"It�s So Simple, It�s Ridiculous": Taxing times for 16th Amendment rebels

[R. A. Hettinga]

<http://www.reason.com/0405/fe.bd.its.shtml>




Reason:




May 2004

"Itms So Simple, Itms Ridiculous"
Taxing times for 16th Amendment rebels.
Brian Doherty



"I wonmt go to jail."

Bob Schulz announces this in late January to a rapt crowd of 200 gathered
in an auditorium in Crystal City, Virginia. Itms the first national
conference of the We The People Foundation for Constitutional Education, a
nonprofit advocacy group Schulz founded and runs.

He delivers his declaration not with reckless bravado but with a dignified,
quiet, middle-management-lifer assurance, in keeping with his general mien.
Schulz is a serious white male in a nice conservative dark suit, a former
environmental engineer for both General Electric and the Environmental
Protection Agency.

Hems been married for 38 years to the same woman, and he has four children
of whom he is quite proud. Yet when his kids begged him to reconsider the
path that requires him to declare publicly that he wonmt go to jail, his
wife Judy told them, "Your father put his country before his family, and I
support him."

Schulz has stopped paying federal income tax, and he isnmt afraid to let
anyone, including the Internal Revenue Service (IRS), know it. Not only is
he not paying, but hems also leading a national movement telling everyone
else they shouldnmt pay either.

When I talk to him after the conference, he doesnmt seem quite so confident
he wonmt go to jail. But he doesnmt seem to care one way or the other.
"Clearly [the government is] going to react," he says. "They may well
sooner or later come at me in one way or another. You hear people say,
kBob, theymre going to take you out. Dozens of armed agents will come turn
your life upside down.m You hear all these things. I have to say I have no
fears. I fear God and God alone."

Americans have been protesting and avoiding taxes since before the U.S.
officially existed. We are a nation born of tax protests. This tradition
feeds the attitude that unites the serious, almost obsessed crowd here: the
belief that they are the true patriots,staunch constitutionalists fiercely
dedicated to the ideals that make America great. A radical transvaluation
of values is going on right here in Crystal City. Far from being the very
foundation of solid citizenry, acceding to the federal personal income tax
is, among this crowd, an act of treason against what defines America: its
Constitution and its "true laws."

Schulzms We The People Foundation is transforming the often subterranean
struggle to deny the legitimacy of the income tax. For decades this
movement has been an inchoate collection of small congregations following
varied gurus. Schulz and his crew, by contrast, offer a unified church with
a canon of Right Arguments. The anti-income tax movement now has, through
Schulz, a united, highly activist national membership organization claiming
around 5,000 dues-paying members, a mailing list of 64,000, and local
coordinators in 39 states and 600 counties.

 While in the past evangelists of the "income tax is a fraud" message have
tended to sell books and seminars, the We The People Foundation has the
advantage of being hard to blithely condemn as a scam. It is not a business
selling advice but a nonprofit dedicated to spending money -- more than $1
million since taking up this fight -- to spread the word. Its founder
claims Gandhi as his influence: From him Schulz learned that to fight an
unjust tyranny, you need a proactive, nonviolent mass movement, and that is
what he is trying to create.

The movement against the income tax has lately adopted one of the tropes
that define an on-the-rise minority in modern America: Its members want to
be called what they call themselves -- the "tax honesty" movement -- and
not be slapped with the pejoratives that most people have known them by (if
aware of them at all).

At the politest, their nemesis the IRS calls them "tax protesters." (Less
politely, theymve been known as "income tax cranks.") A woman who runs a
small business making and selling display boards in Massachusetts, who
claims to have not paid personal income tax for a few years now with no
practical repercussions, tells me that "when people say ktax protester
movement,m it drives me nuts. I do not protest taxes. I think they are
absolutely necessary. I protest illegal confiscation of assets, which is
what the income tax is." She has no problem, she assures me, with sales
taxes, property taxes, or corporate taxes.

