What One Man's Fight Against the IRS Teaches Us About Entrepreneurship Irwin Schiff's wrongheaded pursuit of fighting federal taxes left a lasting legacy for modern business owners.
By Ray Hennessey •
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You'd think in the land of the free, home of the brave there wouldn't be such a thing as a federally banned book. Sure, from time to time, some local school district says you can't have Lady Chatterley's Lover or On the Origin of Species in a kindergarten library somewhere, but that's all local mores and politics.
Getting the actual federal government to ban your book is rare.
And that's why we should all remember the quixotic, entrepreneurial life of Irwin Schiff.
Schiff, 87, died last week in federal prison. His crime? Telling people how to get out of paying income taxes, which he believed were unconstitutional. Essentially, he was serving time for tax evasion. For the third time in his life.
That's where the banned book came in. During his second stint in prison in the early 1990s, he wrote a book called Federal Mafia: How It Illegally Imposes and Unlawfully Collects Income Taxes. Schiff had a number of different arguments about why he -- and other American citizens -- shouldn't have to pay taxes, but, in a nutshell, his argument boiled down to the definition of "income." No individual, Schiff argued, should report any income at all, because the law defines income as only profits generated by corporations. So, he encouraged filers to put "zero" under their income earned on their tax returns, which he acknowledged always needed to be filed.
In addition to how to file, Federal Mafia also laid out how to respond to the Internal Revenue Service when it inevitably came a-calling. It was an innovation, a business like any true entrepreneur would develop -- except it was universally ruled to be against the law.
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Because of that, the U.S. District Court in Nevada said it was illegal to sell Federal Mafia because it was a blueprint for defrauding the government. Schiff fought that ruling on grounds that censoring the book amounted to an infringement of his First Amendement rights. An appeals court in 1994 disagreed, and he was forced to stop sales of the book.
Like the innovator he was, he got around that by allowing anyone to get the book free.
Schiff should be remembered for his life. Most legal scholars disagreed with his argument that taxes were unconstitutional (as much as they would have loved to agree). But Schiff was single-minded in his belief and made a business out of it -- something entrepreneurs know all too well. Many of us spend our days, years and lives titling at our perceived enemies, but few of our windmills have the power to arrest, try and imprison like the federal government.
And that's why his death is worth noting, too. Many people talk about their principles. Few die as a result. Schiff's death is a terrible indictment of what our government can do to citizens, even in the last months of their life. Schiff's son Peter (full disclosure: a friend and former colleague from my FOX Business Network days) wrote that the family had been trying to get a compassionate release for his father, who was blind and in the last stages of cancer. Not only did the inefficiency of the government prevent that from happening (an irony, given how efficient it was in convicting him three times), but they added insult to injury by mistreating him up to his final breath.
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"When his condition deteriorated to the point where he needed to be hospitalized, government employees blindly following orders kept him shackled to his bed," Peter Schiff wrote. "This despite the fact that escape was impossible for an 87-year-old terminally ill, legally blind patient who could barely breathe, let alone walk."
Awful.
Principles often outlive their proponents, so it's important to note that Irwin Schiff's legacy still has legs, even if his theories don't. Death and taxes turned out indeed to be inevitable for Schiff, but the inclination to fight for what you believe remains unquestionably important. Schiff believed in the Constitution -- something worth fighting for -- and though I personally think his arguments were weak, his will to stand up to everyone around him was powerful and worth emulating. That's true even when up against the federal government, which all too often promulgates regulations worth going to court to battle.
That's not sedition. Rather, it's the right and responsibility of the citizenry, and we, hearteningly, see it every day in the entrepreneurial world. When Uber takes on a city's protection of the incumbent taxi industry, or Airbnb offers services that conflict with laws designed to reap tourism taxes through the hotel industry, the instincts that drive those efforts have a spiritual godfather in Irwin Schiff, regardless of whether he was right or wrong.
That's a noble attitude. It's enough to make you want to write a book, and hope it is so dangerous the government won't even let you sell it.
