BULLETIN
#24 Summer 1999

l LET NOT THY LEFT HAND . . .
l DID THOMAS JEFFERSON FATHER ANY SLAVE CHILDREN?
l ONE FOR THE TAXPAYER . . . BUT
l TAKING PROPERTY
l THE SO-CALLED "INTERNET TAX FREEDOM ACT OF 1998"

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LET NOT THY LEFT HAND. . .

True or false? Under the anti-trust laws of the United States and the various state governments, no corporation may have a monopoly over the production of goods or services.

False. The United States Postal Service, for example, is in a monopoly position with respect to the delivery of letters. And its monopoly is protected with criminal sanctions: generally, the penalty for delivering letters in competition with the Postal Service is a $50.00 fine for each letter; and for establishing a "private express", $500.00 or six months in jail.

The Post Office's legally enforced monopoly has existed since colonial times. It is justified by an alleged necessity to ensure that the Postal Service is able "to fulfill its mandate of providing uniform rates and service to patrons in all areas, including those that are remote or less populated." Without the monopoly protection, it is argued, competitors would undercut the Postal Service on profitable routes and leave the Postal Service with high-cost routes and insufficient means to serve them. Egalitarianism over freedom.

Of course, the Post Office exploits its monopoly position. For example, although the government is prosecuting Microsoft for "'leveraging' its dominance in one field in order to compete in another", the United States Postal Service is seeking to expand into fields served by private companies; i.e., doing the very same thing.¹ Thus, the same criminal law used to persecute private companies is used to protect the government in doing the same activity.

True or false? In the United States, the law cannot be used unjustly to effect a deprivation of property. An individual claiming, for example, that another has breached a contract can take no action without the intervention of an independent entity (a court). The creditor must initiate court action. In the court proceedings, he bears the burden of proving both the existence and the amount of the debt. Even if the property must be seized temporarily before debtor has a chance to squander or destroy it, facts justifying the seizure must be established in a sworn statement, the debtor must have an opportunity to be heard before or promptly after the seizure, and a judge must make the decision to seize the property. A creditor cannot take the property and force the debtor to show why it should be returned.

Those who believe in an affirmative answer to this question have the support of the United States Supreme Court. In a series of decisions beginning in 1969, the Court declared that the protections described above are required by Constitution.

But, when the creditor is the federal government, the answer is "false." If the Internal

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Revenue Service believes that an individual owes extra taxes and that the "assessment or collection of a deficiency . . . will be jeopardized by delay . . . ", it summarily assesses the taxes. This is called a "jeopardy assessment." If, in addition, the IRS finds that the taxpayer has "designs" that may jeopardize collection², it may declare the tax immediately due and payable, prematurely close the taxpayer's year, and prepare the tax return for the taxpayer. The IRS computes the tax by considering all the taxpayer's known assets, liabilities, income and expenses. This is known as the "termination assessment." Under certain circumstances³, upon a finding that the collection of . . . tax is in jeopardy," the IRS may immediately, without notice, and "by any means" seize a taxpayer's property; this is known as a "jeopardy levy."⁴

None of these actions requires judicial intervention. In case of a dispute, it is the taxpayer who bears the burden of initiating the legal action. Although the government must show that there is a deficiency, the burden then shifts to the taxpayer to show the amount owed. And even before the taxpayer can take his case to court, he must satisfy IRS administrative procedures.⁵

The differences between the actions allowed to private parties on one hand and to the Postal Service and Internal Revenue Service on the other, are examples of a reversal of the proper relationship between the government and the governed. The purpose of the former is to protect the latter's rights. It is the individual who should be given the widest latitude in the manner in which he can run his business and the government which should be restricted. The government should neither run a corporation nor protect it from competitors; nor should it intervene to favor one business concern over another. The collection of just debts should be as efficient as possible; governmental taking of property from its citizens should be difficult---actually impossible.
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References:
1. The Intellectual Activist, Volume 12, Issue 5 (May 1998).

