Keeping the Faith

The 30 souls who have gathered in the Adobe Story Room of the Whitney Library are passionate about their cause. They speak of getting out "the truth" to their friends and neighbors, winning converts to their faith, and changing America.They have their catechism, their theology. They live by the words of their saints, and are wary of those they collectively hold as sinners. All that's missing are hymns and a benediction.But these people are not gathered for spiritual reasons, to worship a Supreme Being, muse on the nature of creation or ponder the fate of their eternal souls. They're gathered for a much more temporal reason: tax reform.On this particular night, members of the Las Vegas chapter of Citizens for an Alternative Tax System (CATS) have gathered to discuss the advent of a national retail sales tax, a program that would abolish the diabolical Internal Revenue Service by imposing a 15 percent sales tax on goods. The proposal has taken tangible form in H.R. 2001.CATS members are excited about the chance -- however remote -- that the bill will become law. They offer "Amens" to a videotaped debate between Rep. Billy Tauzin, R-La., a vocal champion of the national retail sales tax, and Rep. Dick Armey, R-Texas, whose denomination backs a flat tax, not quite heresy, but not quite truth either.Members of the congregation, who have passed literally reams of tax forms spilling off a table in the library's lobby, murmur their agreement as Tauzin, a compelling, humorous speaker, gets the best of Armey in the edited debate. Then it's on to other business.Bob Schoser, a one-man speakers bureau for the group, rises to give his testimony. "This really shouldn't be a partisan issue," he says. "We're all Americans, we're all taxpayers and we're all getting screwed by this awful tax code, pardon my language."That's right. No swearing in church.Long history of protestsTaxes have long inspired hatred from citizens, even in biblical times. Christ himself advised his disciples to treat an unrepentant brother like "a heathen and a tax collector," that is, shun them like the devil.In modern times, the tax code runs to thousands of pages, not counting court rulings, interpretations and regulations. It's given rise to a frustration that annually becomes acute as April 15 draws near.That frustration has given rise to a bevy of tax protest groups nationwide and in Las Vegas, groups that say to hell with rendering unto Caesar. Caesar probably would just waste it on another $200 hammer anyway.The groups run the gamut from the relatively tame, like Citizens for An Alternative Tax System or the flat tax-backing Citizens for a Sound Economy, to the outrageous, like Irwin Schiff, a former economist who believes the law does not require anyone to pay taxes and who has made a cottage industry out of his philosophy.To one extent or another, all of these groups invest a certain religious dogma to their ideas; Schiff even spent time in federal prison, a period during which he says he was a "political prisoner.""Obviously, the genesis of this is the frustration people have in dealing with the IRS, which is sort of the penultimate bureaucracy," says Carole Vilardo, executive director of the Nevada Taxpayers Association, a group dedicated to "equitable" -- and low -- taxes in the Silver State."It's almost a populist issue to love to hate the IRS," says Vilardo, whose group has agnostically not taken a stand on flat, retail or other tax reform plans.Flattening taxesDan Combs, director of mobilization for the 14-year-old, Washington, D.C.-based Citizens for a Sound Economy, says simplicity is the great thing about a flat tax. The tax return, now at least a page long, is reduced to a 10-line, postcard-size document under which everyone pays a flat, 17 percent tax. No exemptions, no loopholes."It's much more upfront, it's much more honest," says Combs, whose group is sponsoring the Tauzin-Armey debates under the banner "Scrap the Code Tour."Combs says the flat tax treats everyone equally and eliminates the need for complicated receipts, forms, schedules, appendixes and bracketing. Under the flat tax, the standard deduction for a family of four would be $33,600; after that, every dollar gets taxed at the 17 percent rate.But one of the victims of the flat tax is the treasured mortgage interest deduction, one of the only things about the tax code that people actually like. Combs says it won't matter under a flat tax. "We're not taking away that mortgage interest deduction. We're taking away this system that makes you think that mortgage interest deduction is valuable," he says.Critics also charge that the flat tax is susceptible to raises. They point out that when the income tax was adopted in 1913, it was just 1 percent. Combs admits there's nothing to prevent Congress from raising it, but he adds that a two-thirds supermajority would be required to do so."There's nothing you can do to guarantee that nothing's going to change," he says. "There's nothing they (Congress) can ultimately do to guarantee that will never change."And, he admits, the flat tax isn't as lucrative for Uncle Sam as the current system. According to the Congressional Budget Office, the flat tax would come up about $30 billion short. For Combs, however, that's but a drop in the bucket in a $1.5 trillion system.How to make up the difference? Budget cuts, Combs says simply. But for a government where pork means political survival, answering "budget cuts" to a question about deficits may be the ultimate leap of faith.Combs, like