The partisans of the tax honesty movement go beyond complaining that the
income tax is too high, or that out-of-control IRS agents enforce it in
thuggish ways. They claim, for a dizzyingly complicated variety of reasons,
that there is no legal obligation to pay it. The continued life -- and even
flourishing -- of that notion, in the face of obloquy, fines, and jail
sentences, says something fascinating about a peculiarly American spirit of
defiance. It may even say something encouraging about what it means to live
in a nation of laws, not of men.

"I Used to Be Normal, But..."

Bob Schulz has a long history of fighting the government in the name of
constitutionally limited powers and proper procedure. His battles date back
to 1979, when he successfully sued to halt a new sewage treatment system
near Lake George in New York. (According to Schulz, the proposal ignored
environmental impact requirements.) Since then hems been involved in more
than 100 such lawsuits and won many.

All that is small beer compared to his latest crusade. Since 1999 Schulz
has presented his contentions regarding the income taxms illegality to the
IRS, the president, the Department of Justice (DOJ), and every member of
Congress. He has humbly beseeched them to answer a list of questions
regarding whether he, or any American citizen, has an actual
constitutional, statutory, legal obligation to pay the federal income tax.

Hems led marches around IRS headquarters in D.C., and he went on a brief
hunger strike in 2001. In July of that year his persistence prompted
representatives of the IRS and DOJ to promise to show up at a public
meeting Schulz was organizing. They promised to lay forth their official
arguments as to why we do indeed have a legal obligation to pay income tax.
That meeting was scheduled for September 25-26, 2001. The 9/11 attacks made
Schulz reschedule, and the feds bowed out of appearing at the rescheduled
event. Schulz feels he has pursued every proper step to find an answer to
his questions. Now, he says, itms time to fight.

When The New York Times asked IRS spokesman Terry Lemons why the Schulz
petition was being ignored, Lemons "said that courts had upheld the
validity of the tax laws and that the agency did not want to waste time and
resources dealing with well-settled issues. Mr. Lemons added that the
recent spate of enforcement actions taken by the IRS against promoters of
abusive tax schemes...show other ways that government is answering the
petition."

Not the answer the movement wants, obviously. But itms one they should have
expected. Never has any court anywhere -- much less the IRS -- accepted as
valid any of the many arguments the movement offers for how and why there
is no legal obligation for individuals to pay federal income tax. In fact,
courts will fine you up to $25,000 for even raising them, insisting such
arguments have been rejected so often by so many courts at so many levels
that they are patently frivolous and time-wasting.

Despite this, the dominant vibe at this conference, even among those whose
pursuit of these curious doctrines has led them to conflicts with
government or employers, is hopeful in a religious sense. They clasp
valiantly to belief in their own righteousness and the certainty that
through that righteousness they one day will be delivered.

 I eavesdrop on one smiling lady with a shock of short white hair telling a
fellow attendee of her long fight over garnishment of her wages from a tax
lien. It sounds like plenty of trouble came her way, and in the end the
courts were taking her money anyway. But she was still cheerful, evincing
no regret for the path shemd taken. Wrapping up her tale, she confided,
with a smile and an only slightly wistful sigh, "I used to be normal,
but...."

No one at the conference -- from the man who tries to pay for his Au Bon
Pain lunch with a privately minted silver coin to the airline employee
whose union is getting tired of his fights over tax withholding -- strikes
me as merely fumbling for some scam to avoid paying taxes. Their concerns
are higher than that. The Constitution and a properly limited government
are their guiding lights. Indeed, the conference isnmt only about the
income tax: Panels about the Second Amendment, jury nullification, and the
questionable pedigree of the Federal Reserve are also offered, and also
well attended. Mel Gibsonms controversial father, Hutton Gibson, gives a
rousing speech on the need to fight the New World Order to defend our
traditional liberties and is cheered heartily. Most everyone here seems
aware therems a good chance they will pay a price far higher than the mere
cash of taxes for pursuing the movementms difficult truth. When a speaker
announces that his listeners need to be prepared to go to jail, almost all
clap.