2. The "design" is demonstrated by taking actions such as preparing "quickly to depart from the United States or to remove his property therefrom, or to conceal himself or his property therein, or to do any other act (including in the case of a corporation distributing all or a part of its assets in liquidation or otherwise) tending to prejudice or to render wholly or partially ineffectual proceedings to collect the income tax for the current or the immediately preceding taxable year . . ." 26 U.S.C. § 685 1.

3. Circumstances that can trigger these jeopardy procedures include:
Possession of large amounts of cash,
Engaging in an illegal activity,
Using aliases,
Concealing assets,
Transferring or attempting to transfer property to others,
Liquidating assets and/or manifesting other behavior which indicates a likelihood of flight (U-Haul at house is sufficient).

4. Another example worthy of mention is often designated the "unidentified cash rule". If the possessor of cash or cash equivalent (bearer instruments, foreign currency, coins, precious metals, jewelry, precious stones, postage stamps, etc.) in excess of $10,000 does not claim it as his, and if no one steps forward to claim the cash after the individual states the cash belongs to another person whose identity the IRS "cannot readily ascertain," the IRS may:
Create a new and fictitious taxpayer, the possessor of the cash, Create a statutory presumption that this fictitious taxpayer has a tax deficiency equal to the highest individual tax rate, and Assess the tax in jeopardy, seizing the cash.

5. Once in a while, the press discovers some horror example of the use of these powers and labels it an "abuse." This is a misnomer. The horror examples consist of the use of the powers in the way they are designed. As long as they exist, they will be so used. Lord Acton was right: "Power corrupts . . .”

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DID THOMAS JEFFERSON FATHER ANY SLAVE CHILDREN?

The recently publicized DNA evidence claiming to show Thomas Jefferson had fathered a child with his black slave, Sally Hemmings, illustrates the difference between the way evidence is handled in a court of law and the way it is handled by the popular press.

Nature magazine announced this evidence in a headline reading: "Jefferson Fathered Slave's Last Child." It editorialized: "our heroes and especially presidents are not gods or saints, but flesh-and-blood humans, with all the frailties and imperfection that this entails."

The evidence does not support these broad statements. Scientists compared DNA samples from descendants of Field Jefferson, an uncle of Thomas Jefferson, with samples from descendants of two of Sally Hemmings' children: the eldest, Thomas Woodson, and the youngest, Eston Hemmings. They focus on a marker on the Y chromosome which is passed only from father to son.

The markers on the Y chromosome of the descendants of Thomas Woodson are different from those of Field Jefferson. The marker on the Y chromosome of the lone descendant of Eston Hemmings is the same as that of the descendants of Field Jefferson. This means that some Jefferson, not necessarily Thomas, was the father of Eston Hemmings.

In the words of the authors of the study, "We know from the historical and the DNA data that Thomas Jefferson can neither be definitely excluded nor solely implicated in the paternity of illegitimate children with Sally Hemmings." In fact, historian Williard S. Randall notes, "There were 25 men within 20 miles of Monticello who were all Jeffersons and had the same Y chromosome. And 23 of them were younger than Jefferson, who was 65 years old when Eston
was conceived."

In a trial, he who claimed that Jefferson had actually fathered Sally Hemmings sons, would be required to produce an expert witness to support his position. The witness would be expected to be able to explain reasons for this conclusion. And the opponent would have the opportunity to establish, by cross-examination and by producing his own evidence, any weaknesses in the case. In this way, all the facts would be exposed to judge and jury. Not so in the popular press.

ONE FOR THE TAXPAYER . . . BUT

On March 12, 1999, California's "Boxing Act," which imposes a 5% gross receipts tax on pay-per-view telecasts of boxing, wrestling, kickboxing and similar combative contests, was declared unconstitutional under the free speech clause of the First Amendment by the United States District Court for the Eastern District of California. The court's rationale for the decision was that the Act taxes some telecasts, and not others, based on the content of the telecasts. Under modern constitutional interpretation, content-based discrimination is permissible only upon a "compelling state interest." The court stated further that California's interest in raising revenue did not rise to the level of a compelling state interest. Of course the implication is that if California were to tax all paid direct-to-home broadcast telecasts, the constitutional infirmity

