A tax protester, in the United States, is a person who denies that he or she owes a tax based on the belief that the Constitution of the United States, statutes, or regulations do not empower the government to impose, assess or collect the tax. The tax protester may have no dispute with how the government spends its revenue. This differentiates a tax protester from a tax resister, who seeks to avoid paying a tax because the tax is being used for purposes with which the resister takes issue.
Origin of American tax protesters People have protested taxation at various times in the history of the United States, sometimes violently.
In the colonial era, Americans insisted on their rights as Englishmen to have their own legislature raise all taxes. Beginning in 1765 the British Parliament asserted its supreme authority to lay taxes, and a series of American protests began that led directly to the American Revolution. The first wave of protests attacked the Stamp Act 1765, and marked the first time Americans from each of the Thirteen Colonies met together and planned a common front against taxes the colonists considered illegal. At the Boston Tea Party, colonists threw British tea into Boston Harbor because it contained a hidden tax Americans refused to pay. The British responded by trying to crush traditional liberties in Massachusetts, leading to the Revolutionary War in 1775.Thomas P. Slaughter, "The Tax Man Cometh: Ideological Opposition to Internal Taxes, 1760-1790," William and Mary Quarterly Vol. 41, No. 4 (Oct., 1984), pp. 566-591 in JSTOR.
In 1794, settlers in western Pennsylvania responded to a federal tax on liquor with the Whiskey Rebellion. President George Washington led an army to crush the rebellion—the rebels dispersed and federal supremacy in taxation was assured. The Fries Rebellion saw German Americans in Pennsylvania protest new federal taxes on houses in 1798. It also failed, but when the low-tax Democratic Republican Party came to power in 1801, it repealed the whiskey and land taxes. Anger at the Tariff of 1828 led South Carolina to reject the federal law, until President Andrew Jackson threatened to send in the army to enforce it. The tariff was lowered, again and again, at Southern insistence, until 1861. During the Civil War, with Republicans in control, the tariff was raised to produce needed revenue; after the war it was kept high to encourage industrialization, and became a major issue with conservative Bourbon Democrats such as President Grover Cleveland opposing, and Republicans led by William McKinley promoting tariffs as the route to national wealth. In each of these cases, some opponents of the tax in question contended that it was not merely bad, but exceeded the authority of the body that enacted it.
The Civil War saw the enactment of the first federal income tax, as a temporary wartime measure. A federal income tax in 1894 was declared unconstitutional by the Supreme Court. In response, conservatives (led by Senator Nelson Aldrich) wrote and the nation passed the 16th Amendment in 1909. The goal was to shift away from tariffs to a more widely based tax, which proved essential in financing World War I.
The Great Depression made tax delinquency widespread during the presidency of Franklin D. Roosevelt, when income taxes increased dramatically to pay for New Deal programs and U.S. involvement in World War II.
The modern tax protester movement The modern tax protester movement appears to have originated in the 1940s and spread in the mid-1970s, proclaiming legally frivolous arguments that the federal tax on individual income is legally void, unconstitutional, or inapplicable to various forms of income such as wages.
Early example: tax protest in transition Connecticut industrialist Vivien Kellems was an early advocate of the position that the tax laws were ineffective. In 1948, frustrated that the government had not reduced the historically high tax rates assessed during World War II, Kellems refused to withhold payroll taxes for her employees. She did not dispute the propriety of the tax at that time, but contested the power of the government to require her to collect taxes on its behalf.
The IRS then seized the money owed from her bank account. She brought suit against them and, in a book she wrote, asserted that she won,Vivien Kellems, Toil, Taxes and Trouble (New York: E. P. Dutton, 1952) although she did not challenge the constitutionality of tax withholding itself.
She lost a separate case challenging the constitutionality of withholding itself, and continued to pursue legal battles and appeals until her death in 1975, ultimately unsuccessful in challenging the withholding of tax.Vivien Kellems Papers . The tax-protester movement began to develop a greater following in the late 1960s and early 1970s. Many books, lectures and other materials promised to help people avoid having to pay taxes.
