How you can resist funding the government →
other tax resistance strategies →
tax evasion / fraud →
personal tax evasion
From another link on the Tax Policy Center’s web site, I read that according to the IRS, 79% of filers who use “known abusive devices” to avoid paying taxes (the bogus theories I’ve been writing about in recent Picket Line entries) and 75% of those who don’t bother to file returns never have to pay up even though the IRS has caught them!
This is from testimony by Leonard E. Burman before the House Ways and Means Committee a few months ago.
Burman was complaining that with billions and billions of dollars going uncollected, the IRS had decided it was going to concentrate the bulk of its new enforcement efforts on catching Earned Income Tax Credit cheats — in other words, the working poor.
Today’s round-up begins with this story from the Washington Post about tax evaders.
This isn’t about tax resisters, exactly, just people who are trying to keep more of what belongs to them (and on second thought, maybe the distinction between tax evaders and tax resisters is a false one).
The article concerns a GAO report about tax evasion.
Some of the meatier excerpts follow:
[T]he IRS recently told the White House that over it has linked more than 400,000 taxpayers to tax-evasion schemes that the agency says are likely to be found illegal.
That number is considerably larger than the 131,000 the agency reported to congressional investigators .…
[T]hese tax-evasion techniques and others are depriving the Treasury of up to $40 billion in unrealized taxes per year, more than the annual budget for the Department of Homeland Security.…
The GAO is adding its voice to a growing chorus of concern that the IRS is losing the battle against tax evasion.
, as then-IRS Commissioner Charles O. Rossotti was preparing to leave office, he disclosed that 60 percent of identified tax debts are not pursued, 75 percent of taxpayers who did not file a tax return are not pursued, and 79 percent of identified taxpayers who use abusive devices such as offshore accounts are not pursued.
[A] “single-minded” push to improve customer service… had diverted resources from enforcement and sent audit rates and criminal investigations plunging by as much as 30 percent.
That coincided with “a real deterioration in taxpayer attitudes” about compliance with tax laws…
So the IRS is going to be stepping up their enforcement efforts, assuming they get the funding to do so.
Insight on the News offers some educated guesses about where this enforcement will be concentrated.
These include:
Increased audits of small businesses
More attacks on nonfilers
Increased scrutiny of W-4 forms
Targeting underreporters
Criminal investigation and prosecution
The author notes that “the real problem with these actions is the error rate of the IRS.
The agency continues to be wrong half the time with the assessment and collection actions it takes.
Consequently, those accused of say, nonfiling, often are not non-filers at all.
They are victims of some processing mishap that turns into their worst nightmare because of IRS enforcement action.”
IRS Commissioner Mark W.
Everson was interviewed by USA Today, and the interview is in ’s paper.
Observe in this excerpt how Everson decries the degradation of ethics and fairness and the culture of greed and materialism that contributed to more people being unwilling to help the IRS take their money from them:
Q: You’ve noted that a survey showed that 11% of the public thought it was OK to cheat on taxes, and now that is up to 17%.
What is the driving force behind this attitude?
A: It’s probably two things.
One is a degradation of ethics with some practitioners.
It was tied to this same spirit of what many called “the culture of greed and materialism” that developed during .
But the IRS backed away from enforcing the law as this was happening.
It’s a basic sense of fairness.
Somebody out there is complying with the law, and they see others doing things, and over time, they feel like chumps.
But we will change those attitudes.
At the same time that the corporate income tax is being undermined largely by legal tax avoidance, the personal income tax is increasingly being eroded by tax evasion.
The best data we have on this comes from comparing the Internal Revenue Service’s measure of adjusted gross income taken directly from tax returns to the Commerce Department’s measure of AGI compiled from data on wages, interest and dividends paid by businesses.
In , the gap between these two figures reached $961.1 billion or 13.7 percent of the Commerce Department’s estimate of AGI.
This is the largest gap .
