If We All Behaved Like Congress : Government Partially Defunded in One Man Tax Revolt

Government Partially Defunded in One Man Tax Revolt

Joe Smith/The New York Times

Obama's Statement on Unpaid Taxes: President Obama urged Mike Victor to pay his taxes, saying it would be the “height of irresponsibility” not to.

By JOE BLOW

Published: September 30, 2013 2036 Comments

GENEVA— A flurry of last-minute calculations by Mike Victor failed to break a bitter budget standoff with the IRS over President Obama’s health care law, setting in motion the first non-payment of taxes by Mike Victor in nearly four decades.

The impasse meant that no individual federal tax return would be filed since no agreement between Mike Victor and the IRS could be reached.  

After a series of back and forth letters and faxes, the IRS affirmed that despite individual opposition to a particular law, Mike Victor could not unilaterally attempt to block that law, not paying the taxes owed to finance its implementation.    The amount in question worked out to less than $1.00 and in back years would be positive (meaning Mike Victor would have to pay taxes for savings realized by healthcare reform) but it was enough to bring the entire tax return filing process to a screeching halt.  

"We simply cannot allow the selective funding of laws that citizens like or don't," a representative from the IRS said, speaking on condition of anonymity because of the sensitivity of the one-man tax revolt.  "That is not how a country of laws works.  Mr. Victor had his opportunity to express his opposition to the law years ago when he voted for his Congressional representative.  He also could have called his representative or showed up - armed or unarmed - to a town hall meeting set up to discuss healthcare reform."

The IRS dismissed as game-playing Mike Victor's proposal to begin "conference committee negotiations."  "What conference?  What negotiations?  It's a law, get over it, pay your damn taxes."

Mike Victor expressed frustration that the IRS said they felt they had a "gun to their heads." He admits coming close to failing to pay his taxes in the past but had always reached a last-minute agreement to head off penalties and fines the IRS promised to levy.  

In the hours leading up to the deadline, Mike Victor and his wife, in a vote of 1 to 1 along gender lines, approved a new plan in which all of his taxes would be paid except for the $.12 they estimated the new law would cost, tied to a one-year delay in a requirement that individuals buy health insurance.

But with almost no debate, the IRS dismissed this proposal in a curt letter.  An IRS official admitted there had been no debate or serious consideration of the proposal and expressed consternation that there would be.  

“He's lost his mind," the official said, before disposing of the House bill. “He keeps trying to pull the same stunt year after year.  You don’t get to extract a ransom from your government.  You're a citizen?  Pay your damn taxes."

Mr. Victor called the IRS hotline shortly before midnight, but he spoke with a representative for less than 10 minutes, without any sign of progress.

“I talked to the IRS tonight,” Mr. Victor said.  He summed up the IRS's remarks as: “I’m not going to negotiate. I’m not going to negotiate.  In fact, the representative I spoke with was quite rude, pretending not to know what I was talking about.”

Mike Victor's most ardent conservative friends were resigned to seeing through his private war on the health care law to its inevitable conclusion, a failure to file that could test the IRS's patience with his brinkmanship.

Cracks in his marriage were opening into fissures of frustration.  “My husband is obsessed with this issue," his wife said.  "He keeps saying somehow if I'm not with him, I'm for Obamacare.  He even says this to the children.  Our 8-year-old started crying last night, asking what Oblamacare is.  He ruined dinner by explaining it to her, even the individual mandate.   She had nightmares about a government takeover of one-sixth of the economy.  It’s just getting a little old.  It’s moronic not to pay any taxes over this."

Asked if she would remain married indefinitely under these circumstances, she looked away.  “I don’t know. I don’t know.  But what can I do?" she asked.  "He has the Turbotax software.  He has taken over this entire process, locked our W2 and mortgage interest forms in his office.  They're my taxes too, but he keeps saying 'I'm the decider.'" She put the blame for the failure to file any return at all solely on his shoulders.  

In one of his final moves, Mike Victor offered to attach language to his return that would promise payment in full of the amount owed if the government would delay the mandate that individuals obtain health insurance.    "The IRS representative just hung up on me, saying she had to help people with real questions.  Is that not a real question?"

Mike Victor's tax revolt — if followed by any other Americans -  could threaten to close federal offices and facilities, idling thousands of workers around the country.  It stemmed from an unusual push by local Republicans to undo a law that has been on the books for three years, through a presidential election, and that the Supreme Court largely upheld in 2012. A major part of the law is set to take effect Tuesday: the opening of insurance exchanges, where people without insurance will be able to obtain coverage.

Mike Victor argues that the administration has itself delayed elements of the law.  "The administration delay is clear evidence that even the president does not think the bill is perfect.   What kind of a country is this when we allow imperfect bills to be executed?"  When Mr. Victor was reminded that the bill was actually a law and had been for years, he shook his head defiantly.  "Next you're going to tell me that President Obama is not a Kenyan-born socialist muslim," he said.  "I'm not buying it for a second."

Mr. Victor claims that "millions" of Americans agree with him but is unable to name any.  He is unaware if anyone else decided to face the massive penalties that will come with willful failure to file any tax return at all.  "I had a couple friends who sounded interested, but they all said they had kids to put through college and could not afford a battle with the IRS right now."  He looked disgusted.  "Did the Minute Men say that at Concord?  Did the Greatest Generation say that on D-Day?"

An IRS spokesman said that to her knowledge no other taxpayers have joined Mr. Victor who seems to be driven by the most extreme elements of Fox News who first suggested using the federal tax filing system to extract concessions on health care that Republicans could not win through the traditional legislative process.

