April 15 rolls around again. In past years I've spent days wrestling with piles of tax records. No longer. I've discovered that I don't have to pay federal income tax. And it must be true, because I read it on the Internet!
There's a community of swell folks, both online and off, devoted to spreading the word that we can skip paying the income tax. Googling "tax protester" gave me 96,800 hits.
The first thing I learned on the Internet is that the income tax is voluntary. The Supreme Court said, in Flora v. United States, "Our system of taxation is based upon voluntary assessment and payment." Some years the IRS instructions themselves have said that the tax system is voluntary. Maybe this year I just won't volunteer.
Hold on one second. The IRS says "voluntary" means I get to figure out my taxes instead of the government doing it for me. And the courts agree with the IRS. Taxes are only voluntary in the sense that either I volunteer to pay them or I volunteer to go to jail.
On further reflection, I guess I'll fill out the forms after all. But do I have any income?
I've read on the Internet that my wages aren't taxable income. Here's the logic: I get wages in exchange for my labor. Since I've swapped things of equal value -- hours for dollars -- I have no taxable gain. Kinda like deducting business expenses. I can deduct my labor as an expense for earning my wages. So, no net income -- right?
It works for folks on the Internet, sadly, it doesn't work for the courts. They say I do have to pay taxes on my wages. If I fill out my tax form claiming no net income, the IRS can stick me with a penalty for making a frivolous claim. People have pursued these claims through the federal appeals courts, where they get hit with further penalties for filing frivolous appeals.
If you can't trust what you read on the Internet, what can you trust? There's an idea -- form a trust.
With a little bit of searching on the Internet, I'll find someone to show me how to set up an "untaxing trust." Or maybe I can even find someone local. One hitch: The folks selling instructions on setting up these trusts want some pretty sizeable fees.
I expect to pay for services. Come to think of it, I already have a trust to save on estate taxes for my kids. Something called a "generation skipping trust" that Congress wrote into the tax code. My family lawyer did all the paperwork and charged me a couple hundred dollars. This generation skipping trust is legit, and one day will save my kids a bunch of taxes.
What's different about an "untaxing trust?" My family lawyer doesn't do them, that's one thing. Injunctions have been issued against promoters of these trusts, that's another bad sign. There have been criminal prosecutions against some of the promoters, too. Worse. Folks who have trusted these trusts have ended up paying big penalties, plus all their back taxes. I think I'll place my trust elsewhere.
I see one last possibility. Reaching into my wallet and pulling out a dollar bill I see that it says right there at the top "Federal Reserve Note." According to the Internet, these Federal Reserve Note things aren't lawful money and therefore can't be taxed. Why, the Federal Reserve isn't even part of the government!
If we all cooperate we can make this thing work. Trust me! Here's what to do. Take all those dusty, worthless old Federal Reserve Notes out of your wallet. Wrap them in plain paper and send them to me care of the editor of this newspaper. I will take them off your hands -- no charge.
I need them -- I have some taxes to pay.
###
Dick Startz is Castor Professor of Economics and Davis Distinguished Scholar at the University of Washington. He can be reached at econcol@u.washington.edu.
This column appeared in the following publication:
Everett Herald, April 3, 2005.