There are some hopeful signs. A few years ago 39 percent of Americans polled by the Gallup organization said that the federal government was an “immediate threat” to their liberty. Fifty-two percent endorsed the sentiment when the word “immediate” was removed. Libertarian ideas are discussed more prominently in the news media than they have been in decades. Indeed, the word “libertarian” has entered the mainstream political lexicon.
A Libertarian Crusade
What will turn this modest start into a full-fledged libertarian crusade? No one can say for sure, but it will certainly require a multipronged effort. It will no doubt include economic analysis of how much wealth the government drains from people’s pockets via taxation and regulation. But that won’t be enough. It will also require a moral appeal declaring that violations of liberty do not merely take points off the gross domestic product but also make society less human and humane. The heroic men who launched the American Revolution understood the power of such an appeal. We see in their example how the moral case for freedom could bring about American independence from what was the world’s most powerful empire. That was a phenomenal achievement and a tribute to the power of an idea. If a moral crusade for liberty could succeed once, it can succeed again.
The crusade has to start somewhere. What better opening target than the income tax? It combines the most egregious features of government power: theft, intimidation, violation of privacy, and arbitrariness. It is the perfect device for teaching people about the threat of power. According to the Tax Foundation, the biggest tax burden that the American people face is the tax on earnings. At the median income, a two-earner couple works eighty-seven days a year to pay their federal income and payroll taxes. Ironically, because of the structure of the income tax, that burden increases when the economy grows and falls when the economy slows. Americans are punished for being productive. (All taxes at all levels required the average American to work 128 days in 1996.) Besides the financial burden, Americans must also endure the threat of an inquisition by the tax authorities if they are singled out for investigation.
Abolition vs. Reform
A campaign against the Sixteenth Amendment, the income tax, and the Internal Revenue Service would be doubly valuable. It would move us toward the explicit goal of abolition, and it would prepare people for the campaigns to follow against other forms of tyranny. The income tax cannot be reformed, because taxation of income has no place in a free society. It calls into being a multitude of evils that should offend anyone who values liberty. It has parallels with the slavery that once blotted America. The parallels extend even to the proposals for opposition. Some opponents of slavery called for gradual emancipation because they thought immediate freedom for slaves would harm them and disrupt the economy of South. Some even suggested that slave owners be compensated for their “losses.”
Similarly, some opponents of the income tax wish to modify the system by going to a flat rate and other forms of simplification, such as elimination of deductions. Whether such reform is intended as an end in itself or as a gradual step toward abolition of the income tax, the flat tax is a bad idea. Flat-tax advocates are willing to trade tax deductions for a lower single rate, ignoring that rates can be added and raised in the future. More important, the flat tax affirms the principle of income taxation and keeps the IRS in place. But it is the very principle of income taxation that permits most of the evils discussed in this book. We must cut the poisonous vine out at the root. Trimming the leaves is not enough.
In the debate over slavery, the abolitionists represented by William Lloyd Garrison declared that “gradualism in theory is perpetuity in practice.” They knew that the political process could reverse reforms at any time. Small steps won’t get us where we want to go either. They can be co-opted by the defenders of the status quo, and they give the people too little stake in a drawn-out reform process. Abolition of the income tax, on the other hand, is something people can rally around because the benefits are palpable . The shining vision of a future free of income taxation is something that can energize people for the long struggle.
Thus we should apply Garrison’s principle to the fight against the income tax. We must call for nothing less — and settle for nothing less — than the end of the Sixteenth Amendment, all taxation of income, and the IRS. That is the indispensable step on the road to freedom.
Afterword
In the summer of 1998, amid great fanfare, Congress passed, and President Clinton signed, a taxpayer “bill of rights.” Republicans and Democrats alike hailed the IRS “overhaul” as the dawn of a new day, when the agency would be transformed from inquisitor to service agency.
This is the third so-called “bill of rights” for taxpayers passed in a decade. That fact alone should make anyone skeptical that real taxpayer relief is to be expected.
At first glance, the bill might look as though it will afford some protection for taxpayers. It creates a nine-member board to oversee operations, six of whose members will be from the private sector. (Journalist Jim Bovard points out it will also include a representative of the IRS employees’ union.) The bill would also shift the burden of proof from the taxpayer to the IRS in court cases. Currently, the taxpayer is guilty until he proves himself innocent. Other provisions would let citizens harmed by IRS negligence sue for damages and would relieve taxpayers of liabilities of former spouses. Homes could no longer be seized without a court order. Some penalties would be reduced and some IRS deadlines tightened.
But in the world of legislation, especially IRS “reform” legislation, things, as W. S. Gilbert wrote, “are seldom what they seem.”
