Learning from the Past: What History Teaches

0:00Well, I guess we're getting in the last lap, huh? When they asked me to speak, I had been asked to speak at the University of Vienna. And they wanted to speak to me for six hours a day for three days, each day. And I said, I can't speak six hours a day for three days by the time the third day comes around. I don't know how long I'm going to be able to talk. In a little while you're going to escape back to those cool temperatures in Canada, huh? Yeah, sure. I'm not a great one for... See, we don't have air conditioning where we are, so this is all kind of... I'm not really comfortable with air conditioning, but I know that's... What town, Professor Adams?

0:45What town? I live in a town called Omimi. Omimi. What's it near? Yeah. Where about? It's near Lindsay. The bustling little town once had seven hotels and five gas stations, now it has no gas stations, no hotels, it has a max milk, that's about it, things went around it and it's going to disappear like that happens sometimes.

1:52The area, you know, we call it snowbirds, and the name for them, but my wife is a homebody, and so she gets homesick when I get to the front gate, so we don't do good going south. Well, let me, since it's the last session, and since maybe you'd like to talk about some creative things, I have a chapter in my book about suggestions for reforming the tax system. And there's one about how a good tax goes bad. That's kind of a cute chapter. It has some interesting observations.

2:37It's based on the assumption that somebody 200 years in the future were to look back at our tax system. How would they see it? Because, you know, we look back at the British system and the Spanish, to see what we didn't like about them or do like, so what would they see? Well, I thought I could hold that and go into my suggestions for what we could do. I also have a list of 26 suggestions, 27 suggestions on learning from the past, But I have one chapter called Taming the Monster, meaning the tax system.

3:24And some people have picked up on this and thought it was quite interesting. Well, I'll just throw them out and you can see what you think of them. That's on page 460 of the new edition. It's 460, which starts, yeah, 457, yeah. And the first item I say is to tear down the spy system. Remember we talked about how it was an honest system, now it's a spy system. I think we should tear down the spy system. I think that that has simply destroyed our liberties, probably more than anything else. And if you'll remember, Monash, you said that freedom and liberty has the seeds of its own destruction. Because you give the revenue authorities too much authority, Then they have to have too much power, and once they have too much power, you've lost your liberties.

4:16And we've already lost them all. I mean, I think our spy system is just outrageous. That every time we turn around, that we have to file a form, or we're being watched, or photographing our bank accounts, I think this is outrageous for a free society. I don't think you can call yourself a free society with all the intrusions that we live with. And now, of course, with the Patriot Act, I suppose there's probably nothing left. That's really too bad. So my first idea would be to tear down the spy system. Can anybody say why we shouldn't? You all like it? Yeah. All of my peers, not all of them, practically all of them here, it's a university town and they're retired, are delighted with the system. Just like Clinton.

5:02Just like Clinton, right? Bill Clinton. Oh, mercy! My wife had a terrible morning with a friend who just, what a wonderful convention they had, and what a tremendous care he is, and what a wonderful speech Clinton made. She had a hard time keeping her mouth shut, which she did, which is a good thing, because she's not very good. Well, that's why... Have you got an answer? That's why we have a spy system, because we tolerate it. What's the answer to these devoted worshipers of Washington? I don't know. You can just ask them what becomes of our liberty if you photograph everything in our bank account.

5:48What becomes of our liberty if every time we turn around we have to file an information return? What becomes of our liberty if the government knows everything we're doing? In fact, some writers years ago said the test of liberty is how much the government does not know about you. Today, they're going to argue that we need all that because otherwise terrorists are going to use financial systems. Well, but we had this buy system before 9-11. I mean, they just had a little, incy-weency bit of muscle, they got so much now, what can they do? So, every time you turn around that you file an information return, they know what you're doing. Well, these people, like his friends he's talking about, they think it's your duty to pay taxes, a certain amount of taxes to support the government so it can carry on all the wonderful work it does and that anybody who doesn't do that is a villain. And also, they're on their own, yeah, someone,

6:43that's true, I mean, they are, but they think that if they'll turn people in, and I'm not saying his anch time when you think about what that is because I think we'll add drives up everybody else's taxes I know here that argument that's a way to make you nothing to do with with your taxes and and if the government comes up short maybe that's a good thing they have less money to spend you know that that's always been my argument now in ancient times it was true that the taxes were We're on a town, and if somebody left town, like did in the Roman days, then the bill fell back on the rest of them, but we don't have that problem.

7:31So when they say, if you don't pay it, then somebody else says, oh no, the less money they have, the better off we are. Well, that works. The government has to raise taxes and have to get the money, the higher percentage from everybody else, because they're not getting it from you and him, who's cheating or whatever. The first thing we should do is tear down the spy system, and it reminds me of Ronald Regan when he was in Berlin, and he says, Gorbachev, tear this wall down. And I think that should apply to our taxes, I particularly because I grew up at a time when we didn't have the SPI system, and they just keep adding to it and adding to it every year, they put one more thing, so that's the first thing I think we should think about doing is tearing down the SPI system.

8:23The only way you can cut costs is to eliminate programs. And there's no program that somebody doesn't profit from.

8:41As our historian, can you give us examples as we think politically about circumstances that are necessary to successfully reduce the taxes on tax regimes? Are there any examples where societies have reformed themselves without pulling out the guillotines? The guillotine was really a good solution. The most successful kind of revolution of that kind of power is the Soviet Union. The American Revolution was a protest against taxes. They didn't like the stamp tax and they revolted and got rid of that. They didn't like the custom taxes and they got rid of that. And then when we reformed and Hamilton and his bunch said we'll need more money, we'll tax whiskey, they revolted and got rid of that.

