Thoughts, essays, and writings on Liberty. Written by the heirs of Patrick Henry.

February 1, 2008

Ron Paul’s Tax Advisor Believes You Don’t Have To Pay Taxes

by Doug Mataconis

Apparently, Ron Paul has hired the son of legendary tax protester notorious crank Irwin Schiff as his tax advisor:

Representative Ron Paul, the Texas doctor with the libertarian streak who is seeking the Republican nomination, has taken on an economic adviser with very close ties to people who assert that the income tax is illegal.

Dr. Paul announced that his new economic adviser is Paul Schiff, who runs Euro Pacific Capital Inc., an investment fund. He is also the author of “Crash Proof,” a book about a coming economic collapse that on Friday was listed as #224 at Amazon.com.

Not mentioned by the Paul campaign is that Mr. Schiff is the son of Irwin Schiff of Las Vegas, now serving his third federal prison sentence for tax crimes. He is also the author of such books as “The Federal Mafia,” which asserts that federal judges are paid off by the Internal Revenue Service, and other books describing the federal government as a criminal organization that illegally extracts income taxes.

(…)

The son, in interviews, has said he thinks his father is correct in asserting that there is no law to make most Americans liable for income taxes and so they can legally put zeroes on their tax returns. Peter Schiff, however, said that he pays his taxes.

Well, they can put zeros if they want to, but they’d better plan on some time in prison if they do. Let’s be blunt about, there is no legal merit to the arguments that Schiff and the other tax protesters, such as Wesley Snipes, make. The 16th Amendment was legitimately ratified and is blindlingly clear:

The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several States, and without regard to any census or enumeration.

And the Internal Revenue Code clearly defines income:

 

Except as otherwise provided in this subtitle, gross income means all income from whatever source derived, including (but not limited to) the following items:

(1) Compensation for services, including fees, commissions, fringe benefits, and similar items;

(2) Gross income derived from business;

(3) Gains derived from dealings in property;

(4) Interest;

(5) Rents;

(6) Royalties;

(7) Dividends;

(8) Alimony and separate maintenance payments;

(9) Annuities;

(10) Income from life insurance and endowment contracts;

(11) Pensions;

(12) Income from discharge of indebtedness;

(13) Distributive share of partnership gross income;

(14) Income in respect of a decedent; and

(15) Income from an interest in an estate or trust.

 

Schiff is a scam artist and he’s serving time in jail because he broke the law. And the Paul campaign has hired his son, who apparently agrees with his father but apparently isn’t stupid enough to actually put his ideas into practice.

You can argue that the law is unjust, or that we should repeal the income tax, but the argument that we aren’t legally required to do what the law allows is just plain nonsense and it’s truly unfortunate that the libertarian movement is becoming associated with nonsense like this.

The Times article goes on:

Dr. Paul has not criticized the tax protesters among his supporters, even ones who deny the legitimacy of the tax laws. While he has said that the income tax law is valid, he has also said that rules requiring people who make more than minimal income fill out income tax returns violates the 13th Amendment’s prohibition against involuntary servitude.

I haven’t heard Dr. Paul make this argument, but if he has he’s just plain wrong.

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  • http://dangerouslyidealistic.blogspot.com/ UCrawford

    Hey, if Blade says we don’t have to pay our taxes then who are we to argue with the daywalker? :)

  • Tom

    Thanks for the Article, but as a first time reader I wonder if you have a misquote somewhere.

    “And the Internal Revenue Code clearly defines income:” Is this the definition of income?

    “Except as otherwise provided in this subtitle, gross income means all income from whatever source derived, including (but not limited to) the following items:”

    Why is the word gross in there? Just asking.
    Thank you

  • toolman667

    What you failed to mention was that the IRC Title 26 defines “Gross Income” as, “Gross Income”. It never clearly defines its usage of the word “Income”. How many times have you looked into a dictionary to find that the word you’re looking up, is the same word in the definition?

    For the majority of us workers, it works like this.

