(originally launched into cyberspace on 04/14/2003)
Dear List Subscriber,
After my recent messages about propaganda scare tactics, and about how the
DOJ isn't PROSECUTING those relying on the 861 evidence (just censoring a
few of the loudest proponents), someone just brought to my attention a
recent New York Times story by my favorite spin doctor, David Cay Johnston.
It bemoans the continuing collapse of "income tax" enforcement, and the
increase in people "cheating."
In case any of you still wonder why I would be so looney as to DARE the feds
to prosecute me (as I have been doing for a couple years now), this article
shows why. Poor David Cay Johnston, whose eyes shut involuntarily when
faced with evidence that contradicts his long-held beliefs, is at a complete
loss to explain WHY they haven't gone after me (or others relying on the 861
As many of you may recall, Mr. Johnston parrotted the bogus theory from the
DOJ and "Judge"* Conner in Pennsylvania that 26 USC § 861(a)(3) means that
the domestic wages of ALL Americans are taxable. (* Considering what Mr.
Conner actually DID in the case of the injunction against Thurston Bell, I
believe "Cut-and-Paste Conner" is far more accurate than "JUDGE" Conner.)
After being shown irrefutable evidence that Section 861 does NOT mean that
all domestic wages are taxable, Mr. Johnston ran the other way, suddenly
doing a complete about-face (while pretending he hadn't), saying that 861
has nothing to do with most Americans.
Notwithstanding Mr. Johnston's clinical-stage psychological denial, he finds
himself at a loss to explain the very conspicuous ABSENCE of any 861-related
prosecutions. It shows in his recent article, which includes the following
(with my comments added in brackets):
"One leader of the "tax honesty" movement [I don't consider myself that],
Larken Rose, a medical transcriptionist [no I'm not] in Philadelphia [no I'm
not], has repeatedly challenged the Justice Department to prosecute him for
not paying taxes [no, for not paying NON-taxes] since 1997 [since 1996, but
who's counting?] under an argument known as the 861 position, after a
section of the tax law. The Justice Department has brought numerous 861
civil fraud cases and won all of them. [Many are still in litigation, though
I expect the pattern of censorship to continue.] Mr. Rose says Attorney
General John Ashcroft will not indict him out of fear that a jury would
acquit him. [Close enough.] Both the I.R.S. and the Justice Department say
Mr. Rose's claim that Congress has exempted most wages from tax [that's not
quite what I say] is nonsense, but decline to comment on why Mr. Rose has
not been indicted."
Declined to comment, huh? Maybe they're just taking a break? Hardly. They
are going for injunctions all over the place, and are now prosecuting "Judge
Rizzo" (among others). They seem to be REALLY busy: 1) CENSORING those who
mention 861 (which only requires a "judge's" ruling, not a jury, and; 2)
PROSECUTING those who mention everything ELSE (where there WOULD be a jury
making the decision). Is that not slightly curious, in light of the fact
that the DOJ admits that THOUSANDS of people are now relying on the 861
evidence to file claims for refunds or to not file at all? Even Mr.
Johnston can't help but find that odd.
This is PRECISELY why I publicly dared them to prosecute me. Even the lazy,
lap-dog press notices such a thing, and feels the need to mention it, even
if reluctantly, and even if only in their usually slanted "get those darn
cheaters!" theme. Certain patterns of behavior that don't "make sense"
eventually get noticed, even by the most unattentive observors. Mr.
Johnston may be semi-comfortable clinging to his incorrect conventional
wisdom (though he has done some pretty impressive intellectual gymnastics to
avoid the evidence that messes up that "conventional wisdom"), but even he
is noticing that something really strange is going on.
In keeping with the "do the math" theme, showing patterns of evidence that
point in strange directions, I thought it would be helpful--for new folks on
this list as well as everyone else--to show the pattern that I've had the
privilege to see first-hand over the past few years.
