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ADVENTURES IN WISHFUL THINKING

June 27, 2005

As expected, the tax protest crowd is citing the acquittal of anti-tax charlatan Joe Banister as evidence that people don't have to pay taxes. They have issued a press release:

Sacramento California -- On Thursday June 23, a federal jury found former IRS Criminal Investigative Division (CID) Special Agent and CPA Joseph Banister not guilty of all counts alleging criminal tax fraud and conspiracy related to actions he took on behalf of a California business owner who had openly defied the IRS over several years by stopping withholding of all income and employment taxes from the paychecks of his workers.

During the trial the Department of Justice was unable to put forth any evidence that Banister had either engaged in a conspiracy or had acted unlawfully when he shared legal research with business owner Al Thompson concluding that he had no legal obligation to withhold taxes from his workers or when he (Banister) prepared corrected tax returns for Thompson claiming his taxable income was, under U.S. law, zero.

The release omits one fact a reader might find useful: Al Thompson is doing six years in federal prison for following through with the conclusion he arrived at from Mr. Banister's "legal research."

During the trial, Banister's former supervisor at IRS's San Jose CID office, Robert Gorini (who testified via video recording) when pointedly asked, was unable to cite any U.S. law that required Banister to pay income taxes.

We can help. Title 26 (the Internal Revenue Code of 1986), Section 1, says:

(a) Married individuals filing joint returns and surviving spouses. There is hereby imposed on the taxable income of—

every married individual (as defined in section 7703 ) who makes a single return jointly with his spouse under section 6013 , and

every surviving spouse (as defined in section 2(a) ),

a tax determined in accordance with the following table: (table omitted).

(b) Heads of households.There is hereby imposed on the taxable income of every head of a household (as defined in section 2(b) ) a tax determined in accordance with the following table: (table omitted)

(c)Unmarried individuals (other than surviving spouses and heads of households).
There is hereby imposed on the taxable income of every individual (other than a surviving spouse as defined in section 2(a) or the head of a household as defined in section 2(b) ) who is not a married individual (as defined in section 7703 ) a tax determined in accordance with the following table: (table omitted).

That's a federal law that requires Banister to pay taxes, assuming he makes any money.

More from the release:

Banister, who was forced to resign in 1999 after questioning IRS officials about their legal authority, gave Thompson's worker's a presentation in 2000 which reviewed his detailed investigative research of U.S. tax law which concluded that not only did the IRS lack any authority to impose income taxes on the workers, but there was no legal requirement for the business to withhold any taxes from the worker's paychecks.

It's too bad for Mr. Banister's clients, like Mr. Thompson and Richard Simkanin (serving seven years) that Mr. Banister's beating the rap on conspiracy charges does nothing to undo the distastrous consequences of his approach to taxes.

One of the better responses to tax protester nonsense is in a recent district court decision (the protester had to pay the taxes; they always do):

Can ... plaintiff really believe that if (his) view of the law were correct, highly paid, highly trained and highly motivated tax lawyers would not be challenging the Internal Revenue Service’s efforts to collect income tax from persons who are not engaged in “international and possessions commerce”? Do they really think that as lay people, they have discovered a valid view of the tax laws that has eluded not only the tax lawyers in private practice but all of the judges in the United States?

Mr. Banister was charged with conspiracy to help Mr. Thompson avoid taxes -- not with evading his own taxes. This may mean they just haven't gotten around to prosecuting him for that; or it may mean that he has been paying his own tax, while charging others for his catastrophic advice. It certainly doesn't mean that he legally can avoid paying taxes if he has income. For what his advice is worth, he shouldn't have any income.

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