How you can resist funding the government →
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how is tax law/policy/administration changing? →
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Infrastructure and Budget Bills, 2021–22
Tax resistance news in brief:
I don’t know that there’s much to be gained from watching this sausage get made, but here is a quick sketch:
The Biden administration is working on legislation billed as an “infrastructure package” that spends a bunch of money, and tries to raise that money without raising individual taxes on most Americans.
One way they hope to raise the money is by boosting spending on tax enforcement (e.g. audits, collections) at the IRS and increasing the agency’s ability to snoop on bank accounts under the theory that this would mean a lot more tax money collected that is currently being left on the table.
The legislation is moving forward on two fronts: an ostensibly “bipartisan” version, by which some Republicans would risk the wrath of their party to work with the Democrats in return for helping to shape the legislation, and a unipartisan version if that doesn’t work out, that would have to be rammed through via the Democrats’ razor-thin Congressional majority.
However, for reasons that are a mix of fact and fantasy, the Republican base doesn’t much care for the IRS and can pretty easily be riled up to snarl at talk of embiggening it.
At first, it looked like the more bipartisan-leaning Republicans would go along with it, but a conservative group has been trying to torpedo the bipartisan infrastructure deal by airing ads attacking those Republicans who looked to be going along with the IRS-boosting part of the plan.
And a number of Republicans have spoken out against that part of the plan specifically.
So now, that part of the plan seems to be off-the-table in the bipartisan version of the deal.
I don’t know how much that matters, as the Democrats may still try to shove something like that through on their own.
But they won’t have bipartisan cover to do so, so may be unable to keep their thin majority together.
Maverick, nay, fully gonzo entrepreneur John McAfee killed himself in a jail cell while awaiting extradition to the U.S. on charges of tax evasion.
He had declared his intention to refuse to pay taxes because of his objection to government policies.
The on-again/off-again tax strike in South Kivu over the government’s failure to maintain transportation infrastructure appears to be on again.
Some recent links from hither and yon:
Do citizens of the United States have a presumptive right to travel elsewhere, or is that a privilege that the government may withhold at its whim?
This has become a live question thanks to the newish law by which the State Department can revoke passports from (or deny passports to) people the IRS reports have significant unpaid taxes.
Papers, Please! reviews the state of the law and the tenuous right to travel.
Catalan restaurateurs, who protested for independence by redirecting their taxes from Spain to essential services in Catalonia for seven years, have been hit by a €300,000 fine by the Treasury agency in Madrid.
They responded with receipts and an accounting of where the money went — including to local schools and hospitals — but the tax agency was unmoved.
They plan to continue their fight and have started an on-line fundraiser to help pay their legal bills.
The IRS is “pleading for patience” as it deals with the backlog of last year’s tax returns it hasn’t processed yet.
I filed my return back in April or thereabouts and the IRS hasn’t processed it yet.
I always file my tax returns on paper by hand so I’m not too surprised that mine ended up on the procrastination shelf.
Some tabs that have passed across my browser in recent days:
As part of the Biden administration’s plan to reduce the “tax gap,” they proposed that the government be given more visibility into people’s assets by requiring banks and other financial institutions to report to the IRS the amount of gross inflows and outflows from all accounts holding at least $600.
There was pushback, both from opposition lawmakers and the banking industry.
Now, it appears that this proposal has been dropped from the budget reconciliation package making its way through Congress.
That’s not the final word, but it’s an encouraging sign.
IRS Circumvents “Statute of Limitations” by Ruth Benn.
Normally, the IRS has ten years to collect unpaid taxes from you before they have to give up.
Also, normally, if you decide to voluntarily pay your taxes, you can also decide for which tax year you are paying them, and by IRS policy, they’ll respect that.
Ruth Benn’s tax resistance takes the form of refusing to pay her income tax, but voluntarily paying her self-employment tax.
As the ten year statute of limitations approached on one of her unpaid years of income tax, the IRS tried to pull a fast one and used some sleight-of-hand to apply the money Benn was paying for the current year’s self-employment tax to the expiring year’s income tax amount.
She is hoping to get the agency to change its mind and to respect its own policy, and promises to keep us up to date on how the red tape tangles.
