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Context of 'Early 1980s: Disbarred Lawyers Jailed for Marketing ‘Churches’ Designed as Tax-Fraud Organizations'

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Arthur Porth, a Wichita, Kansas, building contractor, files a claim in a Kansas court to recover his income tax payment of $151. Porth argues that the 16th Amendment is unconstitutional because it places the taxpayer in a position of involuntary servitude contrary to the 13th Amendment. The court rules against Porth, but the defeat does not stop him. For 16 years Porth continues battling the income tax requirement, finding new and inventive challenges to the practice. He claims that the 16th Amendment “put[s] Americans into economic bondage to the international bankers,” a claim that the Southern Poverty Law Center will call “a thinly veiled anti-Semitic reference to the supposed ‘international Jewish banking conspiracy.’” He also argues that because paper money is not backed by gold or silver, taxpayers are not obligated to pay their taxes because “Federal Reserve notes are not dollars.” In 1961, Porth files an income tax return that is blank except for a statement declaring that he is pleading the Fifth Amendment, essentially claiming that filling out a tax return violates his right of protection from self-incrimination, a scheme that quickly becomes popular among anti-tax protesters. Porth becomes an activist and garners something of a following among right-wing audiences, traveling around the country distributing tax protest literature that includes a book, A Manual for Those Who Think That They Must Pay an Income Tax. He even issues his own “arrest warrants” against “bureaucrats” whom, in his view, violate the Constitution. In 1967, Porth is convicted of a number of tax evasion charges, but, as the Anti-Defamation League will later write, “he had already become a grass-roots hero to the nascent tax protest movement.” His cause is championed by, among others, William Potter Gale, who will go on to found the racist, anti-government Posse Comitatus movement (see 1969). Gale uses the newsletter of his Ministry of Christ Church, a church espousing the racist and anti-Semitic theology of Christian Identity (see 1960s and After), to promote Porth and the early tax rebellion movement. Porth exhausts his appeals and goes to jail; though sentenced to five years’ imprisonment, he only serves 77 days. One of Porth’s most active followers is his lawyer, Jerome Daly, whose activism eventually leads to his disbarment (see December 9, 1968 and After). Daly meets Porth in 1965 and files his own “protest” tax return just days before Porth is indicted by a grand jury. Daly is also convicted of tax evasion; in 1969, a federal appeals court will issue a ruling invalidating what has by then become known as the “Porth-Daly Fifth Amendment Return.” Porth receives the support of several far-right organizations, many of whom tie their racist views into his anti-tax protests. In a 1967 article for the far-right American Mercury magazine, tax protester and editor Martin A. Larson writes, “The negroes in the United States are increasing at a rate at least twice as great as the rest of the population,” and warns that the tax burden posed by blacks “unquestionably doomed… the American way of life.” Larson will later write regular columns for the white supremacist magazine The Spotlight, in which he will call black women prostitutes whose “offspring run wild in the streets, free to forage their food in garbage cans, and grow up to become permanent reliefers, criminals, rioters, looters, and, in turn, breeders of huge litters of additional human beings belonging to the same category.” He will also write several books promoting Porth’s anti-tax protest strategies. (Southern Poverty Law Center 12/2001; Anti-Defamation League 2011)

Minnesota attorney Jerome Daly defends himself in a lawsuit filed by the First National Bank of Montgomery, in a case later cited as First National Bank of Montgomery v. Daly. The bank sues Daly in Credit River Township, Minnesota, after foreclosing on his property for nonpayment of his mortgage, and seeks to evict Daly. Daly, a well-known anti-tax protester who has filed “protest” tax returns in the past (see 1951-1967), argues that the bank never actually loaned him any money, but merely created credit on its books. Since the bank did not give him anything of tangible value, he argues, the bank has no right to his property. Both the jury and the Justice of the Peace presiding over the case, Martin V. Mahoney, agree, and declare the mortgage “null and void.” In his ruling, Mahoney admits that the verdict runs counter to provisions in the Minnesota Constitution and some Minnesota statutes, but contends that such provisions are “repugnant” to the Constitution of the United States and the Bill of Rights in the Minnesota Constitution. Mahoney finds in his ruling that all Federal Reserve paper money has no intrinsic value. Initially, Daly retains his right to the property and has his mortgage revoked, but the bank appeals the case and the verdict favoring Daly is reversed, as is a similar lawsuit brought by Daly against another bank. The Minnesota Supreme Court begins proceedings against Mahoney and Daly for “constructive contempt” of the law. Mahoney’s death in 1969 voids the proceedings against him, but Daly is subsequently disbarred for his arguments, which the Minnesota Supreme Court finds entirely fraudulent, “unprofessional,” and “reprehensible.” The case and its reasoning will be frequently cited in lawsuits challenging the US banking system, particularly the practice of “fractional reserve banking.” The case has no value as precedent, but will often be cited by groups supporting a government-owned central bank or opposing the Federal Reserve system. (State of Minnesota, County of Scott, First National Bank of Montgomery v. Daly 12/9/1968 pdf file; State of Minnesota, County of Scott, First National Bank of Montgomery v. Daly 1/12/1969 pdf file; US District Court for the District of Utah 10/28/2008; Minnesota State Law Library 5/27/2010)