For a few years now, I've been trying to get the government to decide what
it's OWN position is on two fundamental, painfully relevant and reasonable
points. To paraphrase, the two main questions are: 1) should I use 26 USC §
861(b) and 26 CFR § 1.861-8 to determine my taxable domestic income, and; 2)
do those sections show my income (as a U.S. citizen living and working only
in the 50 states) to be taxable? (I refer to these below as the "two deadly
points.") Every tax professional knows that it is IMPOSSIBLE to determine
what you owe without determining your "taxable income." So knowing the
answers to those questions is absolutely ESSENTIAL to the 100,000,000+
Americans trying to figure out what they owe.
If my income IS taxable, as "conventional wisdom" says, there are only TWO
possible ways to answer the "TWO DEADLY POINTS": 1) "No, you're not supposed
to use 861 (so the second question doesn't matter)," or; 2) "Yes, you should
use those sections, and yes, they show your income to be taxable." It has
to be one or the other, if my income really IS taxable.
Surely the government KNOWS what it's own position is, right? Well, here is
a chronological summary of my experiences in trying to get the government to
decide it's OWN position on those points. (This is part of what the DOJ
doesn't want a jury to see.)
(Actually, the government's own position is found in the Code of Federal
Regulations, which shows that the correct answers are: 1) YES, I should use
those sections (26 CFR §§ 1.861-1(a)(1), 1.861-1(b), 1.861-8(a)(1),
1.862-1(b), 1.863-1(c)), and; 2) NO, they don't show my income to be taxable
(26 CFR §§ 1.861-8(a)(1), 1.861-8(a)(4), 1.861-8(f)(1)), because it's NOT.)
1) I didn't file a return or make any payments to the IRS for 1997. I DID,
however, send them a letter telling them WHY, and asking that they address
the "TWO DEADLY POINTS." I never got a response.
2) The following year, I AGAIN sent a letter, telling what I was doing and
why, and asking for the government's position on the "TWO DEADLY POINTS."
3) In preparation for an Examination meeting concerning a claim for refund
we filed, I sent the IRS a letter (March of 2000) including the "TWO DEADLY
POINTS," and saying I expected them to be able to address these points at
the meeting. But at that meeting, in response to the first point, here is
the response I got (which is typical of the rest of the meeting):
Cathy Spaulding, IRS Examiner: "I would say section 61 and section 63 are
used to determine gross income and taxable income. As far as the regs, I
can’t answer. I admit, I’m much more familiar with the Code, because that’s
primarily what we use. We do use the regs when it’s... when we have to come
to a decision. But I’m just saying as far as my knowledge right now without
actually doing research..."
Here is the full transcript of that meeting (the above quote is on page 3):http://www.taxableincome.net/extortion/case1/transcript1.html
Again, they didn't know their OWN position on the "TWO DEADLY POINTS."
4) Since the Examiner didn't know her OWN position, I decided I should send
a request for "technical advice" on the "TWO DEADLY POINTS." Technical
advice is a procedure for sending questions of legal application to the IRS
lawyers. Guess what happened. At each of several levels, they REFUSED to
issue any "technical advice"; the LAWYERS wouldn't say what their own
position was either.
Is this looking suspicious yet?
5) Eventually, we had another Examination meeting (a.k.a "audit") concerning
the fact that we had stopped filing and paying. Again, I sent them a letter
about a MONTH before the scheduled meeting (September of 2000), which
addressed the "TWO DEADLY POINTS," so they could tell me their OWN position.
Having met with me before, I thought maybe they'd know their OWN position at
the meeting. Nope. After explaining the first "DEADLY POINT," and showing
the citations that say I SHOULD use 861, I asked them for their position.
They STILL weren't sure, and we had this little exchange:
L.R. "Do you see what this says [pointing at the handout]?"
C.S. "I do."
L.R. "Do you understand what I just read?"
L.R. "Do you understand why I think what I think?"
