Tax Protesting in the Age of Trump
Apparently there is a small but growing population of Americans who say they are stopping their tax payments to the IRS, as a protest. The motivations seem to fall into two buckets. The biggest and noisiest bucket is protesting Donald Trump the President, Donald Trump and his admission that he paid little in federal taxes for many years because he’s “smart” and used various exotic loopholes, and Donald Trump’s budget and policy expenditures, yet to be determined but presumably of odious intent.
The second and more durable group is the “no taxation without representation” bucket. This bucket has been around since before the United States was born. In the modern era it is usually war that’s the most effective motivator, but any disagreement about policy or programs can be motivating for the impassioned, or those tight on money.
A Very Brief History of Protesting
The United States was born in part through the seeds of tax protesting. Think the Stamp Act and the Tea Tax as two examples. Fast forward to the United States and the best icon of the tax protest is Henry David Thoreau, who refused to pay his Poll Tax, a tax that would fund wars and slavery. It landed him in jail and was the source for his famous essay, Civil Disobedience, which is an excellent read by the way.
As times change, so do the standard bearers. Gloria Steinem, who is planning on taking part in this current tax protest movement, wrote to the Guardian (UK) very recently regarding her opinion:
“In 1968, we refused to pay the 10 percent of our Federal income tax dollars that funded the war in Vietnam, and included a letter to the IRS saying so. In February before tax time on March 15, 500 or so of us listed our names in ads that we published in the New York Times, together with a quote [from] Thoreau on Civil Disobedience, and an invitation to join us.”
Thoreau protested in 1846; Steinem in 1968. What will happen in 2017?
Consequences of Tax Protesting
You probably are not going to go to jail if you don’t pay your taxes, but make no mistake that you are going to pay your taxes – and then some – in the long run. Penalties and interest will be included in your final tax bill. And if you get a tax lien filed in the course of things, this will hurt your credit, making borrowing more expensive and thus adding a shadow tax.
“Tax Resisters” can face civil penalties of 5 to 25 percent on the amount tax owed plus 10 percent interest (compounding). If you file bad tax returns you could also be subject to criminal prosecution.
The Religious Freedom Peace Tax Bill
There is a cooky wrinkle and potential loophole in the wings. The Religious Freedom Peace Tax Bill would allow taxpayers to assign the “defense” portion of their taxes to a fund supporting peace work and social services.
This may feel good but this Religious Freedom Peace Tax Bill is really a sham. The government doesn’t really have these “accounts” of money split up. There is one national liability, and so long as there is a liability, it makes no difference into which “account” your money goes. The national checkbook has come up short every year since 2001, the last time the government has a balanced budget (balanced between 1998-2001). After 2001 the government has been borrowing every year since to fund the interest on its liability.
You Do Have the Right to Protest
The right to protest is very American. We have free speech enshrined in our constitution. And tax protests go back way to Boston Harbor. Protesting is not illegal. Further, the IRS is actually prohibited by law from labeling people as “illegal tax protesters.” In 1998, Congress even ordered the IRS to purge “protester” from its files. Frivolous Filing, however, is a term the IRS will wield and with it the ability to fine.
- There’s a $5,000 penalty for frivolous tax returns and you can be separately penalized for sending in even seemingly innocuous tax forms throughout the year
I Read that Taxes are a Voluntary System
Advocates of this argument point to the fact that the IRS writes in Form 1040’s instruction book that the tax system is “voluntary,” and cite Flora v. United States, 362 U.S. 145, 176 (1960), where it reads “[o]ur system of taxation is based upon voluntary assessment and payment, not upon distraint.”
Except the requirement to file an income tax return is not voluntary and is clearly set forth in sections 6011(a), 6012(a), et seq., and 6072(a) of the Internal Revenue Code. The word “voluntary,” as used in Flora and in IRS publications, refers to our system of allowing taxpayers initially to determine the correct amount of tax and complete the appropriate returns, rather than have the government determine tax for them from the outset.
Any taxpayer who has received more than a statutorily determined amount of gross income in a given tax year is obligated to file a return for that tax year. In United States v. Tedder, 787 F.2d 540, 542 (10th Cir. 1986), the court stated that, “although Treasury regulations establish voluntary compliance as the general method of income tax collection, Congress gave the Secretary of the Treasury the power to enforce the income tax laws through involuntary collection . . . . The IRS’ efforts to obtain compliance with the tax laws are entirely proper.”
What the Courts Have Determined
United States v. Hartman, 915 F.Supp. 1227, 1230 (M.D. Fla. 1996) – the court held that, “The assertion that the filing of an income tax return is voluntary is, likewise, frivolous.” The court noted that I.R.C. § 6012(a)(1)(A), “requires that every individual who earns a threshold level of income must file a tax return” and that “failure to file an income tax return subjects an individual to criminal penalty.”
United States v. Tedder, 787 F.2d 540 (10th Cir. 1986) – the 10th Circuit upheld a conviction for willfully failing to file a return, stating that the premise “that the tax system is somehow ‘voluntary’ . . . is incorrect.”
Helvering v. Mitchell, 303 U.S. 391, 399 (1938) – the Supreme Court stated that “[i]n assessing income taxes, the Government relies primarily upon the disclosure by the taxpayer of the relevant facts . . . in his annual return. To ensure full and honest disclosure, to discourage fraudulent attempts to evade the tax, Congress imposes [either criminal or civil] sanctions.”
United States v. Richards, 723 F.2d 646 (8th Cir. 1983) – the 8th Circuit upheld a conviction and fines imposed for willfully failing to file tax returns, stating that the claim that filing a tax return is voluntary “was rejected in United States v. Drefke, 707 F.2d 978, 981 (8th Cir. 1983).”
Final Words of Warning
If you are reading this and are protesting by not paying your taxes, or are considering not paying taxes out of protest, please don’t do this. While it can be exceedingly frustrating to see things happen in Washington or around the world and feel like you don’t have a say, this isn’t going to change anything in Washington or around the world. Your money isn’t enough to matter. To put this in perspective, the IRS collects well over $3,000,000,000,000 each year. In the end the government will get the last laugh. They will get their money, and a lot more than you would have paid originally had you just paid your taxes. By not paying you will actually be providing extra funds to that which you are protesting. And if you still refuse to pay, they will take your money, your stuff. If you make legal mistakes or bad arguments along the path, they may even take your freedom. You will not win or be happy with the outcome.
And of course, if you are in a situation where you owe taxes and cannot pay them, you can find a good tax relief company here to help you get back on track.