Reprinted from www.libertylobby.org, home of The SPOTLIGHT archive
The 'Great' Tax Debate
Gentlemen, please introduce yourselves
My books explain how you will totally avoid the payment of income tax. I wrote the best-seller, How Anyone Can Stop Paying Income Taxes, in 1982. It was distributed awhile by Simon & Schuster. Ba sically, I teach people how to file a tax return. I file tax returns. Years ago I didn't. I filed Fifth Amendment returns, but then I developed the "zero" return. You can see the zero return on my website: www.paynoincometax.com.
I file a return and I report "zero" income. I don't care if you had $50,000 in wages or $50,000 in capital gains, because for tax purposes, the word "income" means a corporate profit. Income itself is not even defined in the Internal Revenue code.
I've been teaching people how to file and not pay income taxes since 1976. In 1976, Arlington published a book of mine, called The Biggest Con: How the Government is Fleecing You. It sold over 100,000 copies in hard and soft cover. It was the Conservative Book Club's book-of-the-month selection. I got into this because I believe the government was literally undermining and destroying America's economic base with excessive taxation.
I'm a tax litigation consultant. What that means is that I don't prepare tax returns. I get into the act after the IRS calls a return into question and I deal specifically with businesses and individuals that are having problems with the Internal Revenue Service. I've written a total of 10 books dealing with the IRS. I was a consultant to the National Commission on the Restructuring of the IRS. I've worked with a number of the conservative think tanks in Washington on tax policy issues. I wrote a book, IRS, Taxes and The Beast, which was the book that blew the lid off IRS abuses and led to the Senate Finance Committee hearings on IRS abuse.
I've testified before the Senate and the House of Representatives on a number of occasions. My work in documenting IRS abuses and legal violations has led to a number of the changes that we see in the law now, principally a number of the rights in the restructuring bill were things that were written on my desk, as well as a number of the acts that were put forth by Congress, were as a direct result of the work that I did.
I wrote a book in 1992 called How to Fire the IRSthat really was the book that sparked the national debate on whether we should abolish the income tax entirely and the IRS and go to an alternative system. That's really what sparked the flat tax vs. sales tax debate that's going on now. In the past 24 years I've been dealing with people who have trouble with the IRS, a problem that's created either by their actions or by the IRS. I've dealt with every kind of tax case you can imagine.
You both don't like the IRS and the income tax.
I agree with Irwin Schiff on one thing: the IRS and the tax policies of the United States government for the last 40 years have been completely un-constitutional and improper in every way. I am very much against the IRS and the income tax and I believe it has to end.
Dan has just made some misleading statements. There is nothing wrong with the Internal Revenue Code. The payment of income tax is voluntary. The code doesn't have to be abolished. The thing is that the government is able to collect the tax in violation of law.
Dan knows, as I have debated this with him before, that I am saying that there is no law that requires anybody to pay income taxes or keep books and records for income tax purposes.
Dan tells people they have to pay income taxes and that they have to keep books and records. I am suggesting that despite the fact that Dan talks a good game, he is basically helping the government extort income tax from the American public.
I would like to have Dan identify for us the specific law that requires Americans to pay income tax or the specific law that requires people to keep books and records.
There's nothing tricky about this. Section 5703 of the IR code, dealing with tobacco taxes, says: "The manufacture and import of tobacco products shall be liable to the taxes imposed" and further on it says "such taxes shall be paid on the basis of the return." Section 4401 dealing with the wagering tax, the tax paid by book-makers, states: "Each person who is engaged in the business of accepting wagers shall be liable for and shall pay the tax."
Now Dan is a very good speaker and he's very persuasive, but unfortunately Dan is misleading his listeners because there is no law that requires the payment of income taxes, so let Dan identify it.
Why do I have withholding tax withheld from me?
I show people -- unfortunately Dan doesn't do this -- how to stop the withholding of taxes from your pay, because there's a W-4. All you have to do is to claim "exempt," Section 34021 of the IR code states that if you give your employer a statement saying you have no income tax liability last year and anticipate no liability this year and you give that statement to the employer, the employer is not authorized to deduct taxes from your pay.
More important, what comes out of your pay is not even an income tax. it is a wage tax imposed in Section 34022 of the IR code. Section 31(a)(1) of the IR code allows you to get all your withholding tax back. All you have to do is ask for it.
On my website you will see refund checks for people who have filed my "zero" return and got full refunds. That's one thing Dan Pilla doesn't do. He doesn't show you how to get a refund back of all of the withholding taxes and he doesn't tell the public that what comes out of their pay is not an income tax.
