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Come tax day, some won’t pay

Come tax day, some won’t pay

http://www.santacruzsentinel.com/archive/2003/April/13/local/stories/01local.htm

Number of tax resisters grows amid controversial Iraq war

By KURTIS ALEXANDER
Sentinel staff writer
April 13, 2003

Tax day is two days away.
Some have settled up. Others may be scrambling to file. Others, still, will be among the untold number who won’t pay income tax at all this year.
Ever since some angry American Colonists dumped tea into Boston Harbor, many Americans have shunned what may be the most basic, if not burdensome, responsibility of citizenship paying federal taxes.
Despite threats of jail time and seizure of assets, tax resistance is alive and well today just about everywhere there are taxpayers.
For some, it’s a way to save money. For others, it’s a philosophical problem with government taking their money. And for others, it’s a matter of how their money is spent.
This year, with billions of taxpayer dollars money going to military operations in Iraq, some taxpayers are venting disapproval by withholding tax payments.
“I can’t bear the thought of contributing to the war, or any military spending,” said Santa Cruz resident Jean Peterson, who is still debating whether or not to write out a check to the Internal Revenue Service.
Wartime tax resistance is nothing new. Withholding taxes as a means of protest dates to World War II and had its heyday during the Vietnam War.
The IRS, though, is tight-lipped about every issue surrounding tax resistance, and provides no estimates of the number of tax resisters locally, statewide or nationally.
Today’s antiwar activists are quick to draw comparisons between Vietnam and the war in Iraq, and calls for tax resistance as a way to protest the Mideast conflict are growing.
Several Web sites and support groups have emerged nationwide, offering war critics detailed instructions on how to resist taxes.
In Santa Cruz, the grassroots campaign Schools Not Bombs provides a form letter of protest to the IRS and suggestions on how to withhold tax. It includes a disclaimer noting, “one could face significant fines and/or a prison sentence.”
Santa Cruz resident Betsy Fairbanks, Schools Not Bombs organizer, says 30 people showed up at a recent information session on the tax protest. She expects dozens of area residents will actually withhold taxes in protest of events in the Middle East.
“We like to be smug here in Santa Cruz and say we oppose the war, but if you pay taxes, you’re supporting the war,” she said.
Fairbanks deducts from her tax bill the fraction of total government spending she believes goes toward unnecessary military expenditures. She estimates this to be 23 percent.
The New York-based War Resisters League says 47 percent of the U.S. budget goes toward war expenses, a figure more commonly adopted by war tax protesters. Some put the percentage even higher.
This “partial” withholding is popular this year, according to the league. Though the number of taxpayers won’t be known until after April 15, officials say interest in tax protest is double what it’s been in recent years.
“This is my first time doing it,” said Santa Cruz resident Don Lane, among the dozens of newcomers to the Santa Cruz tax resistance movement.
Lane says he’ll start small. He plans to keep $100 of the total he owes and send a letter to the IRS explaining his motives.
It’s something he has always wanted to do, he said, but couldn’t get over his fear of the IRS until now.
“I was a little afraid in the past,” Lane said. “It was more trouble than I was willing to risk.”
Jail or fines
Some tax resisters put aside their fear of the IRS long ago.
Santa Cruz City Councilman Scott Kennedy has not paid a full tax bill in 30 years, though he lives with the knowledge the IRS may catch up with him at any point.
In fact, it has, several times.
“They’ve seized my salary, my bank account,” he said. “But it’s important for me not to voluntarily pay the war tax.”
Penalties for snubbing tax payments can include up to five years in prison and $250,000 in fines, depending on how the crime is classified.
Charges of “tax evasion,” which presume criminal intent, carry a heavier sentence, while “failure to file” charges are more forgiving, according to the IRS.
“But it’s very serious anytime someone doesn’t pay,” warned Mark Lessler, with the criminal investigation division of the IRS.
Odds, though, according to IRS statistics, are tax resisters will never face criminal charges, only penalty fees and interest charges.
Last fiscal year, the IRS launched 3,906 nationwide investigations into criminal actions. They came away with 1,926 convictions with those convicted averaging two-year jail sentences.
Jail time doesn’t scare Fairbanks of Schools Not Bombs. Nor do the financial penalties.
“We certainly don’t do it to save money,” she said.
For her, the looming eye of the IRS is merely an inconvenience. She has lost count of the number of times the IRS has put a lien on her bank account and seized the money she was required to pay.
On top of that, there are penalties and interest payments to reckon with. Tax resisters estimate penalties between 5 and 25 percent and interest at about 10 percent.
“There were some years that they did not collect, but lately they’ve gotten us,” said Fairbanks, who files jointly with her husband. “We ultimately pay more (than what we owed.)”
Other tax resisters point out the burden of having their credit tarnished, and consequently loan applications denied or problems passing pre-employment screenings.
