How you can resist funding the government → about the IRS and U.S. tax law/policy → how is tax law/policy/administration changing? → increased Big Brotherish snooping

Today’s Moment of Orwellian Dread comes from Massachusetts Revenue Department Commissioner Alan LeBovidge via The Boston Globe:

In theory… the state may eventually be able to track down so much information about a resident’s finances that the state, rather than the individual, could complete the individual’s tax return.
“This is not something that’s going to go away. It’s only going to grow,” LeBovidge said. “The world is shrinking. There’s fewer and fewer places to hide.”
The initiative, dubbed “Discovery” by agency officials.… works by linking information the state has on each taxpayer to more than a dozen public databases to complete a financial puzzle, piece by piece, about each individual.…
The amount of data involved is enormous. LeBovidge said it took 18 months for the Internal Revenue Service to develop one of the databases the state uses; it took the state two months just to load the database on its computers.…
Sometimes the clues indicate a taxpayer may be hiding something. An individual reporting only $20,000 in annual income yet identified by Registry of Motor Vehicle records as having a $60,000 car would merit a second look. So would a plumber with a low reported income but a lavish lifestyle. Is he getting paid under the table?
The public databases include information from the Internal Revenue Service, Customs, state licensing boards, the Registry of Motor Vehicles, state incorporation records, and other sources LeBovidge won’t even discuss. “We can’t give away all the secrets,” he said.
Eventually, LeBovidge said, his agency will start tapping into private databases as well. Dun & Bradstreet, he said, tracks all sorts of indicators of business activity that may help the state uncover corporations not now on its radar screen that owe taxes.
About the only place taxpayers can fudge on their federal returns and not get caught, absent an audit, is their charitable contributions, said Frederick Beebe, the state’s deputy commissioner for audits. But he said it’s only a matter of time before charities start reporting donors and the size of their gifts to tax-collection agencies for verification.
Separately from the Discovery program, the state is also gathering information from other sources to track down tax leads. Most states now share with each other the results of their audits. North Carolina, for example, might audit a furniture manufacturer and get a list of customers to whom the company shipped a chair or a sofa without collecting sales tax.
North Carolina could share that list of customers with other states so they could track down those residents who bought a piece of furniture but didn’t pay use tax on it. The same sharing of data goes on with purchases of jewelry, furs, and virtually anything else that’s taxable.
Massachusetts is already demanding that shipping companies like United Parcel Service and Federal Express share the names of individuals who receive shipments of cigarettes from out-of-state companies. The state has collected $162,000 in cigarette excise taxes this way over the last year.
LeBovidge said eventually the state will begin scrutinizing all shipments into Massachusetts to see if residents are buying items on which they should be paying a use tax.
Noting that the best way to avoid tax increases is to collect all existing taxes, the commissioner stressed that the hunt for unpaid tax revenues is just beginning. “We’re in the embryonic stages of where this is going to go,” he said.

You know how the government’s Knowledge Gathering Bureau is trying to pull all of the world’s databases, public and private, into one giant überdatabase — in order to protect our children from evil madmen who hate freedom?

That way they can use computers to pull together all sorts of information about all of us — each bit possibly innocent in and of itself, but in the aggregate perhaps fitting the profile of a terrorist. Like this family — whose high electricity use and habit of waiting until the last minute to put the garbage out on the curb marked them as likely marijuana farmers.

They weren’t. And they’re a little upset at the police raid. “I understand they feel something isn’t appropriate here,” said Carlsbad Police Lieutenant Bill Rowland, “but it is very much consistent with how search warrants are prepared.”

The Smoking Gun has the complete affidavit for search warrant that the judge approved.

In the future, the police won’t have to rely on such vague data points as electricity use and trash collection patterns — they’ll have your TiVo viewing patterns and Safeway Club Card receipts to help them figure out just what sort of terrorist you might be in danger of becoming.

