Income Taxes: Legit or Not?

NO STINKING TAXES: I’m ever so relieved to learn that I needn’t fill out a tax return this year. That’s because Santa Barbarans I know have assured me that the federal income tax is not only illegal but unconstitutional and utterly un-American.

Imagine that, after all these years of me sending money to Washington and Sacramento. Do I get a refund?

I’ve also heard that “experts” insist the IRS can’t require you to report income from illegal activities, because that would violate the Fifth Amendment shielding you from self-incrimination. Clever argument. Naturally, the IRS counters: “Frivolous. Pay up.”

A similar argument was put some years ago by a very rich guy: “The income tax law is a lot of bunk. The government can’t collect legal taxes from illegal money.” That’s what gangster Al Capone claimed after feds went after him to tax his huge bootlegging profits.

The U.S. Supreme Court begged to differ with Al, who was found guilty of tax evasion and failure to file a return. Capone’s unsavory reputation worked against him. The 1929 Saint Valentine’s Day Massacre was fresh in the public’s minds. Seven members of a Chicago Irish North Side gang were gunned down by Italian mobsters from Capone’s South Side gang. The resulting investigation included Detroit’s Jewish Purple Gang, which was apparently not involved. (Diversity via bullets, I guess.)

In 1931, a judge sentenced Capone to 11 years behind bars. Today, he’d probably get a year wearing a GPS anklet.

The main argument I’ve heard is that the 16th Amendment, setting up the whole income tax back in 1913, was never properly ratified by enough states. According to tax protesters, Ohio was not legally a state at the time it voted. (Courts disagree. It’s complicated.) Protesters will argue ’til doomsday that this and a zillion other pettifogging reasons mean that the whole tax thing is baloney. Paying taxes is “voluntary,” they claim, in an argument that runs to phone-book length.

So, if I can’t use the taxes-are-illegal dodge, about the only thing left is what the big boys do: cheat, bribe Congress to add even more loopholes, or hide the money overseas. Steve Pybrum, a Santa Barbara CPA, was recently found guilty of failing to report more than $1 million by routing his income through a bogus nonprofit called The Foundation for Harmony and Happiness. Feds say he used the money to rent a mansion and buy a plane, a fishing boat, and an SUV. Pybrum is appealing.

As for the time-tested gambit of hiding your money in a foreign country, feds have long tried to get at the practice, with limited success and limited enthusiasm. But a goof by a Swiss tax adviser named Beda Singenberger has given U.S. authorities a surprise windfall: incriminating info for about 60 of his clients. He accidentally included the list in a letter, and it got around. Now the feds are picking them off, one by one, according to Bloomberg News. One man, an 83-year-old exile from Nazi Germany, pleaded guilty to hiding $5.7 million and was sentenced to three months of house arrest. A retired Army surgeon, Bronze Star recipient, and Desert Storm field surgeon was hiding a mere $1.5 million nest egg. He pleaded guilty and will be sentenced next month.

Singenberger was charged with conspiracy to cheat the IRS. He lives in Switzerland, a county that does not have an extradition treaty with the U.S., so it remains to be seen whether he’ll ever show up in court.

Closer to home, an L.A. guy named William Gomez-Corzo was sentenced to 54 months in federal prison for filing more than 1,000 phony tax returns and collecting $1.3 million. But Gomez-Corzo, 52, will have to give it back, if he still has it. The sentence includes two years in the slammer for using a dead man’s ID to obtain a passport.

Then there’s the sometimes-violent tax-resisters movement, frequently characterized by antigovernment, racist, and quasi-religious elements. In 1991, Dean Harvey Hicks launched a mortar attack on a Fresno IRS center. In 1993, someone tried to destroy a Santa Barbara IRS office by pumping explosive propane gas through a broken window. An employee smelled gas and called police. No one was arrested or hurt.

Okay, okay, the tax is probably legit. But rather than fill out forms, I just called my reliable tax guy. Let him crunch numbers. You’re welcome, Uncle Sam. (But I can’t afford any more of your crazy wars.)