    I trade 40 hours of my time a week, for something the market dictates my time is worth (salary). So in mathematics, we would be left with an even trade:

    1 = 1

    After the “IRS” takes 30% or more of it, even tho I am not making money out of nothing (capital gains, interests, etc). We are left with:

    1 = 1 – 30%

    or

    1 = .7

    This is exactly like slavery. We aren’t getting everything we should be, from giving our time to something, “the man” takes his share of our time.

    Income taxes only goto pay back interests the government has accrued spending money it never had. You do not get anything back from paying income taxes, no receipt. The constitution states way before the 16th amendment that “No capitation, or other direct, tax shall be laid, unless in proportion to the census or enumeration herein before directed to be taken.” The income tax is a direct tax.

    The 16th Amendment is summarized “The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several states, and without regard to any census or enumeration.” But fails to define “Income”. And why do you think this was put in place the same year the private bank called the “Federal Reserve” was put into power.

    I firmly believe what most working people do every day, trading their hours for dollars, are getting robbed every time the “IRS” takes their money.

    Think about how much stronger our economy would be if everyone had 30% more money in their pocket, and “income” taxes would still be collected, on money generated from the movement of money, not from the bartering of hours for dollars.

    Please checkout Aaron Russo’s documentary on this subject to at least open your eyes to do more research before you post non-sense articles about Ron Paul’s economic adviser being a cook, he isn’t.

    http://www.freedomtofascism.com/

  • http://www.belowthebeltway.com Doug Mataconis

    Tom,

    Gross income means total income, it’s the same thing.

    toolman,

    I agree the world would be a better place if we didn’t have to pay income taxes, I just don’t think that following the legally frivolous arguments of men like Irwin Schiff is the way to bring that about.

  • http://www.belowthebeltway.com Doug Mataconis

    toolman,

    You are, perhaps willfully, ignoring the plain language of the statute. It says that “gross income” is defined as income from whatever source dervied and then goes on to give specific examples including “compensation for services” which covers every form of wages that anyone with a job receives

  • Michael

    I thought Dr Paul hired him for his economic views, not tax?

  • http://www.belowthebeltway.com Doug Mataconis

    I don’t understand why Paul hired him at all

  • http://www.belowthebeltway.com Doug Mataconis

    Toolman:

    ‘Income may be defined as the gain derived from capital, from labor, or from both combined.’

    Stratton’s Independence v. Howbert, 231 U.S. 399, 415 , 34 S. Sup. Ct. 136

  • toolman667

    ‘Income may be defined as the gain derived from capital, from labor, or from both combined.’

    Like I said before, we are not gaining anything. We are making an even 1:1 trade. Its bartering.

    Capital gains, and gains made from labor (ie. a company uses its labor force and creates gains, not an individual using trading their own hours for dollars) is summed up in this. Most people lose sight of what they actually do every day, which is TRADING your hours for dollars. This is still not income, or gains made from labor.

  • http://www.belowthebeltway.com Doug Mataconis

    Like I said before, we are not gaining anything. We are making an even 1:1 trade. Its bartering.

    Nonsense. You’re receiving compenstation for services, which is clearly income.

    And you realize that barter is taxable too right ?

  • toolman667

    I don’t get paid for my services. I get paid for my hours, which I trade for equal market value. Income is something that comes in addition, or increase. I am not generating money out of thin air (like the Federal Reserve). How can you tax an even barter? You can tax the income derived from the barter, but if I trade you a soccer ball for a football, how can this be taxed? It is 1:1 trade. I am not gaining something in addition, nor increase.

  • http://www.belowthebeltway.com Doug Mataconis

    Toolman

    The argument you make has been considered, and rejected, by Federal Courts at every level:

    1. Lucas v. Earl 281 U.S. 111 (1930)

    The Supreme Court rules that there is “no doubt that the statute required salaries to be taxed by those who earned them and provided that the tax could not be escaped by anticipatory arrangements and contracts however skillfully devised to prevent the salary when paid from vesting even for a second in the man who earned it.”