In one question-and-answer session, a woman airs her concerns about all the
practical difficulties that accompany the tax honesty path. How, for
example, can one get a mortgage loan without tax returns to show? She seems
to be begging for some loophole in the loopholes -- some reason she doesnmt
have to refrain from paying income taxes. But the crowd and Schulz are
pitiless. After she offers up too many what-ifs and how-do-yous, Schulz
acknowledges that this path of truth might not be for everyone -- only, by
implication, for the bravest and staunchest of patriots.

Reality does, however, toss the tax honesty movement the occasional sweet
crumb of hope. A couple of the crumbs that materialized in the last year
seemed substantial and nourishing at first nibble.

Most significantly, a tax honesty true believer named Vernice Kuglin, a
vivacious and attractive Federal Express pilot who has a crowd of admirers
following her everywhere during the conference, was slammed with criminal
charges for failure to file and for tax evasion. She beat the rap in
August, acquitted of all charges by a federal jury in Memphis.

Also last year, Texas plastics manufacturer Dick Simkanin was finally
brought to trial for failure to withhold income taxes for his dozens of
employees. Simkanin had been a poster child in We The People-sponsored ads
in USA Today, featured as a businessman who honestly believes it is his
right under law not to withhold. Two grand juries who had gotten to speak
to Simkanin failed even to indict him. Finally a third grand jury, whom he
didnmt get to speak to, did indict. But at the end of his first trial in
November, the jurors could not reach a verdict.

Both these events occasioned great rejoicing in the tax honesty community.
But both had grimmer denouements. Kuglin stayed out of jail, but she was
slapped with civil liens for past taxes due and penalties. These days shems
only collecting around $290 per pay period from her FedEx job, with the
rest snatched by the IRS. Simkanin was promptly retried and found guilty in
January, and he now faces a potential 129 years in prison.

How the Simkanin case played out should give the tax honesty movement
pause. Judge John McBryde was not entirely fair to his client, says
Simkaninms lawyer, Arch McColl, who spoke at the conference. Schulz and
other movement heroes testified on Simkaninms behalf in vain. McBryde
prevented McColl from mounting a real defense, the attorney complains,
sustaining the prosecutorsm objections almost every time he tried to raise
tax honesty arguments.

The jury sent back a question to the judge asking to see the codes that
directly stated Simkanin was required to withhold. (Some of the defendantms
ideas clearly had gotten through.) The judge told them
 simply to trust him when he said the law required Simkanin to withhold --
essentially directing the verdict, since Simkanin never denied not
withholding. (McColl has strong expectations that this response, among
other things, will help guarantee a successful appeal.)

Other aspects of how the system treated Simkanin should further discourage
tax rebels. Despite being a 59-year-old heretofore-respectable
small-business owner not yet convicted of anything, he has been in jail
since June. (A federal plant claimed via hearsay, denied in court testimony
by someone who was present when the comment was allegedly made, that
Simkanin had threatened to kill some judges. The prosecutors sure knew
their audience.) During the trial Simkanin was dragged into court in leg
irons. The IRS doesnmt resort to criminal prosecution very often, so when
it does, it wants to make a vivid example.

Itms Magic, You Know: Never Believe Itms Not So

The We The People conference brought together many of the movementms
leading lights. It also presents some new strategies. Schulz, with the help
of superstar radical lawyer Mark Lane, is in the process of launching a
class action lawsuit to call the governmentms cheating hand on this whole
income tax matter.

Lane has a mysterious tendency to be wherever the quirky action is in
American politics and law. Hems famous for being one of the first Warren
Commission revisionists with his 1966 book Rush to Judgment and for being
the lawyer for Peoplems Temple death cultist Jim Jones. He has successfully
defended some tax honesty clients, though he tells me: "I pay taxes and
never advise any client not to. But I can tell you, Imve read all these
cases, and I donmt see where it says you have to pay, and I donmt
understand why the government doesnmt answer [Schulzms] questions."

