Irwin A. Schiff, how America Deals with Tax Heretics.

 Death of a Patriot                                                                                                      From an open letter by Peter Schiff

“My father, Irwin A. Schiff, was born Feb. 23rd 1928, the 8th child and only son of Jewish immigrants, who had crossed the Atlantic twenty years earlier in search of freedom. As a result of their hope and courage, my father was fortunate to have been born into the freest nation in the history of the world. But when he passed away on Oct. 16th, 2015 at the age of 87, a political prisoner of that same nation, legally blind and shackled to a hospital bed in a guarded room in intensive care, the free nation he was born into had itself died years earlier.

My father had a life-long love affair with our nation’s founding principles and proudly served his country during the Korean War… Later in life he staged an unsuccessful write-in campaign for governor of Connecticut, then eventually lost the Libertarian Party’s presidential nomination to Harry Browne in 1996.

In 1976, his beliefs in free market economics, limited government, and strict interpretation of the Constitution led him to write his first book, The Biggest Con: How the Government is Fleecing You, a blistering indictment of the post-New Deal expansion of government in the United States.

The book achieved accolades in the mainstream conservative world, receiving a stellar review in the Wall Street Journal, among other mainstream publications“.

Irwin Schiff  Versus Federal Mafia

“But my father was most known for his staunch opposition to the federal income tax, for which the US government labeled him a “tax protester.” But he had no objection to lawful, reasonable taxation. He was not an anarchist and believed that the state had an important, but limited role to play in market-based economy. He opposed the federal government’s illegal and unconstitutional enforcement and collection of the income tax. His first book on this topic (he authored six books in total), How Anyone Can Stop Paying Income Taxes, published in 1982, became a New York Times bestseller. His last, The Federal Mafia; How the Government Illegally Imposes and Unlawfully Collects Income Taxes, the first of three editions published in 1992, became the only non-fiction and second-to-last book to be banned in America. The only other book beingFanny Hill; Memoirs of a Woman of Pleasure, banned for obscenity in 1821 and 1963.

His crusade to force the government to obey the law earned him three prison sentences, the final one being a fourteen-year sentence that he began serving ten years ago, at the age of 77. That sentence turned into a life sentence, as my father failed to survive until his planned 2017 release date. However, in actuality, the life sentence amounted to a death sentence“.

The State Can Kill The Braveheart, But Can Not Break Him

“My father died from skin cancer that went undiagnosed and untreated while he was in federal custody. The skin cancer then led to a virulent outbreak of lung cancer that took his life just more than two months after his initial diagnosis.

The unnecessarily cruel twist in his final years occurred seven years ago when he reached his 80th birthday. At that point, the government moved him from an extremely low security federal prison camp in New York State, where he was within easy driving distance from family and friends, to a federal correctional institute, first in Indiana and then in Texas.

Yet while at these supposed superior medical facilities, my father received virtually no medical care at all, not even for the cataracts that left him legally blind, until the skin cancer on his head had spread to just about every organ in his body.

At the time of his diagnosis in early August of this year, he was given four to six months to live. We tried to get him out of prison on compassionate release so that he could live out the final months of his life with his family, spending some precious moments with the grandchildren he had barely known. But he did not live long enough for the bureaucratic process to be completed.

When his condition deteriorated to the point where he needed to be hospitalized, government employees blindly following orders that kept him shackled to his bed – this despite the fact that escape was impossible for an 87 year old terminally ill, legally blind patient who could barely breathe, let alone walk“.

“Whether or not you agree with my father’s views on the federal income tax, or the manner by which it is collected, it’s hard to condone the way he was treated by our government. He held his convictions so sincerely and so passionately that he continued to espouse them until his dying breath. Like William Wallace in the final scene of Braveheart, an oppressive government may have succeeded in killing him, but they did not break his spirit“.

The Last Don Quixote of America

Peter Schiff ‘s letter seemed so incredible that I decided to carry out my own investigation. It was hard to believe that a country that preaches and spreads democracy all over the world could so cruelly treat a sick old man. After all, he was not a terrorist in the torture chambers of Guantanamo.

Besides, it was not clear on what basis he was sentenced to such a long term. It should be some kind of legal basis, in addition to his books and beliefs.