    2. And if that’s not enough, there’s also:

    * United States v. Connor[68] (tax evasion conviction under 26 U.S.C. § 7201 affirmed by the United States Court of Appeals for the Third Circuit; taxpayer’s argument — that because of the Sixteenth Amendment, wages were not taxable — was rejected by the Court; taxpayer’s argument that an income tax on wages is required to be apportioned by population also rejected);
    * Parker v. Commissioner[69] (taxpayer’s argument — that wages are not taxable — was rejected by the United States Court of Appeals for the Fifth Circuit; taxpayer charged double costs for filing a frivolous appeal);
    * Perkins v. Commissioner[70] (26 U.S.C. § 61 ruled by the United States Court of Appeals for the Sixth Circuit to be “in full accordance with Congressional authority under the Sixteenth Amendment to the Constitution to impose taxes on income without apportionment among the states”; taxpayer’s argument that wages paid for labor are non-taxable was rejected by the Court, and ruled frivolous);
    * Sisemore v. United States[71] (United States Court of Appeals for the Sixth Circuit ruled that the Federal district court properly dismissed taxpayer’s frivolous lawsuit based on taxpayer’s tax return position that wages do not represent a taxable gain because wages are a source of income and are received in equal exchange for labor);
    * White v. United States[72] (taxpayer’s argument that wages are not taxable was ruled frivolous by the United States Court of Appeals for the Sixth Circuit; penalty — imposed under 26 U.S.C. § 6702 for filing tax return with frivolous position — was therefore proper);
    * Granzow v. Commissioner[73] (taxpayer’s argument that wages are not taxable was rejected by the United States Court of Appeals for the Seventh Circuit, and ruled frivolous);
    * Waters v. Commissioner[74] (taxpayer’s argument that income taxation of wages is unconstitutional was rejected by the United States Court of Appeals for the Eleventh Circuit; taxpayer required to pay damages for filing frivolous suit).

  • http://dangerouslyidealistic.blogspot.com/ UCrawford

    toolman667,

    I don’t get paid for my services. I get paid for my hours, which I trade for equal market value.

    Only if you get paid minimum wage because you don’t have any skills. Your pay is not for your hours because not are all hourly wages the same since not all jobs are the same. The price of a service is mainly derived from the utility it provides to that service’s consumer, which is why we pay doctors more than we do moving men. So yes, you are being paid for your services, not your hours.

  • toolman667
  • http://www.belowthebeltway.com Doug Mataconis

    Yea, I’ll take the word of a badly written and horribly researched website over the United States Supreme Court and every Court of Appeals in the country.

  • Dodsworth

    Doug: You are overreaching here again (as is your wont whenever the subject is Ron Paul) to make a point that has some validity. Schiff was against paying income taxes, not taxes per se. This is not a small nuance.

  • http://www.belowthebeltway.com Doug Mataconis

    No, Schiff was a scam artist who made money selling books advocating a bogus legal theory.

  • carl

    goto losthorizons(dot)com and do a little reading.

  • Dodsworth

    Changing the subject, Doug. That wasn’t my point.

    But it fits the pattern. Where Ron Paul is concerned, you see absolutely no nuances. it is pretty much black and white. Nearly every one of your posts on Ron Paul are stunningly predictable.

    You see Ron Paul as the enemy and you will him no quarter. Ironically, you are closer to Rockwell on this who also refuses to allow any nuances when it comes to the ultimate conclusion. Your posts are one-dimensionally anti-Paul while his are undimensionally pro-Paul. For this reason, anything you and Lew write on Ron Paul need to be taken with more a than a grain of salt.

  • http://www.belowthebeltway.com Doug Mataconis

    Dodsworth,

    I’m not going to lie about it, I think that stuff like this hurts the movement for liberty. Having libertarianism associated with crackpot ideas — whether it’s 9/11 conspiracy theories, the Stromfront crowd, or the absurd and frivolous arguments of Irwin Schiff and his son — makes it very easy for the general public to dismiss libertarians as crackpots.

    I used to think that the RP campaign would have minimal impact on the fight for freedom, stuff like this makes me think it will be a net negative.