It suggests that the federal government is losing at least $100 billion per year just due to the non-reporting of taxable income on personal tax returns.
The IRS’s efforts to shrink the tax gap — the difference in the amount of taxes owed and taxes paid — must improve significantly to preserve the public’s confidence in the tax system and help offset mounting deficits, panelists agreed on .
Speaking at the American Bar Association Section of Taxation’s midyear meeting in San Diego, National Taxpayer Advocate Nina Olson and copanelists David Cay Johnston, reporter for The New York Times, and Patrick Heck, Democratic chief tax counsel for the Senate Finance Committee, suggested that recent estimates of a $250 billion to $300 billion tax gap are probably not accurate — and are very likely too low.…
Olson also suggested that increasing compliance, and therefore reducing part of the tax gap, depends on changing social norms. She said the largest section of the tax gap — roughly 67 percent — results from nonreporting and underreporting by self-employed individuals, typically on income that is not subject to information reporting.
The social norm among that group is that it is all right not to report income, Olson said.
“What kind or resources does it take to change the social norm?”
she asked, suggesting that the IRS needs a nationwide strategy to clean up the “entire environment” of noncompliance.
While this news report plays up the possibility that more people are cheating more brazenly on their taxes, I’m not convinced that this is necessarily the case.
The BEA report compared its estimates of how much income people received with what people reported to the IRS as Adjusted Gross Income.
But Adjusted Gross Income is usually adjusted in such a way as to reduce it, quite legally and ordinarily, from what the BEA considers your income (an exception to this would be capital gains, but , in the wake of the dot com bust, for all I know there were more capital losses than gains to report anyway).
There are new ways to reduce Adjusted Gross Income now that weren’t an option before or were less-valuable; perhaps this is just measuring that.
“This growing access to people who aren’t wealthy and are willing to pay a $3,000 fee … to someone to help hide their assets offshore is getting to be a huge problem,” says Sen. Carl Levin, D-Mich., ranking minority member of the Senate Permanent Subcommittee on Investigations, which in released the latest in a series of reports on potential offshore abuses.
“Honest taxpayers get socked with the bill” as tax avoiders transfer assets offshore, Levin said.
That cost is high.
Although no precise estimates are possible, as much as $1.6 trillion in North American wealth is likely held in offshore accounts, according to a report by the Tax Justice Network, an international group opposed to tax avoidance.
Americans with assets offshore probably avoid about $50 billion in taxes annually.
Many Americans, stymied at the complexity of the tax code and not wanting to
make mistakes, go to professional tax preparers to have their annual returns
written up.
TIGTA
sent some auditors, disguised as ordinary mild-mannered taxpayers, to “12
commercial chains and 16 small, independently owned tax return preparation
offices” to have their taxes done.
The results?
Preparers made substantial errors when completing tax returns and correctly
prepared only 11 (39 percent) of the 28 tax returns (i.e., the tax returns
showed the correct amount of taxes owed or refunds due). Of the remaining 17
tax returns that were prepared incorrectly:
11 (65 percent) contained mistakes and omissions that auditors considered
to have been caused by human error and/or misinterpretation of the tax
laws.
6 (35 percent) contained misstatements and omissions that auditors
considered to have been willful or reckless.
If these incorrect returns had been filed, the net effect to the Federal
Government would have been $12,828 in understated taxes (the amount is the
net effect because there were instances in which tax liabilities and tax
refunds were both overstated and understated).
Apparently, it’s pretty simple and low-risk to file fraudulent tax returns claiming that you qualify for thousands of dollars in refunds.
The IRS will cut you a check, then maaaaaybe somewhere down the road they’ll notice something fishy, then maaaaaaybe they’ll catch you, then maaaaaaaaybe they’ll try to get the money back.
No fooling.
Here’s a story about one of the ones they caught up with.
He took in half a million dollars over three years this way — and all he had to do was just to pull the numbers out of his butt.