Former lawyers Jerome Daly and William Drexler, disbarred for their actions as anti-tax protesters in Minnesota (see December 9, 1968 and After), are sentenced to lengthy prison terms for founding and marketing fake churches (the Basic Bible Church and the Life Science Church) for the purpose of allowing people to avoid paying income taxes. Daly and Drexler are proponents of the popular “Fifth Amendment Return” that features citizens refusing to pay federal income taxes on Fifth Amendment grounds (see 1951-1967) and the idea that Federal Reserve paper notes are not legitimate currency because they cannot be redeemed “in specie”—a citizen cannot go to a bank and redeem a paper note for the note’s value in gold or silver. (Anti-Defamation League 2011)

Gordon Kahl, an anti-tax protester, Posse Comitatus member (see 1967 - 1973 and 1975 - 1981), and federal fugitive who killed two US Marshals in a February shootout in North Dakota (see February 13, 1983 and After), quickly gains national prominence as the media begins reporting on the fatal confrontation. Most media reports only identify him as a “tax protester,” failing to mention his Posse Comitatus membership and often leaving out the involvement of his son, Yorie Kahl, and two other Posse members who helped kill the marshals and wound three others. CBS news anchor Dan Rather goes farther than most of his colleagues, describing Kahl as “a radical survivalist, a fanatic, [and] an ultraright-wing tax protester” whom authorities describe as “a killer.” It does not take long for Posse Comitatus leader James Wickstrom (see 1984) to begin contacting the media himself, proudly announcing Kahl’s Posse connections and announcing: “The Posse in Wisconsin is on standby alert. All communications are locked in.” The government has, in pursuing Kahl, “declared war on the people of this country,” Wickstrom tells reporters. He adds that his organization has some three million members, though the FBI estimates its membership at closer to a few thousand; the number is hard to pin down, as many anti-tax protesters (see 1951-1967, December 9, 1968 and After, 1970-1972, 1974, 1976-1978, 1980, and Early 1980s) have at least some affiliation with the loosely organized group. As the FBI and local law enforcement officials mount a nationwide manhunt, Wickstrom, with some success, tries to turn the story away from Kahl’s murder of the two marshals and towards the story of the Posse’s anti-tax beliefs. “What we have here is a gentleman who is now being pursued in North Dakota on a setup to shut his mouth because the American people are waking up by the tens of thousands across this country, realizing that we have been duped by a private central bank,” he declares to a Milwaukee reporter. He makes an appearance on the nationally televised Phil Donahue Show, where he claims that his “heart really goes out to the US Marshals and the children of those marshals and their families.” Asked by Donahue if he would join Kahl’s wife in asking Kahl to turn himself in, Wickstrom changes the subject, arguing that Kahl’s civil rights have been violated and the real issues are farm foreclosures, corrupt courts, the income tax, the Federal Reserve, unemployment, foreign workers, and Jews. In 2002, author Daniel Levitas will write, “Phil Donahue’s dialogue with Wickstrom was oftentimes inane, and though he clearly didn’t agree with his guest, he gave Wickstrom a tremendous platform to spread his ideas.” Wickstrom will use his media appearances to mount a longshot candidacy for governor of Wisconsin. (Levitas 2002, pp. 201-204) Four months later, Kahl will die in a bloody standoff with police officers in Arkansas (see March 13 - June 3, 1983).

The cover of the first volume of ‘The Law that Never Was.’The cover of the first volume of ‘The Law that Never Was.’ [Source: Radaris (.com) / Amazon (.com)]Two anti-tax protesters, William “Bill” Benson and Martin J. “Red” Beckman, publish a two-volume book, The Law that Never Was, that argues the 16th Amendment, the constitutional amendment giving the federal government the authority to levy income taxes, is null and void (see 1951-1967, 1970-1972, 1976-1978, and Early 1980s). The arguments in the book include the idea that because the amendment was ratified by different states with small differences in capitalization and punctuation, it was never properly ratified, as well as the argument that since Ohio was not yet a state when it ratified the amendment, Ohio’s ratification of the amendment renders it null. The authors include other arguments—the Internal Revenue Code is not “positive law”; the Internal Revenue Service is not a legitimate government agency; wages do not qualify as “taxable income”; “sovereign citizens” are exempt from income tax—all of which will be declared worthless and frivolous by various state and federal courts. The Anti-Defamation League will write that the arguments advanced by Benson and Beckman “are used again and again by tax protesters.… When a tax protest argument fails in court, the response among tax protesters is typically not to conclude that the argument was erroneous but rather to assume that the judge was wrong, corrupt, or deliberately misinterpreting the law.” Benson is a former investigator for the Illinois Internal Revenue Service, while Beckman is a virulent anti-Semite who accuses Jews of worshiping Satan and says the Holocaust was God’s “judgment upon a people who believe Satan is their god.” In 1991, Benson will be convicted of tax fraud and tax evasion, and will be sued by the US government to stop him from promoting an “abusive tax shelter” by selling what he calls a “Reliance Defense Package” while doing business as “Constitutional Research Associates.” In 2007, a federal court will find that his Reliance Defense Package “contained false or fraudulent information concerning tax advice,” and will note that a circuit court “explicitly rejected Benson’s arguments that the Sixteenth Amendment was not properly ratified.” Benson’s work will frequently be cited by tax protesters, many of whom will be fined or convicted for relying on his claims. (Southern Poverty Law Center 12/2001; Tax Protester Dossiers 11/30/2009; Anti-Defamation League 2011)