And the IRS is enthusiastic about these new advances in information technology. They’re eager to share their data with other law enforcement agencies — and they want fresh sets of data for their automated investigations too:

“It’s the new trend. It’s where everybody is headed,” said Verenda Smith, government affairs associate at the Federation of Tax Administrators, which represents state tax agencies. “The greatest value of these systems is in finding patterns that the human eye isn’t that good at seeing.”
In Massachusetts, for example, the state tax agency can scan a U.S. Customs and Border Protection database of people who paid duties on big-ticket items entering the country — so anyone who fails to pay the state the required 5 percent “use tax” gets flagged.
The state has also tried comparing motor vehicle registration data with tax returns, looking for people who might be driving Rolls Royces or Jaguars but declaring only a small income, Revenue Commissioner Alan LeBovidge said…
The new tools have reaped hundreds of millions of dollars in increased tax collections, officials say. But the government’s growing sophistication at collecting and scrutinizing data about taxpayers is sounding alarms among privacy advocates.
The Federation of Tax Administrators doesn’t keep a definitive list of states using the technology, but Massachusetts, Texas, California, Washington, Virginia, Iowa and Florida are known to be leaders in the trend, which began in the late 1990s. The IRS is also using the techniques.…
The tax agencies’ “data warehouses” can stockpile data from state and federal agencies and, in some cases, private sources. And they are using new tools to analyze the data, including “data-mining” software that can scrutinize mountains of information to find patterns or establish relationships.…
LeBovidge now unabashedly dreams of a day when people won’t even have to fill out their income tax forms: The government will have so much information about people’s finances that it can simply fill out tax forms and mail them to taxpayers to be endorsed.
California has taken a step in that direction, mailing 23,000 pre-filled-out forms to taxpayers who have simpler types of returns, a small fraction of the state’s 15 million business and private returns, said Denise Azimi, spokeswoman for the California Franchise Tax Board,
She said an upgrade to California’s “non-filer” system that began in the late 1990s offered the state an increased data warehousing and analysis capability. The system brings together multiple databases, including records from the IRS, state agencies, banks and brokerage houses to try to identify tax cheats.

The National Taxpayer Advocate reports to Congress each year on the state of the tax system and the burden on the taxpayer. The latest report, released today, includes some tidbits about the underground economy, sources of the tax gap, and unkind enforcement follies like this one:

Criminal Investigation Refund Freezes. The IRS Criminal Investigation function (CI), through its Questionable Refund Program (QRP), places a “freeze” on hundreds of thousands of refund claims each year that it believes may contain indicia of fraud. CI personnel currently review the refund claims and “determine” whether they are fraudulent — without notifying taxpayers that their claims are under review and without giving taxpayers an opportunity to present documentation supporting their positions. Last year, the Taxpayer Advocate Service (TAS) received more than 28,000 requests for assistance from taxpayers whose refunds had been frozen. TAS studied a randomly selected sample of nearly 500 cases to determine the ultimate disposition of these cases. When TAS assisted the taxpayers, CI ultimately agreed to issue the full amount of the refund claimed (or more) in 66 percent of the decided cases and to issue a partial refund in an additional 14 percent of the decided cases. Thus, taxpayers received a full or partial refund in 80 percent of frozen-refund cases brought to TAS. The median Adjusted Gross Income (AGI) of these taxpayers was $13,330, and the median refund was $3,519. Thus, the refund constituted, on average, more than 26 percent of the claimant’s AGI for the year, and the taxpayers were required to wait, on average, more than 8½ months to receive their refunds. The National Taxpayer Advocate believes that the QRP is an important program to protect against tax fraud, but the IRS must implement procedures to notify taxpayers that their refunds have been frozen, provide taxpayers with an opportunity to submit documentation, and bring cases to a quicker resolution.

This certainly affects those of us using the DON Method of tax resistance — particularly those of us who rely on getting our refunds before April 15^th so we can make an IRA deposit in time to declare it on the previous year’s return.

The report also notes:

The Cash Economy. Underreported income (and related self-employment tax) from the so-called “cash economy” is probably the single largest component of the “tax gap.” It may exceed $100 billion per year. Because income from the cash economy is not subject to information reporting, many of the IRS’s traditional means of enforcement are unlikely to be effective in addressing it. The IRS has a number of initiatives that could be effective if coordinated and pursued more aggressively. However, no single function coordinates research, outreach, and compliance initiatives aimed at improving reporting compliance among cash economy participants. Nor does the IRS give these initiatives the same level of attention as other initiatives, such as those addressing tax shelters or the Earned Income Tax Credit (EITC). The IRS must develop a comprehensive strategy for addressing the cash economy if it is to significantly reduce the tax gap.

