Originally published on Forbes.com.
James Stuart thought that Peter Hendrickson had “cracked the code” – the Internal Revenue Code, that is. Joe Kristan would characterize it as finding the tax fariy – that magical sprite who make your taxes go away painlessly while your sucker friends send checks to the tax man. Hendrickson’s book is available on Amazon if you would like to check it out for yourself. You’ll be out twenty bucks even for a used copy, so you might want to check out some of the one star reviews. There is a free copy pdf copy available online. There are also quite a few videos in which Hendrickson explains his theories. Before you get too caught up in the concepts, I should caution you that like Peter Hendrickson, himself, Mr. Stuart has done (is still doing) federal time for tax crimes.
The Trial
During opening statements Stuart’s trial counsel asserted the theory of Stuart’s defense: Stuart believed that he owed no taxes. He explained that Stuart thought that the money he earned from his family business, New Age Chemical, was not income and that the United States had no authority to tax income. Stuart had adopted these views after reading a book called “Cracking the Code,” which urges people to resist paying income taxes, but his counsel told the jury that Stuart learned his ideas from his fellow church patrons. Counsel described Stuart as a curious, determined, and “kooky, not criminal” person. Only after he received no response to his inquiries from the IRS, the Secretary of the Treasury, or his accountants about his tax ideas, counsel mused, did Stuart begin to refrain from paying income tax.
From there, Mr. Stuart’s attorney pretty much let the prosecution run the show, perhaps thinking, not without reason, that the prosecutor was giving plenty of evidence for the defense’s theory. It is called the Cheek defense. In a probably futile attempt to dissuade people from drinking the tax protester Kool-Aid, quatloos has posted something titled Here Is The Law That Makes The Average American Liable for the Income Tax (I highly recommend it as a restorative after engaging with whackadoodle tax theories.). They give a great explanation of the Cheek defense, which has helped a few protesters keep their liberty.
The main problem with putting on the defense is that you have to be pretty smart to argue the theories – or you have to have a good vocabulary anyway. So that may account for the defense’s decision to not put Mr. Stuart on the stand.
Before those arguments began, in a colloquy with Stuart, the judge asked him whether he knew that he had the right to testify on his own behalf. Stuart answered that he understood this right and that he nonetheless knowingly and voluntarily waived it.
The prosecution had given the defense a lot of material to work with:
They submitted: (1) several letters that Stuart mailed to the IRS declaring that he was not liable for taxes; (2) a letter that Stuart sent to a local newspaper proclaiming that only a few people had income-tax obligations and that accountants and lawyers fail to give valid tax advice; and (3) a letter he wrote to the IRS and the Secretary of the Treasury in which, to evade taxes, he renounced his United States citizenship. Finally an IRS investigator testified that Stuart routinely paid income tax before 2004, but when, in 2007, Stuart requested tax refunds, the IRS told him then that his wages were taxable and his tax protest had no basis in law.
So rather than put on a defense, the attorney just used all that material to make a closing argument.
Referring to evidence that the prosecution had used (Stuart’s emails, letters, and conversations with the IRS and his accountants), counsel argued that Stuart was a curious, passionate, and possibly crazy person who simply was earnestly trying to understand the tax code. He was not, counsel urged, a conniving criminal thwarting tax responsibility.
It might have worked, but of course it didn’t. And that is why Mr. Stuart was arguing ineffective assistance of counsel. The District court did not buy it and the Seventh Circuit is not having any of it either.
And in this case trial counsel’s decision not to call Stuart to testify was reasonable. Stuart’s far-fetched, tax-protesting ideas were already presented to the jury through his letters to the IRS, and his emails and conversations with the accountants. They were also reinforced during opening statements and closing arguments. Calling Stuart to testify would not have added to this information but might have further alienated the jury.
Don’t Try This Yourself
I cover lets call them “alternative views of taxation” more thoroughly than most tax bloggers. Some of the people that come to visit here cannot believe that I actually understand the theories of the likes of Hendrickson and Irwin Schiff, but I really do and I think that they are wrong. If you read the entire Supreme Court decisions that they cite rather than the snippets they pull out to construct their arguments, you would probably reach the same conclusion – or not.
I have spoken to people who believe that the income tax is invalid based on those, theories, who will also encourage you to not put the theories into practice. Among them are Andrew and Peter Schiff, Irwin’s sons and Ernie Land, who is raising funds to defend Kent Hovind, who nearing the end of his sentence is facing new charges. I don’t doubt their sincerity in embracing those beliefs. Nonetheless, they recognize even if Peter Hendrickson and Irwin Schiff are correct, the entire federal judiciary disagrees with them. Many of the promoters of those theories, neglect to mention that. Daniel Evans has done a pretty thorough job of cataloging and refuting many tax protester theories. You can check out this site and see if he has covered your favorite.
I asked Russel Haynes, an attorney specializing in tax controversy, for his thoughts on the case. His evaluation of “Cracking the Code” is harsher than mine.
Good, another tax protestor off the street. The IRS keeps a running digest of common tax protestor arguments and provides citations to court cases striking them down. The opinions are readily available to anyone interested in seeing what the courts have said about these positions – and really there are only a few protestor arguments that keep coming back over and over, with minor variations. The book this guy got sucked in by was written by another (in)famous tax protestor, Pete Hendrickson, who himself went to prison for tax crimes. Interference with the administration of federal tax laws, including the enticement of others into breaking the tax laws, is also a crime. But it’s a little trickier prosecuting people for leading others astray by writing a book . . . free speech and all that. Certainly there are gaps in the tax law — there are grey spaces in the history of most laws. But I think Hendrickson’s book on the intricacies of tax and constitutional law is good only for use as a doorstop or a coaster, even though that books comes from his years of legal experience . . . as a janitor.