9:34So America has a wonderful history of revolting against taxes and getting rid of them. And we even had a lot of resistance against the income tax after the Civil War and they got rid of that too, you'll see. So, it certainly is possible, but I think that we fall back on Gladstone's observation that the real culprit is the public expenditure, and if we didn't have the public expenditure, then we wouldn't need the taxes. I'm going to give you a tough one for you to answer. Last year, in the state of Alabama, we voted down a money bill. The governor stated he needed $1.3 billion extra revenue. He was $700,000 short, so he's $1.3 billion, which sounds like government aside.

10:22Whatever we voted it down, which I thought was a clear message, you guys' spending, you must be more careful. You don't know this campus, but if you care to try, you can't even walk around this campus through the number of buildings that are being torn down and re-erected this year. Yeah, I noticed that. You didn't give them the money. I did walk around. It's a little bit crowded. You can't drive through. I'm sure there wasn't a pipeline a long time ago. Oh, I'm sure it was, but it certainly didn't, they didn't care what we voted. Yeah. It was in the, we got a, there's a justification for it. Yeah. They didn't care what we voted, it was a justification for it. Yeah, well that was sort of like Teddy Roosevelt when he asked for money to send the American fleet around the world and Congress turned him down. And so he sent it anyway, they got halfway around the world, they ran out of money, they ran out of fuel, so Congress had to bail them out with money to bring the fleet home.

11:16And that's why they've been stuck on India sometimes. Politicians can really be difficult animals when it comes to money, but I still think that we cannot tolerate a spy system and be a free society. We just can't do that. Now, if the income tax requires this kind of a spy system to work, which it didn't for 50 years, then we're going to have to have a different tax system. We can't afford the loss of our liberties just to collect taxes. We can just get a better system that doesn't require it. That was my first point. My second point was we should establish a crime for tax extortion, just like the Romans did, as well as a civil action for damages.

12:09What that means is if a revenue agent comes in, he audits you, and he tries to stick it to you, and he doesn't have a basis to do it, we can sue the son of a bitch, and we can throw him in jail. This is in my book, yeah. And I've had people pick up on that, because revenue agents have a wonderful habit of shaking you down. I remember one of my agents went into one of my clients and it was a big company and the guy came in and spent a day looking through the books and he said, well, it's interesting, he says, I'll tell you what I'll do, I'll wrap the audit up now for a million bucks because I think I can find it.

12:54Well, he couldn't. But you see, that was a shakedown. That was extortion. And I don't think they should be able to do that. And they do do that. What they're doing is tobacco companies. They do it all the time. It's not anything new. But it's cheaper to pay than it is to fight. Yes. Yeah. It is cheaper. Oh, you're the son of a bitch here. Huh? Well, we just need a more courageous people, people that do fight, and a lot of them do, a lot of them put up with it. I thought that was a good idea, and it was based on Roman law, because the Romans, this is Roman law. And they provided, in the early days, if the tact man collected more than he was entitled to, they would crucify him on the spot.

13:56At the cross and hang the guy up and get the message out there. So, I think it's legitimate that if an agent tries to shake you down, you ought to be able to sue the guy, and he ought to be liable in criminal matters. He has an obligation to enforce the tax law honestly and fairly and justly. And if he tries to shake you down like he did my client, the guy says, I'll take a million bucks and end the audit today. Well, that is absolute extortion. I had no business doing that. My third thing is that there's a civil action for damages for tortious tax administration, including malicious tax investigations, extortions, leaked information, and grand jury abuse.

14:48You know, they go to the grand jury, if you know how the grand jury works, you know, the only people there is the prosecutor. And a lot of them will say, well, you know, they'll introduce a little bit of evidence, and they indict the guy, and so forth. Well, if they have these weak cases, they go grand jury, I think they ought to answer to it. If they can't come up with a solid case, I think somebody ought to go to jail or be sued for damages, because that's a terrible burden on people. They have to defend themselves against the charge, and then they try to shake you down. And then they say, well, we'll make a plea bargain. And a plea bargain means that you won't get quite as many years in jail as if you got convicted. The theory of grand jury was to protect you from groundless prosecutions, and it so happens that the prosecuted attorneys go in there and they make up their little case, and a lot of grand juries just sit there and do nothing.

15:59My fourth form, have all federal tax districts correspond with congressional districts. So the district director of internal revenue for your district would be the same district that your congressman is in. And that gives your congressman an obligation to keep his thumb on this guy for misbehaving. And you see, that isn't what happened. In my case that I told you about the other day, the House of Representatives contacted the district director in Los Angeles, and the district director told him, place B, go to hell.

16:52And his district is up here in Ventura, and the district director for Los Angeles covered a number of congressional districts. I would have each congressional district have its own district director of internal revenue. And I think that would help those guys to behave a little bit. They wouldn't be telling Garrison where they could go. So these are well thought out, I thought from my experience, these make good sense. When I thought that tax disputes should be adjudicated like any other debt, the idea of having to pay the tax and sue to get it back, it's pretty ridiculous, but that's the way the system works. In other words, you have to go to tax court, and tax court was originally just an administrative court.

