Oliver Wendell Holmes Jr., associate justice of the U.S. Supreme Court from 1902 to 1932, once said, “I like to pay taxes. With them, I buy civilization.” Not all of his fellow citizens have been as levelheaded about the subject. From tea-dumping colonists to high-living gangsters to presidential candidates, Americans have been decrying, evading, protesting and debating taxes since their nation’s dawning days—and they aren’t alone.
Taxes were as hot a topic in the 18th century as they are now. Scottish economist Adam Smith (1723–1790) supported fair taxation but objected to governmental overreach, contending, “There is no art which one government sooner learns of another than that of draining money from the pockets of the people.” In the American colonies, the tax issue began to boil when the British Parliament enforced the Stamp Act of 1765, a fee on legal documents paid to the crown. The Tea Act of 1773, which imposed further taxes, led to the momentous events of December 16, when colonists dumped British tea into Boston Harbor rather than pay import duties on it. With no voice in Parliament, the colonists considered the tariffs “taxation without representation.” Massachusetts writer and philosopher Henry David Thoreau mounted his own protest against governmental levies in 1846, choosing jail over payment. “If a thousand men were not to pay their tax bills this year,” he declared, “that would not be a violent and bloody measure, as it would be to pay them and enable the State to commit violence and shed innocent blood.” Thoreau’s act of civil disobedience has inspired many, including Martin Luther King Jr.
Unrepentant Chicago gangster Al Capone showed a surprisingly patriotic stripe when he said, “Don’t you get the idea I’m one of those goddam radicals. Don’t get the idea I’m knocking the American system. This American system of ours…gives to each and every one of us a great opportunity if we only seize it with both hands and make the most of it.” Capone found that opportunity in criminal enterprise, flagrant disregard for the law and evading the taxes on his earnings. In December 1773 some three dozen American colonists chose the unlawful path to protest the British-imposed tax on tea—a beverage many colonial Americans considered as suspect as Capone’s bootlegged alcohol (future first lady Abigail Adams called it “that bainfull weed”). Dressed as Mohawk Indians, the band boarded three ships in Boston Harbor belonging to the East India Company and threw the contents of 340 cases of tea overboard. Many patriots opposed the incident. Benjamin Franklin thought the trading company should be compensated, and George Washington took the Bostonians to task. Even so, the Boston Tea Party, and the protest against British sanctions that ensued, sparked the American Revolution, paving the road to Capone’s land of opportunity.
Fourteen years after the Boston Tea Party, on September 17, 1787, the Continental Congress in Philadelphia ratified the United States Constitution. It laid the framework for the country’s laws and government. Among the many rules the Constitution put into effect were the means for the new government to raise money and the structure for representation. Taxation with representation, the principle that sparked the incident in Boston Harbor, was guaranteed.
Article One, section 8, reads, “The Congress shall have power to lay and collect taxes, duties, imposts and excises, to pay the debts and provide for the common defense and general welfare of the United States.” Americans have been grousing about taxes ever since, proving the truth of George Washington’s observation, “No taxes can be devised which are not more or less inconvenient and unpleasant.” In November 1789, seven months after the 11 original states ratified the Constitution, 83-year-old Benjamin Franklin wrote to a French friend, “Our new Constitution is now established and has an appearance that promises permanency; but in this world nothing can be said to be certain, except death and taxes.” Franklin died a few months after writing the letter, and taxes remain a certainty in American life.
In July 1846 Henry David Thoreau was imprisoned in Concord, Massachusetts. The charge was nonpayment of his poll tax, a uniform sum levied against every voter. He claimed he had evaded the tax to protest slavery and the Mexican-American War, which would have expanded U.S.-controlled slave territory. As Thoreau saw it, if a law “is of such a nature that it requires you to be the agent of injustice to another, then, I say, break the law.” He was released after one night, against his wishes, when a relative paid the tax. Al Capone, another well-known tax evader, cynically claimed similarly altruistic motives. Authorities had been unable to bring the Chicago gangster to justice for crimes ranging from bootlegging and gambling to the 1929 St. Valentine’s Day Massacre of seven rival gang members. Capone’s downfall came in 1931, when the government made a case against him for tax evasion. He claimed his actions were for the good of others. The prosecutor’s scathing response: “Did Robin Hood buy $8,000 worth of diamond belt buckles to give to the unemployed? Was it a Robin Hood who bought a meat bill of $6,500 in Florida? Did that meat go to the unemployed? No!”