Nothing fancy.
It was only accidentally, “after federal agents learned that Fisher had cheated a local car dealer out of $1.2 million and used that money to buy gold bars and silver coins,” that the tax fraud was uncovered incidentally to that investigation.
A recent TIGTA audit found out that this sort of fraud is a billion-dollar problem for the IRS.
The agency issued an estimated $1 billion in potentially fraudulent refunds, four times what it originally estimated, and then didn’t bother to further investigate half a million of the returns with discrepancies.
Their Criminal Investigation division tracked down about $189 million of that billion, but left $894 million on the table.
The IRS Oversight Board just released their latest Taxpayer Attitude Survey.
The headline they’re pushing for it goes something like this: “Nine Out of Ten Americans Say It Is ‘Not At All’ Acceptable To Cheat on Taxes.”
For the most part, the news media is going along with that.
And since this coincides with the embarrassing tax dodging of members of Obama’s proposed cabinet, we can expect these survey results to get more than usual play in the media.
But the survey uses loaded terms in its questions in order to provoke the results it reports.
It is not so much meant to measure taxpayer attitudes as to shape them by manufacturing and publicizing a consensus.
For example, the question that generated the survey’s most-touted result was:
How much, if any, do you think is an acceptable amount to cheat on your income taxes?
By using the loaded word “cheat” which by definition implies unacceptable behavior, the survey almost guarantees that respondents will label the behavior as “not at all” acceptable.
Other questions follow the same pattern:
It is every American’s civic duty to pay their fair share of taxes.
(Do you completely agree, mostly agree, mostly disagree, or completely disagree?)
Well, if the question already assumes that the share is fair, what is there to disagree with?
Even I think that it’s every American’s civic duty to pay their fair share of taxes; I just think that fair share is zero.
Tax collectors recognize that the perception of social norms of tax paying or tax evasion are very important considerations when an individual is deciding whether or not to cough up money on demand.
The IRS is hoping, with tools like this survey and the help of a lazy news media, to make it appear that taxpaying and condemnation of tax evaders is the social norm.
If you’ve been following along with my Aristotlethon, you may be interested to know that I’ve posted PDFs of the many translations and commentaries I’ve been relying on at a supplemental bibliography page. These are corrected versions of the PDFs available from Google Books.
I’ve adjusted the page numbering to accurately reflect the page numbers of the original books, have removed blank, damaged, or duplicate pages, and have added bookmarks that allow you to quickly jump to particular books and chapters.
Here’s an interesting trick I hadn’t heard of before:
Overpay your taxes with a substantially too-large bad check.
The IRS automatically sends you a refund check.
The IRS notices, too late, that your check was worthless.
If you’re a tax resister, tax protester, or tax evader, would this interfere with your ability to sponsor your fiancé(e) during the process of getting a visa extension or citizenship?
Hmmm… good question.
Take it away, immigration lawyer Brad Bernstein.
The gist is that the group purports to consist of members of U.S. law enforcement and the military who have vowed not to obey any orders that contradict their understanding of their duty to the U.S. Constitution, as given in their oaths of office (typically, such oaths include a promise to “support and defend the Constitution of the United States against all enemies, foreign and domestic”).
They anticipate that the government will become more tyrannical, and that the “domestic” enemies to the Constitution will come from within government and will issue unconstitutional orders to disarm Americans, put them under martial law, eliminate state sovereignty, blockade American cities, enlist foreign troops in the subjugation of American citizens, put Americans in detention camps, and so forth.
In preparation for this, they are trying to build a movement of folks in uniform who insist that they will refuse to obey orders to do such things.
That the group formed with sudden urgency and enthusiasm just as Obama was taking office may lead you to suspect that this is largely a group of paranoid right-wingers of the OMG The New World Order Is Vaccinating Us Against the Flu; Next They’ll Take Our Guns And Lock Us In Concentration Camps Run By ACORN variety.
You’d be right.
