Knights of the Tax Table

Errant protesters are jousting with the IRS

The President has promised income tax cuts, and Congress has indicated its willingness to legislate at least some of them--maybe. But as many as 3,500 taxpayers in the Flint, Mich., area just cannot wait. They have been refusing to shoulder their federal burden by claiming dubious tax exemptions as clergymen, filing their 1040 forms with UNCONSTITUTIONAL! scrawled across the page or in some cases claiming as many as 99 dependents in order to reduce federal withholding from their paychecks to zero.

Dean Hazel, 28, a General Motors worker who has been a leader in the antitax movement, claims that the income tax is unconstitutional (incorrect) and that the Flint IRS office lacks the manpower to prosecute so many tax evaders at once (correct, as even the IRS concedes). But the agency has sent warnings to 1,100 people claiming unusual numbers of dependents. "Terror tactics," scoffs Hazel. "The IRS depends on fear." (Correct.) As of last week almost one-half of those receiving letters had asked their employers to resume the proper withholding.

They were not the only tax rebels feeling federal heat. Bill Greene, a Marin County, Calif., real estate magnate, started publicizing his new book, Win Your Personal Tax Revolt, which tells how to use paper losses to avoid paying income tax. Then, on Jan. 13 the Internal Revenue Service announced a grand jury had indicted Greene on charges of criminal tax evasion. Greene said he would mount a "crusade" against the IRS, and led a parade of 75 tax protesters through downtown San Francisco while wearing a suit of armor. Says he: "For years I have conducted my affairs in exactly the same way, having audits and settling my tax problems on a friendly basis. But as soon as I got a high profile, the IRS began what must have been a million-dollar investigation."

IRS officials concede that they are cracking down this year on people who they believe are evading taxes in ways that inspire others. The taxmen are frankly concerned about the proliferation of anti-tax movements. The number of tax protests has nearly doubled in the past two years, and the IRS fears they will spread like crab grass if not swiftly curbed. So far this year the agency has taken legal steps to snuff out tax rebellions in Washington, Connecticut and Michigan.

A special concern of the IRS is that too many tax "advisers" are getting rich through books and courses that act to encourage tax protests. Often, people who promote illegal tax-avoidance tactics do not personally practice what they preach. Says Scott Waffle, an IRS spokesman: "We know of several people who make a business out of it, but when we look at their returns, we find they are completely straight." The pros know that the federal tax code makes it a crime for anyone to provide false or fraudulent information on an IRS return or to willfully withhold pertinent information.

Many protest leaders, including Greene, describe the IRS as omnipotent. Says the California tax rebel: "These bastards have so much power they can take innocent citizens and screw them to the wall." The truth is, though, that the IRS's enforcement power has deteriorated. Like the Wizard of Oz, who hid his timidity behind a screen, the IRS tries to disguise its own limited enforcement capabilities by playing up a reputation for toughness.

Actually, the IRS is virtually choked with paperwork; last year alone its overburdened staff and computers received 93,143,000 individual tax returns and 547 million documents. The agency was able to audit only 2.02% of the returns. The 2,267 cases it recommended for criminal prosecution in 1980 represented fewer than three out of every 100,000 individual returns and was well below the number of potential cases that could be brought against tax cheaters. Says former IRS Agent Philip Storrer: "The agency is falling further and further behind in their audits. They don't have a large force, and they are in serious trouble."

Still, when IRS investigators decide to press criminal charges against a tax evader, the action cannot be taken lightly. Says a Justice Department official who works with the IRS: "We do try to reserve the criminal cases for those who deserve to go to jail." The agency boasts an 85% conviction rate.

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