The planned suit relies on interestingly fresh grounds: Schulz is claiming
that all these government officials who refuse to answer his questions
about the income tax are violating his First Amendment right to petition
the government for a redress of grievances. Surely, after all, that right
must include the ability not merely to send in such petitions but to get
some sort of reasonable response.

Schulz recruits plaintiffs at the conference for another planned class
action, this one against employers who have refused to stop withholding
income tax from their paychecks when employees request it. This is illegal
according to Schulzms reading of U.S. Code Title 26, Subtitle C, Chapter
24, Section 3402(n), which does indeed seem to indicate, to quote that
section, that "notwithstanding any other provision of this section, an
employer shall not be required to deduct and withhold any tax under this
chapter upon a payment of wages to an employee if there is in effect with
respect to such payments a withholding exemption certificate...furnished to
the employer by the employee certifying that the employee -- (1) incurred
no liability for income tax imposed under subtitle A for his preceding
taxable year, and (2) anticipates that he will incur no liability for
income tax imposed under subtitle I for his current taxable year."

This is an option on every W4 form. Schulz maintains that the language of
the law clearly implies the employer canmt get in trouble with the IRS for
not withholding as long as the employee thus certifies. As a matter of
fact, if not law, the IRS will regularly question such W4s (or ones that
claim "too many" exemptions) and lean on employers to start deducting as if
a straight one-exemption W4 has been filed. Schulz thinks any employer
doing that -- and some do so even without the IRSms prodding -- should be
sued, and he intends to do so in the spring.

 To his mind, and those of the 200 gathered at the conference, they are
doing everything an American citizen needs to do when faced with injustice:
using every legal, reasonable means to seek a redress. The Constitution
will not defend itself, Schulz tells me; it is just a piece of paper.
Keeping it healthy requires bold action, often expensive and time-consuming
action, from those who love it.

After Lane gives his presentation about the redress of grievances suit,
with its announcement that parties to the suit intend to withhold their
cooperation with the income tax until the questions are answered, a
sour-voiced, heavy-set woman toward the back is appalled. No one owes the
tax, she exclaims, so what kind of weapon is that to hold over the
governmentms head, withholding something that wasnmt even due in the first
place?

In his role as general MC for the conference, Schulz is clearly wearied by
the obsessions of some of his audience members -- for example, the notion
that hiring an attorney means abandoning personal sovereignty before the
law, or that having a yellow-fringed flag in a room means you are under
martial law. But he is generally polite about it, if in a pained way. He
tries to explain to the woman that lots of people are paying, and that they
were seeking to enjoin the IRS from enforcing any tax liabilities on them
until the petition is answered.

Sessions at the three-day conference often run late -- through lunch and
into the evening, past the announced closing time -- and the crowds stay
through it all. I meet computer industry workers, violin makers, and even
ex-IRS agents, from all across the country; they are overwhelmingly white,
about two-thirds male, and mostly between 30 and 60 years old. Their
comportment and appearance are not kooky by any means. They dress in
business casual mostly, evincing no untoward whooping or mania or anger.
Gauging audience reaction to certain statements from the podium, Imd say
the majority of them are serious Christians. They are serious people in
general: rebels without cool, with no sense of humor or irony, armed merely
with the conviction that they are right.

Their devotion to their beliefs is certainly religious. Indeed, tax
litigation consultant Daniel Pilla, author of The IRS Problem Solver, says
theymre "like programmed cult members -- you canmt reason with them." More
charitably, the tax honesty people are staunch exemplars of Americams
glorious Protestant heritage.

This observation is not merely a pun on their status as "tax protesters."
Their attitude toward the Constitution and the statutes and legal decisions
regarding the income tax are uniquely Protestant, relying on a laymanms
ability -- indeed, obligation -- to read and study and parse the original
documents himself, to come to his own personal relationship with the law
and the cases, and to prefer his understanding to that of the priesthood of
lawyers, judges, and accountants.

