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A Brief History of Judicial Quotes on Taxes

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Nov 22nd 2017
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As we bear witness to Congress's attempt to undertake a major overhaul of the tax code, it’s generally recognized that proposals to cut taxes and simplify filing rules predictably generate hoopla on Capitol Hill and in the White House.

Those proposals also evoke enthusiasm in many other quarters within the Beltway.

But Washington insiders ignore or forget that our tax system usually is viewed a tad less rapturously, particularly by Supreme Court justices.

As Thanksgiving Day approaches, it’s a time to reflect, and here are some of my favorite quotes:

James C. McReynolds dryly pointed out: "Logic and taxation are not always the best of friends."

Robert H. Jackson observed: "No other branch of the law touches human activities at so many points. (Tax law) can never be made simple, but we can try to avoid making it needlessly complex."

He cautioned that "the United States has a system of taxation by confession. That a people so numerous, scattered and individualistic annually assesses itself with a tax liability is a reassuring sign of the stability and vitality of our system of self government. It will be a sad day for the revenues if the good will of the people toward their taxing system is frittered away in efforts to accomplish by taxation moral reforms that cannot be accomplished by direct legislation."

Chief Justice John Marshall declared: "The power to tax involves the power to destroy."

Oliver Wendell Holmes, Jr. doubled down with his pledge: "The power to tax is not the power to destroy while this Court sits."     

In 1930, Holmes said, "I pay my tax bills more readily than any others — for whether the money is well or ill spent I get civilized society for it."

Back in 1904, he similarly noted that "taxes are what we pay for a civilized society," a comment that is carved in stone above the main entrance to the IRS’s headquarters in Washington. Tax historians have duly noted that he made this oft-quoted pronouncement before the introduction of the modern income tax in 1913.

For an egregious example of bureaucratic imperiousness, reflect on the plight of Lawrence P. McCormick of Brooklyn, a tax protester with an attitude. He wrote the words "under protest" beneath his signature on his return for 1991, and filed it on April 15, 1992.

An aggrieved agency thought the right response was to treat his 1040 as incomplete and assess stiff penalties for a frivolous filing and a return deemed to be late.

Fortunately for McCormick, his case was heard by District Court Judge Jack B. Weinstein, who squelched both penalties as unconstitutional exercises of administrative authority.

"A taxpayer need not suffer in silent acquiescence to a perceived injustice," reasoned the judge, who noted that McCormick’s addition of the two words of protest caused no change in the meaning of anything on his 1040.

Hence, McCormick timely filed a complete return and did no more than "properly exercise his first amendment right to protest," Weinstein ruled.  

A protest is "an expression of grievance, seeking redress that the Internal Revenue Service may not throttle or mute by threats of penalties."

Additional articles. A reminder for accountants who would welcome advice on how to alert clients to tactics that trim taxes for this year and even give a head start for next year: Delve into the archive of my articles (more than 225 and counting). 

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By skinnyvinny
Nov 27th 2017 20:34 EST

You left out my favorite, by Judge Learned Hand:

Over and over again courts have said that there is nothing sinister in so arranging one's affairs as to keep taxes as low as possible. Everybody does so, rich or poor; and all do right, for nobody owes any public duty to pay more than the law demands: taxes are enforced exactions, not voluntary contributions. To demand more in the name of morals is mere cant.

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