Tax protestors, the IRS, and bogus theories

We recently got a round-robin email from someone who had been watching an independent film in which it was being argued that "the legitimacy of the IRS (the U.S. Internal Revenue Service, or tax authorities) to demand income tax is unproven under the U.S. Constitution, and interviewed people who said they "have not submitted tax returns for several years."

This follows news that the singer Billy Bragg (pictured) has decided not to pay tax, in protest at treatment of bankers and so on - though this is not to lump Bragg in closely with these other anti-tax protesters - he's clearly angered by a great injustice here and his protest has a logical coherence that the U.S. tax protesters don't have.

It's important to address theories and approaches like theirs, since a fair few number of people do seem to believe them.

First, a professor of tax law who responded to the email noted that:

"The gentleman has run into a rather widespread tax protest movement in the US which has no basis whatsoever in law. Many of those who follow the advice of the tax protesters have ended up in jail, and others have paid large penalties, and many of the protest promoters themselves have ended up in jail. In brief, the claim that the US government does not have the power to tax income under the US constitution is a cruel and stupid hoax."

Next, we should point out that a lot of these tax protestors are coming from viewpoint which holds that somehow tax is "theft" and therefore illegitimate. Well, in response to that, we can point you back in the direction of Martin O'Neill's piece in the latest edition of Tax Justice Focus, who notes the circular reasoning of those making these kinds of claims:

"If actually-existing property rights are constructed by the legal rules of property, including the rules of taxation, then one is making an error of reasoning in appealing to property rights in order to justify specific kinds of changes in, say, taxation rules.
. . .
Private property is a legal convention, defined in part by the tax system; therefore, the tax system cannot be evaluated by looking at its impact on private property, conceived as something that has independent existence and validity.”

Finally, an excellent source on this is Citizens for Tax Justice in Washington, who published a document last April looking (briefly) at this, entitled "Answers to Your Tax Day Questions." Note also the IRS link in the notes underneath, which provide a much fuller set of answers.

The relevant section from CTJ is cut and pasted below.

Part 5: Tax Protestor Arguments

1. Question: I heard that federal income taxes aren’t really legal. Is that true?

Answer: You heard that from a radical anti-tax activist who wants the courts to accept outrageous legal theories. Or worse, you heard that from someone who is trying to sell you a bogus tax scheme.

Two arguments about the legality of the federal income tax are raised by tax protestors. The first is that federal income taxes are unconstitutional because the 16th Amendment was not properly ratified, or because Ohio was not properly a state at the time of ratification. Ohio’s status as a state was confirmed in 1953 retroactive to 1803, and even without Ohio, enough states ratified the 16th Amendment. The second argument is that the 16th Amendment does not authorize a direct non-apportioned federal income tax on U.S. citizens, but the U.S. Supreme Court has explicitly held that it does.8

2. Question: Is it true that the Internal Revenue Service is not an agency of the United States, and may even be illegal?

Answer: Tax protestors argue that the IRS is illegal because it was created by an act of the Treasury Department rather than by Congress. However, Congress had expressly delegated to Treasury full authority to administer and enforce the internal revenue laws and to create an agency to enforce them.

3. Question: Isn’t filing an income tax return “voluntary” and doesn’t that mean I don’t have a legal obligation to file a return?

Answer: “Voluntary” refers to our system where taxpayers initially complete their returns and determine their tax, rather than having the government do it. Protestors often cite a Supreme Court decision stating “our system of taxation is based upon voluntary assessment and payment” and point to the IRS Form 1040 instructions that state that the tax system is voluntary. “Voluntary” here means self-assessed, it doesn’t mean optional. The requirement to file a return is squarely in the internal revenue law.9

4. Question: Are salary and wages “income”? I heard that compensation isn’t legally taxable.

Answer: The income tax code says that gross income is “all income, from whatever source derived.”10 Anyone who says that doesn’t include wages is wrong.11

5. Question: Do the tax protestors actually believe all the nonsense they’re promoting?

Answer: While some might be true believers, many so-called tax protestors do not believe any of it but are rather trying to sell you a bogus product.

They want taxpayers to buy their “Pay No Taxes” book12 or their “Tax Termination Package,”13 which are schemes that they claim will get you out of paying your income taxes. They are based on legal arguments that have never been held to be legitimate by a U.S. Court. They are, pure and simple, scams. The courts have not only rejected these arguments as “without merit,” they have imposed fines, penalties, and prison sentences for the promoters.14 Taxpayers should avoid these schemes.15
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Notes:
8 In United States v. Collins, 920 F.2d 619, 629 (10th Cir. 1990), cert. denied, 500 U.S. 920 (1991), the court cited to Brushaber v. Union Pac. R.R., 240 U.S. 1, 12-19 (1916), and noted that the U.S. Supreme Court has recognized that the “sixteenth amendment authorizes a direct nonapportioned tax upon United States citizens throughout the nation.” See also Internal Revenue Service Revenue Ruling 2005-19, 2005-1 C.B. 819.

9 Internal Revenue Code Section 6011. 26 U.S.C. 6011. See also Internal Revenue Service Revenue Ruling 2007-20, 2007-14 I.R.B. 863.

10 Internal Revenue Code Section 61. 26 U.S.C. 61.

11 Internal Revenue Service Revenue Ruling 2007-19, 2007-14 I.R.B. 843.

12 Alexander Hamilton, Pay No Taxes, www.paynotaxes.org

13 Offered for $39.95 at www.givemeliberty.org until stopped by a federal injunction.

14 There are other bogus income tax avoidance schemes, like the “Claiming the Slavery Reparation Tax Credit Guide” which tells African-American taxpayers (for a fee) how to claim a tax credit that has never existed. See Internal Revenue Service News Release IR-2002-08, Slavery Reparation Scams Surge, IRS Urges Taxpayers Not To File False Claims, January 24, 2002, available at http://www.irs.gov/pub/irs-news/ir-02-08.pdf

15 For information about tax protestor arguments in general, see Internal Revenue Service, “The Truth about Frivolous Tax Arguments,” February 9, 2009. http://www.irs.gov/taxpros/article/0,,id=159932,00.html#_Toc153765517

Just so you know.