The oversight board and the shift in the burden of proof “are said to be the silver bullets that will end IRS abuse,” writes Daniel J. Pilla, one of the great IRS watchers, in the National Review. “They are more likely to be blank cartridges.”1
Pilla writes that the oversight board is not what we were led to believe it would be. To judge by the news summaries, you’d think that this board would be able to come to the rescue of battered citizens. But that’s not the case. The new body will be involved in planning for the future and in overseeing the IRS budget and commissioner. “In other words,” writes Pilla, “the Board will function as a forum for thinking about the overall direction of the IRS.” It won’t have the power to prevent agents from treating taxpayers like child molesters. Pilla notes that the board is specifically denied authority over the agency’s law-enforcement apparatus. Don’t expect it to rectify the abuses associated with audits, seizures, and other activities designed to wring more revenue out of Americans. The board will not be able to avert the tyrannical conduct citizens reported in horrifying detail at Senate Finance Committee hearings on the IRS.
And what of the burden of proof? A clue to the bogus nature of the “reform” lies in the bill’s command that Americans keep records and cooperate with the IRS during investigations. In other words, the IRS may have the nominal burden of proof, but you still must furnish the evidence it will use against you. No pleading the Fifth Amendment; that is for common criminals only. Moreover, to shift the burden to the government, a taxpayer will have to make a “reasonable” case that the IRS position is defective. In other words, the citizen has the burden of showing that the burden should be shifted! Some protection.
Even if there were a meaningful shift in the burden, it would be of no help to most taxpayers. “The problem,” Pilla writes, “is that 97 percent of everything the IRS does involves no ‘court proceeding.’” Most of the problems that citizens have with the IRS occur outside of the court. They involve, Pilla says, “its powers of lien, levy, and seizure.” In other words, the shift in the burden is moot.
As the Wall Street Journal reported after Congress passed the IRS bill, “The change [shift of the burden] ‘is not going to do much good’ for most taxpayers battling the IRS, says N. Jerold Cohen, a lawyer at Sutherland Asbill in Atlanta and a former head of the American Bar Association tax section. ‘It’s
a rare case that turns on the burden of proof.’ Several other lawyers agree it will have mostly symbolic importance.”2
I think what we have here is a public relations coup for the IRS and its allies in Congress. Don’t expect any major breaks for the taxpayers.
But let us not be too cynical. There are other provisions of this bill that deserve attention. Ten years ago the Congress created the position of ombudsman, which was intended to be a liaison between taxpayers and the IRS. That was soon spotted for the sham it was, so in 1996, a new office was created: the taxpayer advocate. People saw through that too, and Congress in 1998 changed the office yet again. Now it is called the “national taxpayer advocate” and the position will be appointed by the treasury secretary instead of the IRS commissioner. Does anyone really expect such obvious window dressing to result in respect for the rights of American citizens?
But wait, there’s more. The new law orders the IRS to evaluate its staff on the basis of its mission rather than on how much money or property it seizes from taxpayers. Despite congressional orders in the past, the IRS has continued to reward its people by their ability to bring in the bucks. That policy has been suspected of encouraging tax collectors to disregard the rights of taxpayers. The new law ostensibly solves that problem. But the mission of the IRS is to maximize the revenue harvest, so this is simply another ruse.
Bills of rights have never restrained the IRS. We shouldn’t be surprised. It has a mandate to collect a trillion and a half dollars a year. You don’t extract that kind of money by being Mr. Nice Guy. The IRS knows it. More important, the Congress knows it. It certainly wants the public-relations dividend of passing taxpayer-protection legislation, but it doesn’t really want to do anything to reduce the fear and intimidation the American people experience at the thought of the IRS. The moment those things are reduced, people will do what they can to protect their incomes from the taxman. It’s human nature. Tax revolts — even the quiet, private kind — are a constant feature of history. As long as there are taxmen and taxpayers, there will be tax avoidance. You’ll sooner see things fall up than see truly voluntary compliance with the tax code, even if everyone understood it.
Revealingly, throughout the congressional deliberation on the latest taxpayer-protection law, there was great concern over what it would cost. Taxpayers’ rights are fine as long as they aren’t too expensive. In the eyes of the government, much of the cost comes not from spending on new equipment or personnel. It results from revenue forgone. In other words, money not extracted is treated as though it was spending. If the IRS stops collecting back taxes from an ex-spouse who had no idea the tax return had been incorrectly filed, that is counted as an expense chalked up to the new law.
This speaks volumes. The cost associated with government activity used to mean the cost to the taxpayers. Now it means the money the government might have taken from the taxpayers but didn’t. Notice that whenever anyone suggests a tax cut, he is asked how he plans to pay for it. I guess we can say that part of the cost of the present tax code is the 80 percent of the gross domestic product that the government leaves in the taxpayers’ pockets. Any tax increase can be heralded as a reduction in the cost of government. The people who think up these things are absolute geniuses.
This view of costs demonstrates that the purpose of the tax system is not to provide “service” to Americans. We are in no way the IRS’s customers, as the commissioner likes to refer to us. We are its cash cows. Maybe they’ve decided that you get more milk with warm hands than cold.