"Case law" -- the kind that proves that you can and will be arrested or
fined for not filing or paying income tax -- means nothing to them; they
like to rely strictly on the statutes as written, or on Supreme Court cases
and straight constitutional interpretation. Irwin Schiff, the godfather of
the movement, is insistent that you shouldnmt just take his word for
anything: You should check the statutes. He is, he declares, the biggest
reseller of the published version of the U.S. tax code. He sells specially
tabbed copies leading you straight to the pages in the multithousand-page
behemoth you must see to understand his own interpretations.

Not merely Protestant, the tax honesty people are strangely reminiscent of
fandom -- of the comic book, fantasy, science fiction, role-playing-game
variety. They have the same obsession with continuity and coherence within
a created fantasy world of words. Itms just that, in this case, that world
of words isnmt a multivolume fantasy epic or a long-running TV series --
itms U.S. law. When these people try to reconcile the definition of income
in this subsection of Title 26 of the U.S. Code with the definition in a
1918 Supreme Court case, itms like hearing an argument over the
inconsistencies between a supervillainms origin as first presented in a
1965 issue of The Amazing Spider-Man and the explanation given in a 1981
edition of Peter Parker, the Spectacular Spider-Man.

The tax honesty movementms vision of the world is fantastical in another
way. It is not merely obsessed with continuity; it is magical in a
traditional sense. Itms devoted to the belief that the secret forces of the
universe can be bound by verbal formulas if delivered with the proper
ritual. There are numerous formulae in the tax honesty spellbook, with
rival mages defending them. Which spell is best: The summoning of the
Sovereign Citizen? The incantation of the Constitutional Definition of
Income? The banishing spell of No Proper Delegation?

 The tax honesty folks similarly believe that their foe the IRS must also
be bound by these grimoires of magic: that without the properly sanctified
OMB number an IRS form holds no power, that without uttering the mystic
word liable no authority to tax can truly exist.

And always, always, the ultimate incantation, The Question: Where does it
say that I owe income taxes? Show me the law!


"There Is Hereby Imposed on the Taxable Income of..."

 You hear this all the time. When presented with the simple request to
"show me the law that unambiguously requires me to pay income tax," I was
told, everyone from congressmen to tax lawyers to IRS agents is stymied,
even when Schiff and others offer enormous rewards to anyone who can do so.
It didnmt take me long to find what seemed to be an answer to that question.

In U.S. Code Title 26, Subtitle A, Chapter 1, Subchapter A, Part I, Section
1, it says, "There is hereby imposed on the taxable income of...," followed
by subcategories that seem to include most Americans, complete with tables
showing the percentage owed for each income range. (Subchapter A even comes
close to that magic word liable that many in the movement insist is nowhere
applied to personal income taxes -- itms called "Determination of Tax
Liability.") But "taxable income" is the rub. Tax honesty types claim the
"constitutional" definition of income, as set forth in such Supreme Court
cases as Doyle v. Mitchell Brothers (1918), is corporate profits, not
individualsm wages. (Courts have knocked down this claim regularly during
the last 30 years.)

The movement has an argument against the income tax for every level of
abstraction, from the highest (taxing the fruits of our labor is against
our natural rights as sovereign individuals) to the lowest (the IRS canmt
manage to get everyone, so it is reasonably safe just not to file). One
California paralegal who speaks at the We The People conference relies on
everything from the Magna Carta to the Treaty of Paris of 1765 to the U.N.
Declaration of Human Rights to defend her contention that she doesnmt owe
any income tax. Massed together, the chorus of tax honesty voices canmt
help but remind you of the lawyer in the old joke who argued that his
client was not even in town when the victim was killed; and if he was in
town, he didnmt kill him; and if he did kill him, he was insane when he did
it.