Counseling Notes.
Including a reminder that Social Security levies can continue past the ten-year statute of limitations date because the levy is considered “continuous” when it is first applied (not reapplied with each new Social Security check).
Democrats are keen to force banks to report how much their customers have put into and taken out of their accounts each year.
They hope this will bring to the surface some of the money in the underground economy that the government has been frustrated when trying to tax.
This proposal has gotten a lot of pushback, and has been an on-again / off-again part of the budget package currently oozing through Congress.
The latest guesswork suggests that the Democrats may reactivate the proposal but restrict it to accounts with $10,000 or more in them.
There’s a nice website that’s been established by the caretakers of The Nelson Homestead — the modest home of war tax resisters Juanita & Wally Nelson in Deerfield, Massachusetts.
It has good recaps of the lives and activism of the Nelsons, including photos.
The Biafra Nations League, which is trying to establish a break-away nation more representative of the Igbo people, has issued an ultimatum to oil firms in the area, ordering them to stop paying taxes to Cameroon and Nigeria, which currently claim sovereignty over the region.
Argentina legalized abortion .
Now a group of Argentine legislators have proposed a law that would permit a sort of conscientious objection to taxpayer-involvement in abortion, of a similar sort to what is proposed in the “Religious Freedom Peace Tax Fund Act” in the U.S.
The human war on traffic ticket robots continues, with robots taken out of service by human rebels in the U.S., Italy, France, and Germany & France in recent weeks.
Some recent tax resistance news of note:
The Biden administration and Democrats in Congress have been looking for coins under the couch cushions that might help them pay for some of their expensive ambitions.
One plan they came up with was to require banks, credit unions, and other such financial institutions to make annual reports to the IRS of all accounts that had more than $600 of combined deposits or withdrawals over the course of the year.
The theory was that the IRS could match this information with the declared income of the account owners, and, if there was a significant discrepancy, could launch an audit to investigate — thereby making it a bit more difficult for people to earn and spend undeclared income, and so increasing the tax base.
Republicans seized on this proposal as a good wedge with which to spoil the Democrats’ plans, and painted it as an Orwellian nightmare of the government peering into everybody’s private business.
At first, the Democrats doubled down, but as anticipated, they have now pared back the proposal such that it will only apply to accounts with at least $10,000 of combined deposits and withdrawals, and exempting certain deposits (such as direct deposit paychecks or social security checks) and withdrawals (such as for the purchase of a home).
Exemptions like those may make the proposal easier to sell on the talk shows, but they would make it considerably more complex for banks to comply, and so this is unlikely to dampen their increasingly loud and organized opposition.
And the Republican kvetching, which had predictably floated free from the actual facts about the legislation almost immediately anyway, isn’t likely to get any quieter.
It remains to be seen whether the proposal will survive its further journey through the legislative meat grinder.
Why this matters for American tax resisters is this:
One of the easiest and most common ways for the IRS to take money, from a resister who refuses to pay voluntarily, is to seize it from their bank account.
For the agency to make such a seizure, though, they must first become aware of the bank account.
The usual way they discover such an account is when the bank sends an annual 1099 report to the IRS indicating how much interest income was earned by the account.
But in recent years, with interest rates so low, banks and credit unions have often offered accounts that do not generate any interest (they use other sorts of perks to entice customers instead).
Such accounts therefore do not generate 1099s and so do not create a paper trail for the IRS to follow.
So resisters have been able to use accounts like this to protect their money from IRS seizures.
Under the new proposals, such accounts would be reported to the IRS if they had a sufficient amount of deposits and/or withdrawals, and so this protection would be diminished or eliminated.
Federal tax revenues are sharply up , largely thanks to booming fortunes of corporations and the wealthy.
This appears to be more than just a rebound from the economic challenges of the pandemic, as the numbers are also way up from the pre-pandemic .
However, the budget does include a planned
$44 billion increase (over the next decade) in the IRS budget.
That’s about half of what the Democrats were hoping for, but it will reverse the budget cuts of the past decade that have helped to make the IRS the pathetic, flailing, gutted bureaucracy we know and love.
The Democrats hope (or claim to believe) that the increase in IRS funding will lead to a big boost in tax collection.