17:38It was called the Board of Tax Appeals or some dumb name, and they eventually called it the tax court, and that's the only way you can get adjudication without paying for it. To be able to adjudicate your tax obligation just like you adjudicate any debt. Somebody says, you owe money, then you say, sue me. And the IRS says, you owe your money, I would say, sue me. And then we'd go to court, and we'd write the jury trial, we'd have all the benefits that we're then supposed to have in civil litigation. So I think that would be a good point. I'd like to see that in there. There, what was my, yeah, then I thought we should decriminalize the tax law. You might want to go maybe to where the Swiss are.

18:44The Swiss have a crime of tax fraud, but it has to be a real fraud. See, we use the word tax fraud, but we didn't file a tax return. Well, that's no tax fraud. And with tax fraud, it would be a simple example, as suppose you buy yourself a yacht and you put it on your business as a bulldozer, and you start depreciating it. That's tax fraud, you see. And okay, I would grant legitimate common law fraud, okay, if it's legitimate. But I certainly don't think that you can call a tax evade, not file on a tax return, as a crime. If I don't pay my gas bill, it's not a crime, they have to come after me.

19:32And I think if you don't pay your tax bill, they should have to come after you. Civil action, and then you have all the protection, the benefits that the law provides for a civil So I'm not really that radical, but I've had a lot of positive comments about this, and this is another one. My seventh one on my list is make congressional representatives and federal judges immune from the IRS. That way they wouldn't have the pressure on them, and what are they going to do to me? I think that if your congressman was immune from the IRS, he could look out for your best interest. The problem is that now he's afraid of what they'll do to him.

20:18You mean he'd still have to pay his taxes? No. I would make him immune from the tax system. And that would give them independent aloofness. We need to take away, in compensation, we need to eliminate their special pension and their special health program. Well, whatever you want to do. I would just say, get the IRS off their back so they can... Murray Rothbard argued that people who were paid by the government employees didn't pay taxes anyway, they just simply, if you pay in, if you're paid $100,000 and you give $30,000 back, you only receive $70,000 in income because if they take from the tax pot to give it to you and then they put it back in the tax pot, it's the net effect is all there is.

21:13See, my purpose here is to make your representative and congress free and independent. Because we have so many examples of where they went after the IRS and they ended up in real trouble. So this isn't just something I thought about on the moon, this is something that is a real case. and there's not enough tax in that bunch of guys to mount the hill of beans and they're serving the public anyway and they're probably underpaid considering what they do so I don't think they should have to pay taxes it because it makes them immune and they can do what's best for us I know that's funny what was Not underpaid in Alabama.

22:30That does seem kind of funny that the government would tax the tax money they're giving to their employees. Well, of course, they didn't win, but they had a point. And at least because the idea was that they would have an aloofness from the paying process. This is their salary and nobody's going to take it away from them. And so there was even the theory on it, yes. That does seem kind of funny that the government would tax the tax money they're giving to their employees. Well, remember in history that I've talked about, in Spain, the civil service paid no tax is one of the ways you got out of the system, and you go all the way back to ancient Egypt, the scribes paid no tax, and that one teacher says, mark it well, he who works in writing is not taxed, and he was telling his kids where they should go rather than get out into the field.

23:30Would that apply to Carey's wife? Carey's wife.

24:00Theoretical, because they claim to be so much concerned about the working man and the poor elegant. I've never worked in Dana's life, but really. Okay, that's my seventh point. I've got one more point. Well, I just said, make the federal tax system as indirect as possible. And they were talking about sales taxes and things of that sort, and getting rid of the forms of direct taxation. Well, anyway, yeah, this is Andrew Mellon, who, maybe you don't know the whole story of Mellon. Mellon was the Secretary of Treasury during the 20s. And for some reason, Roosevelt hated him.

24:46I think Roosevelt had a problem that because he was a bit of an aristocrat in origin, you know, the Roosevelt family and so forth, and so forth. Yet he didn't quite get accepted into the Blue Bloods of the East. He didn't get in the right country club, but he was always kind of bitter at that. So he turns around during the night when he becomes president and has Andrew Mellon indicted for tax evasion. And he's the secretary of treasury for, you know, richest guys in America. And it went on and, you know, they never succeeded in it, but it was just a way of harassing him. And this would go to my point of bringing groundless tax suits and being liable for damages for doing it, for whoever brought that case.

25:32And you remember Ella Erickman who used the IRS, he called in the IRS to go after Nixon's enemies and using the exact words he says, I hate your god damn foot dragging. You know, go after these guys. Well, you know, the worst thing in the world is for the executive to have the power to use the tax system to punish people, and if they do it, they should get punished. One of our problems is we tolerate too much misdeeds from our government, and particularly our police and things like that. I don't know why, but we do tolerate it. We know it happens, and this is vile a crime, as you can imagine. Remember, Kennedy used debt to force the steal of Degadish to accept a union contract.

26:40But isn't it true that government becomes more corrupt the longer it continues? and I think the more power you get what was it that power corrupts or no power tends to corrupt and absolute power corrupts absolutely who would say who is it that said that Lord Atkin yeah do you remember what he said about when he I wrote to Robert E. Lee. He said that, I don't know exactly how he said it, but one of the worst things that happened, he says, is when you lost the war, because I was more upset with your defeat than I was with our victory at Waterloo.

27:51I think that is what he said, yeah, and he was a guy that had a great sense of, I think, of justice, but his power tends to corrupt and absolute power corrupts absolutely. I mean, we just live with that every day, and so that would apply to that. Let me talk a little bit about George Clemenceau. He was the Prime Minister of France in World War I, and after the war was over, he came and he spoke and lectured at the Ivy University, I should call them Ivy University, you know, the big university in the East.

