Wesley Snipes: One tough tax protester

So my friend Conor emailed me yesterday with the news that Wesley Snipes is a tax protester:

unlike other celebrities who find themselves on the wrong side of the Internal Revenue Service, Mr. Snipes has a flamboyant explanation: he argues that he is not actually required to pay taxes.

Mr. Snipes, who is scheduled to go on trial Monday in Ocala, Fla., has become an unlikely public face for the antitax movement, whose members maintain that Americans are not obligated to pay income taxes and that the government extracts taxes from its citizens illegally.

His trial has become the most prominent income tax prosecution since the 1989 conviction of the billionaire New York hotelier, Leona Helmsley, who went to prison for improperly billing personal expenses to her business.

Tax deniers maintain that the law only appears to require payment of taxes. All their theories have been rejected by the courts, including the one invoked by Mr. Snipes, which is known as the 861 position, after a section of the federal tax code.

Adherents say a regulation applying the 861 provision does not list wages as taxable, though it does say that “compensation for services” is taxable. The courts have uniformly rejected all such theories, and eight people have been sentenced to prison after not paying taxes based on the 861 argument.

Despite the court rulings, juries have acquitted some prominent tax resisters in recent years, and failed prosecutions have encouraged others to join. Even when the government has failed to obtain convictions, it succeeded in collecting the taxes through civil enforcement.

Actual rich people are almost never tax protesters; they have too much to lose. And Mr Snipes will lose. Whatever the justice of the argument, no court is going to shut down the tax collection system that finances the federal government. Most tax protesters get by simply because it takes quite a long while for the government to notice that they haven't paid any taxes, and to get around to collecting them. But once it does, it's ruthless. The State of New York once (erroneously) concluded that I hadn't paid taxes I owed it1; by the time they got around to demanding their money, a several-hundred-dollar tax bill had, through the magic of penalties and interest, ballooned into several thousand. It took over a year to straighten out their misconception, in part because they were unable to explain why, exactly they thought I owed them money.

Wesley Snipes will presumably now lose much more of his fortune to the IRS than he would have if he'd just paid the damn taxes. I find it hard to imagine that any reputable advisor is encouraging him to proceed with this course.

1I had paid the taxes to Illinois, where I had resided for the part of the year during which I earned the money. The State of New York had lost my partial-year tax return.