Incidentally, Dan says he doesn't prepare tax returns. Well, I do. I prepare returns for people who walk in my office and we show them how to file "zero" returns and claim a refund for all the taxes they might have paid last year.
I know a lot of people who are employed and if they went into their employer and told them that they were "exempt," the employer would say, "Well, then you're exempt from this job, because I'm not going to stick my neck in this noose."
First of all, you don't do it like that. All you do is you hand in your W-4. If you couldn't claim exempt, why would it appear on the W-4 that your employer gives you? The law is clear. I have thousands and thousands of people around the country who no longer have taxes taken out of their pay. Hopefully some of these people will actually call in and explain that.
Dan will admit, for instance, that income taxes have to be assessed and you can't owe a tax until it is assessed and, among other things, people who are drawing wages in 2000, their income taxes haven't been assessed, so why should they pay taxes that have never been assessed?
I believe this all sounds accurate, but it seems to me that the government just doesn't play the same game.
The name of my book is, of course, The Federal Mafia: How the Government Illegally Imposes and Unlawfully Claims Income Taxes. Now I've been saying that organized crime in America begins with the federal government. There's no question that the government is collecting taxes in violation of law and the government is literally extorting.
I teach people how to fight back. In other words, the only people who pay income taxes are people who are either ignorant or fearful. Get a copy of my book at 1-800-TAX-NO-MORE.
When you look at Irwin's remarks, you find a number of inherent inconsistencies. First of all, he talks about taxes being voluntary and that there's no law requiring the filing of a tax return or requiring a person to keep records. Yet, Irwin says he files tax returns. If this is so voluntary, why does he have people out there filing tax returns?
Another thing that's important to point out here is that the fundamental argument that Irwin makes is just absolutely dead wrong. Not only is it dead wrong, but it has been tested by the courts over and over again and Irwin himself has taken this very argument through the courts in the battles that he has had with the IRS over the years and he has lost it every single time it has been presented.
In specific response to Irwin's claims, IRS code section 6012 requires a person to file a tax return if that person has earned income in the required amounts. There are various sections of that code provision that provide if you are a single person you have to earn "x" amount of dollars; if you are married person, you have to earn "y" dollars etc.
Section 6011 and 6001 require a person to make and keep records for the purposes of reporting income and deductions on his tax returns. Code section 61 very specifically sets forth what constitutes income for purposes of the IR code and there's basically a laundry list of items set forth in code section 61. Item #1 on the list is compensation for services, including wages and commissions and salaries and so forth. So Irwin's argument that people who earn wage income are not taxable is absolutely false.
Ultimately my opinion doesn't matter. The federal courts are the ones that sort these issues out. I want people to write down the name of this case Ficalora v. Commissioner. It is cited at 751Fed 2nd 85. It is a 1984 decision. The Irwin Schiff argument was presented to the court in this case, arguing that wages are not income and the income tax is voluntary and that there is no law requiring a person to file a tax return and so on.
The court specifically and expressly rejected the argument in that case and in hundreds of cases that have come after it, including Irwin's own case that went through the Second Circuit Court of Appeals in1990, Schiff v. United States. Irwin's own case is cited at 919 Fed 2nd 830. The court specifically rejected Irwin's argument.
It is very important for people to understand that Irwin Schiff knows darn well that every time one of these legal arguments ends up in the courts, the person who makes the argument loses, including Irwin himself.
Now I must confess that there is nobody in the country who is better at making the "un-tax" argument than Irwin Schiff is. He's a master of manipulating the code sections to create the appearance that his argument is sustainable. But the fact of the matter is that he has never won the argument in court. Not one time. My question is this: if Irwin can't win the argument, what makes anybody else think they can win the argument?
I want to make one more point here. Irwin makes the point about the "exempt" W-4. This is very misleading to people to just say that they can go into their employer's office and drop a W-4 on the table that says you're "exempt."
First of all, if taxes are voluntary, why do I have to file a tax form provided for under the code -- Irwin himself cited the code section 3402 -- to get out of the wage withholding?
Here's the thing that's very important: what Irwin didn't tell people is that the IRS has a program called the "Questionable Form W-4 program." What that says is that anytime an employer gets a W-4 form -- and these are regulations that are enforced against the employer -- that claims "exempt" and that person is earning more than $200 per week in wage income, the employer is required by law to send that form to the IRS.
When the IRS gets the form, what they do is they write a letter to the citizen who files the form and they say, "It appears from our records that you can't file exempt the way you have done" and what they do, then, is that the IRS instructs the employer to disregard the W-4 form and to withhold from the employee as though he is a single person with no allowances, which, of course, means the IRS takes the most amount of money possible. Then they penalize the employee (the person who filed "exempt") a $500 penalty for filing a false W-4 form and the IRS collects the penalty, in many cases through bank levies or wage levies and so on.