Fox News legal analyst Andrew Napolitano, a former federal judge and a guest on Fox News host Glenn Beck’s broadcast, says: “How about floating a constitutional amendment amongst the states? Let’s rescind the 16th Amendment. That’s the income tax. If 25, 30 states start thinking about it and talking about it seriously, the Congress will take note because they will be scared to death it will starve them out of existence. And they won’t be able to regulate progressively or retrogressively how we live.” (Media Matters 9/7/2010) The 16th Amendment allows Congress to collect income taxes. It was passed by Congress and submitted to the states in 1909 and ratified in 1913, both under President William Howard Taft. Recently, far-right Republicans (see 1951-1967, 1970-1972, 1976-1978, Early 1980s, and 1985) and tea party activists have begun calling for its repeal, joined by some members of Congress (see April 28, 1999). (Media Matters 9/7/2010; Legal Information Institute 2011)

Fox News legal analyst Andrew Napolitano, a former federal judge and a guest on Fox News host Glenn Beck’s broadcast, advocates repealing the 16th Amendment, something he has done previously on Beck’s show (see April 28, 2009). Beck asks about “this solution that you and I have talked about on a constitutional amendment, or a threat of a constitutional amendment.” Napolitano replies: “If two-thirds of the states ask the Congress to call a constitutional convention to consider the adoption of this amendment, which I’ll describe in a moment, as it gets closer and closer to the two-thirds necessary and Congress would be required to call the convention, you’ll see some reaction on the part of Congress to attempt to placate the states that want to call this. Now, the constitutional amendment is a simple one. It simply abolishes the 16th Amendment and states affirmatively that Congress shall have no power to tax the personal incomes of individual persons. If that were enacted, it would starve the federal government back into the original footprint that the founders intended for it. But as it gets closer to enactment, Congress will have to do something for fear that it might be enacted.” (Glenn Beck 5/6/2009; Media Matters 9/7/2010) The 16th Amendment allows Congress to collect income taxes. It was passed by Congress and submitted to the states in 1909 and ratified in 1913, both under President William Howard Taft. Recently, far-right Republicans (see 1951-1967, 1970-1972, 1976-1978, Early 1980s, and 1985) and tea party activists have begun calling for its repeal, joined by some members of Congress (see April 28, 1999). (Media Matters 9/7/2010; Legal Information Institute 2011)

Former Govenor Mike Huckabee (R-AR), a Fox News host and a presumed 2012 presidential candidate, calls the passage of the 17th Amendment “one of the dumbest things we ever did in this country.” Huckabee, appearing as a guest on Fox News Radio’s Brian & the Judge, also says that Republicans should consider calling for the repeal of the 16th Amendment, saying, “I think we ought to talk about repealing the 16th Amendment, which authorizes the IRS.” He then says that Americans should “talk about—this is one of those things that senators would never agree, but one of the dumbest things we ever did in this country was the 17th Amendment.” He adds: “The original Constitution and the way we operated for the first 120 years of our existence, senators were appointed by state legislators to represent the broader interests of the states to make sure the federal government didn’t take too much power into itself. And most people don’t even remember that. But we have had an increasing problem of too much centralization of federal power at the expense of local and state governments—the antithesis of our Constitution—because we’ve put all this power in the popular election of senators and representatives.” (Media Matters 10/16/2009) The 16th Amendment allows Congress to collect income taxes. It was passed by Congress and submitted to the states in 1909 and ratified in 1913, both under President William Howard Taft. The 17th Amendment provides for the direct election of US senators, rather than their selection by state legislators, in part to eliminate cronyism and corruption in their ascension to the US Capitol. It was signed into law by President Woodrow Wilson in 1913. Recently, far-right Republicans (see 1951-1967, 1970-1972, 1976-1978, Early 1980s, and 1985) and tea party activists have begun calling for their repeal, joined by some members of Congress (see 1951-1967 and April 28, 1999). (Media Matters 9/7/2010; Legal Information Institute 2011; Legal Information Institute 2011)


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