At the conference you learn that taxing violates our natural rights; and
anyway, the Constitution does not permit an unapportioned direct tax like
an income tax; and if you think the 16th Amendment took care of that, well,
it wasnmt properly ratified; and even if it was, it didnmt give any new
taxing powers to Congress; and even if it did, the statutes and codes of
the IRS as written arenmt officially U.S. law; and even if they were, they
donmt define liability and income such that any normal working American
owes taxes; and anyway, if you just donmt file they might never catch you.
And there are plenty of complications on every step of this tangled path.
(The claim that the 16th Amendment wasnmt properly ratified actually holds
up pretty well. To judge from the pathbreaking research of Bill Benson -- a
marvelous example of legal Protestantism -- there were enough procedural
irregularities in its passage that it technically should not have been
declared ratified in 1913. Still, it was thus certified, and the courts
tend to respond to Bensonite arguments by saying itms too late to do
anything about it now, and it isnmt the courtms problem.)

This doesnmt mean anything goes in stabbing at the income tax. There are
fringe beliefs even on this fringe. Larry Becraft is a lawyer who has
actually won a handful of acquittals -- including one for Vernice Kuglin --
in defending people on trial for tax evasion. He gives a talk that is
basically a warning to the movement to get its act straight and stop being
absurd. Among the beliefs even others in the movement condemn as silly are
the notions that by using a ZIP code or allowing a government document to
spell your name in all capital letters, you surrender your sovereignty and
make yourself a serf of the federal government, and that the income tax
applies only to people who live in a federal territory or district, not to
residents of the states.

"Here I Am, IRS, and I Donmt Believe in You!"

Far from that sort of futile reliance on concepts of personal sovereignty
that U.S. law just does not recognize, I encounter a remarkably frank and
refreshing approach from Peymon Mottahedeh and his Freedom Law School.
(Technically, he tells me, the school is a function of a church he runs.)
Peymon has a table set up at the We The People conference seeking customers
("students," he prefers to call them) for the "tax defense funds" he sells
(both "simple" and "royal" packages).

Peymon and his crew do believe the basic catechism of the movement: that
one technically does not have a legal obligation to pay the individual
income tax. They also know these arguments never succeed in court. When we
meet later at his U.S. Code-lined office, attached to his home on the rural
outskirts east of Los Angeles, he tells me hems never seen much value in
waving your hands in the air tauntingly and bellowing, "Here I am, IRS, and
I donmt believe in you!"

Thus Peymon advocates simply not filing and relying on the luck of the
draw. Peymon claims more than 60 million Americans a year donmt file.
(There is no official number for this, though some more recent estimates
from the government have it that only around 10 million people a year who
are supposed to be filing arenmt. The IRS admits that in the last three
years fewer than 230 nonfilers a year have been convicted.)

 The next step is to ignore the threatening letters and audit re--quests
you receive until you get an official Notice of Deficiency from the IRS.
Then you go to Tax Court and stonewall like crazy, making the IRS prove you
owe them something without the aid of the "tax confession form," as Peymon
calls the 1040. (This all works better for you if you are self-employed and
the IRS hasnmt already gotten its hands on your money through withholding.)

Peymon is a natural-born salesman, a handsome Iranian man with thick black
hair swept back. He says he doesnmt really fear retaliation from the IRS
since, after escaping from the Shahms Iran, he feels hems living a second
life now anyway. "If we lose our freedom here, where else are we going to
go?" he asks. Since hems been selling this advice for only a couple of
years, and tax court proceedings often stretch out that long, he says he
doesnmt have solid stats on how well this approach is doing, and he shies
from announcing his number of customers -- wouldnmt the IRS love to know?
But he thinks his approach is the smartest one the movement has come up
with. The IRS is a big bully; the smartest thing to do is stay out of the
bullyms way and not call attention to yourself.

Itms too late for that for the movementms biggest star, Irwin Schiff. At
the We The People conference I witness a young fellow enthusiastically
shake the hand of this compact 75-year-old man with a broad and squeaky
voice and call him his hero; Schiff takes it in stride. He is the man, the
granddaddy, in many ways the Founding Father of the modern tax honesty
movement. Some of his signature ideas were floated by earlier figures,
including Pete Soehnlen and Robert Golden, but he became the first mass
phenomenon of tax honesty with his 1982 book How Anyone Can Stop Paying
Income Taxes, originally self-published and later distributed by Simon &
Schuster. He says hems sold nearly half a million copies of his various
books. Schiff used to sell tax shelters, and he first came to prominence in
anti-statist circles with a 1976 Arlington House hit called The Biggest Con
-- which, despite the title, is a standard right-wing peroration against
taxing, spending, and Social Security and does not take a radical
anti-income tax stance.

