Snipes' hunt for no tax

By DAVID MOON, Moon Capital Management, LLC
April 13, 2008

He's pretty indestructible in his action movies, and after his recent run-in with the IRS, actor Wesley Snipes' reputation as a larger-than-life figure may grow.

It may grow in prison, however.

After the IRS alleged that he made fraudulent refund claims for more than $11.4 million, Mr. Snipes made a number of unique arguments in his defense. Tax evaders always do, claiming things like only citizens of the District of Columbia and Puerto Rico are subject to federal income tax, the 16th Amendment (which introduced the federal income tax) was not properly ratified, and (my favorite) the Internal Revenue Code violates the Paperwork Reduction Act.

Despite his seemingly bizarre defense, Mr. Snipes was acquitted of all felony counts and found guilty only of failing to file tax returns for 1999 to 2004. Still, however, he faces up to three years in prison.

Snipes earned $38 million from 1999 to 2004, yet argued that he owed no taxes.

Apparently, the star of 'White Men Can't Jump' has his own ideas about a 'Fair Tax' proposal. He likes the zero percent flat tax.

I have to admit that the idea of a flat tax appeals to me. Maybe that's because of where I am in life. A century or so ago, French Premier Georges Clemenceau (or maybe Bismarck, or Churchill, or Shaw, or French historian Francois Guizot) said, approximately, 'If you're not a socialist at age 20 you have no heart. If you're still a socialist at age 30, you have no head.'

I would add that if you're still hanging onto your socialism by age 40, odds are that you don't have a job ' or that you're woefully underemployed.

If you want to really irritate someone about an emotional argument, quote the Bible to him. It even works with taxes.

Take the notion of a flat tax, for example. There are no examples of a graduated or progressive tithe in the Bible. If 10 percent was good enough for the Levites, why shouldn't it be good enough for the U.S. Congress?

The New Testament writers tell us of a poor widow who freely gives an inordinate percentage of her net worth into the coffers of the state-sponsored church. Talk about nonprogressive tax rates.

Just when I feel pretty holy in my reasoning, the same source can be used to shoot down my rationale for a spiritual flat tax.

Remember the story of the rich young ruler who went to Jesus looking for advice? 'Sell all that you have and give the money to the poor.'

Wow. That makes 36 or 39.6 percent not look so bad.

Before you think I'm completely jesting about a 100 percent tax, don't forget that in 1960, the top marginal tax rate in the U.S. was 91 percent.

Flat tax. Progressive tax. National sales tax. The Wesley Snipes no-tax. Maybe we should just figure out the cost to run the government and divide it by the number of people in the country and send each person a bill.

I don't know.

But I do know that you and I spend an inordinate amount of our resources paying taxes in some form.

Including the 32 percent who pay no federal income tax, Americans pay almost 40 percent of their income on various taxes, including federal, state and local levies.

Yet, other than this week, many of us do it without thinking much about it.

Think about that.

David Moon is president of Moon Capital Management, a Knoxville-based investment management firm. This article originally appeared in the News Sentinel (Knoxville, TN).

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