other tax reformers interviewed for this article, says he doesn't get discouraged that more hasn't happened in the tax reform debate since he's been involved. The "Scrap the Code" tour is spreading the word like a circuit preacher doing tent revivals, and Combs says Americans are getting the message."Everywhere we've gone we've gotten energized and people are getting involved," he says. "Until the American people get involved and tell Washington what to do, it's just not going to happen. You're going to need the American people telling Congress what to do."Although both groups -- intertwined as they are in the debate business -- agree that they're on the side of the angels, some denominational rivalry occasionally sets in. Combs criticizes the national retail sales tax for the potential to create another tax-assessing bureaucracy (states would collect the tax from merchants, then pass it along to Washington after taking about a 1 percent cut) and for the need to repeal the 16th Amendment to the Constitution, a heady task that even populist anti-flag burners or balanced-budget backers couldn't do."On paper, perhaps the sales tax sounds better," he says. "But in reality, you could create a whole new monster that is worse than the IRS."Keeping the faithBut national retail sales tax backers politely argue that they know the best way. In one of the best scenes from the Tauzin-Armey debates, the Louisiana congressman tells audiences that if they like the postcard-size return, they'll love the sales taxers' return. He turns a chart over to show it, and, of course, the back is blank.That's the major appeal of the sales tax: Everybody pays, from working people to drug dealers. "One person put it very bluntly: There's no loopholes with a sales tax," says Schoser of the Las Vegas CATS chapter.That's why, at a national rate of 15 percent, the group can say its proposal is "revenue neutral." No deficits, no cuts.D.P. Bracken, who has spent 18 years dealing craps in Las Vegas, says he got involved in CATS about six years ago despite never having been politically active before. He was converted, he says, by the group's approach to making change through the system."Their plan was more of what I felt was a legitimate plan," says Bracken, who is a prolific writer of letters to the editor and who saves, copies and passes out his epistles at CATS meetings.Bracken is entering big-time recruitment season. He's got media-grabbing, literature-passing demonstrations planned for April 15, one in front of the den of the beast, the IRS office at Oakey and Decatur boulevards, and another in front of the main post office on Sunset Road as the midnight deadline looms. Meanwhile, Schoser will be spreading the word at a Las Vegas Chamber of Commerce forum on tax reform the same day.Bracken says the poor needn't fear the national retail sales tax, despite the fact that a $4.99 item will end up costing $5.74 instead of $5.33 under his plan, because federal withholding of income will be eliminated. Moreover, recipients of welfare and Social Security will actually see more income in their checks, he says. "No one will be hurt by this," Bracken says. "We made sure that it would not hurt any single group."But what about the 16th Amendment, the one that says "The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several states, and without regard to any census or enumeration"? Critics raise the ugly specter of a national retail sales tax being voted in, but the regular income tax surviving a repeal. That means Washington would be collecting in both ways, surely tax hell on earth.Bracken responds that the bill authorizing the national sales tax would eliminate the IRS, basically rendering the tax amendment moot. He says another bill in Congress would repeal the 16th Amendment, although it's not connected to the national sales tax push. "It doesn't really hinge on the 16th Amendment," Bracken says. "We won't allow that (both taxes)."And although the national retail sales tax is susceptible to the same criticism as the flat tax -- that Congress could raise it higher than 15 percent -- Bracken says people get more upset about sales tax hikes than they do about income tax hikes. Even so, he says, a supermajority two-thirds requirement also appears in the national sales tax bill. "We want to make sure that it is very hard for them to raise this thing," he says.Bracken is not discouraged by the fact that the status quo remains firmly in place, and looks like it will for the foreseeable future. President Clinton recently derided people who advocate doing away with the IRS without a solid plan to replace it as "irresponsible.""Considering the fact that six years ago they said you'll never have a bill in Congress ... the changes have been nothing short of phenomenal," Bracken says.Marvin Wear, a devoted disciple of the national retail sales tax who has converted the back of his truck to a moving billboard in support, is sold. "I will not stop until the IRS is abolished and I'm a serious as a heart attack," says Wear, a former Navy torpedo repairman who fixed appliances for two decades before retiring. "If you have the flat tax, you will still have the IRS. National sales tax eliminates the IRS."But even the greatest apostles have doubts. Sometimes, Wear says, he does feel like he's wasting his time preaching to people who just don't care. "I just won't let that be the dominating thing in my life. I have a life. I function quite well," he says.And part of that life is having faith that the change he seeks