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Snipes 'victory' doesn't let tax filers off the hook

Actor Wesley Snipes' recent acquittal on tax fraud charges is being taken as a victory by a band of tax "protesters." But, they are overlooking a key fact: Snipes still faces jail time.
/ Source: msnbc.com

The recent acquittal of actor Wesley Snipes on tax fraud charges is being taken as a victory by a vocal band of tax “protesters” who have assembled all manner of arguments that income taxes are illegal.

Their reaction is not surprising. The wide variety of stunningly fanciful arguments against the legal validity of the U.S. tax code have one thing in common. They all selectively ignore one important point: No court has ever held in their favor.

I heard that there is no law that requires you to pay your tax return(s), as stated in the movie "Zeitgeist," by numerous former IRS agents. Is this true?
Robert H., Hanalei, Hawaii

The breadth and depth of delusional nonsense offered up in this popular YouTube video — and others like it — is simply too vast to cover in this column. Suffice to say that "Zeitgeist" is the "Gone With the Wind" of its genre. It's a comical collection of conspiracy theories that ties together Christianity, the attacks of 9/11, and the Federal Reserve Bank. If there were an Oscar for Best Picture to Connect Completely Unrelated Dots with a Straight Face, this one would get my vote.

While the “taxes are illegal” myth plays only a minor role in this video non sequitur posing as truth, the Snipes case seems to have revived this piece of misinformation with readers. The reaction to the case also confirms for us how seriously out of touch tax “deniers”  are with the real world that the vast majority of hard-working Americans lives in.

As they do in all of their arguments, the tax crazies celebrating Snipes “acquittal” have once again conveniently overlooked an important detail. While the jury let him off the hook for fraud, it found no basis whatsoever for Snipes’ novel legal arguments that he didn’t owe taxes. His own lawyers called the idea “crazy” and “kooky.”  But the jury bought his defense lawyers’ arguments that Snipes committed no fraud because he actually believed the ridiculous legal interpretations advanced by promoters of these absurd fairy tales. (One of those promoters told the court it has no authority over him and he'd rather sit in jail than argue his case.)  In the end, Snipes was convicted of not paying his fair share, ordered to cough up $17 millions in back taxes, and still faces three years in jail. Some “victory.”

Ever since the British tried to lead a little too heavily on American colonists with taxes on tea and whiskey, the United States has had a long and colorful history of tax protests. Modern tax “deniers” have come up with an impressive collection of twisted arguments to support the idea that Uncle Sam has no right to ask American citizens to pay for the services their government provides them.

As with many of these theories, there is often a seed of truth upon which a giant oak of nonsense is grown. One of the more popular notions is that taxes are unconstitutional. It’s true that the history of the U.S. income tax is not without some serious legal twists and setbacks. Congress botched one attempt with an amendment to an 1894 bill on tariffs calling for a 2 percent income tax; it was struck down by the Supreme Court the following year. The high court’s legal objections were then overcome with the enactment and subsequent ratification of the 16th Amendment in 1913.

Not so fast, say the tax nut jobs: the 16th Amendment wasn’t properly ratified. Others argue that freedom of speech or religion shields them from owing taxes. Many claim that the term “income” is not properly defined in the tax code. Because failure to pay taxes comes with a threat of jail time, some argue that tax collection is a form of illegal extortion.

All of these inanely creative theories make for fun reading and might actually be amusing if they didn’t clog up the courts with frivolous drivel that wastes everyone’s time. For all the effort devoted to trying to thwart the tax code through “legal” arguments, not one court has upheld a single case based on any of these theories.

Until that happens, we plan to keep filing our annual return. No doubt the Internet will continue to offer a valuable forum for believers of these schemes. We can only hope that those who act on them will find another appropriate setting to discuss the rightness of their cause with other like-minded lunatics: federal prison.

Is using the services of a credit counselor a good idea or will it hurt my credit in the long run?
Lester J., Glendora, Calif.

Working with a counselor is a great idea — as long as you deal with an accredited counselor. Ask if they’re certified by the Department of Housing and Urban Development (HUD). Or go to the National Federation of Credit Counselors www.nfcc.org to find an accredited counselor near you.

Going to a counselor by itself won’t hurt your credit. If you have fallen behind and can’t catch up on your own, they may approach lenders (with your approval) to work out an alternate payment plan. In some cases, that could hurt your credit, but the counselor will work with the lender to minimize that impact. It’s a lot better than falling so far behind that you have take more drastic measures — like, say, filing for bankruptcy.

Make sure you get someone who is certified. There are a lot of crooks out there who claim the “erase your debt” or “refinance” it by rolling it up into a bigger loan and charging you more interest. These folks will lure you in with promises of a lower monthly payment. What they don’t tell you is that the way they get the monthly payment lower is by stretching out the term of the loan for decades, which means you pay much more interest over the life of the loan.

So give it a try. The sooner you get started, the sooner you’ll be out from under.

Money doesn't just disappear: where did it go (in the housing bust)? The developers and builders got paid by the banks, correct? Are the banks losses not the builders gains?
Jay, Raleigh, N.C.

It’s true that the money behind the mortgages used to fuel housing boom came from lenders (and investors who bought into pools of mortgage loans that were shopped up as securities like shares of stock.) 

Not all of that went to the builder or owner of the house bought with that mortgage. Some of it went to the mortgage brokers — in the form of fees and commissions. Then Wall Street took a nice cut when the bundled the mortgages and sold them off.

And yes, it's true that some of it went to builders and homeowners who sold their houses during the height of the boom. When a buyer uses a $250,000 mortgage to buy a house that’s really only worth $225,000, the seller gets a $25,000 windfall because the market “overestimated” how much it was worth. Or, in some cases, the estimate was cooked up by an appraiser who inflated the amount to please a lender or mortgage broker. (Some of these bad actors have been convicted of fraud.)

The bulk of the money that “disappeared” is now showing up as losses by those lenders an investors; some $100 billion so far, and the story isn’t over yet. Much of that represents a paper profit that may never have existed.

As long as house prices keep falling, more builders or home owners will find their houses worth less that the loan they took out to build or buy it. Selling the house won’t help. If the loan principal is more than the market value, the builder or homeowner gets nothing and the banks gets what’s left. And if market value is less than loan value (which is getting more common as market prices fall) the bank loses too.

Money may not disappear, but market value does.