In February President Bush presented a $1.6 trillion-dollar tax cut plan. Two features that received high marks from small business advocacy groups, are marginal rate reductions and the repeal of the death tax.
"When you cut marginal rates, you increase capital for a company, and that can be used for investments in technology, efficiency issues, better pension, or healthcare plans or wages," says Dan Blankenburg, manager of legislative affairs for the National Federation of Independent Business (NFIB). "And if you repeal the death tax, small businesses don't have to worry about paying life insurance premiums for policies they must carry in order to cover the death tax liability."
But those steps are still not enough for people like Irwin Schiff, owner of Freedom Books in Las Vegas and author of The Great Income Tax Hoax. His arguments, and those of others like him, center on interpretation of the 16th amendment to the U.S. Constitution, which gives Congress power to levy and collect taxes. Claims that the amendment was never properly ratified or that its wording is too vague to be effective dot several anti-tax Web sites, including Schiff's own site (www.paynoincometax.com).
"A small businessperson has Uncle Sam as a partner, who puts up no money, does no work, and in many cases wants 30 or 40 percent," Schiff says. "My materials will allow you to get rid of your deadhead partner; you fire the government."
Many tax watchers refute no-tax claims by citing several court cases that have ruled in favor of taxation. "The courts have been very clear that the amendment on income tax is constitutional, and that people owe income tax," says John Berthoud, president of the National Taxpayers Union. "It's a more productive use of time and resources to say, 'what laws can we pass to lower the tax burden?' Ultimately, yes, we'd like to see the income tax eliminated, and replaced by either a national sales tax or a flat tax."
Adds NFIB's Blankenburg, "The Federal government has to have revenue to run." he says. "The question is how much is enough? The deeper question of whether the federal government has any right to tax Americans is going to have to be fought another day."
That day may come soon. The New York Times recently reported that the IRS will step up its efforts to investigate and prosecute businesses refusing to pay up.