C.J. "Yeah, I... look, I don’t know why there’s... ya know... not more of an
obvious... I think we’re missing something somewhere here under 861."
Immediately after that, after they admitted they still didn't KNOW their own
position, one IRS agent said that IRS District Counsel told them NOT to send
that issue for technical advice.
Here is the full transcript of the meeting:http://www.taxableincome.net/extortion/case3/transcript1.html
6) Maybe the problem was that I wasn't asking the right IRS officials, or
ENOUGH of them. So in April of 2001, I started "Operation Honest Inquiry,"
in which well over a HUNDRED people sent the "TWO DEADLY POINTS" to the IRS
and well over a HUNDRED Congressional offices. Guess how many people got an
actual ANSWER to any of the questions? Zero.
Here are the results of "Operation Honest Inquiry":http://www.taxableincome.net/takestand/honestinquiry/responseindex.html
7) Meanwhile, the IRS started widely issuing legally-irrelevant "notices"
mentioning 861. But surprise, surprise... those "notices" very carefully
DID NOT answer either of the "TWO DEADLY POINTS." They STILL weren't saying
what their OWN position was.
8) Meanwhile, the "Tax Court" had issued a few (non-binding) rulings about
861, which also DID NOT answer the "TWO DEADLY POINTS" (though they did lots
of asserting and insulting).
9) So we went to the top, and a friend of mine sent the letter to the IRS'
top attorneys at Chief Counsel in DC, specifically asking about the "TWO
DEADLY POINTS." The IRS sent back form letters, which carefully AVOIDED
both points. After sending the same questions a couple more times, IRS
CHIEF COUNSEL wrote back, saying they had provided all the "general
information" they had on the topic. (In other words, the weren't going to
answer the specific points.)
10) Shortly after a new Assistant Secretary of the Treasury (Pam Olson) took
office (November of 2002), about THREE HUNDRED people asked Ms. Olson a few
questions, including the "TWO DEADLY POINTS." Ms. Olson never responded.
11) In January and February of 2003, OVER THREE HUNDRED more letters were
sent to Ms. Olson, asking the "TWO DEADLY POINTS" (and four other near-fatal
points). Ms. Olson never responded.
12) In late 2002, about TWO HUNDRED people sent a letter to Jim South--one
of the IRS employees orchestrating their nationwide plan for dealing with
those who mention 861--asking just the FIRST of the "TWO DEADLY POINTS" (to
make it easier on them). He never responded.
(I have to point out here that we weren't demanding an argument or debate,
or even proof of anything; we were merely asking what their OWN position is
on two fundamental points, and they either COULD NOT or WOULD NOT say.)
13) Beginning in late February of this year, more than SIX HUNDRED letters
were sent to more than SIX HUNDRED offices of H&R Block, asking just the
FIRST of the "TWO DEADLY POINTS." Surely one of the most widely-used
private industry tax preparation companies would know how THEY determine the
taxable domestic income of their clients. Guess how many responses we got?
Zero. When Peter McCandless called their headquarters (in Kansas City),
they ADMITTED getting a whole bunch of letters, but said it wasn't their
"policy" to answer "such a question." This is H&R Block we're talking
about. WHAT THEY DO is answer questions about tax laws... but not THAT
If I were to include every example of every time someone has asked a
government official or private sector "tax expert" to say what their OWN
POSITION is on the "TWO DEADLY POINTS," there would be literally HUNDREDS of
items on this list. And no answers.
If this pattern doesn't seem suspicious to you--if you don't find it odd
that NO ONE IN THE WHOLE STINKING GOVERNMENT seems to know for sure how YOU
are supposed to DETERMINE YOUR TAXABLE DOMESTIC INCOME (which you have to do
to determine what you owe)--then you probably shouldn't be on this update
list. If, on the other hand, you find that at least a tad strange, you will
be very interested by what happens over the next 12 months.
(P.S. I really don't TRY to make my messages this enormous. It just