I think they’ll probably be disappointed.
I expect a lot of the money will end up spent on deferred maintenance (e.g. “A 60-year-old IRS IT system won’t finish modernizing until ”) and on hiring and training new workers to replace rapidly-retiring agency veterans, in a challenging labor market.
The IRS has a lot more on its plate than it did ten years ago, too.
It has to paddle harder just to stay in place.
The budget and infrastructure bills aren’t final final yet.
Things could still change a bit.
But the paint is beginning to dry.
Some recent tax resistance news of note:
Jane Rogers & Alex Pension from Extinction Rebellion’s “Money Rebellion” tax resistance campaign in the U.K. and José “Cuti” Cutillas from Spain’s Antimilitarista Tortuga war tax resistance movement spoke at the recent NWTRCC national gathering about how tax resistance plays out in their work:
The “Build Back Better Act” as currently proposed includes among its many provisions $498 million for the Department of Justice specifically to prosecute tax evasion, and $80 billion for the IRS (both figures are spread out over ten years).
Both Democrats and Republicans have reason to exaggerate the practical effect of this.
Democrats will insist that this new funding will mean the government can finally pursue fat cat tax evaders, close the tax gap, and result in lots of new tax revenue that will pay for the rest of the spending in the bill.
Republicans will paint a picture of vast swarms of jack-booted thugs running rampant over innocent families and small businesses across the land.
The purportedly nonpartisan Congressional Budget Office analyzed the bill and said that according to their calculations, the new IRS funding would lead to less than a third of the increased revenue that the Democrats were trumpeting.
As a result, the bill as a whole will put the government yet further in the red.
I have seen no signs that the IRS bank-account-monitoring proposal will sneak its way back into the bill, despite some Democrats’ hopes.
NWTRCC’s recent national conference featured a talk from attorney Peter Goldberger on the changing legal landscape for conscientious objectors to military taxation.
Goldberger says that the current Supreme Court’s increasing deference to religious scruples on First Amendment grounds provides a long-shot opening that war tax resisters might be able to leverage:
The “Build Back Better” infrastructure bill that recently passed in the U.S. House of Representatives does not include dreaded provisions that would force banks to report to the IRS more details about more of their customers’ accounts.
The Senate still has to weigh in, but it looks like this expanded reporting proposal is dead for now.
Some residents of the “Electronic City” tech zone in Bangalore, India, have been refusing to pay property taxes for three years now to protest the government’s broken promises regarding infrastructure and trash disposal.
Some links of interest:
The council tax resistance campaign that is part of the opposition to the Edmonton Incinerator has so far attracted eleven tax resisters.
As previously reported, the version of the “Build Back Better Act” passed by the House did not include a feared provision that would require banks to report to the IRS about more of their customers’s accounts and transactions.
There was a long-shot chance that those provisions would reappear in the bill as passed by the Senate, but thusfar no such provisions have appeared in the Senate’s version of the bill.
There is still some chance that the bill will be amended in the Senate to include such provisions, and I believe it’s not unheard of for provisions to get tacked on during the reconciliation process even if they weren’t in the versions of the bill that passed in either of the houses.
So we won’t know for sure until the bill hits Biden’s desk.
But I wouldn’t lose sleep.
One of the bill’s provisions would remove the requirement that IRS agents get written approval from their supervisors before assessing penalties against a taxpayer.
My gut feeling is that this isn’t a big deal (contra the Titanic alarm in the linked-to article about it).
It might make it marginally easier for the agency to apply penalties, or somewhat more likely that those penalties will be applied in inconsistent and haphazard ways.
But I suspect it mostly amounts to the trashing of a red-tape, rubber-stamp provision that didn’t have much practical effect.
Democrats in Congress are having more trouble than expected getting everyone in and out of the clown car.
The upshot is that the painstakingly-negotiated “Build Back Better Act” is in jeopardy — along with the $80 billion in new IRS funding that was part of the bill.
was surely the most challenging year taxpayers and tax professionals have ever experienced — long processing and refund delays, difficulty reaching the IRS by phone, correspondence that went unprocessed for many months, collection notices issued while taxpayer correspondence was awaiting processing, limited or no information on the Where’s My Refund? tool for delayed returns, and — for full disclosure — difficulty obtaining timely assistance from TAS.