Even though he tells us anyone can stop paying income taxes, Schiff has
spent a few years in prison as a result of criminal prosecutions on various
charges stemming from his own failure to pay taxes. He has been out of jail
since the early m90s and has avoided "failure to file" convictions since
then by filing an innovation he popularized, the "zero return." That means
you file a 1040 but claim to have had no taxable income -- which by
Schiffms reading of the tax code and various Supreme Court cases, he does
not (and neither do you).

His latest book-length disquisition on these matters, The Federal Mafia, is
a work of baroque complexity. Yet when Schiff hears Imm a reporter writing
about the movement, he says the truth about taxes is easy to grasp. "Itms
so simple, itms ridiculous," he tells me.

Sometimes Schiffms arguments are not really about the law, just an appeal
to a basic sense of fairness. For example, how can a country with a Fifth
Amendment require us to file and sign 1040s under penalty of perjury when
the information on them can be used against us in civil and criminal
prosecutions?

 Mostly, though, his shtick is based on various sorts of word magic. While
some sections of the excise tax code specifically list the circumstances
under which one becomes liable for them, for example, there appears to be
no such section for the income tax. Therefore, Schiff argues, no one is
actually liable for it -- even though, as detailed above, the tax is
"imposed." Similarly, he posits a terribly significant distinction between
a "notice of levy" and a "levy."

I get hit with a hilarious application of Schiffms verbal judo as he
attempts to convince me and another apparently confused attendee that
"compensation for services" could not mean the same thing as "wages" for
tax liability purposes. (This all fits in with his argument that only
corporate profits should be considered "income.") He shows us a place in
the code that seems to define "compensation for services" as taxable while
not mentioning "wages." The other guy objects that surely a wage falls into
the category of a "compensation for services."

"Itms not the same!" barks Schiff, the Socrates of the tax code. "And Imll
prove it to you: Can a corporation receive compensation for services?"

His interlocutor admits that yes, wise Schiff, it cannot be denied this is
indeed so.

"Can a corporation receive wages?"

The guy pauses a moment, then grants that this proposition seems doubtful.

 "See!" Schiff is pleased. "Theymre not the same!"

It all seems so sensible with the energetic Schiff yapping at you. Of
course, to say that something falls into a category is not the same as
saying it is identical to the category. Schiffms argument is ultimately as
convincing as saying that if an apple is a fruit, and an apple is not an
orange, then an orange canmt be a fruit. Still, he seems happy with it.

How, one might ask (and many have), can Schiff continue to maintain there
is no legal obligation to pay income taxes when he has spent time in jail
for not paying income taxes? He addresses this question in the latest
edition of The Federal Mafia: "Unfortunately, some people who were
persuaded by [my books] that they could legally stop paying income tax
(they could) went to jail. How many, I donmt know. But they and their
families paid a terrible price because of what they learned....I must again
warn you regarding the use of this information. There is no question that
it is all correct. Paying and filing income taxes are, by law, voluntary.
The law...also provides you with a means for stopping the withholding of
that tax, which, by any legitimate standard, you have a perfect right to
do. But, by doing so, you run the risk of going to jail!"


"Liable, Liable, What Makes Me Liable?"

The reason for that seeming paradox, Schiff says, is simple: The IRS and
the judges it brings cases before are corrupt and donmt care what the law
says. Which is why, since February 2003, Schiff has had his Las Vegas
office raided and records of all his clients seized; the IRS has moved for
judgment on $2.5 million in back taxes and penalties it claims he owes; and
a federal judge has banned the sale and distribution of The Federal Mafia
by Schiff and forbade him from publicly saying what he believes about the
income tax. (That ban is under appeal now.)