Kennedy said when the IRS came after him, they targeted not only his personal bank account, but the accounts of volunteer organizations where he played a financial role.
“I’ve taken my name off these accounts. I don’t want to jeopardize them,” he said.
The hassle of the IRS eventually becomes too much for some.
“I caved in. It just beat me down,” said former tax resister Mike Rotkin, also a Santa Cruz councilman.
During the Vietnam War, Rotkin refused to pay a federal surcharge levied on telephone bills that helped fund war costs. He was eventually assessed years worth of interest and penalties.
Dodging the IRS
For some tax resisters, ducking payment is only half the battle. The other half is holding on to their money.
“If you’re sharp, you can get away with it,” said Oswald Lake, an IRS-certified agent, now retired from his 25-year practice in Soquel.
Oswald has always paid his taxes, but as a tax advisor and registered Libertarian since 1978, he’s seen his share of tax resisters and understands their anguish.
“I don’t think the income tax law was ever properly passed,” said Lake, who counts himself among those who oppose incomes taxes on philosophical grounds.
Since the 1913 ratification of the 16th Amendment, which first granted Congress the power to “lay and collect taxes on income,” critics have questioned the act’s legitimacy.
They challenge the constitutionality of the ratification process. They protest the government’s right to “withhold” income tax. They say filing tax returns violates a right guaranteed by the Fifth Amendment due process.
The IRS calls these constitutional arguments “frivolous.” But the objections continue.
“If the government takes my money, I want to feel justly compensated,” Capitola resident Bill Anderson said. “This is my right.”
In a self-published manifesto, Anderson writes, “A few short decades ago the federal government deducted nothing from a person’s paycheck. ... We need to recover our tax history.”
Anderson, though, pays his taxes. Other county residents who share his concerns and decide not to pay are less conspicuous.
“Most people who are not paying taxes are not broadcasting it,” explained Lake. “They don’t want to go to jail.”
Silence is the secret to their success, Lake said. Compared to tax protesters, quiet tax resisters aren’t likely to be bothered by the IRS, he explained, adding that those who are self-employed and don’t have sizable assets are more likely to succeed.
Staffing levels at the IRS, which have fallen in recent years, may help bolster Lake’s assertions.
According to the Washington, D.C.-based Anti-Defamation League, the number of IRS employees has dropped by more than 15 percent since 1992, and the number of civil suits filed against tax resisters has fallen from 2,500 in 1992 to 641 in 1999.
San Jose resident Joseph Bannister is candid about not having filed a federal tax form since 1998. Unlike many outspoken tax resisters, he has not been hassled by the IRS.
His story is different, though. Until February 1999, Bannister worked as a special agent for the IRS, during which time he became convinced it was not his duty, as an American, to pay federal income tax.
“If they (IRS officials) show me documentation that I owe them money, I got my checkbook ready,” he said.
In his Internet-distributed book “Investigating the Federal Income Tax,” Bannister lays out the history of constitutional arguments against income tax and alleges some present-day wrongdoings of the IRS.
“There’s very suspicious conduct that the government engages in when they’re dealing with someone who knows nothing,” he said, noting his gun-toting days as an IRS investigator when he seized property and made arrests.
He says his experience and knowledge of the IRS is why the agency has not come after him.
Making their point
Bannister says all tax resisters, despite their motivation, share a similar struggle.
“War protesters, too, see that the government hasn’t followed proper procedures,” he said. Everyone is in this to bring about change in the government, he explained.
Many, however, say this isn’t likely to happen.
Tax resistance is limited to a small number of “right-wing” groups with constitutional arguments, and “left-wing” war protesters are unlikely to gain the momentum they had during the Vietnam era, said Mark Pitcavage, director of fact-finding for the Anti-Defamation League and an expert on extremist activities.
“If it’s a short war, which it’s looking to be, I don’t expect to see much of this,” Pitcavage said. Only if American occupation drags on will the tax-protest movement have any real impact, he said.
As for the “right-wing” tax activists, the movement at times has been marked by violence, which is counter-productive, Pitcavage said. Those incidents include an attempt to blow up an IRS office in Santa Barbara and machine gun fire into an IRS office in Hayward.
These incidents, though, are exceptional. Most tax resisters try to avoid the IRS, and some even show sympathy for them.
“I had a good relationship with the tax collector,” said Kennedy, the councilman. “I knew him from Mass. He was just doing his job.”
But Kennedy and other outspoken tax resisters also believe the IRS targets agitators like them to stifle their message.
The IRS denies investigation biases and it doesn’t track the motives of tax resisters. The agency does not comment on specific investigations either.
“All taxpayers are required to follow tax laws,” said Lessler of the IRS.
Others continue to disagree.
“There are things that I morally can’t go along with,” Lane said.
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Contact Kurtis Alexander at kalexander@santa-cruz.com

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