Expanding on this summary, the full report says:

According to the IRS, taxpayers report:

99 percent of the income subject to withholding (e.g., wages),

96 percent of the income subject to third-party information reporting (e.g., interest), and

68 percent of the income not subject to withholding or information reporting (e.g., inventory sales proceeds).

This percentage drops to 20 percent for income earned by certain sole proprietors (called “informal suppliers”) who operate “off the books” on a cash basis in areas such as street vending, door-to-door sales or moonlighting in a trade or profession.…

The IRS has no direct estimate of the portion of the tax gap attributable to the so called “cash economy.” However, according to IRS estimates:

More than 60 percent of the tax gap is attributable to self-employed individuals.

Eighty percent of the tax gap is attributable to underreporting of tax.

About 43 percent of the tax gap, $134 billion to $155 billion, is attributable to underreporting by self-employed individuals.

Over 80 percent of all individual underreporting is attributable to understated income rather than overstated deductions.

These estimates suggest that self-employed taxpayers who file returns but underreport their income (or self-employment taxes) represent the single largest component of the tax gap, accounting for more than a third of the gap and over $100 billion per year. Further, the IRS’s estimates may understate the portions of the tax gap attributable to the cash economy because such noncompliance is inherently difficult to detect. Taxpayers, including the self-employed, primarily underreport income that is not subject to third-party information reporting, i.e., income earned in the cash economy. Practitioners confirm that the IRS is frequently unable to deter or detect underreporting among cash economy participants.
Research suggests that the cash economy is growing. According to one estimate the “underground economy,” which includes both the cash economy and illegal activities, increased from four percent of the U.S. Gross National Product in 1970 to nine percent in 2000. A recent study suggests that between nine and 29 percent of the workers in Los Angeles County California are paid in cash and do not have federal or state payroll taxes withheld. The cash economy may grow even faster as cash transactions move to the Internet.

To address some of this, the Advocate’s office suggests:

Measures to Reduce Noncompliance in the Cash Economy. The IRS estimates that the annual federal tax gap for 2001 was between $257 billion and $298 billion. The IRS receives about 130 million income tax returns each year. Thus, every taxpayer is forced to pay an average $2,000 “surtax” each year to subsidize noncompliance. IRS data show that the highest rate of noncompliance by far is attributable to transactions that are not reported to the IRS on a Form W-2, Form 1099, Schedule K-1, or similar form. These unreported transactions occur largely in the so-called “cash economy.” To reduce the tax burden on compliant taxpayers, we recommend that Congress (1) create a three-pronged reporting and payment system that encourages compliance in certain cash economy transactions by (a) instituting backup withholding on payments to taxpayers who have demonstrated “substantial noncompliance”; (b) releasing backup withholding on payments to “substantially noncompliant” taxpayers who have demonstrated “substantial compliance” and agree to schedule and make future estimated tax payments through the IRS Electronic Funds Transfer Payment System (EFTPS); and (c) providing that payors will not be required to institute backup withholding on payments to independent contractors that present payors with a valid IRS “compliance certificate”; (2) require the IRS to promote the making of estimated tax payments through EFTPS; (3) authorize voluntary withholding agreements between independent contractors and service recipients; and (4) require third-party information reporting for certain payments to corporations with 50 or fewer shareholders.

Probably easier said than done, but I wouldn’t be at all surprised to see some moves in this direction.

Another tax-gap source mentioned in the report is misreporting capital gains and losses on the sale of stocks and mutual funds. Apparently there is no reliable reporting mechanism for the price at which an investor buys such a thing (the “basis”), so when the taxpayer reports the difference between the sale price and the purchase price, the IRS has to either take it on faith or perform a full-scale audit to force the taxpayer to cough up documentation:

Many financial institutions through which investors own stocks and mutual funds (“brokers”) do not currently keep track of an investor’s basis in the stocks or mutual funds, and no brokers report basis information to both taxpayers and the IRS on a Form 1099-B. The absence of information reporting creates serious problems for many taxpayers and the government alike. For taxpayers, tracking basis can be extraordinarily complex and many taxpayers seeking to comply with the law find that they simply cannot do so with accuracy, leaving them exposed if audited. From the government’s perspective, the absence of information reporting enables underreporting by taxpayers who deliberately overstate their basis (thereby reducing their gain or even generating a loss), because they know the IRS generally cannot detect errors in basis reporting in the absence of an audit. One recent estimate puts the revenue loss to the government from such underreporting at $250 billion over the next 10 years.