, examination coverage has decreased, enforcement efforts have been negatively impacted, and the Level of Service has continued to drop as the IRS’s workforce and budget have declined.
On the resources side, the IRS’s baseline budget has been reduced by about 20 percent on an inflation-adjusted basis , and its workforce has shrunk by about 17 percent.
There is no way to sugarcoat in tax administration: From the perspective of tens of millions of taxpayers, it was horrendous.
[T]he number of individual income tax returns the IRS receives — a reasonable approximation of its workload — has increased by 19 percent , while its baseline appropriation on an inflation-adjusted basis has decreased by nearly 20 percent.
This imbalance has left the IRS without enough resources to meet taxpayer needs, let alone to invest in additional personnel and technology.
The IRS has not finished processing millions of original and amended returns from , even though returns will soon arrive for processing.
According to the Department of the Treasury, the gross tax gap — the difference between taxes paid and taxes owed — is estimated to have totaled about $580 billion in , up from an estimated amount of nearly $440 billion in , and is expected to rise to about $7 trillion by if left unaddressed.
Processing a paper-filed return is significantly more expensive for the IRS than processing an e-filed return due to the costs associated with training, recruiting, and staffing for manual data transcription.
In fact, the cost to process a paper-filed Form 1040 in was $15.21, which is substantially higher than the $0.36 cost to process an e-filed return.
The report also included some totals for levies, liens, and seizures, so I can update these graphs:
More excitement from the human war on traffic ticket robot cameras, as fire, spray paint, and other sorts of sabotage knocked cameras out of commission in France, Germany, and Italy in recent weeks.
Anabaptist World features a letter from Harold A. Penner urging Mennonites to redirect their war taxes to the Mennonite Church USA Peace Tax Fund.
And here is some more news about the ongoing troubles at the IRS.
This CNN Business story goes in some depth into how a loose coalition of activists forced the IRS into an embarrassing and costly retreat from its plan to use facial recognition technology to verify the identity of taxpayers using its online account portal.
This note from the National Taxpayer Advocate gives more details about the IRS plan to stop issuing certain enforcement action notices while it tries to deal with the enormous backlog of unprocessed returns and other correspondence.
For example: “If a taxpayer’s account has been assigned to one of the IRS’s automated levy programs (ALPs), the IRS is also suspending the levies made by those programs…”
The agency will also not be able to pursue many new levies because in order to do so, it must first send the taxpayer a letter informing them of their right to request a Collection Due Process hearing, and they’ve temporarily stopped the automatic sending of those letters.
Some 53,000 IRS employees are still on remote work — about two-thirds of the agency’s workforce, which an IRS spokesperson characterized as “a maximized telework posture.”
But privacy rules prevent remote processing of the millions of paper tax returns mailed to the IRS, as well as the examination of returns with discrepancies from IRS records, the issuance of refunds and dealing with other taxpayer mail.
The Transactional Records Access Clearinghouse at Syracuse University issued a report showing that the IRS audits the poorest American households at five times the rate as the rest.
This seems to be an effect of the agency’s plummeting rate of audits of the well-to-do combined with its increasing use of cheap-and-easy “correspondence audits” against low-income taxpayers who apply for the Earned Income Tax Credit.
As the National Taxpayer Advocate puts it:
The IRS correspondence audit process is structured to expend the least amount of resources to conduct the largest number of examinations — resulting in the lowest level of customer service to taxpayers having the greatest need for assistance.
Last Summer, the U.S. House of Representatives passed a spending bill that would have boosted the IRS budget.
That bill got bogged down in Congress before anything could come of it.
A recent appropriations bill resurrected the IRS budget boost, but pared it way back, so now the agency budget will only rise by 6%.
These days that’s hardly enough to keep up with inflation.
And the appropriations bill restricts how various parts of the increase can be spent, so some parts of the agency budget — tax enforcement for example — will see even smaller increases.
Senate Democrats have broken their internal log-jam and have come up with a new budget reconciliation bill they can agree on.
It still has to navigate through the congressional tract a bit before it comes to life, and it could change during that process.
That said, it’s beginning to look like something that can be taken seriously.