Schiff tells a group of well-wishers this latest wave of statist oppression
swamped him momentarily -- he went into a depression and lost 20 pounds --
but "Imm back! Imm back! Imm going to kick their ass!"

He proudly points out that all the back taxes in the $2.5 million judgment
are from many years ago and that the IRS has done nothing to him for his
more recent zero return filings. This proves to him that strategy must be
foolproof.

Vernice Kuglinms acquittal on criminal charges has made her one of the
movementms new saints and heroes. I witness her taking aside a man troubled
by the mess hems in because he advocated these beliefs as an accountant;
she tells him kindly but firmly, "We know in our core thatms what we have
to do." She was involved in Libertarian Party activities in the early m90s
and through that was exposed to tax honesty ideas. By 1995 she was sending
letters to the IRS asking what specific section of U.S. code or statutes
made her liable for the federal income tax. Were she legally liable, she
insisted, she would be more than happy to pay.

Despite the liens on her income, Kuglin is optimistic. A juror in her case,
she tells me, had a dream during deliberations in which he heard Kuglin
repeating, "Liable, liable, what makes me liable?" This was apparently the
crack in his mind that convinced him to lead the jury to acquittal. And
then her son had a dream in which she and her lawyer were standing in front
of the courthouse, and a ball of light spread around them and enveloped the
world. She believes it is all fate, that the universe is taking care of
her, that her victory is the beginning of the end of the whole evil lie of
the income tax, and that "every setback is one more step to the win" in
this battle.

A sober assessment of the empirical evidence shows that the exact opposite
is true -- that victories for the tax honesty movement (the occasional
criminal acquittal or mistrial) lead inevitably to a later defeat (further
convictions or civil seizures). But that realization doesnmt rely on
contemplating the Constitution, statutes, codes, or rabbinical parsings of
word definitions. Thus, it is not quick to occur to the devotees of tax
honesty.

They move, with heavenly grace, through an existential hell: In their minds
and hearts they are absolutely certain that they are right, and even doing
Godms work. (The contention that the Constitution was divinely inspired
elicits a fair amount of clapping and no open unrest at the We The People
conference.) But they are also fully aware that all the powers and
dominions of the earth are arrayed against them and regularly torment them.

They believe, in the face of all evidence to the contrary, that their
citizenms understanding of the written law should, and in some Platonic
sense does, trump the realities of dealing with the government. This makes
them uniquely American rebels -- more true, they maintain, to the nationms
core values than those of us who follow the pragmatic advice an accountant
once gave to one man at the conference. When the tax honesty devotee showed
him a Schiff-marked copy of the tax code, the accountant replied: "You mess
with that shit, you are going to jail."

Well, not necessarily to jail. Tax honesty folks adore the Supreme Courtms
1991 decision Cheek v. U.S., which authoritatively ruled that a belief,
however objectively unreasonable, that one was not liable to pay income tax
could negate the element of willfulness necessary to establish criminal
culpability for income tax crimes. In this area, in essence, ignorance of
the law is an excuse. But as Daniel Pilla puts it, Cheek "might keep you
out of jail, but it wonmt mean you donmt owe the tax."

Still, the tax honesty folks believe, to their core, that a written
Constitution and written laws truly can restrain the unbridled force of
government. They push a naive Americanism, but an Americanism nonetheless.
They are no more insane, in principle, then anyone else anywhere who has
ever tried to fight city hall, sue the government, or halt congressional
action by relying on, say, the Commerce Clause.

Their facts are mostly wrong. But whether wrong or not, they are irrelevant
-- and the tax honesty folks know it. Not a one seems unaware that jail and
property confiscation are a likely result of acting on their ardently held
conclusions. But they refuse to believe it. This makes them foolish, to be
sure. But it doesnmt necessarily mean they arenmt heroic. As one conference
attendee tells me, "I donmt care how many cowards there are. Therems one
less on the planet, and thatms me. Everyone has to stand up for something
in their lifetime."



Senior Editor Brian Doherty is the author of This Is Burning Man, to be
published this summer by Little, Brown.


  
 



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