Congress has passed a housing-market-themed bill that includes a number of tax-related provisions. One in particular will be of interest to some people who have been earning income through credit card transactions without reporting that income to the IRS. In short, that part of the “underground economy” is about to get dug up:

The bill would… require institutions that make payments to merchants in settlement of payment card transactions to file an information return with the Internal Revenue Service. According to the Treasury Department, “Payment cards (both credit cards and debit cards) are an increasingly common form of payment to merchants for property and services rendered. Some merchants fail to report accurately their gross income, including income derived from payment card transactions. Generally, compliance increases significantly for amounts that a third party reports to the IRS.” The bill would also require information returns for payments in settlement of certain third party network transactions that operate in a manner similar to payment card transactions. This proposal was previously approved by the House of Representatives as part of H.R. 6275 by a vote of 233 to 189 (with 10 House Republicans joining 223 House Democrats in support). This proposal is estimated to raise $9.802 billion over 10 years.

From the looks of this, the IRS isn’t going to be asking for a report on every credit card transaction, but just for the annual total that any particular card-issuer or online payment system pays to each person who receives money. In the same way that banks send the IRS a 1099 each year for everybody who earns interest on their bank accounts, and every company with a payroll files W-2 forms each year for anybody who’s earned a paycheck, now credit card companies and companies like PayPal will have to send in some sort of form saying how much money they’ve passed along and to whom.

By “third party network transactions that operate in a manner similar to payment card transactions” I think they mean stuff like PayPal, but it’s a little unclear to me. Here’s some stuff from the official technical explanation of the bill:

[A]n organization generally is required to report if it provides a network enabling buyers to transfer funds to sellers who have established accounts with the organization and have a contractual obligation to accept payment through the network. However, an organization operating a network which merely processes electronic payments (such as wire transfers, electronic checks, and direct deposit payments) between buyers and sellers, but does not have contractual agreements with sellers to use such network, is not required to report under the provision. Similarly, an agreement to transfer funds between two demand deposit accounts will not, by itself, constitute a third party network transaction.
…In addition, a third party settlement organization is not required to report unless the aggregate value of third party network transactions for the year exceeds $20,000 and the aggregate number of such transactions exceeds 200.

This description is a little hard for me to wrap my mind around, so I’m not sure if it applies strictly to on-line credit-card-like payments of the PayPal variety, or if it applies to any of the myriad ways of earning a buck or two on-line through referral fees, paid links, etc.

In any case, not only will this have the effect of bringing some underground economy transactions to light, but it will provide the IRS with additional targets for liens.

Bush is expected to sign the bill. The new reporting provisions are scheduled to take effect starting in 2011.

A couple of links that caught my eye:

Antimilitarist activists and women’s groups call for war tax resistance in Bilbao (español) — a news report of a public demonstration designed to highlight the cost of military spending and encourage redirection. The demonstrators gave cartons of milk to passers-by, using the slogan “el gasto militar nos pone de mala leche” (military spending puts us in “bad milk” — a bad mood).
CNNMoney reports on what it calls “an all-but-overlooked provision of the health reform law” that was recently signed into law that would dramatically expand the requirement for businesses to file 1099s. According to the article, “beginning in 2012 all companies will have to issue 1099 tax forms not just to contract workers but to any individual or corporation from which they buy more than $600 in goods or services in a tax year.” TaxGirl takes a closer look at the details. And here’s some commentary from Cato @ Liberty.

Some bits and pieces from here and there:

The Obama administration announced a few days ago that it would interpret the somewhat ambiguous existing law in such a way that would allow it to seize money from “Thrift Savings Plan” accounts to settle tax debts. These plans are a variety of 401k-like retirement savings account that are available to employees of the federal government.
The big health industry legislation that passed a while back included a little-noticed (at the time) provision that would dramatically expand the requirements of businesses to file 1099 forms to report their payments to other businesses. The IRS recently announced that, for now anyway, it plans not to require quite as much paperwork as the law at first glance seems to require.