Another early protester was Arthur J. Porth, who argued that the Sixteenth Amendment to the U.S. Constitution should itself be declared unconstitutional, under his theory that the income taxes under the Internal Revenue Code of 1939 imposed "involuntary servitude" in violation of the Thirteenth Amendment. That argument was ruled to be without merit in Porth v. Brodrick, United States Collector of Internal Revenue for the State of Kansas.Porth v. Brodrick, 214 F.2d 925, 54-2 U.S. Tax Cas. (CCH) ¶ 9552 (10th Cir. 1954) (per curiam). He continued his tax protester activities and was eventually convicted of willful failure to file returns and other tax crimes; see United States v. Porth.United States v. Porth, 426 F.2d 519, 70-1 U.S. Tax Cas. (CCH) ¶ 9329 (10th Cir.), cert. denied, . Generally, see also
C. George Swallow was convicted of tax evasion and filing false tax returns. In 1962, his convictions were upheld on appeal.Swallow v. United States, 307 F.2d 81 (10th Cir. 1962), cert. denied, , rehearing denied, . In 1963, in a separate appeal, the Court of Appeals for the Tenth Circuit also rejected (1) his argument that the income tax laws and regulations are so complex that it is impossible for a taxpayer to comprehend and comply with them, and that the tax laws therefore violate the Fifth Amendment, (2) his argument that the income tax laws are unconstitutionally arbitrary, unfair and discriminatory; (3) his argument that the tax proceeds are used for unconstitutional purposes such as the economic welfare of certain groups of taxpayers, foreign people, and foreign governments; and (4) his argument that certain provisions of the Internal Revenue Code violate the establishment of religion clause of the First Amendment.Swallow v. United States, 325 F.2d 97 (10th Cir. 1963) (per curiam), cert. denied, .
Modern tax protesters: Positions based on legally frivolous arguments
In another early case, Lamb v. Commissioner, the taxpayer argued that because his income was not received in the form of gold or silver currency, none of the income was taxable. He also argued that his income was not taxable because Federal Reserve notes were bogus and counterfeit under the Constitution. In 1973, the United States Tax Court rejected those arguments.Lamb v. Commissioner, 32 T.C.M. (CCH) 305, T.C. Memo. 1973-71 (1973).
Also in 1973, a disbarred attorney named Jerome Daly lost an appeal on his conviction for willfully failing to file federal income tax returns. In rejecting Daly's appeal, the United States Court of Appeals for the Eighth Circuit noted that one of Daly's contentions involved his "seemingly incessant attack against the federal reserve and monetary system of the United States. His apparent thesis is that the only 'Legal Tender Dollars' are those that contain a mixture of gold and silver and that only those dollars may be constitutionally taxed. This contention is clearly frivolous."United States v. Daly, 481 F.2d 28, 73-2 U.S. Tax Cas. (CCH) ¶ 9574 (8th Cir.) (per curiam), cert. denied, .
In a case before the United States Tax Court in 1974, Everett and Dorothy Vernaccini argued that the Internal Revenue Service should allow them certain deductions on the theory that the record keeping requirements of Internal Revenue Code section 274 were unconstitutional under the Thirteenth Amendment (prohibiting slavery and involuntary servitude), and under the theory that the record keeping requirements violated (which prohibits "peonage"). The Tax Court rejected those arguments.Vernaccini v. Commissioner, 33 T.C.M. (CCH) 321, T.C. Memo 1974-66 (1974).
In 1975, the term "tax protester" began to appear in reported court decisions. The first two reported federal cases may have been Gilbert v. Miriami75-2 U.S. Tax Cas. (CCH) ¶ 9603 (N.D. Ill. 1975). and United States v. Scott, coincidentally decided only two days apart. In Gilbert v. Miriami, the taxpayer (Walter Gilbert) sued the District Director of Internal Revenue (Charles Miriami) asking for injunctive and declaratory relief from enforcement of the internal revenue laws, including a request for a judgment that the statute prohibiting most suits to restrain the assessment or collection of Federal taxes was unconstitutional. The court rejected the taxpayer's claims.
In Scott, the court noted that an undercover government agent had sworn out an affidavit regarding the agent's infiltration into a "tax-protester" organization. The case involved James Walter Scott, the leader of that organization. Scott had failed to file tax returns from 1969 to 1972, based on Constitutional arguments against the validity of the income tax. Scott argued unsuccessfully that the Sixteenth Amendment was not properly ratified, that federal reserve notes were not legal tender and that he was not required to report their receipt as income, and that he was not required to file tax returns if he felt they would incriminate him. The United States Court of Appeals for the Ninth Circuit upheld Scott's conviction.
In 1977, the United States District Court for the Northern District of Texas, in the case of Ex parte Tammen, referred to a tax-protester group called the "United Tax Action Patriots" or "UTAP":
The evidence shows that the organized tax-protester group is growing rapidly. It has spread eastward from the West Coast and is adding substantially and wrongfully to the workload of the federal courts. The goal of UTAP is to do away with federal income taxation by making the burden so heavy on the IRS and the federal courts that the government will have to yield. It is their philosophy that the Sixteenth Amendment was improperly passed and therefore invalid, and that anyone attempting to enforce the income tax laws is violating the rights of the taxpayers and should be treated as a criminal.