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would be removed. One might speculate what the courts would do in the case of jurisdictions like Pennsylvania that tax "premium" cable or satellite programs, given the spurious dichotomy in our constitutional jurisprudence between so-called commercial speech and non-commercial speech. ("Commercial" speech currently "enjoys" a lesser standard of protection.) Since Pennsylvania defines "premium" programming as programming without paid commercial interruption (e.g., the Disney Channel), arguably a lesser constitutional standard would apply. However, this result would be particularly bizarre since the effect would be to allow Pennsylvania to tax programming without advertising while exempting programming with advertising, an effect we doubt would be well received among the anti-business crowd.

TAKING PROPERTY

Eighteen years ago, a land developer applied for permission to plat 37 acres of land in the City of Monterey California. He followed all the rules the City had imposed. But the City apparently did not want the development---it wanted the acreage left as open space but did not want to pay for it as the takings clauses of the state and federal constitutions require. So it used a method of bureaucrats everywhere: it simply stalled.

After 5 years, the landowner sued in a federal court and won a judgment of $1.45 million for a "temporary taking." The judgment was affirmed by the Court of Appeals and, on May 24, by the United States Supreme Court. (The appeal was not based on the merits of the taking itself but on procedural issues involving the right to a jury trial.)

THE SO-CALLED "INTERNET TAX FREEDOM ACT OF 1998"

The Internet Tax Freedom Act, signed into law last October by President Clinton, imposes a three-year moratorium on: (i) new state and local taxes on Internet access; and (ii) multiple or discriminatory taxes on Internet commerce. Absent the moratorium, electronic commerce is theoretically susceptible to taxation by more than 30,000 state and local jurisdictions. (Enterprises with a presence in several states are subject to taxation (as well as tax audits) by every state, county, city and town, as well as every special taxing district, in which

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they have a presence, and entities involved in electronic commerce are literally omnipresent.) Nonetheless, the moniker "Internet Tax Freedom Act" is a misnomer. During the course of the "moratorium," roughly a dozen states that previously collected Internet access taxes may continue to do so. Additionally, states may continue to collect sales tax on products delivered over the Internet, if they impose sales taxes on similar sales transacted through other remote means, such as mail orders. In fact, some states likely will attempt to impose a collection obligation on out-of-state sellers merely because their web sites can be viewed via an in-state computer server.

The Act also establishes a 19-member advisory commission to study electronic commerce (and other) tax issues for 18 months and then report its findings to Congress. The commission is to consider model state legislation that would provide for uniform and consistent taxation of electronic commerce. (Clearly, "freedom from taxation" extant during the moratorium is not intended to continue thereafter.) However, the commission is bogged down in bickering over who its members should be. Ostensibly the commission is to be composed of 3 members from the federal government; 8 from state and local governments; and 8 from the private sector. But the four congressional leaders handling appointments produced a panel that "favors" the private sector by 10 to 6. Apparently none of the industry appointees volunteered to step down, and the ensuing bickering has resulted in a reduction of the time available to the commission to conduct the study, not a bad result if, in the end, the "moratorium" is extended. (As we go to print, the commission, chaired by Virginia's governor, has met for the first time.)

NOTE

Because of production delays, the issues for Winter and Spring of 1999 will not appear. We now continue with this Summer issue.

ANNOUNCEMENT

On July 11, TAFOL will present a panel discussion at the upcoming Lyceum International conference in Lake Tahoe. Dr. Harry Binswanger will moderate. The panel will consist of TAFOL lawyers Tami Lefko, Jim McCrory, and Steve Plafker. They will discuss jury nullification (the theory that a jury is entitled to ignore the law under certain conditions), adverse possession (the legal principle that allows an owner of real estate to lose his ownership to another who uses the property), and liability of parents for the actions of their children. The results will be reported in the next issue of this Bulletin.
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Copyright © 1999 The Association for Objective Law. All rights reserved. The Association for Objective Law is a Missouri non-profit corporation whose purpose is to advance Objectivism, the philosophy of Ayn Rand, as the basis of a proper legal system.