“We plan to use our administrative authority to exempt from this new requirement business transactions conducted using payment cards such as credit and debit cards,” said IRS Commissioner Douglas Shulman. “These transactions will already be covered by reporting requirements on payment card processors, so there is no need for businesses to report them as well. So, whenever a business uses a credit or debit card, there will be no new burden under the law.”
The federal government also is expanding its use of direct deposit for payments it makes, and hopes to mostly phase out sending checks to people. From here on out if you want your Social Security, unemployment insurance, veterans benefits, railroad retirement, and so forth, you’ll either have to give Uncle Sam your routing and account numbers or you’ll have to settle for getting your money in the form of a debit card. This is being billed as a cost-saving measure (how expensive to mail all those checks!) but mailing out those plastic cards can’t be any cheaper, so I suspect it has more to do with being able to keep a closer eye on people’s money so as to narrow the size of the underground economy and make it easier to seize funds from people.

Congress just passed another bill, which the President is expected to sign into law. It has a number of tax provisions, some of which may affect those of us who are using The DON Method of tax resistance.

Most exciting to me is that the bill permits sole proprietors to deduct their health insurance premiums as a business expense. Formerly such folks could take a deduction, but only after calculating business profits. The significance of this is that now the deduction reduces our profitability/income and therefore both our income tax and our SECA (social security & medicare) tax. The old way, it could reduce our income tax but we still were charged SECA on the income.

This makes sole proprietors more like employees whose employers provide health benefits. Those benefits don’t typically count as income and so neither the employer nor the employee gets charged taxes on them.

Unfortunately, Congress being Congress, it was only willing to enact this new provision temporarily. It officially applies only to the 2010 tax year. But now that the precedent has been established, it will probably get rolled into one of the yearly extenders packages.

Other provisions of the new bill:

Raises the §179 depreciation limit from $250,000 to $500,000 and extends the 50% bonus depreciation option for another year.
Allows new businesses to deduct $10,000 in start-up costs (that otherwise would have to be depreciated); the limit had been $5,000.
Expands the favored tax treatment of C corporation capital gains.
Allows some small business taxpayers to shift certain tax credits back into the five previous years and to use them even if the Alternative Minimum Tax would otherwise apply.
Expands the new “if you pay $600 or more to anyone you have to file a 1099-MISC with the government about it” policy so that it applies to landlords.

When Obama’s big medical industry bill passed, one of the footnotes that was supposed to help pay for it was more intrusive government demands for 1099s — those forms that report when money changes hands.

Under the new law, businesses would have had to file a 1099 to and for any business they’d favored with $600 or more in business. That means if your mom-and-pop store spent more than $600 at Smart & Final or Best Buy over the course of the year, they’d have to send a 1099 to them and a copy to the IRS.

This was unpopular, and there have been a handful of attempts to rescind this part of the law. Now it looks like it’s finally on the way out.

I skimmed a bit of the pitch for Obama’s new budget proposal to see if there was anything there we tax resisters ought to keep an eye out for. A few things caught my eye:

Some years back, when “deadbeat dads” were the objects of the latest Hate Week, Congress set up something called the “National Directory of New Hires” so that if anyone who owed child support got a job, the government would be on them like flies on shit to make sure they made their payments. Obama would give the IRS access to this database “for general tax administration purposes, including data matching, verification of taxpayer claims during return processing, preparation of substitute returns for non-compliant taxpayers, and identification of levy sources.”
Obama would also make “repeated willful failure to file a tax return” a felony, rather than a series of misdemeanors like it is today. “Repeated” would be defined as a failure to file returns for any three years within a five-year period, if the total tax liability during that period is at least $50,000.
Obama would index all penalty amounts in the Internal Revenue Code to inflation, so that they would increase every year automatically rather than increases requiring Congressional action.

These are only proposals, of course, and Congress will have its own ideas, but they give you some idea of what sort of things are percolating through the mire in Washington.

Prospects for big tax reform legislation are considered pretty slim, but it can be a good idea to keep track of which tax reform ideas are being taken seriously in Congress, as they sometimes get rolled into other bills as offsetting revenue-raisers or for other reasons, and they may also be part of some future tax reform bill or grand budget compromise.

