Progress in 'The Capitalist Tool'

Column by Jim Davies.

Exclusive to STR

Last week Forbes magazine ran an article by one Peter Reilly, to assess the merits of Irwin Schiff's stand against the alleged income tax, and drawing extensively on remarks made by his son Peter Schiff, the investment advisor. To call the article “fair” would over-rate it, but it did bring that debate to the attention of some highly influential people, and that's goodness.

Peter Schiff acquitted himself very well indeed, doing honor to his father. He agreed with pretty well all his findings and positions, differing only in the matter of what to do about them; understandably, Peter prefers not to live inside a government cage and so elects to pay the alleged tax as the price of staying outside.

I was delighted that the subject got an airing in such company, and doubly delighted at the snowstorm of reader comments by which it was followed. At this writing there are 19 pages of them, total around 225 comments, and the quality of all of them – con as well as pro – is very high. These are articulate people.

Most of all, I was delighted to see among them some uncompromising anarchist arguments, not just the ones that (rightly, IMO) denounced the income tax as being illegal. I figured out how to contribute some only after 16 pages had filled up, so was late to the party; but I wasn't alone.

Go read them for yourself, you'll need half an hour or so beside the Yule Log fireplace. But for those without logs, I'll extract for the rest of this article just three of the comments, found on pages 19 and 20. The third is my own, but the first two are crackerjack pieces by commenters of whom I have never heard. If they happen to read this, welcome to STR!

By Ron McKinney

I do not think the income tax law is valid and I also do not think I could ever convince anyone who holds a certain mindset that it is not and I am like Peter Schiff in that I would not recommend anyone go the route of his father. Not because he is wrong but because of the mindset of those he is arguing with. It would be like Daniel trying to reason with the lions. Not going to happen. It is theft, as Mr. Jackson points out, pure and simple regardless of the legal language or decisions by any number of judges.

By whose authority do you delegate the power to take from me without just compensation money that I have earned? By whose authority do you delegate the power to some IRS yahoo to point a gun at me because I refuse to fork it over? On a personal level no one has this authority and you simply cannot rightfully delegate something you do not possess.

As far as historical examples there are many. Rome is the best example. It centers on the debasement of the currency. Bare [sic] in mind it is beyond coincidence that the income tax law and the federal reserve act occurred around the same time. They are two sides of the same coin. One is for the issuance of the fiat currency, the other is to guarantee the payment of interest. One reason for the downfall of Rome was the debasement of the coinage and it will be one reason for the downfall of the United States.

By Denny Jackson

I can think of at least two errors made in demanding to see a successful stateless society before believing such a thing is even possible. One is that it is obviously wrong to think that because something has not happened yet that it never can happen. The other is to fail to recognize that anarchy–absence of a ruler–is, to be successful, by necessity a post-state society that has matured and evolved away from the use of aggressive force. The situation can be compared to the history of chattel slavery. Previous to the elimination of slavery many could not imagine a state without slavery; after all, it had been so since the beginning of time.

There are examples of nations/tribes/societies existing for periods of time without formal governmental structures. Wikipedia has an entry on stateless societies. Here’s an excerpt:

In many stateless societies, conflicts between families are resolved by appealing to the community. Each of the sides of the dispute will voice their concerns, and the community, often voicing its will through village elders will reach a judgment on the situation. Even when there is no legal or coercive authority to enforce these community decisions, people tend to adhere to them, due to a desire to be held in esteem by the community.[12]

Peter [Reilly], you (and many others here) seem to be confusing ‘society’ with ‘government.’ They are actually opposites. Society is the self-organizing entity formed by the productive sector engaged in peaceful trade in a free market–willing buyers and sellers. Government–more accurately, ‘the state’–is an anti-social entity–a collection of parasites who live by using force to take what the productive produce, convincing their victims that their services are so vital to maintaining society that they just have to use force or it would all fall apart. As if a vital service desired by most people would not be supplied by the market to willing customers without the threat of death to anyone who refused to buy it. Any intelligent, honest person can easily see the fallacious reasoning there, yet we keep hearing the pathetic whining of psychopaths (to use a clinical term, not an insult) who complain that we anarcho-capitalists who absolutely refuse to use force to take what others produce are not “bridge-builders,” meaning we won’t agree that taking someone’s property by force is not theft as long as we call it taxation! It’s ludicrous!

