| I fought the law|
and the law won
“”A small business person has Uncle Sam as a partner, a partner who puts up no money, does no work, and wants 30 to 40 percent.
Irwin Schiff (1928–2015), father of author and stockbroker Peter Schiff, was America's loudest tax protester and beloved revolutionary of the Mises Institute. Since 1968, he had championed the idea that income tax was illegal, and stopped paying his own income taxes in 1974. This resulted in Irwin being jailed many times throughout the years, including the final 14-year sentence during which he passed away. You too can share in his misery by buying one of his books or buying one of the kits for $1,000.
Schiff's history was one of a small-government conservative quietly working in a brokerage for many years and likely would have stayed that way till 1968. It was not just notable for being the year Schiff declared his war against taxes, but for losing most of his money and investors' money in a tax shelter that later turned out to be a Ponzi scheme. Instead of blaming the con men associated with the scam he turned on the government with renewed fury. This was later detailed in a 2004 trial where Schiff submitted his psychiatrist notes to avoid jail at such a late age and immediately denied by his followers as a legal tactic.
Schiff made some consistent arguments that were incorporated into later tax protestor nonsense:
- That no statutory deficiency in Federal income tax can exist until an assessment has been made
- That no tax assessment can be made unless a tax return has been voluntarily filed
- That the Internal Revenue Service, in enforcing the income tax, seeks to impose a tax not authorized by the taxing clauses of the United States Constitution
- That the United States Tax Court has no jurisdiction over him
- That the United States Tax Court is not a court
All of these arguments were shot down, or frankly mocked, in court in the case Schiff v. Commissioner.
Not to be daunted by failure Schiff tried the then-new idea that income only means corporate income or capital gains, while individuals do not make an income, for the remainder of his life. He repeated this as often and as loudly as possible gaining many followers and losing every single court case that heard this nonsense. There will be sure to be many more, as tax protestors can't seem to be dissuaded from his ideas.
In The Federal Mafia, Schiff argued that Federal Reserve Notes, while being "legal tender," were not in fact lawful money. He went so far as to use the symbol ø to stand for Federal Reserve Note dollars, instead of the usual $ which he reserved for "real" dollars.
He also argued that no law made him liable to pay Federal income tax, because the word "liable" was not explicitly used in the statutes that governed individual income taxes.
Irwin was never intimidated by the hurdles he faced in order to convince someone in a court room that the IRS was wrong. The biggest hurdle was that he was wrong and repeating himself for 40 years couldn't make it right.
Schiff started his quest by refusing to supply income tax data on his 1040 form in 1974 and 1975. Then started conducting seminars about his ideas and got an invitation to The Tomorrow Show where he stated his beliefs and starting touting his first book. Just after the show Schiff was arrested and the video from The Tomorrow Show was used during the case in order to show willful intent. He was fined an undisclosed amount.
Irwin tried nearly the same thing again from 1979 to 1985 resulting in a jail term till 1993, the term also included money laundering accusations after attempting to shuffle money around many bank accounts to confuse investigators. Schiff also wrote a book during his prison term titled The Federal Mafia where he attempts to market his tax protestor ideas. This was later found to be full of such ridiculous and fraudulent ideas that a federal court issued an injunction to have the book pulled from the shelves and contact customers to inform them the dire consequences of trying these ideas. The book was later made available on his website and on Amazon.
Having not learned anything, Schiff tried nearly the same thing again from 1997 to 2002 in Las Vegas. He was convicted yet again and owed a total of $4.2 million to the IRS, and he was ordered to serve 14-years in prison. His partner, Lawrence Cohen, was fined $480,000 and was sentenced to 33-months in jail. Another business partner, Cynthia Neun, was fined $1.1 million and was sentenced to 68 months in jail for selling Schiff's promotional materials. A number of his followers were also later convicted in other trials of putting his ideas into practice.
Final trial weirdness
Schiff's final trial was a startling display of weirdness. According to Schiff the reason why all of this happened was a delusional disorder where he stated he had fantasies that he alone can properly interpret the tax laws. This was almost immediately discounted as a defense strategy by co-defendant Cindy Nuen during the trial where she sent an email to supporters. "We are sick about having to use this defense," Ms. Nuen wrote in her e-mail message, "It is ridiculous."
On the other hand his psychiatrist, Dr. Ortega, made no bones about this being the real issue the previous year when he made this diagnosis. In notes placed in the court file Dr. Ortega stated Mr. Schiff has suffered from paranoid delusions about the tax system for decades. Dr. Ortega attributed the mental illness to Mr. Schiff's loss of his own money and that of clients of his Connecticut insurance brokerage firm in an oil industry tax shelter decades ago. Mr. Schiff's distorted beliefs that the tax system is a hoax appear to have grown out of his business failures, Dr. Ortega wrote.
The court system was not impressed and added an additional year for contempt onto Schiff's sentence for this and other courtroom shenanigans.
Schiff's codefendant Lawrence Cohen tried the same thing and won the appeal that was later denied.
- Federal Mafia: How It Illegally Imposes and Unlawfully Collects Income Taxes (1992)
- The Great Income Tax Hoax: Why You Can Immediately Stop Paying This Illegally Enforced Tax (1985)
- How an Economy Grows and Why It Doesn't (1985)
- The Social Security Swindle: How Anyone Can Drop Out (1984)
- How Anyone Can Stop Paying Income Taxes (1982)
- The Kingdom of Moltz (1980)
- The Biggest Con: How the Government Is Fleecing You (1977)
- The Economist Irwin Schiff — The man who said no
- Mises Obit
- Forbe's Irwin Schiffs Passing
- NYTimes — Hell Nay, We Won’t Pay!
- 63 T.C.M. (CCH) 2572, T.C. Memo 1992-183, CCH Dec. 48,108(M) (1992).
- Cameron v. Internal Revenue Service, Stoewer v. Commissioner, Reinhart v. United States, Fink v. Commissioner, Flathers v. Commissioner, Schroeder v. Commissioner, Sherwood v. Commissioner, Ho v. Commissioner
- Tax Protestor Tells Federal Court he is Delusional
- Lawrence Cohen Appeal