How to Refuse to Pay Taxes and Still Live to Fight Another Day

Coach is back! Craig T. Nelson, who played Hayden Fox in the ABC series Coach, lit up the Glenn Beck show with a Thomas Paine-like rant against paying taxes to the federal government. The Huffington Post called the Beck segment an "epic clip," while posting it under the headline: "Glenn Beck and Craig T. Nelson Talk About Not Paying Taxes Ever Again, For Some Reason."

Anyway. It'd been a while since I'd checked in with my old longboarding buddy, and I wondered what his take was on all the hubbub created by the "epic" Nelsonian rant. My surfer friend is a thinker, and I like getting his views on things (see How to Inject Financial Liquidity Through the Housing Market; Who the Mortgage Bailout Won't Help and Why that Stinks for the Economy; The Real-Economy Effect of Financially Shell-shocked Former Consumers; and When Will the Bigs Realize it Takes Two to Tango?). My friend was watching the groms surf down by the jetty when I popped a few questions.

Q. I take it you caught Nelson's rant on Beck. Or were you catching a set at that hour?

A. Both. Through the magic of DVR.

Q. Lots of talk in the blogosphere about Nelson's remarks. Why do you think Nelson's rant went viral?

A. Because he talked about not paying taxes. Refusing to pay taxes? Wow. That hits a nerve on the political right. And it hits a different nerve on the political left. So, it's a lightning bolt either way, just for wildly different reasons.

Q. Then Beck floated the question of what would happen if a million people refused to pay their taxes.

A. That's going to leave a mark. Look, if you severely disagree with how the government is spending your money, it's logical to think, at least in principle, that the best way to protest that spending is to stop giving the government your money. But people have been paying taxes for programs they despise and think are wrong for the country for decades. At this point, it's really about much more. Frustration with the truly unsustainable debt the government is creating, the never-ending print runs of funny money, the potential for Zimbabwe-like inflation---if a tax revolt took off, it wouldn't be about particular programs. It would be about the fundamental direction of the economy and our form of government.

Q. Could a million-person refusal to pay taxes even work?

A. Depends on what you mean by "work." But before you even get to that, you have to ask, could it happen?

Q. You mean, could a million people actually decide to refuse to pay their taxes and go through with it? Considering that pesky "I fought the law and the law won" thing.

A. That's the biggie. I mean, even at a million strong, each individual would be in deep doo-doo all by himself. Don't think for a moment that the government wouldn't pull out all the stops to pursue and prosecute each individual to the fullest extent of the law.

Q. Unless, maybe, you get a job as, say, Secretary of the Treasury?

A. I was going to mention that. Thank you.

Q. Do tax "cheats" go to jail?

A. If they do, jail isn't the worst of it. The interest and penalties that rack up under the tax code are truly astounding. The President thinks credit card rules are onerous? The IRS can garnish your future wages. We're talking potentially massive destruction of household wealth here, way into the foreseeable future.

Q. Ouch.

A. I just don't think most people are in a position to do that voluntarily. They may want to protest, even sincerely be willing to sacrifice a lot to protest, but they aren't going to voluntarily destroy their ability to provide for their family to do it.

Q. So. What's a resister to do?

A. Protest comes in many forms, and incrementalism is not chopped liver. A person could pay his taxes, just pay as little as possible. Pay zero, if he can legally. If a million people, or more, seriously focused on legally paying as little in taxes as possible, pretty soon you're talking serious money.

Q. That could add up, for sure. I bet most people don't bother trying to get every last dime they can in tax deductions.

A. You're right. Something like three in five Americans supposedly do nothing to reduce their tax burden. In other words, they don't takes any steps to reduce their taxable income and they certainly don't plan to maximize their deductions and credits.

Q. Reduce taxable income? How do you do that?

A. Probably the most common way is to contribute to a 401(k) account. If your goal is to protest by reducing the amount of your money that goes to the government in 2009, 401(k) and similar retirement accounts can shelter a nice amount of dough. At least until you take it out.

Q. And tax deductions?

A. The President tried to put a cap on the deduction for charitable giving, but even Congress figured out that wouldn't fly. How bad is that, protesting by giving your money to charity rather than the government? Works for me. And, in the past, maybe it was too much work to keep track of miles driven for charitable causes and items donated to thrift stores. If you're making this part of a protest, though, it's not so hard to keep those itemized lists and receipts.

Q. Even for the used underwear.

A. There's a wonderful irony here. On many levels.

Q. Hmm.

A. And thrift stores are rocking about now. They're the new retail. But the point is that most people don't maximize their charitable giving deduction, which directly redirects your money to the cause of your choice and away from the government. And there are many other deductions you can strive for. If this is your thing, fire up something like Turbo Tax and, you know, start protesting.

Q. There's a little thrill of the chase here, I think.

A. Not that there's anything wrong with that.

Q. Exactly. So, if you're Nelson-inclined, the idea is to protest by seriously working at reducing how much you pay in taxes. And do this on a massive scale.

A. Yes. Again, it's simple reality that money talks. If millions of taxpayers want to inform the government that they are seriously unhappy, say, with the unsustainable national debt and the magic printing presses, money talks. And there are ways to talk back to the IRS and still live to fight another day. The government can't do a thing about it if you legitimately donate loads of clothes and household items to the Salvation Army---except scramble to take away the deductions in the future.

Q. If that happened, we might get into a big debate about the tax code. It's all good. Hey, maybe this protest needs some kind of name, something to unify people as they all set out to pay as close to zero in taxes as legally possible for 2009. Something like the tea parties, where people were saying "tea" stood for Taxed Enough Already.

A. Um. I got nothing.

Q. Okay. Maybe we should ask Glenn. And Craig.

A. Couldn't hurt. Might help.

Q. Maybe Glenn will [fingers making quotation marks] "tweet" on maximizing tax deductions.

A. You getting silly.

Q. Yeah, it's time to go. But good discussion. Lots to think about. Thanks.

A. Maybe I'll see you at the thrift store.

Q. Just don't forget to itemize the underwear!