28:38And when he was leaving on the docks of New York, the press came down to interview him and ask him how he liked his visit to America, and he said it was fine, and he said, do you have any complaints about the American people? And he said, yeah, a couple. He says, first he says, you make a lousy cup of coffee. Secondly, he says, you're terribly ignorant of history, was his second complaint. And I think both of them are still pretty true, even though we do have some of the coffee machines, or just gaslight anyway.

29:26Then on the remedies, there's a fellow who made this statement in a bar in Paris. He said, my fortune is in the White, is in the Bahamas as long as that son of a bitch in the White House, referring to Roosevelt. Well, I have a list of the very lessons from history. If Clemenceau is right, and he probably is, The very fact that we don't have a lot of interest in tax history, when it's the most fundamental thing in society, is amazing. But it seems to be true. I have found that, in my experience, I wanted to go into the history a little bit and how a good tax system goes bad, Because our income tax system, even though the rates were kind of high, wasn't too bad, but it's really gone bad.

30:31And one of the areas that's gone bad, I think, is in the criminal punishments for tax evasion. And in my book, I talk about a fellow by the name of Otto Lamden. He was a, is it Lamberg? Anyway, he's the finance minister of Germany.

31:18and Policy Prosecutions. One of them, I didn't bring it with me, but one of them was a group down in the Cayman Islands that called themselves the United States Tax Planning Service. And they had this beautiful ad, had a picture of the Boston Celtics with a flag, and had a picture of USC with a flag, and at the bottom had a picture of US Tax Planning Services. Well, the IRS went after those guys, and it was Mickey Mouse stuff, you know, they should have got in trouble. But when they came up, they got punished. There was a Judge Dean Whipple in Kansas City that gave the guy 25 years. And then the other guy behind this, from which they got this team idea, this tax planning team, you see a lot today.

32:11Now, they're using the team stuff. Have you noticed that? In the markets and so forth, you know, team, this, team, oh yeah, like that. It was a guy who was a wrestling coach up in Oregon, and he was the one that thought of the team idea. Well, they gave him 25 years in the camp, and when he tried to get it reduced, they wouldn't reduce it. So here are these grotesque punishments that we hand out, and one was a lady named Trula Walkman. I thought maybe that the judge didn't like women, but she apparently cheated on a million dollars worth of taxes and she got 25 years. So what are we doing things like that for? You could rob a bank and get less punishment than that.

32:57But this is the theory. You scare the hell out of everybody. That's why some of the cartoons are kind of cute that I dug up. One of the old ones shows a guy up in a tree, and underneath is an IRS agent, and the guy's up in the tree looking down at him, and he says all I asked for was a match, or the one that shows the American terrorist is an IRS guy with a briefcase. So I think that's the pocket of tyranny that we have that's pretty sad. There's a guy who wrote a little book called The April Game, have any of you heard of that book?

33:43It's really a delight, it's an old publication, it's written by an IRS agent and he tells his story and he says that, let me show you what he says about, I forgot the right book, I got too many books, I can't keep track of them. Yeah, yeah, he said that we're worse than the Gestapo. He says, Of all the information gathering agencies in all the world's governments, past or present, the very cleverest must surely be the United States Internal Revenue Service. That monster organization gathers more information about more people and does it quietly and raises less public outcry in the process than any other government outfit I know of. It may be that the Soviet Union and the Red China can boast of agencies that beat the IRS on these counts, but I doubt it.

34:34The Gestapo? Not a contender either. So this is the IRS agent. And one of the things that he says here, how he really gets the taxpayers, he says, Now one information, I bring out a little black book and I say, may I have your name, sir? Which time he says they just fold, which reminds me of years ago when I was a young attorney and I was a public defender, I represented a guy, he and his partner had murdered a police officer and I was the only thing between him and the gas chamber And it was an interesting experience, but one day I asked him, how do you conduct a robbery?

35:24You know, these guys are real professional robbers. His face beams up, you know, almost like I'd ask a hat-back how it feels to go across the goalpost for a touchdown. He says, well, he says, I have a .45. And he's smiling all the time, and he says, I poke it out, and I point it right at him, and I say, this is it. And then he says, I bring back and slam it forward, and he says, and a 45 bullet hits the table and rolls across the table and drops on the floor. And he says, I own them. Well, that kind of reminds me of what the IRS guy does. He says, can I have your name, sir? You know, just about all of it. And he's got a little pen, a little black book.

36:10So, you know, we are scared to death of those guys. Well, what was that earliest of all the sayings? The man to fear is the tax collector, so it is. Well, let's see, those are some of the examples of, I think, abusive enough of our systems. Let's see what else I've got over here you might like. Oh yeah, Ingmar Bergman. He was the great Swedish director, made some wonderful movies. And the Swedish tax authorities got the feeling that maybe he was not paying his taxes. So the Swedish tax authorities went out while he was directing a movie and arrested him. And threw him in the can. They just arrested him.

36:56They also went out and picked up Bibi Andersson, a very beautiful Swedish actress that was on the set. They locked her up. They wouldn't even let her call home to her daughter. and eventually he was so upset that he left Sweden and he went on to Switzerland and he went to put up with these guys and finally they dropped and he charged against them and finally he came home and the press in Sweden got wind of this and published it and the government that had ruled Sweden for 30 years was thrown out of office the next time so we're not the only ones that have to put up with these angry bastards There's another thing that's quite interesting, if any of you get to Europe, in Rotterdam, there's a museum of taxation, it's quite a remarkable place.

