Tax Resistance

Business, Legal & Accounting Glossary

Definition: Tax Resistance



Full Definition of Tax Resistance


A tax resister resists or refuses payment of a tax because of opposition to the institution collecting the tax, or to some of that institution’s policies. Often tax resistance has come from pacifists, conscientious objectors or members of religious groups, such as the Quakers, who choose not to fund violent government activities. It has also been a technique used by nonviolent resistance movements, such as India’s campaign for independence led by Mahatma Gandhi.

Unlike tax protesters who deny that the legal obligation to pay taxes exists or applies, tax resisters typically recognize that the law commands them to pay taxes but still choose to resist taxation.

Motives

Tax resisters are typically motivated by disagreement with the policies of the government or institution that is collecting the tax. This may include opposing that government or institution entirely, and not just specific policies (for instance, Gandhi’s opposition to British Imperial rule).

Anarchists who resist taxes oppose anybody or any institution that demands tribute. Christian anarchists in the pacifist tradition resist taxes that fund a violent civil defence force or military. Some people suggest that a right to deny tax payments is in the spirit of democracy, giving people a veto right and forcing government spending to be done with the consent of the governed.

What a tax resister hopes to accomplish may be personal or political or some combination of those two. Some tax resisters want to “wash their hands” of complicity in immoral government policies by not contributing to funding them. Some resist taxes as a form of protest that communicates the strength of their opposition through an act of civil disobedience. Some see tax resistance as a form of nonviolent political force – cutting off funds from the government as part of a campaign to force concessions from that government or to cause it to relinquish control.

Methods

There are many methods of tax resistance. In war-tax resistance circles in the United States, it is sometimes remarked that there are as many ways to practice tax resistance as there are resisters.

Redirection

Some tax resisters refuse to pay all or a portion of the taxes due, but make an equivalent donation to charity. In this way, they demonstrate that the intent of their resistance is not selfish and that they want to use a portion of their earnings to contribute to the common good.

For instance, Julia Butterfly Hill resisted about $150,000 in federal taxes and donated that money to after school programs, arts and cultural programs, community gardens, programs for Native Americans, alternatives to incarceration, and environmental protection programs. She said:

I actually take the money that the IRS says goes to them and I give it to the places where our taxes should be going. And in my letter to the IRS I said: “I’m not refusing to pay my taxes. I’m actually paying them but I’m paying them where they belong because you refuse to do so.”

Groups like the National Campaign for a Peace Tax Fund (United States), Peace Tax Seven (United Kingdom), Netzwerk-Friedenssteuer (Germany), and Conscience and Peace Tax International work to legalize a form of conscientious objection to military taxation which would enable conscientious objectors to designate their taxes to be spent only on non-military budget items. They see this as a legalized form of war tax redirection.

Refusing Specific Taxes

Some resisters resist only certain taxes, either because those taxes are especially noxious to them, or because they present a useful symbolic target, or because they are more easily resisted.

For instance, in the United States, many war tax resisters resist the telephone federal excise tax. The tax was initiated to pay for the Spanish-American War and has frequently been raised or extended by the government during times of war. This made it an attractive symbolic target as a “war tax”. Such refusal is relatively safe: because this tax is typically small, resistance very rarely triggers significant government retaliation. Phone companies will cooperate with such resisters by removing the excise tax from their phone bills and reporting their resistance to the government.

Refusing To Pay

The most dramatic and characteristic method of tax resistance is to refuse to pay a tax – either by quietly ignoring the tax bill or by openly declaring the refusal to pay.

Some tax resisters resist only a portion of the taxes due. For instance, some war tax resisters refuse to pay a percentage of their taxes equivalent to the military percentage of the government’s budget.

Other resisters withhold a symbolic amount – for instance, in the United States, some might hold back $17.76/17.76% (symbolic of the revolutionary year 1776) or $10.40/10.4% (in tribute to Form 1040, which is used in federal income tax returns).

Paying Under Protest

Some taxpayers pay their taxes, but include protest letters along with their tax forms. Others pay in a protesting form – for instance, by writing their check on a toilet seat or a mock-up of a missile. Others pay in a way that creates inconvenience for the collector – for instance, by paying the entire amount in low-denomination coins.

Tax Avoidance

A resister may lower the tax due by using legal tax avoidance techniques.

Tax Evasion

A resister may lower the tax due through illegal tax evasion. For instance, one way to avoid the income tax is to participate in the underground economy – earning money that is never declared to the government.

Reducing Expenditure And Income

Other tax resisters change their lives and lifestyles so that they owe less tax. For instance; to avoid an excise tax on alcohol, a resister might home-brew beer; to avoid excise taxes on gasoline, a resister might take up bicycling; to avoid income tax, a resister might decide to take in less income and take up a simple living or freegan lifestyle; and so forth.

These methods differ from tax evasion in that they stay within the tax laws, and they differ from tax avoidance in that the goal is to pay as little tax as possible rather than to keep as much post-tax income as possible.

Arguments For Tax Resistance

There are a variety of arguments made for tax resistance. Some of the arguments are as follows:

  • The government has no legitimate claim to the fruits of one’s labour and so taxation is tantamount to theft or slavery.
  • The government engages in immoral, unethical and destructive activities, such as war or capital punishment, and paying taxes inevitably funds these activities.
  • The government is non-legitimate i.e. the rulers did not come to power in a legitimate manner.
  • The government regime in power is corrupt, serving mainly their own needs and wants.
  • The size and scope of government has reached levels far beyond that required of the state.
  • The wealthy, or those in power, do not pay their “fair share.”
  • The government is inefficient and wasteful, providing an inadequate return on the tax collected.
  • The destitute should be helped through voluntary giving and charities, not funds obtained from compulsory taxation.
  • Individuals who chose to take nothing out of the government system (no state pension, healthcare or police protection, for example) need not pay into the system.
  • Some taxpayers are non-citizens and are therefore subject to taxation without having a voice in the government (taxation without representation)

Arguments Against Tax Resistance

Many arguments can be made against the tactic of tax resistance. Most basic, of course, is from those who support the entity collecting the tax and feel that other people should as well. But even those who are sympathetic with the tax resister’s complaints may question the methods. Some common arguments against tax resistance are:

  • In a majoritarian democracy, if everyone funded only those decisions with which they agree, the government would be undermined.
  • If taxes are left unpaid, the government will take the money from someone else, which is unfair to them.
  • Individuals who evade taxes are free riders, benefiting from government services like road infrastructure and security without paying their share of the bill.
  • Tax resistance is too passive and ineffective a way to gain political change. As of 2006, a third of those Americans who file tax returns and 41% of all Americans, pay no federal income tax. If the U.S. government can thrive with so many people avoiding the income tax, it would require an unlikely number of tax resisters to have any effect, either as a protest or as an actual curb on government policy.
  • The government responds to tax resisters by assessing fines, interest, and/or penalties against them, which may mean they end up with more money in the end.

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Definition Sources


Definitions for Tax Resistance are sourced/syndicated and enhanced from:

  • A Dictionary of Economics (Oxford Quick Reference)
  • Oxford Dictionary Of Accounting
  • Oxford Dictionary Of Business & Management

This glossary post was last updated: 25th April, 2020 | 5 Views.