Sean Hannity himself could not be reached for comment, but a transcript from several shows indicates that he clearly suggested a tax revolt.  A Fox News representative said that Mr. Hannity never really intended anyone not to file at all and that doing so would be "stupid.  Mr. Hannity says a lot of things that are stupid and provocative for entertainment value."  At any rate, "the tax code does not deal with pennies.  Round off $.12 per tax payer and you still get the same net bill in dollars."  

When confronted with this information, Mike Victor seemed a bit shaken but still firm in his resolve.   "I refuse to admit that I can't get my way," he said.  "And I refuse to pay any taxes if some of the taxes go to things I do not like.  Isn't that what America is all about?"

   

If the Middle Class is so well-off, the top 1% can afford to pay more in taxes

In a recent column  ("No Time Like the Present", 9/16/13) in Barron's, Donald J. Boudreaux, a libertarian economist, makes an excellent point - in absolute terms middle class Americans are better off than their 1950s counterparts - but uses this observation to counter an argument no one is making.

The "left-wing propaganda" of economists such as Nobel Laureate Paul Krugman whom Boudreaux has made a career of attacking is far less nostalgic for the bad old days of the 1950s than are many on the far right who wax about the days before Medicare, Medicaid, the EPA, and desegregation as some kind of Fathers Knows Best utopia.  

The actual arguments made by Krugman can be (honestly) summarized as:

1.)   The extraordinary increase in wealth over the past few decades has been shunted disproportionately to the top 1% with American middle class workers earning no more than they earned decades ago despite soaring worker productivity.

2.)  Economic history shows that the oft-repeated right wing talking point that economic growth is strangled by top marginal income tax rates above 30% (or wherever they happened to be last year) is wrong.

In one sense, Boudreaux's column helps make point #2.   The technology driving all that Cheap Stuff Americans enjoy today, as well as the advances in medicine, public safety, and hygiene that prolonged life expectancy did not happen overnight.   We are beneficiaries today of a process that was in full bloom in the 1950s, a period when top marginal tax rates topped 90%.  The fact that high marginal income tax rates did not choke off an economic and scientific boom then makes it hard to defend maintaining tax rates only a third as high today.

The author also confuses and conflates many developments that were financed by the higher income taxes he bemoans.  We live longer in large part because our workplaces and highways are safer.   Motor vehicle deaths per mile traveled, for example, are a fraction of what they were in the 1950s in large part because of technological changes such as seat belts, anti-lock brakes, and airbags that were fought vociferously by free market advocates and only developed and installed when the federal government mandated them.  Safety devices in the workplace, such as obligatory carbon monoxide detectors in coal mines, were not installed out of the love of coal mine owners' hearts.   The air we breathe is cleaner not because Big Oil had an epiphany about CO2 emissions and lung cancer.  Rather, our government, based on extensive taxpayer-funded research, mandated that cars have cleaner emissions and smokestacks have filters.

Life expectancy of course has nothing to do with marginal tax rates or the ability to buy big refrigerators inexpensively.  It has to do with access to clean, running water, cars that don't kill us in a crash, and access to healthcare (it does us no good to live in a society with vaccines and antibiotics if workers lack health insurance).   Although we continue to lag other developed countries, the United States made massive progress in insuring its citizens through programs that have nothing to do with low income tax rates and everything to do with government intervention:  Medicare, Medicaid, and now the Affordable Care Act, all of which were vociferously opposed by "right wing propagandists" as an apocalyptic scheme to deprive us of our liberty.  During 2008 presidential campaign, Sarah Palin famously cited one such campaign, quoting (without attribution) then actor Ronald Reagan's 1961 tirade against the "Socialist Dictatorship" that would inevitably follow the implementation of Medicare.

No one argues that we are not better off materialistically than we were in the 1950s.  The point is whether the middle class is sharing the extraordinary profits they created.   From income to net worth skew, the answer clearly seems to be no.   We can argue about the reasons - perhaps the fact that income tax is less progressive and unions have been gutted is simply coincidental - but no one can deny that the lion's share of the wealth the middle class created has been transferred to a managerial and speculative elite.   (Interestingly, the magnitude of this wealth transfer deviates dramatically both from what people think it is and what people when surveyed believe is fair.)  Active unions and progressive income taxes arguably help offset some of this wealth transfer as indeed they do in Western Europe.  If Bordeaux's thesis were correct, workers in European countries with more progressive income taxes and powerful unions should not live longer or enjoy higher standards of living than their American counterparts.  And yet they do.

Boudreaux has argued elsewhere that the idea that "America's middle class has stagnated economically since the 1970s" is a "spectacularly wrong… 'progressive' trope."  His bottom line seems to be:  middle class, stop whining.  You don't need to be paid more, have more job security or benefits, or join a union because you can buy a cheap refrigerator and live 8% longer.   Anyone who says otherwise is just spinning "left wing propaganda."

Fair enough.  So let's apply this same logic to those who whine incessantly about how they will not work or hire if they have to pay a penny more in taxes.  The ratio of CEO-to-worker pay surged 1,000 percent since 1950; Fortune 500 CEOs earn 204 times as much as their workers, up from 20 times in 1950.   This means that CEOs today could suffer a 90% income tax haircut and still have the same relative wealth as their 1950s counterparts - they would still earn 20 times as much as their workers (the ones who live so long and can buy all those cheap refrigerators).   The fact that no one is proposing anything like a 90% top marginal income tax rate is irrelevant, but illustrates how strident and divorced from reality the conversation about optimal income tax rates has become.   

If Bordeaux is correct, then surely at the top should be ecstatic at making 2,000% of what the fat and happy American middle class earns.  The fact that they are not satisfied earning even 20,400% of what workers speaks volumes about the true economic reality in America.

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