There’s no sense blaming the IRS for its disdainful attitude toward taxpayers. That would be like holding a bird responsible for eating worms: that’s what it was born to do! It’s not the agency’s fault. The fault lies with Congress, which created the IRS and charged it with extracting so much from the hide of the American people. It can’t do that while being gentle.
There is one way — and only one way — to respect taxpayers’ rights: repeal all income taxes and the outrageous spending that requires them. “Taxpayers’ rights” is actually a contradiction in terms, like vacation pay and free elections.
The torment that the IRS inflicts on individuals is horrific. People have lost their homes, businesses, and even their lives. But we must not let those terrible incidents make us forget the more general offense against the American people: the routine, day-to-day theft engaged in by government at all levels — most egregiously from income taxes.
Notes
1 Daniel J. Pilla, “Revenue Neutral,” National Review, June 1, 1998, p. 42. All Pilla quotes are from this article.
2 Tom Herman, “Tax Notes,” Wall Street Journal Interactive Edition, July 15, 1998 (http://interactive.wsj.com).
Epilogue: Beware Income-Tax Casuistry
(2013)
This epilogue to the 2013 ebook edition of Your Money or Your Life is adapted from four articles Mr. Richman wrote for FFF’s flagship journal, earlier called Freedom Daily and now renamed Future of Freedom. The first three articles were a series, “Beware Income-Tax Casuistry,” published from August to October 2006. The fourth, “The Flimflam of Income-Tax Denial,” was Mr. Richman’s follow-up article in March 2007, explaining and refuting several passionate critiques of the original series.
Beware Income-Tax Casuistry, Part 1
For many opponents of the income tax the name Brushaber is magical. It comes from Frank R. Brushaber v. Union Pacific Railroad Co., the 1916 U.S. Supreme Court case that upheld the 1913 income-tax law passed under the Sixteenth Amendment to the U.S. Constitution. That income-tax opponents would look with favor on a Supreme Court opinion that affirmed, in the most sweeping terms, Congress’s power to tax incomes “from whatever source derived” seems incomprehensible. But according to their reading of the case, Brushaber is salvation.
That reading, I’m sorry to say, is wrong — in the extreme. After close study of the case, its context, predecessors, and successors, I am compelled to conclude that Brushaber offers neither aid nor comfort to those looking for a legal escape from the hated income tax. If we are ever to get this monster off our backs, it will not be through casuistry and pettifoggery. We will have to pull off a far tougher feat: convincing a critical mass of the American people that taxation is theft.
A cautionary note: Do not conclude from what I will demonstrate in this series of articles that I approve of the income tax. The foregoing book on that subject makes my position clear. The tax (like all taxes) entails the threat of physical force against nonaggressors and is thus indistinguishable from robbery or extortion. I have not changed my mind about that. In the most fundamental terms, the income tax is objectionable, not because it’s an income tax, but because it is an income tax. In other words, Frank Chodorov, one of my heroes, was wrong. It’s not the income tax that is the root of all evil. It’s taxation per se. (See my article “Libertarian Class Analysis” in the June 2006 issue of Freedom Daily.)
Unfortunately, the gulf between morality and the edicts of governments is vast. To say that something is legal (in the narrow sense) or constitutional is not to say it is moral or proper. If I am right that the income-tax laws satisfy the requirements of the U.S. Constitution, I hope I will not be taken as saying that the income tax is legitimate in the broader sense. To be constitutional and to be legitimate are not the same thing. No libertarian should have to be reminded of this.
Only recently I spoke with a libertarian who insisted, as many others do, that Brushaber shows beyond doubt that the federal government has no constitutional power to tax the wages of ordinary Americans and that the income-tax laws passed over the years were never intended to tax that form of income. In this view, the only income targeted for taxation was that which is derived from federal privilege: government employment, government contracts, corporate income, trade across national boundaries, business done in the federal possessions, et cetera. One looks at Brushaber in vain for such a statement. (If “privilege” is broad enough to include trade with foreigners, the con
cept is very broad indeed — broad enough to cover all people under the jurisdiction of the U.S. government and hence all forms of income.)
But according to Brushaber fans, the link between taxable income and federal privilege is indirect. The emptiness of this claim will be clear by the time we reach the end.
To understand Brushaber we have to understand why the Sixteenth Amendment was passed. And to do that, we have to reach back to 1894, when Congress passed the Wilson-Gorman Tariff, which included an income tax. (The first U.S. income tax was passed during the war between the states.)
Direct and Indirect Taxes
But before we do all that, we must pause to consider the matter of direct and indirect taxes, an important distinction in the Constitution. Article I, Section 8, Clause 1 of the Constitution states, “The Congress shall have power to lay and collect taxes, duties, imposts and excises…; but all duties, imposts and excises shall be uniform throughout the United States.” Article I, Section 9, Clause 4, states, “No capitation, or other direct, tax shall be laid, unless in proportion to the census or enumeration herein before directed to be taken.”
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