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May 02, 1979 - Image 4

Resource type:
Michigan Daily, 1979-05-02

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Page 4-Wednesday, May 2, 1979-The Michigan Daily
4michigan DAILY
Eighty-eight Years of Editorial Freedom
420 Maynard St., Ann Arbor, Mi. 48109
Vol. LXXXIX, No. 1-S News Phone: 764-0552
Wednesday, May2;, 1979
Edited and managed by students
at the University of Michigan
Chief's term
OK as is

Pauper's loophole


R ECENTLY, President Carter voiced sup-
port for the idea of a single six-year term for
the chief executive. Mr. Carter said he was con-
cerned that the American public could not discern
between presidential actions motivated by regard
for the public good and those aimed at returning
him to office.
We feel that public support for Mr. Carter in-
dicates the public good is being served. Likewise,
if his actions breed widespread discontent, it is
doubtful that they are beneficial.
The four-year renewable term- was wisely
designed with accountability in mind. If the chief
executive did not have to face the voters once
again, their needs might not command his ex-
pedient attention. Presently, Mr. Carter must
reckon with powerful business and labor interests
in addition to the less influential parties. While it
is clear that the president would still have to
reckon with those groups if he could not run again,
the impetus to minimize alienation would be
reduced. In fact, it- would be even easier to act in
the interest of the heavyweights while neglecting
the needs of powerless citizens if their votes were
no longer needed. So, the change would probably
not benefit the latter.
Regrettably, a substantial portion of Mr. Car-
ter's time and energy has already been consumed
by his 1980 campaign. And we cannot rule out the
possibility that politics were foremost in mind
when he pushed the Israeli-Egyptian peace treaty
or behind the intermittent emphasis on national,
health insurance. But concern for popularity also
forced the editing of hiA energy speech during the
Three Mile Island debacle, omitting extensive
pro-nuclear passages. While politics arouses the
public's suspicion, that ingredient also holds the
president accountable.
Taxpayers bear part of the campaign costs
when presidential speeches and visits thinly veil
political plugs for the president and other party
members. While it is unfortunate that support is
awarded without sanction, at least public finan-
cing laws ensure the incumbent is no longer the
sole benefactor.
Mr. Carter, whose 1980 campaign is already
being field-tested in key primary states, has not
yet declared his candidacy. But in order to hold
the president accountable to all sectors of the
citizenry, the present provisions should not be
changed. Politics are the price of populism.

By Prank Browning
once'a weeA, a smal group of
people in Billings. Montana,
meets to discuss strategies for a
revolt against the government of
the United states.
These ranchers and
storekeepers are not anarchists
or terrorists. They are the
descendants of a grand American
tradition-tax rebels who believe
that government taxation is little
more than blatant confiscation of
private property to feed the in-
satiable appetites of Washington.
the Montana group-Americans
for Constitutional Gover-
nment-counsels followers that
they have a constitutional right to
protect their incomes from
government confiscation. "You
only have those rights you
demand," he says. "You use
those rights or you lose them. Our
founding fathers were all tax
Though the IRS and the federal
courts strongly disagree, Beck-
man's group, and others like it,
are thriving in virtually every
section of the country. John
Davidson, director of the
National Taxpayers Union,
estimates that some 10 million
Americans have refused to pay or
avoid paying lederal income
taxs-10 times the number the
IRS claims to have caught.
A good portion of that number
represents middle-class
professionals and business
executives who have discovered
a variety of sophisticated
schemes to avoid paying some or
all of their taxes. But the largest
portion is believed to represent
those who can survive only by
working in the so-called "un-
derground economy", an
economy that functions totally on
cash and in 1977 produced some
$195 billion, or ten per cent of the
entire gross national product, ac-
cording to economist Peter Gut-
mann of Baruch College of the
City University of New York.
None of that income was taxed,
because none of it was declared.
Week magazine, this un-
derground economy "may be the
fastest growing segment of U.S.
society.".It claims that the taxes
not paid on underground income
would be nearly enough to wipe
out the federal budget deficit.

Who are these underground
workers? Some are illegally em-
ployed-white-collar extor-
tionists, con artists, prostitutes,
and dope dealers. But most are
simply honest, lower and middle-
class American workers for
whom there are no tax loopholes
and who are struggling to fight
inflation by working at jobs, or
moonlighting at second jobs,
where no taxes are collected
and where earnings are paid in
Such jobs include freelance
hoasepainting and carpentry,
flea market vending, yard work,
auto repair, dome-tic work, and
scores of other service-type jobs.
The category might also include
a portion of cash-paid
professional services, such as
those of doctors, dentists, writers
or accountants.
"OUll THEORY", said a
representative of Chase
Econometric Associates, a sub-
sidiary of the Chase Manhattan
Bank, "and I must emphasize
that it is still a theory, is that
Americans are returning to self-
employment as a means of sup-
port and not reporting the income
to the government."
If so, then Americans are
following in the footsteps of the
French, the English, the Italians,
and the Japanese, for whom tax
cheating is more the norm than
the exception. The French gover-
nment has estimated that as
much as 25 per cent of the work
force is engaged in moonlighting
and pays notaxes on second jobs.
Besides tax avoidance through
non-reporting of income, there
are a variety of legal means that
the average worker can use to
protect income from the
IRS--methods everyd it as ac-
ceptable as those used hy Ronald
Reagan or Jimmy Carter. While
some of them require middle-
class privileges such as bank
credit or credit cards, and the
ability to work as a "consultant"
rather than as a wage-earner,
others are available to a wide
spectrum of workers.
One effective device
discovered by many beleaguered
families is the family cor-
poration. These are simply small,
hometown versions of U.S. Steel,
Chase Manhattan anc Pan
American Airways-none of
which paid any income tax in
family corporations are on

profits and capital gains. If the
family "business" fails to make a
profit or reap any capital gains,
then it cannot be taxed, though it
provides numerous business
deductions. The officers of the
corporation may be members of
the family and any others whom
the incorporators wish to name.
The key to the success of the
family corporation is a careful
assessment of the marketable
skills of each family member.
"Anyone who has expert
knowledge in some field of en-
deavor can become a consultant
in that field," says Stephen
Angell, an advisor to the War
Resisters League. There fields
can include sales. management,
manufacturing and any number
of endeavors which, if broadly in-
terpreted, can relate to the
family business.
"For example," says Angell,
'-manufacturing includes han-
dmade articles, and
management encompasses
property management." such as
a home which may be partially
leased for residential purposes.
The handmade crafts may be
sold to friends and neighbors. "A
proportionate share of all house
expenses-insurance, repairs,
heat, light, telephone, taxes,
depreciation and mortgage in-
terestbecomes a deductible
business expense.
"Family members who like
pets may be paid a fee by the cor-
poration each month to raise
stock, which, when it reaches
maturity, is offered on the
market.'these expenses are
deductible, Angell says, even if
the "business" fails to make a
profit for several years.
Group life insurance, health in-
surance. and IRS-approved
retirement plans can also be
removed from personal budgets
and made deductible expenses by
a family corporation.
It' any conclusion can be
derived from the records of the
tax courts: it is that very few
people need worry about getting
slapped by !he harsh hand of the
government, especially if t ey
exercise common sense i
avoiding taxes and do not flaunt
their tax resistance.
Frank Browning wrote
this piece for Pacific News
Service, of which he is a for-
Iner editor.

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