By Yours Truly

I’d like to offer a Summary for the Defense, in this Forbes Court – as an admirer of Irwin Schiff’s extraordinary courage, tenacity and clarity of legal analysis. For more detail, his best book in my view is “The Great Income Tax Hoax” (accessible free here).

1. In 26 USC 1, a tax is imposed on the “income” of numerous classes of target, and “income” is a term so ambiguous as to be the subject of several SCOTUS opinions in the 1910s. One (Eisner v Macomber) clearly observed that Congress had not defined it (in 26 USC) because to do so would be to amend the Constitution, from which it derives its right to exist. Hence the absence of such a definition from Title 26.

Nonetheless, a definition is urgently needed, for this term allegedly applies to every working American, including folk as ignorant and untutored as myself.

Yet, it remains undefined. The Merchants’ Loan court offered an emphatic opinion (that it refers to corporate profit) but even SCOTUS is not empowered to amend the Constitution, so that’s an opinion only. I differ from Mr. Schiff by concluding that therefore “income” is a term utterly, profoundly and permanently devoid of meaning, until and unless a new Amendment is ratified to bestow one.

Accordingly, every statute purporting to tax the stuff is “benign.” The whole of 26 USC Subtitle A is a bust.

2. Each of the statutes there which mandate action such as filing a return, paying an earnings tax, enduring an audit, etc., also specify that they apply only to those people made “liable” for that tax. Yet there is no statute that makes anyone liable for it.

Even Judge Dawson, when instructing Schiff’s jury, acknowledged that void – so, after consulting the prosecution team, he infamously concocted Jury Instruction #19 which said, “[Code Sections 1, 63, 61 and 6012], working together, make an individual liable for income taxes.”

Not one of those four Sections refers to “liability.” Not one of them refers to any of the other three. Each of them was written at a different time, and in a different part of 26 USC, from the others. The notion that such can “work together” is a fiction fabricated from thin air. The trick of associating them in the same instruction is like that of the street doomsday preacher who quoted Matthew 27:5 (Judas went and hanged himself) and Luke 10:37 (Jesus said, go and do thou likewise). Chicanery like that is why Schiff was convicted.

3. Notwithstanding the absence of any earnings-tax law, the Judicial Branch does its utmost to convict protesters of this illegal tax, and usually succeeds. It is therefore unwise to refuse to pay it. I concur in Peter Schiff’s opinion to that effect.

4. I differ from his father in one respect; Irwin clings, amazingly, to the belief that a government limited by a constitution is an ideal that can actually occur in the real world; that is, that there can be a government which can be trusted to submit itself to a higher authority. I respect him enormously, but have to dismiss that as naive and Utopian. There can never be such a thing as a governed governor; it’s a fatal contradiction. Accordingly those who, like me, desire a society that is peaceful and prosperous need to follow Joe Sobran and many others and work to abolish it.

One good place to start is here.

When governments have been tossed into history’s ash can and the IRS headquarters in D.C. has been demolished and its fabric sold as souvenirs like fragments of the Berlin Wall, I hope that a park is laid out in the block it now occupies; and that in its center will be a statue erected to the memory of this amazing American, Irwin Schiff.

Your rating: None Average: 10 (2 votes)
Jim Davies's picture
Columns on STR: 243

Jim Davies is a retired businessman in New Hampshire who led the development of an on-line school of liberty in 2006, and who wrote A Vision of Liberty" , "Transition to Liberty" and, in 2010, "Denial of Liberty" and "To FREEDOM from Fascism, America!" He started The Zero Government Blog in the same year.
In 2012 Jim launched , to help lead government workers to an honest life.
In 2013 he wrote his fifth book, a concise and rational introduction to the Christian religion called "Which Church (if any)?"


Alex R. Knight III's picture

Very nicely done, Jim!  (Loud applause!)  :-)  Merry Christmas!