I’ve quite easily found in Google a lot of information  about Irwin Schiff. On the one hand, it confirmed the facts in the letter of his son, and, on the other hand, clarified the motives of his detention. The fact is that Irwin Schiff not only wrote books, lectured around the country and spoke in famous TV talk-shows, but also advised those wishing to evade taxes by conviction. He was one of the founders of the anti-tax movement in the USA and had thousands of followers throughout the country.

For non-American readers, Schiff’s arguments against the income tax may seem a bit casuistic and idealistic at the same time. Dennis Hevesi briefly sums his basic views in the article in The New York Times “Irwin Schiff, Fervent Opponent of Federal Income Taxes, Dies at 87”.

“In essence, Mr. Schiff argued that the Constitution had established that the value of the dollar was based on a certain amount of gold or silver, and that after the so-called gold standard was phased out, starting during the Depression, citizens no longer earned dollars, or income”.

“His second basic argument was that since all information in a tax return can be used against the taxpayer in a criminal proceeding, filling out a return — he called it a “tax confession” — violated the Fifth Amendment protection against self-incrimination”.

The third  argument was connected with a fuzzy wording of income tax in the US legislation, from which it followed that it is the tax on corporate profits. Therefore, ordinary citizens did not have to pay it.

However, Schiff not only justified his position theoretically but, as Hevesi puts it,  “his most recent was for personally evading taxes as well as advising more than 3,600 others to follow his example by withholding about $56 million in revenue from the federal government”. At that Schiff did not evaded taxes on the sly. For years 1974 and 1975 ,  he refused to disclose his income. Instead, he sent unsigned 1040 forms to the Internal Revenue Service with the title (“U.S. Individual Income Tax Return”) changed to read “U.S. Individual Income Confession.” Instead of disclosing income, he included assertions of various constitutional rights on the forms, claiming essentially that under the Fourth, Fifth, Sixth, Seventh, Eighth, Ninth, Tenth, and Thirteenth Amendments he would not be an “involuntary serf” of the U.S. government…

Despite Schiff’s age (he turned 78 years old on the day of sentencing), on February 24, 2006, Schiff was sentenced to 151 months (12 years and 7 months)  in prison and was ordered to pay over $4.2 million in restitution to the Internal Revenue Service; Schiff was also sentenced to 12 additional months for contempt of court”.

As soon as I regard myself as a law-abiding taxpayer, this new information has caused a rather controversial reaction. One may argue about the illegality of the income tax, but until it exists, he should pay it. By the way, his two sons regularly paid taxes, and Peter also spent more than half a million dollars to pay to father’s lawyers. At the same time, Irwin Schiff could find hundreds of legal loopholes to reduce his tax to a meager amount, or to hide his money in an offshore jurisdiction. Instead, he rushed like Don Quixote to the fight against the stronghold of state power.

His idealism has led to a tragic end, and such a devotion to the idea should be respected if not admired. And, finally, a cruel treatment of the terminally ill, very old man is shocking. We are used to think that prisons in the United States belong to the two extreme poles. On the one hand, there are comfortable as hotels, ordinary prisons for US citizens and, on the other hand, there are a sort of the Guantanamo prison, where terrorists are detetained.

Financial observer  Peter J. Reilly wrote in Forbes, “Irwin Schiff, imprisoned for his resistance to the federal income tax, died yesterday. Efforts by his son, the noted financial commentator Peter Schiff, to secure his release from prison so that he could die with his family, were unsuccessful.

Schiff’s sad passing illustrates an essential truth about the state: if you resist its orders, you will be dealt with by force”.

IRS as a tool for global dominance of the United States

What is the reason for such an extraordinary abuse of power ?! As a University professor, I lecture about foreign tax systems, so I can tell you very interesting things about the US  fiscal system. The fact is that the budgetary system of the United States is in the deep crisis. Since 2001, the federal budget is characterised by a permanent deficit, that is, expenditures constantly exceed revenues. For Fiscal Year 2016 (October 1, 2015 – September 30, 2016) the U.S. Federal budget deficit is projected to be $474 billion. That’s because U.S. government spending, budgeted at $3.999 trillion, is higher than projected U.S. government revenue which will be only $3.525 trillion.