Yesterday, Max Baucus, chairman of the Senate Finance Committee, released his tax reform plan. Among the elements that caught my eye:

“Banks must report the existence of bank accounts, including accounts on which no interest was earned, during the taxable year.” This helps to confirm a suspicion held by some of us in the war tax resistance community who have noticed that the IRS seems less likely to levy non-interest-bearing accounts, as though it only notices those accounts that it receives 1099-INT reports about.
“The State Department is authorized to revoke passports of individuals with seriously delinquent tax debts in excess of $50,000.” I’ve seen proposals like this floated before that haven’t gone anywhere, but the writing is on the wall: this is definitely a mainstream proposition in the hells of Congress.
The proposal would require more people to file electronically. For instance, if you have your income tax return done by a professional, that professional would be required to file your return electronically (you would no longer have the option of asking for a printout and filing the paper return). Software that prints paper returns would have to print the data using a machine-readable barcode in addition to the human-legible form. You could still file a paper return by filling it out long-hand in the old-school way (that’s what I do).
“The IRS is granted authority to use the Department of Health and Human Services’ National Directory of New Hires to verify employment data.” Not sure if this might have ramifications for resisters who switch jobs to avoid salary levies.
The proposal calls for reviewing and revamping the system of tax penalties, but has no details about how (instead it requests comments). Because some penalties aren’t indexed for inflation, usually review-and-revamp means “increase.”

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.

Changes at the IRS

First: the IRS is being significantly degraded and is in disarray. There have been four acting IRS commissioners already in the first four months of the Trump Administration, serving between four days and six-and-a-half weeks each. There is no Senate-confirmed commissioner. In addition there have been thousands of dismissals of probationary IRS employees, and many others have accepted buyout offers to retire early. Furthermore, the recently-released presidential budget assumes a further 25–50% headcount reduction at the agency. The enforcement & collection branches have not been spared from this slaughter.

The agency was already on-the-ropes before all this happened. For years they have lost headcount and their budget has dwindled, even as their responsibilities and the number of taxpayers has increased. There was briefly some hiring and a budget boost at the agency during Biden’s term, but that hardly had begun to take effect before Trump’s crew came in and eviscerated it.

As a result, we can predict that the already feeble agency will be further incapacitated.

Second: there has been a collapse of the post-Nixon consensus that put a firewall between IRS enforcement and political appointees. For the last 50 years it would have been considered a serious taboo for the president or one of his political appointees to try to go to the IRS and say “you should audit so-and-so; I think they’re up to something (or: I don’t like them).” IRS enforcement decisions were firmly in the hands of career IRS employees, not political appointees. Trump is putting an end to that. He’s put a political appointee in charge of the IRS Criminal Investigation Division. He’s being aggressive in using his powers to punish political enemies or to shake down deep-pocketed victims. We can expect that he will use the IRS in this way, too.

Will this affect American war tax resisters? Probably not right away. I don’t think we’re on Trump’s enemies radar, and we’re not attractive shakedown targets. But if tax resistance becomes a more prominent part of the anti-Trumpery movement, then, yes: expect politically-motivated reprisals.

The possible end of the federal income tax

Trump has repeatedly claimed that he plans to replace the IRS with an “External” Revenue Service, and replace income taxes with tariffs. Of course, Trump claims a lot of things, and that’s never been a good reason to take those claims seriously. But there are some other lines of evidence that suggest this may be for real.

Trump’s nominee for IRS Commissioner, Billy Long, when he was in Congress, co-sponsored legislation to abolish the IRS and replace the federal income tax with a sales tax. This idea of replacing income taxes with consumption taxes has been floating around conservative circles for decades, but hasn’t had enough traction to go anywhere yet. The “serious people” mostly ignore these proposals as being too onerous to accomplish and too likely to go very badly, but Trump shows strong signs of being willing to do very disruptive things and to not care much if they’ll go badly, so I think we have to consider the possibility.

This is not something Trump could do directly by fiat. Congress would have to act to eliminate the federal income tax or the Internal Revenue Service. But potentially Trump could force their hand by 1) unilaterally enacting tariffs, as he can do and has done, and 2) making the IRS so dysfunctional that it can no longer effectively collect income taxes, as he seems to be doing. At that point, Congress might be faced with a fait accompli and might believe that if it wants to continue to have a budget to spend, it must allow Trump to raise tariffs (or other consumption taxes) to make up for what the IRS is unable to collect.