Irwin knows this because the court cases are loaded with people who have challenged these penalties using Irwin's argument and they have lost every single time. Irwin cannot point to one court case anywhere that says "Tax laws are voluntary." You don't have to file if you don't want to. "The 16th Amendment is un-constitutional," or any of the rest of the arguments he makes along the way.
First of all, when Dan [asks] why I file, one of the reasons why I file today is to prevent illegal prosecutions for failure to file. I put an attachment on my zero return in which I point out that even though there is no law requiring me to file, I am filing anyway. The reason I file is to get a refund. On my web site, you will see hundreds of checks that we've gotten. In order to get a refund, you have to file. So if anybody paid taxes last year and they want to get that money back, they have to file.
Now Dan, in response to my question as to what law says you have to pay or be liable to income taxes, cited four code sections. This shows you how misleading and devious Dan is.
In none of those code sections does it say anything about paying income taxes. First of all, he cites 6001 and 6011. The word "income tax" doesn't even appear in either section. Section 6001 attempts to define income but it doesn't do it. There's nothing in section 6001.
Now, as far as 6012 is concerned, it does mention income tax but nowhere in section 6012 does it say anything about being liable or having to pay the tax.
Let me give you an example of what section 6001 says: It says "every person liable for any tax." But now you have to find where you are liable for income tax. Section 6011 says: "When required by regulations, any person may [be] liable."
I just want to ask Dan one question: Dan, isn't it a fact that income tax is imposed in section one, subtitle (a) of the IR code? Isn't that correct?
The tax liability itself is created in section one.
But isn't subtitle (a) having to do with income tax?
Yes, but Irwin, you can't --
Just answer me the question. Does subtitle (a) have to do with income tax, subtitle (b) is estate and gift and subtitle (c) is payroll?
You can't go by the headings --
Let me just say this. Let me just say this --
Hold it, Dan, my turn. Hold it, both of you.
Let me say this.
Hold it. Just a minute, Irwin. I'm just the poor dumb taxpayer in the middle.
The reason I asked --
Irwin, let me do to you what you just tried to do to Dan. This 6001 and 6012 that you guys are talking about. What is the name of that code?
The Internal Revenue Code.
That stands for taxes, doesn't it?
No, no. Let me answer the question. There are tobacco taxes --
Is the IRS a government agency?
It's a part of the Treasury Department. In my view --
I deal with the Food and Drug Administration (FDA) all the time in my health products business and they make rules and I get stuck, whether I say their rules abide by my reading of the law or not.
The reason I asked Dan is that section subtitle (a) deals with income taxes. Section 6001, 6011 and 6012 are all in subtitle (f). If they had anything to do with income tax they would be in subtitle (a).
But Dan cited four sections. I challenge Dan to read from any one of those sections where it says that persons are required to pay income taxes. Why don't you read, Dan? You're very eloquent. I want Dan to read from section 6012, 6011 and 6001 where it says persons who have income shall pay an income tax.
It's very simple, Irwin and you know it's very simple. What you are doing is twisting the law, as you so masterfully do, and you create the impression in peoples' minds -- .
Here's the point that I want to make very clearly: the arguments that Irwin Schiff makes fail in court. They fail time and time and time again, by every person including Irwin Schiff, who has made the arguments.
Let's talk about the requirement to file tax returns and pay taxes --
No, no --
Irwin, you're interrupting me.
No, no, I said the payment of taxes --
No, let's play the game, Dan. Read those parts he says he wants you to read. I'm sure you're right, Irwin. Those parts probably don't say anything about the income tax. But that doesn't mean, Irwin, that the government isn't going to throw me in jail.
Irwin says that he files tax returns to prevent a prosecution for failure to file a return --
An illegal prosecution --
If it's voluntary, why is he filing?
Have you got people who have gone to court and won, even though they have not paid and not filed, and not gone to jail after using your method?
We don't go to court. When Dan says I went to jail, I went to jail when I filed a Fifth Amendment return and when I failed to file at all. The name of my book is The Federal Mafia. The government illegally prosecutes people. So in order to avoid an illegal prosecution, we file. But the point --
You are saying that no one who has filed with your method of filing has been called in?
We don't go to court. As a matter of fact, I'm suing the government in 15 cases where we filed for refunds. If you go to my web site you'll see the refund checks. If I am advising people, I guarantee to your listeners that if they order my book for $38 I will send them a book that will show them how they can get a refund of every penny in taxes they paid last year. Now if I couldn't do that, that's mail fraud, okay? I guarantee that the information in my book will prove to them that they don't have to pay income taxes.
