries such as banks. Bitcoin is exchangeable peer-to-peer by definition. Bitcoin thus seems immune to the developing international anti-evasion regime [in which] financial institutions [are] the emerging agents of tax collection… Thus, cryptocurrencies have the potential to become super tax havens.

  Bitcoin transactions are not anonymous by default. Indeed, there is a permanent record of every bitcoin transaction that is fully available to law enforcement. If you want to use bitcoin anonymously you have to take careful steps to do so.
• Here’s another example of someone paying taxes with a huge quantity of low-denomination money as a protest.
• There’s a bit of interesting background in this IRS research paper about the process the agency goes through when it detects that someone has failed to file a tax return.

Some links that have skipped past my browser in recent days:

• Shirin Ebadi, Iranian human rights activist and Nobel Peace Prize laureate, said of protesters in Iran: “People should stop paying electricity, water, and gas bills. They should not pay their tax. They should withdraw their money from banks.” The remarks were made a few days ago in a press interview.
• KQED commentator Luke Pease has lost interest in being a responsible taxpayer and now is on the lookout for businesses that offer a “discount for cash” and other opportunities to evade taxes levied by a government that has lost his moral support.
• The new federal tax law restricts how much people can take deductions on their federal tax returns for the state and local taxes they have paid. Some states and localities are toying with ways to allow taxpayers to recharacterize their taxes as charitable donations to get around the restrictions. On the other hand, the Tax Foundation is skeptical that such games will pass muster.
• Demonstrators in Urabá, Colombia, following in the footsteps of the Rebecca Rioters and the Bonnets Rouges, put two new highway tollbooths to the torch Friday.
• The vast majority of people whose bank accounts were abruptly seized by the IRS for “structuring currency transactions” (defined as deliberately depositing amounts under $10,000 in order not to have the transactions reported to the government) had earned that money legitimately, contrary to the government’s representations that such transactions were evidence of criminal activity, according to a new report from the Treasury Inspector General for Tax Administration. The law permits the IRS to seize money in such cases without having to go to the trouble of proving a crime, forcing the suddenly-impoverished owners to go to court to prove their innocence if they want to see their money again. The widespread abuse of this practice has led the agency to back off somewhat from the use of this tool.

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.
• Alex Tabarrok and Michael Makowsky used some clever data mining to unveil that when governments make it profitable for police to arrest black and Hispanic people (through property forfeiture laws that allow police to profit from the booty they seize), such arrests increase. They conclude: “The prospects for justice are dimmed when the probability an individual is arrested varies not only by the character of their transgression but also by the potential windfall they present to the public coffer.”
• It’s hard to tell your cops from your robbers, that’s for sure. Take for instance Officer Ebony Nesbitt of the Miami-Dade police force… recently arrested for her part in raking in half a million dollars by filing false tax returns in an identity theft scam.

IRS Follies

• 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.
• The Tax-Expatriation blog has gotten its hands on a letter from the U.S. State Department refusing to issue a passport to a person with what the IRS categorizes as “a seriously delinquent tax debt”.

Miscellaneous

• 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 this year (2% more than last year). 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 2016. But things seem to have leveled off since then. Why? Your guess is as good as mine, maybe better.