Legal Snake Oil: The Tax Protest Movement

A federal appeals court has just upheld a verdict (also seen here) against (former?) actor Wesley Snipes, who was convicted a few years ago of 3 counts of deliberately failing to file a tax return. Nobody likes to pay taxes, but most of us recognize that they’re a necessary evil, and many of the government services we take for granted (military and police protection, schools, fire departments, roads, etc.) are paid for with our taxes. It’s no fun, but them’s the breaks.

Some people, however, have taken advantage of this fact by concocting some elaborate and fascinating legal theories, which they claim prove that the federal government can’t legally tax your income. The fact that most of these people don’t follow their own advice, live in cabins in the woods so they don’t have any income to tax, or are in jail, should be telling.

Many so-called tax protestors spout their theories in expensive workshops, or through books that they sell. A few people invariably get drawn in by the lure of being able to get out of their tax obligations, with no legal consequences. Many of these people are not very educated or sophisticated, and can be seen as victims.

Other people, however, are reasonably well-educated, and can afford a good tax attorney who would have advised them that their actions would have serious legal and financial consequences. Wesley Snipes was one of these people, and should have known better.

Tax Protestors rely on a wide variety of legal and historical arguments to justify their positions, and you can’t fault them for a lack of creativity – some of these arguments are extremely entertaining. All of them, however, will get you laughed out of court.

Some of the arguments, however, might make some intuitive sense to someone who doesn’t understand tax law, or where the federal government derives its power to collect income taxes.

If somebody has told you that the U.S. Supreme Court has held the federal income tax to be unconstitutional, they were technically correct. In 1894, Congress enacted an income tax law. In 1895, the Supreme Court declared it unconstitutional, ruling that it was a direct tax, which was, at the time, prohibited by the Constitution. However, in 1913, the 16^th Amendment to the Constitution was ratified, which explicitly gives the federal government the power to tax the incomes of individuals. Accordingly, the income tax is now perfectly constitutional, and has been for nearly 100 years.

However, tax protesters have many arguments which they claim prove that the 16^th Amendment was not properly ratified, or is otherwise invalid. In order to amend the Constitution, the proposed amendment must be passed by a 2/3 majority of both houses of Congress. Then, it must be ratified by the legislatures of 3/4 of the states. Some tax protesters claim that when the various state legislatures took up the amendment, the text of the amendment that some of the states adopted differed slightly in capitalization, spelling, and punctuation. However, they were identical in substance. Every federal court that has taken up the issue has ruled that such minor differences don’t have any effect on the amendment’s validity.

Another, even more bizarre, argument is not used exclusively in tax cases. However, it’s equally ineffective no matter the context it which it’s used. This is the capital letters argument. Because many official court documents often write the parties’ names in all capital letters, tax protestors sometimes argue that, because they don’t use all capital letters to write their name, the documents are addressed at another person, who doesn’t exist. For example, if a tax protester named “John Smith” receives a summons that names him as “JOHN SMITH,” he might argue that it’s addressed to another legal entity. “I’m John Smith. According to this document, you’re obviously looking for JOHN SMITH. That’s not me.”

It should strike you as obvious that this is a ridiculous argument. Every court that has been faced with it has rejected it out of hand.

These last two arguments are what I like to call magic words legal arguments. They center on the idea that, simply by saying something special, you can get out of your legal obligations. I hate to break it to you, but real life doesn’t have cheat codes. There is no magic legal incantation you can tell a court and make them drop all charges against you. Anyone who tells you otherwise has something to sell you (for example, a “get-out-of-tax-liability-free” workshop, which, incidentally, is not free to attend).

There are a few other arguments that tax protesters commonly make. One of them is the show me the law argument. They claim that the U.S. tax code, in the thousands of pages it spends defining what counts as “income” and all of the various credits and deductions available, never gets around to actually requiring anyone to pay taxes. Of course, such laws do exist. 28 USC 6012 makes it a crime to not willfully file a tax return, and 28 USC 6151 specifies that any taxes owed are to be paid at the time the return is filed. Nonetheless, tax protesters continue to demand that the IRS or tax attorneys (tax attorneys are, after all, part of The System, even though they can sometimes help you reduce your tax liability without breaking any laws) “show them the law.”

In the end, if somebody tells you that they can get you out of your obligation to pay taxes, you should take whatever they say with a few spoonfuls of salt (just make sure to drink plenty of water afterwards). Unless they’re truly delusional, they almost certainly have something to sell you.

This is a pattern we’ve seen before: in the mid to late 19^th Century, as medical science began to enter the modern era, medicine became more complex and difficult for laypersons to understand. Clever salesmen took advantage of this fact to dupe people into buying ineffective or even harmful concoctions, using pseudoscientific jargon to make more convincing their claims that they could cure any ailment.

The same has happened with the legal system. The scope of the federal government expanded exponentially in the 20^th Century. New industries and institutions necessitated the passage of new laws and regulations. These laws have become so complex that lawyers, like doctors, generally have to specialize in a few specific areas of practice. Also, the general public has very little understanding of what the law actually requires, in many situations.

Just like snake oil salesmen, tax protesters offer their marks the promise of keeping more, or all, of their hard-earned money out of the government’s hands. They use phony legalese, and arguments that might make intuitive sense to people with a limited understanding of the law. But make no mistake; the stuff they’re peddling is ineffective, at best. At worst, following their advice will land you in jail, or end up costing you far more than it would have just to pay your taxes.

Bottom line: talk to a licensed tax attorney.