But, like it or not, this is what grassroots dissent from within the ranks is liable to look like, at least at first.
And any such movement that advocates that folks in uniform judge and possibly disobey orders is salutary, at least to that extent.
There are some ominous signs that the IRS may turn on sole proprietors next.
The government suspects that many sole proprietors who declare losses on their tax returns are doing so fraudulently — by deducting fake or non-business-related expenses, by not disclosing income, or by pretending that their expensive hobbies are really businesses.
The agency estimates that over half of the losses claimed by unprofitable sole proprietorships were not legally justified, and fully 70% of such sole proprietorships reported such losses.
In spite of this, the agency has not put much effort into plugging the leak, in part because the losses on each return are typically small and the effort involved in auditing a sole proprietorship return is costly.
The Treasury Inspector General for Tax Administration reports that the number of tax returns the IRS believes to be claiming fraudulent refunds has skyrocketed this year.
It’s a little unclear to me from the report how much of this is a real trend in taxpayer behavior and how much is an artifact of new IRS procedures or the fact that more people are e-filing, thus making their returns available for automated analysis quicker.
“Bushel Bob” has a website where he explains why he shut down his produce market so as to avoid earning money on which he’d have to pay war taxes.
Now he donates his produce to charity and thereby avoids the tax.
Radley Balko, in Reason magazine, has an interesting interview with Stewart Rhodes about the “Oath Keepers,” a group of American military and police personnel who have taken a vow not to carry out unconstitutional orders.
In revolutions worldwide and throughout history, the turning point has often been when the folks in uniform have started questioning their orders and refusing to attack the citizenry on behalf of the politicians.
Some bits and pieces from here and there:
We tend to think of the IRS mainly as the government’s tool for taking money from us, but these days it’s also one of the primary ways the government distributes money to people and corporations.
Naturally, freelance crooks would like to get their hands on some of this officially stolen loot, and so I’m seeing more and more reports of organized tax fraud — the numbers after the dollar-sign, the number of people involved, and the brazenness of the schemes all seems to be increasing, as more people think, “the government bailed out the big guys — why not me?”
Alas, many of these schemes involve filing fraudulent returns using someone else’s identity, then cashing in the “refund.”
In such cases, the IRS tends to react by sending its enforcement branch after the victim of the identity-theft.
Elaine Silvestrini of the Tampa Tribune listened well to some of these victims recently and found they were telling “maddening stories of fighting a seemingly malevolent bureaucracy whose employees were unaccountable and either overwhelmed, incompetent or rude.”
The government of Spain recently amended the country’s constitution for the first time since 1992 in order to mandate deficit-cutting austerity measures and to give the repayment of government debt priority over other spending.
There have been widespread protests, and one group has called on Spaniards to “exercise the right of rebellion.” The constitutional amendment, they say, was “dictated by international capital and enacted behind the backs of the people” (translation mine):
Our commitment is to the common good, and for this reason, following our legitimate duty as citizens, we declare ourselves rebels to the constitution, insurrectionary to the State, and disobedient to all authority that it represents.
For this reason we declare ourselves citizens of the popular assemblies and the assemblies of postcapitalist projects in which we participate.
It is in this way that we exercise our sovereignty.
We pledge to do everything that is in our power to construct a new, popular power that enables a new society where the decisions will be actually realized by the people.
We understand that after the great outpouring of indignation the best way to regain our dignity is by means of rebellion.
We understand that with our dignity comes our ability to disobey laws that are unjust and/or contrary to the benefit of the people.
Therefore, we commit ourselves to the call to begin and extend an action of complete tax resistance against the Spanish state and those who control it, with consequent action to demonstrate that we will not pay “their debts,” because we do not recognize this constitution.
A tax resistance that serves to fund the popular assemblies, and from these, giving “absolute priority” to participatory funding of the resources that we really consider public.