  • http://poppychop.net/ Nitroadict

    (a bit off topic here but…)

    I always think of the following lines whenever I see a new mataconis post, as well as a Lew post, probably more so with a Lew post due to blinding optimism, but blinding pessimism is equally annoying:

    “…don’t tell me about the answer,
    ’cause then another one will come along soon,
    I don’t believe you have the answer,
    I’ve got ideas too,
    but if you’ve got enough naivete,
    and you’ve got conviction,
    then the answer is perfect for you…”

    Once again, I second Dodsworth. Oddly enough, I don’t remember RP saying anything about a 9/11 conspiracy other than that 9/11 was largely the result of “blowback” during his smackdown on Guuillani months back… I hardly see the concept of blowback as conspiratorial. I could see RP suggesting the government be more transparent with 9/11 (as with other areas), but I’ve never hear him say anything on the level of questionable sanity that I hear/read some of these 9/11 truthers spout.

    It really seems that in general (especially on Reddit), anyone who sees nuances and/or doesn’t see things regarding RP as black-or-white is some type of apologist moron who doesn’t deserve to be a libertarian.

    I guess when it comes to elitism, the Libertarians can do it just as well as the Republicans or Democrats, if not better so.

    Regardless my personal perceptions, while I may think and or call most of mataconis’ post ridiculous (as would others), I hope otrhers dont begin to formulate an “us. vs. them” approach to this and calls for any type of elitism or censorship against such posts :\. Ultimatley, despite disagreements, the colour and nature of the debate is better served with varied opinions, which is why I am sort of thankful mataconis (or anyone else for that matter), hasn’t done something silly like quitting or leaving out of protest.

    In any case, back on topic, I just think it says a lot when despite not agreeing with the law, and even going about to actively change it, tax protesters may decide to not pay taxes, which seems like a bit of a paradox, despite “no taxation without representation”. One reason I could never really agree with them; although I think the income tax is questionable, the concept of taxes isn’t, imo.

  • Craig

    The NY Times has taken guilt by association to a whole new level. Now they are trying to smear Ron Paul by saying he hired an adviser — a well known, nationally respected frequent guest on financial news programs — whose father happens to be in jail for protesting a law that he (the father) considers unconstitutional.

  • JL
  • http://dangerouslyidealistic.blogspot.com/ UCrawford

    WESLEY SNIPES ACQUITTED OF TAX FRAUD!!!

    http://www.cnn.com/2008/CRIME/02/01/snipes.verdict/index.html

    That’s what the bloodsuckers get when they fuck with Blade. In your face, Doug!!! :)

  • http://www.thelibertypapers.org Doug Mataconis

    U.C.,

    But he was convicted of failure to file income tax returns I noticed :)

  • GuyF

    I don’t know about his father, but Peter Schiff made anyone who listened to him a ridculous amount of money, by urging people to buy gold, get out of the dollar, and get out of the housing well before the subrpime meltdown, and being right on just about everything.

  • Ian

    Look be slaves to the war machine if you want, but don’t be naive in your own ability to understand the tax issue. Most of the trails are mock trials. The government in no way wants you to stop paying this tax. Therefore, you are fed a steady supply of propaganda to make you feel good about giving the fruits of your labor to an over sized government that wastes all you money and doesn’t give a damn about you. You will go to jail most of the time if you don’t pay your tribute but please don’t fool yourself into thinking your doing a good thing by paying it.

  • UCrawford

    Doug,

    Yeah, three misdemeanors. He got off on the charges that mattered.

  • http://www.belowthebeltway.com Doug Mataconis

    U.C.,

    Well, convicting someone on fraud and conspiracy charges isn’t easy to begin with. Obviously, the jury believed that while Snipes’ idea that he had no legal obligation to pay taxes were wrong (hence the conviction on failure to file), that belief was genuine which means that there was no conscious effort to defraud the government.

  • Johnnyb

    Show us the law!

  • TerryP

    Now I guess Doug thinks that if you have any relation that doesn’t agree with him you should be purged from the freedom movement.

    Doug, you would do yourself well if you based your opinion on Paul Schiff, not his father and what he has done.

    This just reeks of elitism!

  • Nick

    Doug,

    Thanks for quoting the constitution and the US Code that shows that paying income tax is required. Altho it didn’t seem to stop the kooks from repeating the same questions from the tax conspiracy theory film.

    If any of them out there are open minded enough to consider opposing viewpoints, it’s quite thourughy debunkd here: http://evans-legal.com/dan/tpfaq.html

    (it’s also the first hit in google for tax protester – in case you had done any research into the claims you’re making.)