Emmett Harris's picture


Thunderbolt's picture

Nice, indeed. I have had some experience along these lines.
During the Vietnam debacle, I decided that it is immoral to fund these monsters. Eventually, they caught up with me and did the usual. I met some nice people there. I was in for 400K, but another person was there for the same period for 5K. For the short term, I suspect that working under the table for bitcoins or cash is the approach most likely to succeed. Furthermore, interest free loans are not reportable and not taxable. This is likely the target of a reference by Harry Browne that somewhere in the tax code lies the secret to legally not paying the mafia. Why not structure all your affairs as a loan? I will hand you that new Craftsman wrench to hold for thirty years as collateral for a loan of twenty dollars, subject to review or automatic renewal. Ditto for hotdogs, washing cars, flipping burgers, etc. As George Bush correctly pointed out, no document will make any difference to all the players on the take, including the judges, cops, prosecutors, and in most cases, the defense.There is no law that requires one to have employees and none that requires one be an employee. Perhaps you are in training and need a subsistence loan periodically until you are qualified to be an employee, say, in thirty years or so. Of course, I was too stupid to see that no one wins playing by traditional statist rules. One attorney told me he had not won a federal defense case in five years. Fighting in court is a waste of time. I have high hopes for Bitcoins in a Dark Wallet.

Alex R. Knight III's picture

Thunderbolt:  Harry Browne emphatically denied the absence of any income tax law, and I personally and publicly confronted him about it in Nashua, NH during his 2000 presidential run.  If he changed his mind about it later on, I was unaware.  For what it's worth, I think in his heart of hearts he knew, but saw no benefit in openly acknowledging it.  Sad.  But otherwise he was a great man, a great mind and writer, and did truly believe in liberty.

Jim Davies's picture

At a similar meeting in 1996 I had the pleasure of seeing Harry and Irwin side he by side. The former had just promised to end the i-tax if elected, and the latter handed him a copy of the Internal Revenue Code and asked which law he would repeal, so as to do that.
Harry put on his best Brer Rabbit smile, but couldn't answer; there isn't one.
But he had the last... laugh. They can and do cage people without such a law.

Lawrence M. Ludlow's picture

Thanks for the article, Jim. This reminds me of years ago when there was a Libertarian presidential candidate called Jim Burns. Do you remember him? He to went to jail for fighting the tax. I wrote to him when he was in jail, and I inserted a bunch of stamps so that he could write back to me and to anyone else he took a mind to. The jail confiscated those stamps as contraband. Can you imagine? I'm glad that this idea is getting out, and as the government acts more insanely by the day, mor and more people will come on to this truth. There will come a point when everyone is disgusted and refuses to cooperate with government any longer, and I don't want to be the last person paying taxes do you?

Thunderbolt's picture

Thank you, Alex. I agree that Harry Browne was very careful about what he said regarding income tax. He was aware that people who fight on legal issues always lose: fifth amendment, voluntary tax, and so forth. The judges, cops, prosecutors and even god are all part of the conspiracy to take your money at gunpoint (God has lately become a libertarian). I was all the more stunned to find Harry saying that there are legal ways to avoid income tax, found embedded within the tax code, but he was deliberately vague on the issue. (Cannot find the quote, yet).
I have a friend who has never paid income tax, since she did what I suggested could be done: structured all her financial affairs as loans. She has been audited, and always passed.
Banks and governments lend money, knowing that they will never be paid back. That is not the intent. Acquiring assets and influence might well be. Borrowing and lending money is, on a personal level, entirely legal and voluntary for both parties. Each must be careful to document what he is doing. Video and attorneys might be a good idea, as well. Nonetheless, interest-free loans are neither reportable nor taxable. Surprisingly, the mafia appears to be afraid of fighting on this issue, since it is meat-and-potatoes for their own strategies. If you let your imagination run a little, you can see where bitcoins in a dark wallet might mesh nicely with this concept. Banks become an unnecessary road hazard. The subtle difference between getting paid and receiving a loan is very powerful. Both are legal. One is taxable.