will someday happen. "It's just a godawful system that needs to be corrected," he says. "It won't get any better until guys like me and you get involved."Prophet and LossIf tax reform was a religious movement, Irwin Schiff would be its prophet. A former economist, Schiff now makes a living by giving seminars, guesting on radio shows and writing books, all with the same message: You don't legally have to pay income tax, and you can get all the tax that the government took from you this year back.Schiff, a wiry, energetic man operating from a busy but cramped warren of offices on South Eleventh Street, can't sit still as he jumps from subject to subject, flowing around questions from a reporter like dams in his stream of consciousness. Phones constantly ring as Schiff picks up another book, another file, another newspaper article to illustrate a point.On a recent morning, a UPS truck arrives with tax codes, a whole lot of them, which Schiff helpfully annotates and highlights and then sells for $75 each, using the government's own regulations to support his central claim: "There is no law requiring people to pay income taxes."So sure is Schiff of his beliefs that he's offered $50,000 to charity if any of the members of Nevada's congressional delegation can prove him wrong, using the law. So far, no takers. A similar $5,000 offer to individuals has also gone unanswered.Schiff has suffered for his faith. He has been convicted of income tax evasion and spent four years in federal prison. Of course, back in those days he wasn't filing income tax returns at all. Now, he files returns alleging he has no income, because according to his reading of court rulings, income is defined as profits of a corporation."If doing this was illegal, I would go to jail," Schiff says. "This is why we're beating the government. The word is getting out."Schiff says lots of people -- including about 4,000 in Las Vegas alone -- are following the advice he gives at his $35-per-person seminars. He has a sheaf of refund checks he proudly shows in which people got back everything the government withheld. Best of all, Schiff maintains, no one has gotten in trouble for following his advice.But Bob Norris, communications manager of the IRS' Southwest district, says lying on a return can land a taxpayer in trouble. "We're looking for you to file a correct return, no more and no less," Norris says. Otherwise, "you're subjecting yourself to civil and criminal penalties."Norris couldn't name anyone who's been prosecuted for following Schiff's advice, but said zero-return cases do happen. "Obviously, those cases exist," he says.What of Schiff's claim that no law requires people to pay their taxes? Norris says a long list of court cases has upheld the income tax, but he doesn't relish the prospect of sparring with the bulldog Schiff. "There's no way I'm going to get into a debate with Mr. Schiff,"ÊNorris says. "The taxability of income has been tried time and time again."The worst part, says Norris, is that even if a taxpayer wrongly follows Schiff's advice, they are still liable for the tax, interest and penalties. "Correctness of the return is the responsibility of the filer," Norris says. "I hate to see a taxpayer take advice that turns out not to be correct for them."But Schiff says people pay taxes only out ignorance and fear. "The income tax supports half the lawyers in this country," he says.Even worse, he says, GOP stalwarts like Sen. Mitch McConnell, chairman of the National Republican Senatorial Committee, are using the fear of the IRS to raise money, promising to eliminate the agency or at least drastically scale it back. He pulls out a McConnell fund-raising letter in which the senator implausibly suggests the IRSÊhas developed powers without the authorization of Congress."What they are trying to do is capitalize on the fear of the IRS," Schiff says.He knows about that. In 1995, Schiff was pepper-sprayed by an IRS special agent trying to seize the car he was driving to satisfy some of the back taxes the agency claims he owes the government. Schiff, who spent the night at the Clark County Detention Center, fired off an angry 14-page missive to the U.S. attorney's office, challenging the agents' authority and demanding the charges be dropped. They were, but he's suing the government over the incident.Schiff says there's nothing for him to be disillusioned about in his anti-tax crusade. "We're bringing it down. I see successes there. We're winning," he says. "I have people who call my show and say without me they couldn't live. The people who file zero returns, they sleep very well nights."Secure, one suspects, in the prospects of their economic salvation.The Conclusion of the MatterIs it worth it? Is fighting to pay less in taxes really worth the time, emotion and energy that tax reformers put into it? Is the near-religious devotion wasted? The reformers answer by action, and some say that regardless of what will happen in the future, they've already had an impact."I think what they have accomplished is they have heightened the awareness," says Vilardo of the Nevada Taxpayers Association. "I think Congress is very well aware that they have to do something."But what? Everyone thinks they know, but navigating the field of different proposals and different philosophies is enough to confuse even the most pure hearted. "Do any of us have the answer?" Vilardo asks. "I don't think so, at this point in time. At this point, you have more questions than you have answers."But that, they say, is what faith is for.