I hate paying this government so much in income taxes. You will guarantee that if the IRS comes after me two or three years from now and says that I put in a phony "zero" return, based on what Irwin Schiff says --
I said I will guarantee that the information is correct. I can't guarantee that you're going to use it correctly.
You won't say that the government won't call me in and then fine me?
Well, they haven't done it to anybody. If they are going to do it, there is a statute, section 7206 of the IR code, which makes it a crime, punishable by up to three years in jail and up to a $100,000 fine for anybody to advise or counsel anybody into putting false claims in to the government.
So if I tell you that I am going to show you how to file a return and that you are legally entitled to get a refund of every penny you've paid in taxes last year, if I couldn't provide you with a book that would show you how to do that, the government would arrest me on mail fraud.
What's to keep the government from, two or three years from now, coming in and arresting you on mail fraud?
Well, I've been doing this for six years and the fact of the matter is, it's perfectly legal.
Isn't there a statute of limitations on it?
If you go to my web site, you can click on to my address. I occupy a whole building right on East Saharah in Las Vegas and on the roof of my building there's a sign that's 16 feet long and 4 feet high and it says, "Why Pay Income Taxes When You Don't Have To?"
What's the 1-800 number for your book?
Dan, you counsel a lot of people. Have you worked with anybody who has tried what Irwin suggests?
My phone rings steadily, week after week, with people who have used Irwin Schiff techniques over the last five, 10, 20 years -- since he's been out there that long --
What about the last six years?
I'll tell you exactly what happens with people who do this. Irwin Schiff can absolutely not verify that anybody has had any success with his material because the fact of the matter is that anybody who uses it, including Irwin himself, loses in the courts. I'll give you another case: U.S. vs. Hartman. These same issues were hashed over in this 1996 case, cited 915 Fed Supplement, page 1227. This Florida case featured the same arguments Irwin is using here now and that person lost his case.
What happens is that the IRS will take the position that when you file a tax return with zeroes on, the way he is arguing -- which is peculiar, because if filing a return is voluntary, why file one in the first place. Irwin says he files it to prevent a prosecution for failure to file. What does that tell you about the "voluntary" nature of the income tax if you risk prosecution for failure to file a return?
What Irwin doesn't tell you is there is also the capacity of the IRS to prosecute for filing a false return. If you file a return that says you didn't earn any wages or income whatsoever when, in fact, the IRS can prove that you did, you are running the risk of a felony prosecution under Section 7201 of the IR code or under 7206, whichever one under which the IRS decides to file. So these cases fail over and over and over again.
It's interesting that Irwin talks about suing the government in 15 different cases for refunds. Obviously, the people are not getting the refunds if Irwin has to go to court and make the lawsuits. What the IRS says when they get these returns is that they will contact the taxpayer in writing and say, "Citizen, you didn't file a return. If you don't file, we will file one for you."
If the person continues to argue the Irwin Schiff failure argument the way Irwin is laying it out here, the IRS essentially prepares a return for you. You don't have to file it. The IRS can file it for you and what they will do is to base their return on available information which generally involves the W-2 form or 1099s or any other information concerning your tax liability. The law specifically says that return is considered legal and proper and that you, as the citizen, have the burden to prove it is wrong.
So if the IRS is wrong in taking the position that you had $100,000 worth of income, and you don't file a return and produce the records to prove you didn't, then you are going to be taxed on $100,000 worth of income. The burden of proof is not on the IRS when a citizen does not file tax returns or does not produce records. The burden remains on the citizens.
People come to me after they get the tax liabilities assessed against them, five or 10 times more than they should be, because of penalties and interest that have accumulated, and ask: What can I do? That is why I help people solve the problems that Irwin Schiff creates for them in the first place.
Irwin can talk a good game, but once the IRS makes the wage levies and assessments and property seizures and bank levies and tax liens start, then he can't help people. Irwin says, "Oh well, gee, you must have done it wrong." That's his favorite response: "You must have done it wrong." Irwin was making an offer that he would give $5,000 or $50,000 or something for anybody who would prove that there was a law that would prove you had to file tax returns. Did anybody ever claim that reward?
Let me just say this: practically every statement uttered by Dan Pilla is false. They say that before the truth gets out of bed, a lie is halfway around the world. Now Dan said that the IRS will prepare returns for you. There is no law -- the IRS is not even mentioned in the IR code, as a matter of fact. The IRS is purely an administrative agency. They have no power whatsoever.