Stealth taxation: Part IV


Discussing taxes and tax policy is a little like watching paint dry, a fact that those who want to increase taxes or create new ones rely on. But the public’s seeming lack of interest is not really about whether they care. It’s more about the complexity and confusion created by the myriad of taxes that are employed to separate them from their money. When they become sufficiently resentful of legislative decisions about taxes, they can react quite aggressively. 


America’s politicians and bureaucrats have created more ways to fleece the public than anyone can possibly identify. But that’s no surprise, given that they are able to work at it day in and day out — on our nickel.

The excessive complexities and inequities of the income tax are bad enough but, to me, stealth taxation is even more offensive.

However, there is a slight gleam of hope shining through the fog of legislative hide-and-seek that our politicians and government bureaucrats employ to screen tax initiatives from public view, and people do sometimes fight back.

It’s not always easy to see the relationship between government actions and taxation, but transitioning from an increase in the budget to higher taxes seems like an obvious connection. Increased expenses generally lead to a search for more revenue to pay the bills, and this invariably translates into higher taxes — somehow, some way.


In a truly offensive display of political chutzpah, in July 2005 Pennsylvania’s GOP-controlled legislature collaborated with the state’s Democratic governor to sneak a 2 a.m. vote past the public to raise legislative salaries between 16 and 54 percent.

There was no public notice, no review, and no debate. Adding insult to injury, they even managed to circumvent a state constitutional prohibition against midterm pay increases by treating themselves to retroactive expense reimbursements.

But, all’s well that ends well.

When Pennsylvania’s voters got wind of the legislature’s sneak action by the very people who had been elected to represent them, a groundswell of opposition rapidly turned into an outright revolt that a few months later resulted in the repeal of their stealth pay raise, with only one dissenting vote.

In Indiana, the president of the state Senate, a 36-year incumbent who pushed through a bill to give lifetime health insurance benefits to state legislators, was subsequently defeated by a political novice who rode the crest of a wave of public protest into office.


People tend to feel that trying to resist taxation is hopeless, what with politicians and bureaucrats constantly scheming to find ways of increasing taxes while taxpayers struggle to break free of the web of tax laws that they somehow never seem to be able to understand or control.

And unfortunately, litigating tax issues is well beyond the means of most taxpayers, while the government has unlimited resources on which to draw in pursuit of its claims.

However, reported on what may be the beginning of a growing trend toward resisting stealth taxes, noting:

“The federal telephone excise tax — enacted as a temporary measure two centuries back to help finance the Spanish-American war — may finally in large part be meeting its demise as the result of evolving markets, bureaucratic punting, and Congressional bungling.”

So, on the face of things, it’s pretty clear — the IRS has been collecting a lot of tax on phone service that it isn’t entitled to. … And in the last year companies have begun asking for that tax back ... and courts have been giving it to them.

Even in the face of a growing tide of resistance, “... the IRS says it’s not going to be paying any refunds soon; it is appealing these cases and hopes to win in the higher courts. Things don’t look so good for it up there either, but with more than $9 billion (and rising) estimated as being at stake, it has reason to fight on.”


Although few taxpayers have the resources to challenge the IRS in court, the organized resistance they demonstrated in Pennsylvania and Indiana does show promise.

We may get there yet, but it will take concerted political effort. There is strength in numbers, provided people can be motivated and organized to act in concert.

A beacon of hope was ignited in 1999, when irate taxpayers blanketed the Tennessee state capitol with a parade of cars, horns blaring, to protest the imposition of a first-ever state income tax that was being debated by the legislature. In an embarrassing defeat, the state’s legislators were so intimidated that they adjourned without adopting the new tax — proving that it can be done if taxpayers can get better organized.

But, that’s just my opinion.