Because the situation that we are experiencing in the Spanish state is common to many countries worldwide, and because the ruling economic powers are global, we encourage human beings around the world to assert their right of rebellion by means of manifestos like this.
Tax resistance was one of the civil disobedience strategies that raised India to independence from the British Empire; now it may be a key strategy for the independence of all from global capitalism.
We have already passed the stage of indignation, now we are a new insurgent fellowship!
I like the sound of that a lot more than anything I’m hearing coming out of the Wall Street protests these days.
Matt Yglesias penned a sobering speculation that one result of the difficulty the United States has had in coming up with a way to deal with its prisoners of war that is not medieval in its barbarity, is that now it prefers just to assassinate — finding a “take no prisoners” policy easier on the reputation.
James C. Scott, in a paper in the Copenhagen Papers series (“Everyday Forms of Resistance,” ), looked at tax resistance as one of the varieties of behind-the-scenes peasant resistance to exploitation.
In particular, he investigated resistance to mandatory tithing of rice yields in Malaysia.
This tithe was a traditional Islamic zakāt that had been made mandatory and brought under the control of the central government in 1960, in the course of which the government also added an invasive bureaucracy that “mandated the registration of acreage and yields in order to enforce its collection.”
Says Scott:
Opposition to the new tithe was so unanimous and vehement in the villages where I conducted research that it was a comparatively simple matter to learn about the techniques of evasion.
They take essentially four forms. Some cultivators, particularly small-holders and tenants, simply refuse to register their cultivated acreage with the tithe agent.
Others underreport their acreage and/or crop and may take the bolder step of delivering less rice than even their false declarations would require.
Finally, the grain handed over is of the very poorest quality — it may be spoiled by moisture, have sprouted, be mixed with straw and stones so that the recoverable milled grain is far less than its nominal weight would suggest.
Scott says that the government, in one local sample, got only one-fifth of the grain that it would have if people had complied with the tithe law.
But though this was a largely successful tax strike, it was also a quiet one:
There have been no tithe riots, no tithe demonstrations, no petitions, no violent confrontations, no protests of any kind.
Why protest, indeed, when quieter stratagems have achieved the same results at minimal risk?
…it is the safer course for resisters to leave the tithe system standing in name while they dismantle it in practice… without affording the state an easily discernible target.
There is no organization to be banned, no conspiratorial leaders to round up or buy off, no rioters to haul before the courts — only the generalized non-compliance by thousands of peasants.
Scott says that there are three factors that aid this mode of resistance:
“a palpable ‘climate of opinion’ ” — that is, a widespread belief that the tithe is unjust and that resistance is proper
“a shared knowledge of the available techniques of evasion”
“economic interest” — that is, the fact that it is personally economically advantageous to resist paying the tithe
(He refines this in another work to: “the conjunction of a folk culture that encourages some forms of resistance, a set of habits and practices that are part of the practical heritage of the peasantry, and a shared material interest in thwarting appropriation [that] can produce a form of tacit coordination that mimics or substitutes for formal organization.”)
Also important is the political context.
The authorities could, Scott says, crack down on evasion, though this would be costly and difficult.
But it would also hurt political support for the ruling party among the peasantry.
Scott says that once tax resistance “has become a customary practice it generates its own expectations about what is permissible [and] raises the political and administrative costs for any regime that subsequently decides it will enforce the rules in earnest.
For everyday resisters there is safety in numbers and successful resistance builds its own momentum.”
He also notes, in another context, that “the social historian could profitably examine the role of petty tax resistance in producing, over time, the ‘fiscal crisis of the state’ which frequently presages radical political change.
Here too, without intending it, the small self-serving acts of thousands of petty producers may deprive a regime of the wherewithal to maintain its ruling coalition and prevail against its enemies.”
…a vast range of what counts — or should count — as peasant resistance involved no overt protest and requires little or no organization.
