#24 Summer 1999
l LET NOT
THY LEFT HAND . . .
l DID THOMAS JEFFERSON FATHER ANY
l ONE FOR THE TAXPAYER . . . BUT
l TAKING PROPERTY
l THE SO-CALLED "INTERNET TAX FREEDOM
ACT OF 1998"
1999 Page 1
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.
United States Postal Service, for example, is in a monopoly position
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
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
the Post Office exploits its monopoly position. For example,
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.
the creditor is the federal government, the answer is "false." If
1999 Page 2
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
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.
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
3. Circumstances that can trigger these jeopardy procedures include:
Possession of large amounts of cash,
Engaging in an illegal activity,
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).
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
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
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 . . .”
1999 Page 3
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.
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
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
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
1999 Page 4
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.
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
tax audits) by every state, county, city and town, as well as every
special taxing district, in which
1999 Page 5
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
(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.)
Because of production delays, the issues for Winter and Spring
of 1999 will not appear. We now continue with this Summer issue.
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
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.