Of most interest to us at The Picket Line are the sections of the bill that provide additional funding to the IRS.
As regular readers know, the agency has suffered from reduced budgets and a diminished workforce at the same time as it has been coping with increasing numbers of taxpayers, additional Congressionally-mandated responsibilities, an evolving and sophisticated threat from identity theft and tax refund fraud, and the disruption that the covid pandemic caused to their offices.
As a result, the agency has become pitifully ineffective at enforcement, and struggles to do even the bare minimum of tax return processing.
The new bill hopes to address this with a new appropriation of $78,911,000,000 for the agency which is meant to be spent .
That $7.9 billion per year would be in addition to the regular IRS budget, which is currently about $12.6 billion.
So that’s a pretty significant increase!
(Though a future Republican Congress might well chop the yearly IRS budget appropriation to compensate for this.)
About 58% of this money is to be dedicated to tax enforcement.
The agency hopes to use the money in part to go on a hiring spree to replace the 33,000 employees it has lost over and the nearly two-thirds of its current workforce that will be eligible to retire in the next six years.
The government hopes that this new spending will more than “pay for itself” in that it will result in additional tax collection, such that the Congressional Budget Office projects that the result of this $80 billion in spending will be a return to the government of $124 billion in revenue above and beyond that.
The bill has a clause that says: “Nothing in this subsection [that gives more money to the IRS] is intended to increase taxes on any taxpayer with a taxable income below $400,000.”
That is meant to provide cover for President Biden’s campaign promise along those lines, though I doubt it will be very meaningful from a legal standpoint.
The additional enforcement revenue and personnel will most likely increase enforcement pressure on the rich and poor alike.
President Biden has signed into law the new bill that, among other things, gives a large budget boost to the IRS.
The law gives almost $80 billion to the agency, which it is instructed to spend over the next ten years, in addition to its annual budgets.
This amounts to an over 60% increase in the budget for the agency, assuming the annual budget numbers stay the same over that ten-year span.
It remains possible that a future Congress, particularly a Republican-dominated one, will slash the IRS budget to compensate for this extra spending.
But if I had to guess, I’d guess that such a Congress would prefer to spend the extra money that a beefed-up IRS brings in while complaining about how the Democrats have unleashed the IRS, than to actually cut its budget.
My expectation is that we’re stuck with a better-funded IRS for the near future.
The IRS recently released its Strategic Plan for .
I assume that most of it is now obsolete, but it gives some idea of what the agency sees as its priorities.
Treasury Secretary Yellen was anticipating the bill’s passage, and has fired off a memo instructing the agency to quickly (by bureaucratic standards) develop a new plan for spending the additional money.
The agency hopes to use some of the money to hire about 87,000 new employees.
Since the agency currently has something like 83,000 employees, that sounds at first like a pretty big deal.
But about 52,000 of the agency’s current employees will be eligible to retire within the next six years.
So a lot of this new hiring will just be replacements.
Also, I think that “87,000” number comes from a Treasury Department estimate published before inflation and a tight labor market combined to change salary expectations significantly.
My guess is that the actual number of new hires will come in well below that number.
(Republican hyperbole suggests that these 87,000 will be “an army of 87,000 armed IRS agents” doing enforcement and audits, but I see no reason to believe that is the case.
Rather the hires will likely be in a variety of roles throughout the agency.)
The IRS has been tightening its belt for a decade or so now, so much so that it can barely function.
There’s a boatload of deferred maintenance it will have to undergo just to get seaworthy.
Onboarding new employees is a lengthy and cumbersome process for the agency.
So I do not expect much rapid improvement in the agency’s abilities, particularly in enforcement.
We’ll probably begin to soon see evidence that the capabilities collapse of the agency has slowed and halted (there may be somewhat quicker improvements in data entry and what they call “customer service”).
it took the agency to process my tax return, for example, and I’d be surprised if it takes them any longer than that .
Treasury Secretary Yellen has vowed that none of the new spending will be used to increase audits on households making less than $400,000 per year — “relative to historical levels” anyway, which seems to me like it leaves enough wiggle room for a substantial increase, given how audits in all income levels have been falling in the recent “historical” epoch.