The chronic deficit leads to an increase in public debt. At the end of FY 2015 the federal debt was $18.2 trillion. At the end of FY 2016 federal debt is expected to reach $19.3 trillion.  While I write these words, the US debt has been steadily increasing.You can watch how the time bomb of the US government debt is ticking at USdebtclock.org in real time. In fact we can compare the US economy to the Colossus of Rhodes which had feet of clay.

It’s clear that in order to make ends meet somehow, and most importantly – to finance the huge military expenditure, the US government is using all possible ways to increase tax revenues. While Irwin Schiff was languishing in the dungeons, the situation has changed radically. The IRS has turned into an extraterritorial special service, which is hunting US taxpayers all over the world. At that, the IRS threatens sanctions not only to non-payers, but also to foreign financial institutions that provide banking services to Americans. In 2010, the US Congress passed the Foreign Account Tax

Compliance Act (FATCA), which entered into force in mid-2014. The law  requires United States persons (including those living outside the U.S.) to declare their non-U.S. financial accounts to the Financial Crimes Enforcement Network (FINCEN), and also demands all Foreign Financial Institutions to report about their US clients to the US Treasury. As Robert W. Wood writes in the Forbes, FATCA “is America’s global tax reporting law. Never before has an American tax law attempted such an astounding reach… FATCA requires foreign banks to disclose the identity and details of Americans with foreign accounts over $50,000. Non-compliant institutions worldwide could be frozen out of U.S. markets, so everyone is complying… So far, over 145,000 financial institutions have registered through the IRS FATCA Registration System. The U.S. has more than 110 intergovernmental agreements (IGAs), either signed or agreed in substance”.

As the prominent Russian scholar Valentin Katasonov rightly points out, “FATCA has a pronounced extraterritorial nature and is a clear manifestation of  Washington’s global dictate.”

It is not surprising that an increasing number of expats wish to renounce the US citizenship.

However, it isn’t that easy. To begin with, the U.S. has world’s highest fee to renounce citizenship.

While, some countries let their ex-citizens to part for good and all for free or paying a symbolic fee, the U.S. has hiked its fee to renounce by 422%, from $450 to $2,350. Moreover, as Robert W. Wood warns, “Getting a Certificate of Loss of Nationality and exiting will address the immigration side of the legal issue, but not taxes. Obtaining a Certificate of Loss of Nationality doesn’t mean the IRS will leave you alone. To leave America, you generally must prove 5 years of U.S. tax compliance. If you have a net worth greater than $2 million or average annual net income tax for the 5 previous years of $160,000 or more (that’s tax, not income), you pay an exit tax. It is a capital gain tax as if you sold your property when you left. At least there’s an exemption of $680,000”.

Hands off US colossus’ clay foot!

American Themis has mercilessly punished Irwin Schiff because he encroached on the cornerstone of the American economic power or better say its underbelly – the income tax. The fact is that the US tax system is tuned in such a way that the lion’s share of tax burden falls on citizens, not corporations. According to the Center on Budget and Policy Priorities, “almost half of all federal revenue (46 percent) comes from individual income taxes.  Another 34 percent of revenue comes from payroll taxes, which are assessed on the wage or salary paychecks of almost all workers and used to fund Social Security, Medicare Hospital Insurance, and unemployment insurance.  By law, employers and employees split the cost of payroll taxes, but research has shown that employers pass their portion of the cost on to workers in the form of lower wages. So 80% of federal revenue is connected to individual income. At that, corporate income taxes make up less than 11 percent offederal revenue”.

Moreover, the tax burden is unfairly distributed between different categories of individuals.

Although formally the federal income tax is levied on a progressive scale from 10 to 39.6% (2015), however, the poor give the greater part of their income in the form of tax. In 2011, the world’s largest investor Warren Buffett, whose fortune in March 1, 2015 was equal to $72.7 billion, had suggested to raise taxes on the super rich. He said that his effective tax rate was only 17.4%, while tax rate for his own  employees was over 33%. Buffett optimizes his taxes by paying himself  a very low salary, giving a lot of money to charity, and receiving his main income in the form of long-term capital gain, which, incidentally, is taxed at a preferential rate of 15%.

 We, Russian taxpayers, take for granted our clear, stable and transparent tax system with flat scales of income taxes for citizens and businesses – 13% and 20% accordingly. Moreover, some businesses and oligarchs seek to evade even these very low taxes and escape to offshore destinations.  However, we can hardly imagine that a tax system can kill!