This look at what Scott calls “everyday resistance” is in reaction to our normal tendency to concentrate on more organized, visible, acute uprisings and to consider other forms to be inchoate, immature forms of real rebellion.
Because the duration of and the number of participants in such everyday resistance may be greater than of more well-recognized revolts, their effect on the balance of power between the ruling class and the exploited class may be proportionally greater as well.
By itself, the peasantry’s most common and durable weapon is an everyday resistance that stops short of the more dangerous forms of overt protest and confrontation.
Because members of the exploited class lack access to the legislative and administrative levers of power, they take their political stand instead at the point of enforcement.
As Thoreau put it:
Scott gives a pleasant oceanographical metaphor about this sort of resistance:
Everyday resistance does not throw up the manifestos, demonstrations, or pitched battles that normally compel attention.
It makes no headlines.
But just as millions of anthozoan polyps create, willy-nilly, a coral reef, so do thousands of individual acts of insubordination and evasion create a political and economic barrier reef of their own.
There is rarely any dramatic confrontation, any movement that is particularly newsworthy.
And whenever, to pursue the simile, the ship of state runs aground on such a reef, attention is typically directed to the shipwreck (for example, a fiscal crisis) itself and not to the vast aggregation of petty acts that made it possible.
The paper goes into more detail about the Malaysian resistance, and shows how effectively the peasants essentially set their own tax rate rather than complying with the official one.
When improvements in irrigation allowed the rice farmers to plant two crops instead of one during the course of a year, which officially subjected them to twice the tax, they instead “simply compensated by paying less than half of what they paid earlier on a single crop.”
Collectively, they reduced a nominal 10% tax to an actual 1.5% one.
Scott then looks at the French tithe resisters in the light of this.
He notes some overt, acute resistance (“In , the residents of one commune refused to pay the wine tithe and threatened to throw the collector into the Rhône.
In , another village, led by its curé, stoned the monks and their tithe agent when they came to collect the grain.
In , peasants wearing disguises sacked the granary of the tithe collector, and no witnesses could be found to testify against them.”), but is more interested in the “everyday resistance,” finding that in France the techniques “were far more elaborate and varied.”
These techniques included:
introducing novel crops or growing marginal ones that were not covered by existing tithe laws
growing taxable crops alongside or interspersed with non-taxable ones and then claiming the whole field as exempt
opening new, hidden plots of land to planting without declaring them
planting tax-exempt “gardens,” “orchards,” or “meadows” that were functionally equivalent to taxable fields
harvesting and hiding a portion of the crop before the tax collector arrived
assembling sheaves in such a way as to conceal valuable grain in the non-taxable base
taking advantage of the rounding-off process in counting the grain to make large portions of the harvest effectively exempt
Much of this is simply clever loophole-hunting, aided by a culture of tax disgust that celebrates and spreads it.
Each technique alone was a petty nuisance to the tax-gatherers, but in the aggregate they took a huge bite out of their cut — one complained “of thirty sacks, it is plausible that they pay only one.”
This individual, canny, shoulder-shrugging, “who, me?” resistance was made possible by “a generalized, often unspoken complicity… the French sources frequently refer to ‘tacit consent,’ ‘unanimity,’ the refusal to give testimony, and conspiracies of silence.”
[T]he law is almost perfectly designed for tax fraud.
This tax fraud, which will be at least somewhat legal, will happen in two stages.
First, the way the Obama administration is implementing the law allows people to state their income with little to no verification.
By stating a low income, people can qualify for a large subsidy which gets paid in advance.
When people receiving subsidies file their taxes in , if it turns out their income was higher than they originally stated, you might think they would then have to repay the subsidy.
But now we get to the second part of the tax fraud.
Under the law it is not only difficult for the government to get its money back, in some cases it is legally impossible.
There are two limits on the ability of the IRS to collect the overpayment.
The IRS is not allowed to place a lien on your property or garnish your wages in order to collect money owed under Obamacare.