This is probably not happening right away. The current Trump budget and tax proposals are for income tax cuts and for cuts to the IRS but not elimination of either.

Where would this leave war tax resisters, who tend to concentrate on the federal income tax as the most important source of war funding? We would have to retool to resist these new taxes in new ways. (More on this below.)

Expanded information-sharing among federal agencies

A variety of legal firewalls, bureaucratic hurdles, and incompatibilities have prevented federal government agencies from sharing information with each other. Some of that fell away during the consolidation of the Department of Homeland Security after 9/11. Now many of the remaining firewalls seem to be dropping to DOGE.

Most news I’ve seen about this is in the immigrant-crackdown context. For example, the IRS is sharing info from people’s tax returns, and the postal service is sharing information about people’s mailing addresses, to help ICE find immigrants to deport.

Potentially this could make it easier for the IRS to find assets or previously shadowy income. There’s no sign that this is happening yet, and it would be yet another task for a gutted IRS to try to tackle, so maybe it’s unlikely, but it’s worth keeping on the radar, and we should raise the alarm if anyone notices anything.

Anti-Trumpery tax resistance and war tax resistance

There’s a lot of eagerness among anti-Trumpery activists for some strong, collective action, which could include tax resistance (see for example the National Tax Strike under the Choose Democracy umbrella).

Where does the war tax resistance movement fit in? Anti-Trumpery tax resistance isn’t “war” tax resistance. Sure, you can stretch “war” metaphorically to cover deportations, civil liberties collapse, evasion of due process, Constitutional crisis, willful malgovernance, fascism, white supremacy, and so forth, but it’s awkward. Most of NWTRCC’s outreach and educational material assumes that war and militarism are the focal concern of tax resisters, and to these new resisters this has the potential to be alienating at worst or confusing at best.

Of course, if Trump invades Greenland or Canada or something, then the anti-Trumpery movement will probably develop a strong anti-war focus, and then war tax resistance rhetoric will fit right in. I suppose we can’t rule that out.

It’s an encouraging sign that the War Tax Resisters Penalty Fund mutual aid program now explicitly welcomes anti-Trumpery tax resisters as well as traditional war tax resisters. Maybe we can learn from the process they went through as they decided to become more accommodating to a new set of resisters.

Correction: the WTRPF board has since released a statement that says they are not going to extend the fund to cover tax resisters who are not resisting from anti-war motives. I had based what I said here on a statement from a member of the WTRPF board who apparently misstated the position of the organization.

How to resist tariffs

Trump would seemingly prefer that tariffs permanently make up a predominate portion of federal government income (and therefore military budget income), as they did in the 19^th century. How could war tax resisters continue to resist if this were to come to pass?

Tariffs are taxes that apply to imported goods and that are paid by the U.S. importer. So you can resist to some extent simply by not importing anything so that you personally do not pay the tax. But the typical American is going to be paying tariffs indirectly as a consumer of goods whose prices include the costs of tariffs to the importer or manufacturer.

Note that tariffs apply not only to consumer-ready goods (like imported cars) but also to imported raw materials and intermediate manufacturing goods. For this reason, the prices of many “domestic” products will embed tariffs just as much as do imported ones. A tax resistance strategy of consuming only “Made in the U.S.A.” domestic goods will not be effective.

Some tactics that might be worth considering if tariffs make up a large amount of military income include:

Anti-consumerism, lifestyle simplification, DIY, grow-your-own, repair/reuse/recycle: spend less money in general, take more of your life out of the marketplace, and you’ll spend less on tariffs.
Smuggling: if tariffs are high, smuggling will become highly profitable and will certainly emerge. We can help nourish that and can redirect our own consumption to smuggled goods.
Domestic manufacture: try to produce and market goods that deliberately and carefully avoid tariffs. Spread awareness about tariff-free goods.
Promote avoidance strategies: there will certainly be loopholes that can be exploited to reduce or eliminate tariffs; we can help importers learn about and use them.
Disrupt the tariff-collection bureaucracy: anything we can do to make the tax collectors’ work more difficult and less efficient will give the Pentagon less to play with.

These tactics (or similar ones) apply also to other consumption taxes that might be in the cards (e.g. a sales tax or use tax).