Martha Stewart and Your Next 1040
This month Martha Stewart emerged from five months' incarceration after being convicted of lying to the government. Next month you, dear Reader, will have to decide what you are going to do about your tax return. The two events are connected.
The Stewart case was not about the victimless crime of insider trading (a practice that would give useful price signals to outsider traders) but about the victimless crime of telling fibs to FedGov agents (there are no victims because government is an artificial construct with no existence in the real, rational world). Yet there was nothing this wealthy business lady and her attorneys could do to keep her out of Camp Cupcake . Doing unto them what they do daily unto us is, nowadays, an imprisonable offense--even when, like Martha's, the fibs are told in unsworn statements with no lawyer present or Miranda warning given.
Those facts carry awesome implications for what you do about your 1040 Form; for as is clear at its foot, that is very much a sworn statement, made under "penalties of perjury." I'll come later to the question of whether or not you've been read your Miranda/Fifth Amendment rights.
By common knowledge, a majority of Americans lie on their tax returns. An item of income "forgotten" here, a deduction "inadvertently" exaggerated there, or coined out of thin air when the supporting documents have unhappily been lost. I know this is true, because the prospect of an IRS audit is more terrifying to most people than a root canal appointment. Why so? Because the white liars who now make up most of the population are scared stiff that the lies will be uncovered. And well they may be; IRS audit examiners are expected to produce extra revenues of $1,000 per hour, and their Snooper School is quite efficient. With the precedent of the Stewart case now before them, the level of terror will reach new highs in 2005. Not for nothing has the libertarian Republican (forgive the oxymoron) Congressman Ron Paul described the IRS as "the world's largest terrorist organization." Al Q'eda hardly even ranks.
But there's more. Not only do most 1040 filers fib, the fact is there is no way to avoid fibbing--that is, the alleged income tax law is so complex that if 16 experts consider the same data and prepare 1040s accordingly, they will come up with 20 different tax returns. In a literal sense, it is now impossible to tell the truth, even assuming one wanted to; for the "truth" in this respect is something nobody can actually know. The law is exactly what the b-rats want it to be; they hold the entire population in terror, and that is just the way they like it. "Tax simplification"? Believe it only when you see it.
And now with the Stewart precedent, they can pick and choose pretty well at will which of the 120 million filers they are going to incarcerate next. America has become a textbook case of an enslaved, tyrannized society. All in the name of freedom and democracy, of course.
So April 15th poses everyone here quite a dilemma; we are damned if we lie, yet we are damned also if we try to tell the truth. One terribly popular solution is to deliberately overstate the tax due, by not claiming deductions, etc., in the hope of avoiding IRS radar. That may work, but what a terrible price! The FedGov says people underpay what is due, in total; I think it more likely that the population overpays, even assuming the income tax were legally due at all. What other solutions are available?
Happily, there are a few. Monstrous as government is, fortunately it is incompetent as well as arrogant, and what it has written down as "tax law" is not only impenetrably complex, it is also grossly deceptive and has huge gaps. The law in question is USC Title 26, a.k.a. the Internal Revenue Code. Everyone reading this will be considering the surrender of thousands of dollars a year on his or her 1040, and it seems hypocritical to say one wishes to see the dissolution of government while volunteering to fund it (and that is the case here, as I'll show below) so it's worth knowing a little about what that 9,300-section volume does and does not say. There is a rich menu of surprises; some of them very tasty.
Title 26 covers dozens of Federal taxes. The "income tax" is only one, though it occupies the whole of its Section A--perhaps 2 cm out of its 5 cm thickness--and yields 50% of the FedGov revenues. The first thing one might do is to enquire the legal meaning of the word "income," since that is what they say they are taxing. There are, after all, scores of legal terms used in this book to which it does give clear, unambiguous definitions, so of course we can expect the most important word of all to be defined: "Income." Is it "everything that comes in"? Is it "what's left when we've paid for essentials of living"? Are gifts included? Tips? What?
Then comes the first of several pleasant surprises: this crucial term is not defined at all! Not only is its definition missing, it's missing for the very good reason that if it were not missing, Congress would have blatantly exceeded its powers by attempting to amend the Constitution; for the term "income" is used there, in Amendment 16. The Supreme Court confirmed that, in the 1920 case of Eisner vs. Macomber: ". . . the Congress may not, by any definition it may adopt, conclude the matter, since it cannot by legislation alter the Constitution, from which alone it derives its power to legislate . . . ." Elegant! The SoBs are hoist on their own petard.
So a possible solution for April 15th is to write across a 1040 Form such words as "I cannot supply these data because I do not know whether I received any 'income' or not. If you will define the term for me (also under penalty of perjury, naturally) I will be glad to prepare appropriate figures and make due payment." As far as I know, nobody has tried that yet, but it would be reasonable--and truthful. Perhaps some reader will give it a go. Let us know how it turns out.
The solution that I have used for seven years, and will use again this year, is to write a zero on every line and to attach to the 1040 sheet a second, containing a 10-point legal brief to show why those numbers are accurate. I think my income is zero because two other Supreme Court cases (Brushaber and Merchants' Loan vs. Smietanka, from 1916 and 1921 and never overturned) offer the opinion that "income" means "corporate profit." Sounds fair; often the annual report of a corporation will show a line called "income" that means simply the profit it earned and not at all the much larger figure on the "sales revenues" line. Anyway, that's the only authoritative definition I have, so I go with it. I'm not a corporation, so I have no corporate profit. And as far as I know, no human mother ever gave birth to a corporation, so no other individual has any, either. The solution works fine, and it's quite fun to see IRS people dissolve into cognitive dissonance when one invites them to fault it. Credit for its design goes to Irwin Schiff and many thousands of us have used it, some since 1992.
There are other solutions, but that's the one I think is the soundest. Let me round out the scene by telling you where to find your "Miranda Warning"; it's hidden in plain sight in the 1040 Instruction Booklet available now at your local, friendly Post Office, 100% free. There's a page there in small print (of course!) headed "Disclosure, Privacy Act and Paperwork Reduction Act Notice." Bo-ring.
Yet in its third paragraph is the nugget of gold: There the IRS quotes three Code Sections and correctly says they say "You must file a return or statement with us for any tax you are liable for" and that whatever you say can be shared with the "Department of Justice." Aside from the shocking placement of a preposition at the end of a sentence, those are the most valuable words in the whole 100+ page booklet. Why so? Because just as nobody has yet found in Title 26 a definition of "income," nobody has yet found any Section to make anyone "liable for" the income tax, either. Almost in so many words, therefore, the IRS is declaring in that paragraph that nobody need file a 1040; that not to volunteer payment is like burning a draft card, except that it's not illegal.
That is your Miranda Warning, so you've had more than Martha Stewart was given, and April 15th will not go away. So this year, why not put it to good use?