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The People Vs. Wesley Snipes


Actor's acquittal a boon to anti-tax movement?

Actor Wesley Snipes refused to pay taxes on $38 million of personal income and $20 million of corporate income, offenses that could have carried serious penalty under law.

He was convicted on three misdemeanor counts of failing to file income tax returns, but was ultimately acquitted of the gravest charges.

Will the acquittal serve to embolden the fringe anti-tax movement, today roughly half a million Americans strong? Probably.

Despite the courts' wholesale rejection of anti-tax theories, juries have acquitted several evaders in recent years, encouraging others to withhold their own payments.

Others like Tommy K. Cryer, who was acquitted of tax evasion in U.S. District Court in Louisiana on July 1st, 2007. The decision was a boon to the movement, despite Cryer still being liable for what he owed to Uncle Sam.

Even Snipe's fate -- the fact that he faces up to 36 months in federal prison, and himself has been ordered to pay all back taxes, plus applicable penalties and interest -- isn't enough to discourage the tax protestors. Minyanville's Taken to Tax

Their argument consists of pointed misinterpretations of the tax code, so it's unlikely that the details of any legal case, regardless of how high-profile, will be digested with clarity.

No doubt the movement's go-to passage from the Internal Revenue Code is, "Our system of taxation is based upon voluntary assessment and payment." But here's what the IRS has to say about the issue:

The word "voluntary" as used in Flora v. United States, 362 U.S. 145, 176 (1960) and in IRS publications, refers to our system of allowing taxpayers to determine the correct amount of tax and complete the appropriate returns, rather than have the government determine tax for them. The requirement to file an income tax return is not voluntary and is clearly set forth in Internal Revenue Code §§ 6011(a) , 6012(a) , et seq., and 6072(a).

I asked Minyanville CFO, Allan Millstein, himself a CPA, for his opinion on tax protest. He told me I was asking the wrong guy. Not because he doesn't know something about it. He just finds the whole idea so outrageous, he couldn't think of anything to say.

Doubtful IRS Commissioner Mark W. Everson would find himself at a loss. He's stated in no uncertain terms that "Paying taxes is the price of citizenship."

The government bears an interesting burden of proof in tax cases. The defendant must be shown to have acted with willful and malicious intent to defraud. Anything less, they're off the hook. As it concerns Snipes, the jury decided that he -- and this is the crux of the case -- believed his tax advisers, who falsely claimed that U.S. citizens have no legal obligation to pay taxes.

It's what's known as the "Cheek defense," named for the 1991 federal trial of John Cheek, an American Airlines pilot. Cheek maintained that, since he had a good faith belief he wasn't subject to taxes, he must be found innocent.

It didn't work. Cheek was sentenced to one year and one day in prison. He later told The New York Times he had changed his views about paying taxes, and intended to pay them from now on.

Some have asserted that Snipes was targeted because he's a movie star, which probably has merit. But the part of the story that's been woefully underreported is the actor's unbelievable hubris. Emboldened by the founders of anti-tax group American Rights Litigators (later, Guiding Light of God Ministries), Eddie Ray Kahn and Douglas Rosile, the two men who would become his co-defendants, Snipes sent a 600-page letter to the IRS declaring he was a "nonresident alien" of the United States, and refuting his Social Security number, this shortly after the IRS had begun investigating him.

Make no mistake: I can't stand paying taxes. Although I think I'd like life behind bars even less.

One last point: This wasn't Snipe's first run-in with authorities. In 2005, he was held and questioned at Johannesburg International Airport for attempting to use a fake South African passport. A quick check of the South African Revenue Service website shows that a citizen earning what Mr. Snipes does pays 26,100 rand, plus 45% of income above 80,000 rand.

No wonder he decided to move to Florida.

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