37:49It's got all kinds of paraphernalia for smuggling, you know, not just empty bottom suitcases, but all various devices, and it's really quite worth seeing. So, we have that. The other thing we have is over in China, China is probably the only place today in which there are really riots and murders of tax agents. And one Chinese agency said in two years over 13 Chinese tax agents had been murdered. And then it tells a story in one province where the farmers, I wouldn't say arrested, the farmers seized four tax agents and shoved them in a pig pen and left them there for a couple of days.

38:39This is the current... Yeah, yeah, yeah, this is Mises. Anyway, I thought it was pretty funny. And then of course, what about old Will Rogers? Everybody loved Will Rogers. He was here before our time, but he was probably the most beloved humorist in America, and he didn't like the tax system, and he said, when I pay my taxes on the level, I don't know if I'm a crook or a martyr. And then they went after it all well, because he claimed a big deduction for his wife, The days before you had joint returns, and all you did was open the mail. And his answer to that was, well, the income tax has made more liars out of the Americans than golf has.

39:34But anyway, he's one of my favorites. I don't know about any of the ones who said the difference between the taxidermist and the tax man was the taxidermist left the skin. Okay, give me that again a little slower. The difference between the taxidermist and the tax man is the taxidermist will at least leave the skin. Yeah, and he did get in hot water with a service over his wife's deduction, because he made a lot of money, you know, a very successful guy, and apparently he paid her $20,000 and deducted it. Well, that's a lot of money going back in the 20s, you know, the bundle, he was a little... A bit much for opening the mail.

40:19All she did was open the mail, yeah. She was a high-class secretary. Yes. I got a great picture of him in the book. I think the book is worth the price. Nixon's tax scandal. You know how he got in trouble. There was a provision in the tax code that gave him the right to deduct the cost of his papers or something like that. But it had been repealed, so his tax account and the tax lawyer backdated the transfer, and it didn't work, they got caught, so it's a, oh well, of course Nixon was anything but a, well he's a politician, you know, he just got caught, that's the only difference between him and the others.

41:12The interesting thing, one of these guys noticed that in my chapter on the tax havens, go a flight to the havens, up here at the top, they go a flight to the heavens. This is something that publishers do sometimes. And in the first edition, it simply had the offshore world, but I don't know why they did that. And the Rolling Stones, some of you guys might be familiar with them, the musical business. In 1971 they left England because of the tax system, this is the way they go. And here's what they said, in 1971 we were forced to make a decision, courtesy of the British government, live in England and not be able to afford another set of tar strengths.

42:03Or move out, keep the band together, hence exile on Main Street, History, which is one of the songs that they wrote at that time. We did talk about some of the people that have fled. We did talk about Howard Hughes, and Howard Hughes, and I told you how he awarded all tax. He paid no tax because he used the foundation, and he borrowed money from it, and he paid interest on the loans, and the interest he deducted against his income. The Junior Accountant got to figure that out, but it took a lot to transfer all the huge tool companies' stock over to the Foundation. And today we have one of the certainly wonderful things that came with that, but he never had a bone in his body of charity, and with all that wealth he had, he was not a very nice guy.

42:56But one of the things that he did, and this is just one of the stories I'll give you When he tried to get Nixon to move the atomic testing from Nevada up to Alaska and the government really voted its back, afraid of what the Russians would do, and he stuck to it. He decided that he would set up a slush fund, and slush funds were kind of common in this He decided to set up a slush fund, so he got some clever tax guys who, he got one of his aides, and the aide's name was John Meyer, and Meyer went out and bought up all kinds of mining gold mining claims.

43:58times. He then sold them and—how did he do that? He bought up the claim—go ahead. One of the names was B.B. Reboza. That was one of the slush funds. Yeah, I was just thinking. What happened is—that's right. This guy bought up the claims through The result was they had millions of dollars that was collected offshore in the offshore company. And because it was offshore, it was not subject to U.S. tax.

44:45So he builds up this large slush fund, and the main target was Richard Nixon. or the main beneficiary was to be Mr. Nixon, but unfortunately the plan had a little problem. The guys who originally, the old mining prospectors in Nevada, who originally had the claims and and sold the claims offshore for a modest amount, didn't have the money to pay their tax. So what had happened is that Howard Hughes' aides gave them the cash in suitcases so they could pay their tax, and that should be fine.

45:38Well the problem is they didn't pay their tax, you know, they just, this is wonderful. We sold our claims, we got a barrel of dough, and now they gave us the money to pay our taxes, and we'll just pocket that too. Of course, the IRS caught that, and they went to these guys, and they said, well, what did you do with the money? And he says, we spent it. Oh, and why did you do this? Well, we did it because they wanted us to do it, and we were very happy to cooperate and be part of the arrangement. And the claims weren't worth anything, but they were suckers anyway. Well, the service has just absolutely got to live it over this, and they proceeded to try and chase this down.

46:26They went overseas, they contacted the banks overseas, and the professionals overseas, and everybody handled the money. Ultimately, they never got a dime out of the deal, but the thing is, because the government got into that, then, of course, Hughes backs off. He doesn't want everything to do with a sludge fund. Well, that meant the sludge fund was up for grabs, which was the other side of the coin. So all the people who were dealing with it were grabbing onto the money, and this was in Nevada. I know a little bit about this because I was familiar with it, and it was a rather funny story in one sense, but it was rather interesting that the service was really concerned with getting Hughes.

