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Tax fight by Hart is torture of logic

Wed., July 17, 2013

Phil Hart, the former Idaho lawmaker and tax-dodger extraordinaire, admits it: He’s made a “huge mistake.”

That’s what he says in a new court filing in his effort to outwit the nation’s bankruptcy laws – a bit of court-clogging windmill-tilting that follows his battle to outwit the nation’s tax laws.

He’s made a huge mistake. Which one, do you think?

Was it his claim that he did not owe income taxes because income taxes are unconstitutional? Was it his refusal to pay those income taxes for years? Was it his repeated insistence that his eventual payment of some income taxes, however begrudgingly, should wash away the taint of all the taxes he still has not paid? Was it the hypocrisy of drawing a public paycheck while refusing to pay taxes? Was it the theft of state timber years ago or his ridiculous defense of said theft? Was it his slippery handling of a home he owns and tried to shift out of reach of the tax man? Was it his expectation that a bankruptcy court would accept the most preposterous explanations imaginable for that? Was it his abusive manipulation of the bankruptcy system itself?

Neither Hart nor his attorney wanted to answer questions about which of these things constitutes his huge mistake. Here’s how he put it in a recent filing in bankruptcy court:

“Starting in 1995, on the mistaken belief that I could quickly show that the term ‘wages’ was being misapplied as to ‘income’ for the purposes of income taxes, I pursued this idea in Tax Court and stopped filing returns. After the Supreme Court declined to hear my case in about 2003, I immediately begin filing past tax returns and sought to settle the case … .”

“Recognizing that my actions were a huge mistake did not alleviate the burden that the IRS subsequently laid on me by denying all of my business expenses and my attempts to reconcile the true amount of taxes owed have dominated my actions since then.”

Having recognized his huge mistake, Hart suggests, he should have been alleviated of the burden of having to prove legitimate business expenses and pay taxes.

If ever there was a Hart-like admission of error, there it is. The logical loopholes. The rhetorical dancing. The lightning-fast shift from an admission of error to an assignment of blame. It is not unlike the passage later in the same document where Hart says that the taxes he owes the IRS – still more than half a million dollars – actually exceeds his income for those years.

But that assertion is hugely mistaken. Or perhaps intentionally mistaken. Hart owes the IRS that much money because he’s being penalized for not paying his taxes.

Hart has fought with spectacular factual dexterity against any effort to get him to pay his taxes; he seems to consider any kind of cheap dishonesty, any manner of back-of-the-envelope accounting sufficient for his ever-more-desperate arguments.

He is now trying to wriggle his way through a third bankruptcy petition since last May and prevent the government from taking his home to satisfy his tax debt. Court filings refer to his bankruptcies like movie sequels: Hart I, Hart II, Hart III … There are now hints that the feds may be looking at criminal charges – which, if their allegations are correct, would be only natural.

Small example: Hart created a company, White Snow LLC, that he says owns the 13-year-old Audi that he drives. White Snow LLC has never done any business nor filed any tax returns. It exists, seemingly, to own the car.

Much larger example: Hart lives in a home – where he parks the Audi – valued at more than $200,000 by county assessors. He has listed the home’s value at $69,000. For a long time, he insisted he did not own the home. He transferred ownership of the house several years ago into a trust named after his daughter. He had to stop insisting it was not his house, at least in court, when a judge ruled the whole thing a “sham.”

The depth of what may or may not constitute, for Hart, a huge mistake is exhibited in the explanation he tried to give for how he pays rent to live in this home. This is how he explained it in a deposition:

He pays $600 a month to rent the house from the trust, though there are no records to substantiate this. He pays this rent, he says, by putting $600 in cash into an envelope and then into a drawer in the house. He calls this “pay(ing) into the trust.” When bills for the house come due Hart himself takes the envelope out of the desk, takes the money out of the envelope, and uses it to pay the bills.

This kind of pot-dealer accountancy is the explanation Hart has offered to the court in what he deems “good faith.”

The tally of his huge mistakes may not be quite at an end.

Shawn Vestal can be reached at (509) 459-5431 or Follow him on Twitter at @vestal13.

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