Eye On Boise

Hart defends tax fight

Idaho Rep. Phil Hart, in his first public comment since House Speaker Lawerence Denney said yesterday he'd appoint an ethics committee to investigate Hart's conduct, sent a guest opinion to newspapers this afternoon defending his fight against income taxes, but making no mention of his use of legislative privilege in his fight, his service on the House Revenue & Taxation Committee while he pressed his fight, or the pending ethics action, which is aimed at those two matters. Hart's op-ed piece (click below to read it in full) focuses on his legal challenge to the federal income tax, including a quote from a lawyer who he said called his challenge "brilliant legal work;" his subsequent problems with an IRS audit; and his concerns about revealing the names of those who bought his book, "Constitutional Income."

As for the ethics committee, Hart told Eye on Boise this afternoon, "I would welcome the opportunity to tell my story."

In his op-ed piece, Hart writes that the IRS denied eight years of his business deductions because he refused to provide those names. However, federal court documents filed in both California and Idaho in June of 2007 show the IRS and Hart both agreed that he could provide the book-sale information with buyers' names redacted, and that the IRS agreed not to seek that same information again. Hart suggests in his op-ed that the IRS is defying the court stipulations: "For them, this isn't about the liens or the money; it is about getting the names," he writes. He said this afternoon, "Well the reality is, they did it."

"It’s a nightmare," Hart writes in his op-ed article. "I would happily trade places with any of my detractors who somehow think I’ve gotten a 'good deal.' Regardless of whether or not the income tax on wages and salaries is constitutional, most agree on one thing: it is an inefficient and privacy invading tax.  It is also subject to manipulation and abuse.  Is it then wrong to fight for my legitimate deductions and to stand on my principals(sic)?"

A Very Taxing Process   by Rep. Phil Hart

After fighting what I believed was an unconstitutional federal income tax, six years ago I capitulated, filed returns, and have since then, paid $120,054 in combined state and federal income taxes (including the interest and penalties).  I was also working toward a settlement with the IRS.  What derailed this settlement process was becoming a target for an audit.  My experiences provide a case study of why we need to get rid of the income tax on wages and salaries.  

Years ago I became interested in the income tax and wanted to understand how it worked.  I thought it would be easier to research the purpose and intent of the income tax rather than study the Internal Revenue Code.  I focused my research on the years 1908 to 1913, as this was when the income tax amendment was debated.  Because I discovered so much new information in doing this research, I wrote a book about it.

My challenge to the income tax included petitioning the United States Supreme Court.  The Supreme Court would not hear my case.  The late Mr. Paul Chappell, a former attorney with the IRS Office of Chief Counsel for the District of Columbia said of my Petition “Reading Phil Hart’s work is like returning to law school.  After decades of practice as a tax attorney, Phil makes me feel as if I’m a student again.”  And after reading my Petition for the eighth time, another tax attorney, Mr. Arch McColl wrote me, “What you did was brilliant legal work in your Petition for Certiorari….”

In 2004 I filed 1040 returns to get caught up. Suddenly I found myself in an IRS audit. I had to sue the IRS to avoid turning over the names and addresses of those who purchased my book, Constitutional Income.  I was represented by the Center for Individual Rights, a Washington D.C. public interest freedom of speech law firm.  As far as CIR can figure out, I was the first author in American history to have the government demand I turn over such names and addresses.

The Center for Individual Rights won these lawsuits for me.  However, when the IRS issued their audit report, the IRS denied all my business deductions for eight years.  The amount of denied deductions totals $300,000.  Why?  An IRS employee told me “When you don’t give us
everything we ask for, you get all of your deductions denied.”   For them, this isn’t about the liens or the money; it is about getting the names.

I believe I have a First Amendment right to protect the identities of my readers, just as a journalist has a First Amendment right to protect their sources.  I also believe in protecting my readers’ Forth Amendment right against unreasonable searches and seizures.  These are principles worth defending!

During this four year audit, I provided the IRS with all my canceled checks, receipts, invoices and so on.  Boxes worth.  Yet these deductions were denied solely for political reasons.  Losing $300,000 worth of deductions inflated my now purported “taxable income” and the tax imposed
thereon.  My expenses for engineering and drafting personnel were denied, office rent expenses denied, office supply expenses denied, book publishing expenses including editors, artists and printing expenses denied.  What small business can operate with $0 in business expenses?

Protecting my readers from having big government snooping into their lives has increased my state and federal tax liability by about $125,000.

When the State Tax Commission got their hands on this IRS audit report that reflected the $300,000 in denied business deductions, they wanted their cut of the inflated “taxable income.”

After the Supreme Court declining to hear my case, I began making tax payments.  But of the $120,054 I have paid since then, not a single dollar of these payments has been used to offset any of the lien amounts.  It’s a nightmare.  I would happily trade places with any of my detractors who somehow think I’ve gotten a “good deal.”

Regardless of whether or not the income tax on wages and salaries is constitutional, most agree on one thing: it is an inefficient and privacy invading tax.  It is also subject to manipulation and abuse.  Is it then wrong to fight for my legitimate deductions and to stand on my principals?  




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Betsy Z. Russell
Betsy Russell covers Idaho news from the state capitol in Boise and writes the Eye on Boise blog.

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