    If you still have objections, please note, that even if any of these arguments was legitimate and a court found it so, it would be quite easy for congress to modify the law to count money bartered for labor as income, or whatever silly objections you have.

    I have mixed opinions on the kookish fringe that supports RP. I can’t deny they help bring attention to his campaign, but they give the MSM and other candidates a ready reason to dismiss RP and by extension libertarianism.

  • Bill

    First of all, you must remember the USSC stated quite clearly that the 16th Amendment gave Congress no new powers of taxation. Second, a good case can be made that the 16th was not ratified.

    All of that aside, I file and pay because if I don’t, the government will lock me away or kill me. That is the reality we face and each of us must decide if allowing armed robbery is just part of the price we pay to live here or if we want to take a stand and say NO MORE!

    Of course all of the courts are going to do everything in their power to refute any claims that the tax is illegal, it is in their best interest to do so. Would you tell your boss he is a lying criminal and deserves to be shoot?

    So, I am a firm believer that any and all taxation is illegal and immoral, there is no difference between a government thug with a gun robbing you or a private citizen. I pay because I don’t see a way out of it that doesn’t include my imprisionment or death.

  • oilnwater

    when has Ron Paul ever associated himself with the LP this cycle? it’s apparent that if anyone looks bad here, it’s libertarian publications that whine about Ron Paul. isn’t there a LP presidential nominee, or won’t there be one at some point? since, you know, Paul shrugged off a LP plea for him to run.

  • Garry

    Peter Schiff was hired as an economic adviser, not a legal expert on the tax code. While the other candidates hire Keynesian ignoramuses to advise them on economics, Ron Paul hires someone who actually knows real economics and doesn’t accept silly ideas which assert that a population and its government can spend themselves into prosperity.

    Schiff has been right on economics to the benefit of his customers. He had been warning of the housing collapse for years on numerous TV appearances and no one listened. He warned of inflation, which we are now seeing as commodity prices have skyrocketed, as have the values of all major currencies with respect to the dollar. He was saying that US stocks were in a bear market for years, despite meaningless nominal highs.

    The man understands economics. That is why he was hired. It only figures that he would be labeled as “crazy” just like Ron Paul. These days, anyone who understands economics is considered crazy or kooky. Nevermind the kookiness of fiat money and endless debt that Schiff continuously points out. Why? Because the guy that points out these problems is the son of a tax protester (gasp).

  • Thomas Wilkinson

    I can’t believe you people and Doug is the worst. Now I know why I don’t read this site anymore.

    I consider Peter Schiff an economic genius and the fact that you guys would actually disparage Paul for hiring Peter is nothing short of astonishing. Try actually listening to Peter’s commentary on the markets and economics before you accuse him of being a conspiracy theorist. Yes, I know who Irwin Schiff is and no, I don’t give a crap he’s Peter’s Dad.

    Peter Schiff is an economic advisor. He runs an investment company. He doesn’t tell people the income tax is illegal. He doesn’t tell them not to pay their taxes. He doesn’t believe in conspiracy theories. He pays taxes himself. He gives economic advice and he manages people’s money. He has made anyone who follows his advice a killing the past 6 years and no that doesn’t include me.

    I’m still having a hard time believing the outright slander in this article.

  • Adam Selene

    GuyF:

    I don’t know about his father, but Peter Schiff made anyone who listened to him a ridculous amount of money, by urging people to buy gold, get out of the dollar, and get out of the housing well before the subrpime meltdown

    Well, I predicted the housing meltdown in 2005 and was urging my friends and neighbors to sell ahead of it too. That was pretty much commonsense, not brilliance, in my opinion. Predicting something predictable doesn’t make someone a genius.

    Nick:

    I have mixed opinions on the kookish fringe that supports RP. I can’t deny they help bring attention to his campaign, but they give the MSM and other candidates a ready reason to dismiss RP and by extension libertarianism.

    Exactly

    Thomas Wilkinson:

    I can’t believe you people and Doug is the worst. Now I know why I don’t read this site anymore.

    Well, you are actually reading it right now.

    I’m still having a hard time believing the outright slander in this article.

    Show the slander and I’m sure Doug will retract it.

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