(Hint for rich people: If you’re going to cheat on your taxes, make sure you cheat enough to get your declared income under $400,000!)
But for many of us tax resisters, audits aren’t really the sort of enforcement we’re most concerned about anyway.
In my case, for example, the IRS seems to have thrown in the towel, and has been letting my years of unpaid taxes expire due to the statute of limitations without taking any but the most half-hearted measures to collect.
It may be that in a few years, when some of these new hires come up to speed, they’ll begin to take some of these cold cases like mine off the back burner and start trying to collect more earnestly.
I’ve been mostly concentrating on the IRS funding aspects of the new legislation, but there are a few other elements that may be of interest to those of us who use legal tax deductions and tax credits to lower or eliminate our income tax bills.
The legislation extends the more-generous health insurance subsidies of the Affordable Care Act (Obamacare), which were otherwise scheduled to expire, and which are partially-implemented in the form of a tax credit.
There are also new tax credits available to people who spend money on making their homes more energy-efficient or who purchase certain types of clean-fuel vehicles.
The latest tax resistance news to hit the web:
Bridget J. Crawford and W. Edward Afield have a forthcoming paper in Tax Law Review in which they analyze the tax resistance of Dorothy Day.
The paper has some good background and overview of her tax resistance and her reasoning behind it, but the authors seem to mostly have the perspective that Day was mistaken and if she only realized what a marvelous social service and wealth-redistribution agency the government is, she would have changed her mind.
The IRS now has its hands on the big budget boost that was recently passed, and one of its first orders of business is to try to boost its depleted and aging workforce.
But that may be easier pledged than done, reports The Wall Street Journal.
The current job market is tight (especially in the finance sector, where the IRS is competing), and agency wages are stagnant against a background of inflation and wage growth in the private-sector.
Expedited hire authority and pay flexibility that were part of early versions of the funding bill were stripped from the final version, so the IRS must plod along as before, though with more budget to work with.
In addition, some of the positions the IRS is hoping to fill are in its hollowed-out human resources department: the same people responsible for recruiting, interviewing, and training new hires.
The founder and former owner of the outdoor recreation gear company Patagonia, Yvon Chouinard, has transferred the ownership of the company to a non-profit focused on environmental causes.
If he had sold the company — which is worth something like $3 billion — or if his heirs had inherited it, this would have resulted in a huge tax bill.
But by giving the company entirely to a 501(c)(4) non-profit instead, he avoids those taxes.
So not only was Chouinard generous to environmental causes, he also was able to avoid funding the environmental wrecking ball of the U.S. government.
The U.S. federal government is seeing a surge in tax revenue.
Federal tax collections as a percentage of gross domestic product are higher than they’ve been since World War Ⅱ.
The largest component of this recent increase is from personal income taxes.
In part this is because wages are rising due to inflation and employer competition for labor.
There was an evacuation and large-scale police response at an IRS building in Memphis, Tennessee in response to reports of an “active shooter” in the building.
Those reports were later labeled “misinformation.”
This begins to look like it may have been a case of “swatting” — the use of false, anonymous reports of violent crime in progress to provoke a militarized police response against some target.
I’ve reported on a number of garden-variety bomb threats and “suspicious powder”-style incidents at IRS buildings in the past, but this is the first swatting I’m aware of.
I continue to be impressed at how tax resistance seems to be just part of how politics works in the Democratic Republic of the Congo.
The latest example comes from a rally by small businesspeople in Butembo, North Kivu who are protesting heavy-handed tax enforcement there.
Some recent news from here and there:
There’s a new NWTRCC newsletter out.
This is a special issue focusing on the 40th anniversary of the founding of the organization, and includes some reminiscences from war tax resisters from throughout the history of the group.
The Republican party seems to believe that opposition to the recent IRS funding boost is a winning issue for them, so they are campaigning on pledges to rescind the spending.
I wouldn’t take that too seriously.
I mean, they also promised to rescind Obamacare back in the day, but just kind of flailed around once they had the opportunity.
I’m categorizing this as campaign bluster rather than a serious proposal.
But, in case I’m wrong, The Wall Street Journal breaks down how Republicans might try to claw back this extra funding should they retake Congress.