This applies to both overpayment of subsidies and to the penalty for not purchasing insurance at all.
That means unless a person voluntarily pays what is owed the IRS can only collect money from people who would otherwise be owed a refund on their taxes.
If someone owes money either for not purchasing insurance or overpayment of a subsidy, the IRS can deduct the amount owed from the refund the person would have received.
If they are not owed a refund large enough to collect the entire amount, there is nothing more the IRS can do.
In addition to the above difficulties that the law places on the IRS, the law also limits the amount of any subsidy overpayment that must be repaid under any circumstances (look at the very end of the law in this link).
In other words, if a person lies about their income in order to collect a larger subsidy, there is a good chance that they legally can keep at least some of the overpayment.
For example, for a family with actual income of less than 200 percent of the poverty line (around $47,000 for a family of four), the most that must be repaid is $600. If the family’s income is as high as $115,000, they still cannot be forced to repay more than $3,500.
Given that the Obamacare subsidies for a family of four can easily be $10,000 or more the difference between what is paid as an undeserved subsidy and the amount that must be repaid could be quite large.
Recent reports have described how the IRS has been paying $4 billion per year in fraudulent refunds filed by thieves who didn’t even do a particularly good job of disguising the fraud.
The IRS was also found to have paid over $110 billion in fraudulent earned income tax credits over a decade.
Thus, tax fraud is a major problem already and Obamacare seems almost to be intentionally designed to make tax fraud easy.
Obamacare is going to be one of the largest government programs we have as measured by spending, with most of the spending occurring through the subsidies designed to make insurance affordable.
Yet the program is designed in a manner that invites tax fraud on a massive scale.
Just understate your income, arrange your withholding so you are not due a refund, and keep your subsidy overpayment with no fear of reprisal.
Given that an entire industry has grown up helping people commit tax fraud using the earned income tax credit, we should expect a similar phenomenon to arise around the Obamacare subsidies.
If the IRS cannot minimize fraud when they have the full range of their enforcement powers, how bad is the fraud going to be when the IRS has both hands tied behind its back?
Your tax resistance news round-up
The third war tax resistance podcast, sponsored by the War Tax Talk blog, features war tax resisters Shirley Whiteside, Juanita Nelson, Randy Kehler, Betty Winkler, and Beth Seberger sharing the fruits of their experience.
“Tax evasion” has a bad reputation because governments have successfully convinced people that paying taxes is of public benefit, and that those who dodge their share reap these benefits while pushing the burden off on others.
But there are a lot of assumptions packaged in with that story that don’t hold up under scrutiny.
Under a more realistic set of assumptions about the nature of public spending and taxation, tax dodging is an important public service that benefits all of us by limiting the invasiveness of government.
The scam in which callers impersonating IRS agents trick people into sending them money to settle spurious tax debts continues to grow.
According to the latest news:
When the law enforcement agency that oversees the Internal Revenue Service warned in of the “largest-ever phone fraud scam targeting taxpayers,” it did not realize the 20,000 victims would be just the tip of a growing iceberg.
As of , close to 300,000 consumers have reported to the Treasury Inspector General for Taxpayer Administration, or TIGTA for short, that they’ve been contacted by callers claiming to be from the IRS.
As we head into tax season in 2015, 12,000 people are complaining to TIGTA about the IRS impersonation scam every single week.
At least $14 million have been reported to be extorted by criminals, and the actual number may be twice that high.
The tax resistance movement that’s sprouting from the Occupy Central / Umbrella Movement in Hong Kong continues to seek guidance from tax resistance campaigns around the world.
In the latest example, they look to Julia “Butterfly” Hill’s enormous war tax redirection action for inspiration.
The Italian tax resistance movement growing under the hashtag “#IoNonMiAmmazzo” now has a rap video to dramatize its campaign:
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.
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.
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 ? Do you keep your income low?
Kelly
Many years I have lived below the taxable income. But in , 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 . 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.
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.
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.