47:17They really didn't care too much about the money and who got it and so forth, but they wanted to nail Howard Hughes on this. And they almost did, because when he was in Venezuela, and they had an earthquake there, and so he was then going to fly to London, and if you know the history, he ended up in London for a while, but the plane had to stop in Miami to refuel, the jet did, and the service know he was coming. So when the plane was parked and Hughes was in it, the IRS agents went out to get him, you know, to serve him with the summons and so forth. And then Hughes just said, call Chester Davis. And Chester Davis was his lawyer in New York, and so he called Chester Davis, and Chester Davis called the IRS's treasury people, and they then told the revenue agents in Miami to lay off.

48:16And so they laid off. And so then Hughes went on and never did enter the United States, but Jack Anderson had written that Hughes had a lot of tax problems, and that's one of the reasons why he stayed out of the United States, and that's true. But the tax problems were the attempts at the slush fund, that was what the tax problem was. But none of this you'll read about, I know about it, because I was really with what happened. I was living in Houston, and that's where Dr. Loomis was from, so that battle, the Loomis's and some others, it went on for another 8, 9, 10, 12 years or so.

49:15Law against Hughes, everybody that could sue him, because they knew he wouldn't show himself. And eventually the federal, I guess it's the judge and the probate, he just said, I want these cases settled, get them out of here, and he literally forced them to be settled. But the heirs, whom Hughes had no use for and never seen, they came out pretty good. Lewis did a wonderful job of managing, much better than the Hughes people did, and he was the one who was his nephew, or I guess it was a nephew, wasn't he? And he's tall, like Howard Hughes was, and it looks a bit like him. I have a client of mine who was married to one of the Loomis family, and was in on that deal.

50:04They tried very hard, you see, to prove that Howard Hughes wanted to give this, the medical Foundation, and his estate, what he had left, which was a substantial, but they couldn't find a will. They could only find it, he had said he wanted to do that, but he had no will, so I don't care who you are. In Nevada or which state? Yeah, Texas and Nevada, yeah, the thing is, he hadn't been in Texas for years, years being in Texas. Yeah, actually he was in Nevada, as you know, and that's when he left Nevada secretly. Well, some of the things I say in learning from the past.

51:00Many of the great nations tax themselves to death. Now, conversely, many nations became great because of the right kind of taxation. Taxation was stimulating growth and enterprise. So taxes can be a very positive and a very negative force. I said, whatever is taxed must be surveyed. So if the tax system is all-encompassing, liberty must give way. And all-encompassing taxation vests enormous power in the hands of the Revenue Bureau and and in time overpowers not only the taxpayer, but the other branches of government. Even kings and emperors have had to yield to the power of the taxpayer.

51:45These are just lessons of history that I thought. The Greeks produced the first civilization without despotism, and they achieved this by discovering that tyranny is the product of the wrong kind of taxation, of direct taxation. Now we don't agree with the Greeks, but because we have direct taxation. But anyway, that's one of the great lessons of it. And here's an interesting, the love is, when wars and other great emergencies demand great revenues, then all citizens should be taxed according to what they are worth by equitable principles, not odious arbitrariness.

52:27Well, I guess we can, I'm going to kind of just let, just whet your appetite. Well, I got half an hour if you want it, and maybe you're tired of hearing me. What would you like to talk about? Some more stories? Can you expand a little bit on this person you said in Florida that has an alternate scheme about the money? Yeah, there's a fellow in Florida, his name is Holmes, and he has an operation called Just One Tax. And he got the idea, actually from Hamilton, going back to his writings, that what should be taxed is the flow of money.

53:19And when it flows slow, then there's not too much tax. When it flows fast, then there's more tax. If you just tax the flow of money. Just a tiny tax. At every exchange? At every exchange. One-tenth of one percent. Yeah, yeah. And it would produce as much revenue as our own system produces today. He's talked to Congress about it, but he never has been able to swing it. And that would encourage putting it in permanent fixtures like factories and railroads and so forth?

54:15That's right. The money that was in the factory wouldn't flow, therefore there'd be no taxes.

54:29Maybe what you'd build up, the solid buildings would not...

54:45In that sense, of course, you would miss land, but land is usually taxed on the state level, you know, that's what supports our schools and roads and things like that. If it was sold, there would be a tax on the flow of the money used to buy it, though, right? Yeah, anytime money moves, there would be automatically a tax on it. If you were buying a house, it would stay there a long time, but it would later sell it 15 years later. On the flow, yeah. Like the sales tax or the consumption tax, you would be able to capture the black, the underground economy that's escaping, if I'm right.

55:42Well, what about, say you had a lot of cash, but when you either deposited it or withdrew it from the bank, you incurred that fee? So, unless the gangster kept it all under the mattress? Yeah, yeah, you wouldn't get the mattress, people. But somehow, you would have to flow through the system, even through a merchant, when you buy something. It would flow through the banking system. Well, everybody uses the banking system. Pretty hard to operate, you know, on a cash deal.

56:27It didn't work too well. Oh, and maybe the $18 billion that's being sent to Mexico every year, Prof. Fox, I'm going to give a little bit of that to you. Yeah, Alt-Money Movement. And anyway, I thought it was an ingenious idea, and I know the guy, I've met him, and he, I feel, I feel he has an idea that really needs to be looked at. Curtis Holmes, and it's called Just One Tax, probably you can get it on the internet, yeah, Just One Tax, yes. You say here, in your epilogue, first is the glaring fact that all good tax systems tend to go bad.