By 1929 Al Capone was employing more than 600 gangsters to protect his Chicago fiefdom from rival gangs and doling out millions in bribes to politicians, prosecutors, policemen and other city officials. Henchmen and hush money, though, couldn’t protect him from life’s only two certainties (according to Ben Franklin), death and taxes. After seven-plus years in prison for tax evasion, Capone emerged greatly damaged from the effects of untreated syphilis, to which he succumbed in 1947. Leona Helmsley, the tyrannical hotelier who came to be known as the Queen of Mean, also defied Franklin’s words of wisdom (as well as the U.S. tax code), asserting, “We don’t pay taxes. Only the little people pay taxes.” She was right in part; as multibillionaire Warren Buffett has noted, his tax rate is lower than his secretary’s. But the tax collector caught up with Helmsley after she wrote off improvements to her Connecticut mansion as business expenses. Convicted of conspiracy to defraud the United States, tax evasion and several other crimes, she served 19 months in prison. The Queen of Mean died of heart failure in 2007, leaving part of her vast fortune to her dog, Trouble, who was not subject to taxation.
Published after David Foster Wallace’s suicide, The Pale King concerns loneliness and boredom among employees at the Internal Revenue Service in Peoria, Illinois. Many actual IRS cases against delinquent taxpayers are far more colorful than those in the novel, including actions taken against accused murderer O.J. Simpson, Beverly Hills madam Heidi Fleiss, lifestyle guru Martha Stewart, former U.S. treasury secretary Timothy Geithner and country singer Willie Nelson. Catching Al Capone, though, is still the biggest IRS coup. Prohibition enforcement agent Eliot Ness and his cohorts, dubbed the Untouchables, are well known for their efforts to bust Capone’s bootlegging empire, but mild-mannered IRS agent Frank Wilson finally brought Capone down. Wilson placed an infiltrator in Capone’s headquarters in Chicago’s Lexington Hotel, confiscated ledgers showing payments to Capone and brought in Western Union clerks who testified that Capone had cashed money transfers. Capone was tried on 23 counts, but despite the evidence, he was found guilty of three felony tax evasion counts and two misdemeanors. The punishment came closer to fitting his crimes, however: Capone was sentenced to federal prison for 11 years (he served seven), fined $50,000 and charged $215,000 in back taxes, plus interest.
Henry David Thoreau refused to pay taxes on moral grounds and willingly went to jail for his beliefs. Most of us try to pay as little as we possibly can without going to jail. Wealthy individuals use offshore tax havens to shelter their money from taxation legally. Among them is former Republican presidential candidate Mitt Romney, whose tax records indicate he has invested an amount between $5 million and $25 million in the Cayman Islands, where it is sheltered from U.S. taxation. Bernard Madoff also chose the Caymans to stockpile funds he gained illegally in the largest Ponzi scheme in U.S. history. To avoid France’s 75 percent tax on those earning more than 1 million euros a year, actor Gérard Depardieu decamped to Russia. The Beatles complained about the high U.K. tax rate in the 1966 song “Taxman,” and drummer Ringo Starr recently relocated to tax-free Monaco. The Rolling Stones fled to the south of France in 1972—before the rates there drove Depardieu to bid adieu. More recent tax-avoidance maneuverings earned the band the label Stingy Stones in the British press when reports surfaced claiming they had paid just 1.6 percent tax on earnings of $389 million.
David Foster Wallace set The Pale King in the Peoria, Illinois, Internal Revenue Service regional examination center, in the mid-1980s. His descriptions of the slow, dull work of bureaucracy recount in part the year he worked at the IRS while in college: “David Cusk turns a page. Boris Kratz turns a page. Robert Atkins turns two separate pages. Anand Singh turns a page. R. Jarvis Brown uncrosses his legs and turns a page. Latrice Theakston turns a page."
A similar scene may have unfolded as IRS analysts reviewed the 390 pages of Mitt and Ann Romney’s 2011 return, in which the presidential candidate and his wife declared $13.69 million in income and paid $1.9 million in taxes, a rate of 14.1 percent. Many critics of the wealthy businessman’s financial maneuverings wondered whether Romney, who dismissed the 47 percent of Americans who pay no federal income tax as “victims,” had paid his fair share. In fact, the Romneys had not taken full advantage of deductions for charitable contributions that would’ve allowed them to pay $467,000 less. The real-life IRS counterparts of Wallace’s drones had a lot to do: The couple had three years to file amended returns and take the deductions.