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The Internal Revenue Service has to go

In the past few weeks, we have all been reminded of the warning by George Washington, “Government is not reason; it is not eloquent; it is force. Like fire, it is a dangerous servant and a fearful master.”

We should not be surprised that certain Internal Revenue Service (IRS) personnel decided to negate the free speech and free association protections of the First Amendment to our Constitution in order to punish people with whom they, or they and their superiors, disagree. While conservatives are upset today, the next time this happens it may be the liberals who are abused.

The Internal Revenue Code (IRC) is over 74,000 pages and almost four million words. As any experienced income tax practitioner knows, the IRC is full of vague rules and regulations that almost always produces a variety of “correct” answers to any issue–many that contradict each other.

Why did the IRS employees and their superiors act as “fearful masters?”

Because they could. The real problem is not the IRS employees or their superiors. The real problem is that the complexity and incomprehensibility of the Internal Revenue Code (“IRC”) literally precludes almost all black or white, yes or no type answers and this makes these types of abuses not only possible but easy. When the IRC can be interpreted in any way that they want, an employee’s personal feelings and opinions can lead to violations of the First Amendment like the ones that are now becoming public.

However, this type of violation of the First Amendment has been happening since the first IRC in 1913. If you get an IRS reviewer who disagrees with the objectives of a group seeking nonprofit status, then they can slow down the approval process. Because it is very expensive to hire attorneys skilled in this area, many non-profit groups are at the mercy of these IRS employees. They find that getting angry doesn’t help and most just wait as the months can sometimes become years. Many just go away.

It is not just in the exempt area where the IRS causes problems.

Many millions receive notices that they owe additional income taxes even though they paid a tax preparer and, unless the amount is higher than the cost of hiring a tax professional to dispute the assessment, these Americans just pay the tax. No one wants a fight with an agency that can start a full audit, take up enormous amounts of time and expense and arbitrarily assess more taxes that if you can’t pay, can result in the loss of your home or other property.

Again, there is almost always no “right” answer and this allows the IRS to determine that taxes are due or that the needed documentation is not present. Most tax practitioners know of situations where an IRS agent who “disliked” a taxpayer demanded more and more and still was not satisfied. The IRS agent’s decision can be challenged but it is costly and the burden of proof is on the taxpayer–not the IRS. In tax matters, unlike in other areas where the government alleges you have done something wrong, you are guilty until proven innocent. This makes it very difficult to prevail when challenging the IRS.

The problem continues to get worse. Since 2001, Congress has made over 5,000 changes to the IRC that complicate it even more. This trend is going to continue–no matter if some “reforms” are instituted. Some people say the solution is to make violations of the First Amendment by IRS employees a criminal offense. While this may help for a time, employees who want to suppress a group with whom they do not agree or a taxpayer who they don’t like will just do it carefully. The only way to convict someone of a criminal act is to show intent and this will be easy to hide and almost impossible to prove, given the vagueness and complexity of the IRC.

THE ONLY SOLUTION

Some people say that a flat income tax is the solution. However, most of the IRC is devoted to the determination of taxable income. Once you have determined the amount of taxable income, it is relatively simple to determine the amount of tax that you owe. This is why any tax based on income will require a tax code almost as complex, vague and incomprehensible as the present IRC. Just because there are fewer and lower rates, it will not address the actual problem–determination of income.

This is why all of the talk about “reforming” the IRC or the IRS is just talk and really will lead to nothing. Also, even if there were reforms it is unlikely that future Congresses would not complicate it again. The more complicated it is then the more the IRC will be “interpreted” because there will be no “correct” answers and the power of the government will be used to enforce the biases and opinions of the people who work at the IRS and their superiors.

Will Rogers was a famous humorist and commentator in the 1920‘s and 1930‘s who is remembered for his statement, “Income taxes have made more liars out of the American people than golf.” He also wrote in his weekly newspaper column number 99 in 1924, “Why don’t they use a sales tax? That is the only fair and just tax.” Like many intelligent people Will Rogers got it right. The FairTax is a retail sales tax. It is the only real solution.

Under the FairTax Act (HR-25):

• Americans pay their federal taxes as they make purchases of retail goods and services;

• Only retail businesses will collect the FairTax and file tax returns–not the IRS

• The IRS and IRC will be eliminated and the FairTax will be collected by

• Hard work and savings will be rewarded and not punished;

• Companies will not be punished for bringing jobs to the United States;

• Imports will no longer have an unfair advantage over products produced in the United States;

• The economy will grow more rapidly, jobs will increase at a faster rate and the trillions of dollars held overseas by companies will be invested back in the United States;

• Social Security will be saved and not go bankrupt;

• Everyone will be exempt from the FairTax on their purchases up to the poverty level, but everyone will see the costs of government;

• Individuals and not bureaucrats will determine how much tax they pay by how and when they spend.

George Washington said, “If the freedom of speech is taken away then dumb and silent we may be led like sheep to the slaughter.” We see how the IRC is being used by federal employees to take away the freedom of speech of millions. What is the next step? Do we have a country no longer operating under the Constitution but according to the whim of the government? We must eliminate the income tax and replace it with the FairTax. There is no other way.

Steve Hayes

Steve Hayes is a licensed California and Florida attorney. His legal training and experience help Steve understand legal and tax issues. He assists distressed companies that are confronting more than just legal issues. These companies need help in coordinating with their own legal counsel but also need help in understanding and determining their actual condition and if there are options that they have not been considering or been able to implement. In some cases, Steve was able to help the company survive. In other cases, Steve helped the company be sold and, in some cases, he assisted in the orderly liquidation of the companies. Hayes sits on the Board of Directors of Fair Tax Florida. He is an expert on the Fair Tax and writes and speaks about national retail sales tax legislation - HR 25.

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Categories: Must Read, News, Policy, Taxes

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