57:15Yeah. That means they're all bad. No, they tend to go bad. Well, the good ones turn bad and the bad ones are bad. Our problem is we want less taxes. There's nothing that the government does for us. This is Hans-Hermann Hoppe's statement that couldn't be done better by other institutions other than the government. True. That's what we need to aim for. We just need to cut taxes off totally. Okay. I'll argue with that. I'm listening to you now, you're trying to make taxes fair, but you said it's impossible, because all good tax systems tend to go bad.

58:02I said tend to go bad. I didn't say tend. Tend. Tend, not dead, but tend. Well, I took some classes in economics and the tend meant it's going to happen. Well, you know, you're a utopian dreamer. The point is that we are a tax-oriented society and so we simply have to come up with the Well, let me ask you, if you read the stuff a hundred years ago, HGUL, there was no question and they understood we can manage the society.

59:06Yeah. There's nothing to it. That's right. We're always coming and asking more. Yeah, and? Well, we're now, maybe we've discovered that didn't work. No, that's right. If we can push harder to this, cut your taxes, don't worry about making them fair, just cut them. OK. Maybe you say that in here. Maybe you say to cut them. Are you saying cut them, or are you saying make them fair? They must be cut anyhow. We must get other institutions to do the things that we're asking the government to do for us now. Well, I'd get rid of the E. He suggested the guillotine a little bit ago. He's suggesting we need alternatives to the guillotine.

59:56I tell you, there were no tears when the heads of those tax bombers flopped in the basket. You know, they held a big basket at the end of the guillotine down the game and the head flopped in the basket. I don't think anybody had any tears. They were so hated, and I think in my book there's a story of a guy named Mike Klein, who was 50 years old, and he retired to Florida, and he didn't have anything to do, and he'd been an accountant, so he went down and got a job working for the IRS. And he said, my brother refused to have anything to do with me.

1:00:44He says, you've joined the enemy, I'll never talk to you again. So everybody disowned him and he tells some interesting stories about the service down there. He says these guys boasted about how they got this guy and how they got this woman to cry and he says, you know, I said I was going to take away her kids and so forth and he says, I remember this one guy, he said he just didn't have any money. So the agent told him to have his wife go peddle herself. And then he writes that one guy came in and had a heart attack and died. And he says, we didn't know what to do with him because there's people out there in the front waiting to be seen.

1:01:31He says, so we covered him up with a blanket and wheeled him out into the alley. But I like the thing he says, my family disowned me. you join the enemy and you know it's not a it's not a job I would want you know I really I think that most the most the guys who work in the service are sometimes they're accountants and they want to get a few few years experience and so forth and and then they want to get out of there and and I remember once I had a had a case and there was this young guy there and I ran into him on the in the streets, a year later, after this case was over, and he said, oh, I left there, he said, I was really glad to get out of that job, and he just didn't want anything to do with it, it's a, I get, yes, go ahead, yeah.

1:02:30In fact, I had a family I had represented for many years and the son who was managing the company died and his wife, everybody is quite concerned about it. And then one day I get a call, the name is Diane. They said, Diane has remarried. She's remarried an IRS agent. And that family was really concerned and worried, you know, because, you know, they always, big families with big bucks do interesting things.

1:03:18And they were quite distressed with the fact, with the lat I heard she had divorced Damon, now everything's okay. As long as we're talking, this guy I know, I'm a training dog, we go to National Historic Railroad Society meetings every year, by most years, and this IRS guy is from New Jersey, he's retired now, but he's taught me some things, and after I quit paying the income tax, when he found that out, he didn't want to talk to me anymore, he said I could call I didn't call him, but he couldn't call me because my number would show up on his phone list, and he was afraid they'd tap in and get him, and he says they're bad about really getting out to IRS employees and making sure that they really tug the line.

1:04:18When the 1998 Restruction and Reformation Act took place, an IRS employee even mentioned illegal tax protestors that were automatically fired. He said things got so strenuous in the office that his blood pressure shot up and he changed jobs until he was maybe a couple of years later able to retire. That's good. I'm glad he changed jobs. He says now that if he'd had a choice he never got into it and didn't really know what he was getting into. Well, it's like that quotation from the magazine this morning that I read from The Nation where he said they described tax agents as the most odious of mankind.

1:05:13And they really are. Maybe I should read to you, let's see, it's in the book, Carl Hess, you remember that name at all? Carl Hess was a wonderful tax resistor, and he and I were sort of friends, and he wrote a little clip in the back of my first book, and I had the worst time getting a copy of the book to him. I'd mail the book down, you know, it just occurred to me, and he never got the books, He retired to West Virginia and he proceeded to support himself by barter.

1:06:15He died some time ago, he was quite a remarkable guy. He wrote a book called Dear America. If you ever have a chance to pick up that book, it's one, you know, I'm not one that believes in reading a great number of books, but I think it's important to read good ones. I'll say within Dear America was the book that he wrote, and this is where the quote comes from. I became a tax resistor, not simply because of the Vietnam War, not simply because of corruption. I became a tax resistor at that particular moment because I got mad and because somewhere in everybody's life there probably is a line in the real world which you will not or cannot pass and which often with a sort of sudden anger I felt you ball cats stand on and fight on.

1:07:06So he just said, I had enough, and that's that, you know. He wrote this wonderful book, Dear America, and he was a Goldwater speechwriter. What was his name again? Carl Hess. Let's see if I got it right. Let's see if I got this. K with, yeah, K, Carl Hess. He does have a few books out, and he had heart trouble, and he died about ten years ago. They made a movie, a documentary, that won Academy Award on him back in the 1970s, I guess. And that's worth seeing, you know, since it was Academy Award winner, but it was a documentary.

1:07:58and it was on his life. You get a few of those courageous souls like him and they're all right. I eventually got him a book by sending it down registered mail and return receipt and all that. So they didn't steal that. But I understand that he had this small little home up in the back hills of West Virginia where he lived, and he was still writing, you know, against the IRS and stuff like that. Well, I just like what I read, and apparently he says that one day two carloads of agents showed up. Two. And they seized everything in his house. He didn't have much, very humble, you know, just, they were trying in some way to shut him up. But I don't think they succeeded. He was one of those great souls that stands up against corruption, yeah.

1:08:51You say that he left a remarkable collection of austerity in books and things. I wonder where those reside, his writings. I wonder where his papers are. I don't know. It'd be interesting. Find out if he had any heirs and see where they are. I know he had a wife, and she lived on, but a lot of libraries should have his stuff. The library here actually has a lot of his books. Okay, well that's good. Do they have Dear America? Oh yes. Well, wonderful. Yeah, wonderful. So they can read it. I had really a lot of trouble getting my copy back.

1:09:36I gave it to some guy to read, and then I asked for him to give it back, and he wouldn't. I sent him five bucks for the mail, he still wouldn't send it back. And then he died, and then I contacted his wife, and I hammered on her for a while, and apparently she had donated the book to the library. So she went down to the library and got it de-donated, or whatever you call it, and I got my book back. It took me about five years to get it. So when you loan books, you never know. Well, that's the old story. My grandfather used to have a thing when somebody would come to borrow something. He'd say, I'll lend you the dog. And people would look at him with a puzzled look on their face. He says, why the dog?

1:10:25He would say, well, the dog will come home at night. Federal Judges, the corruption or misjudgment of cases, there's a fellow I know running for Congress, and he's in touch with a Reagan appointee in D.C. And they've written up some bills in case he gets in Congress, and one of the bills he's going to introduce is the procedure, according to the Constitution, of reading the Federal Inferior Courts, in other words, everything below the Supreme Court, and doing what they can to judge the judiciary.

1:11:27And if they are using foreign case law and such as they appear to be, or just making the law up as they go, start having some hearings and dismissing the federal judges. I don't think they can. The Constitution allows it. Does it? I thought they serve for good behavior. Yeah, but... Well, I guess that wouldn't be good behavior, huh? The tension between the Fifth Amendment and our obligation to report on ourselves, is that been thoroughly hashed out in the courts to any kind of rational conclusion?

1:12:17I've seen tax protesters say that my fifth amendment gives me the right to not sign my tax return because it will be used against me.

1:12:47of being forced to report or provide information to the government that could be used against it. You have an absolute right not to do so. And it was a tax case, as a matter of fact. The problem with the Boyd case is they kept wiling away on it. And finally, Sandra Day, isn't that the Supreme Court Justice, the lady out there, don't you think? O'Connor. O'Connor, yeah. Anyway, yeah, Adele O'Connor. She wrote an opinion and she said the Boyd case is dead, and it is, and all those principles that you're raising there, which were supported by the Supreme Court, are dead. You don't have any of those rights.

1:13:36And what she's saying is because of the case that she was writing on, you know, the opinion she was writing, that the Court is now just simply throwing out the Boyd case. So if you just refuse to sign a tax, fill it out properly and everything and send it in unsigned, are they going to do something about it? Unfortunately, they would go after it, like if I sent one in unsigned, then they would all of the hell out of my prior years that I did sign.

1:14:15So you have to decide if it's worth it. That's a simple question. I've always taken the position with people is to try to be audit-proof, have your tax return look clean, sneaky clean, don't give anything on that to flag an audit because you don't want an audit. And I just think that's good advice. Now, I go to accountants and say, we'll always leave them something, you know, when you file your tax return, we'll leave them something, so then the agent can find something, and then he'll get off your back, and so forth. That's enough, but leaving something doesn't mean that your tax return is not clean, but I just think that good common sense, unless you're some kind of a martyr, you know, well, Carl has to, I mean, you know, he bowed his back, and that was his position, but I think most of us are just chicken, like I am.

1:15:11I'm regulated, my business is regulated by the Securities and Exchange Commission, so there's a million things that you could get in trouble with them for. I don't think you don't even think about it, or mind it from them. I would say it was a curiosity question. Well, we're a highly regulated society, and it's too bad. I was pleased to hear your comment on plea bargains. Yeah. Jacob Walker, who's a retired, very successful lawyer in Lee County, ran a class for us and he had a lawyer speak to us about plea bargains and how successful they were in the courts in Lee County. Yeah. And being a very prudent fellow, I just kept my mouth shut because it sounded to me like—because I think the comment was that plea bargains are always accepted in Lee County.

1:16:07Nobody ever argues. It's always settled and everybody's happy. It means some guy got it, I think. Well, if you're guilty as hell, then it's not a bad deal. Where we're poor. But when plea bargaining is bad is when you have the threat of a prosecution that you're really innocent of. and so they want to plea bargain you well it's a it's a solution I guess it's like Martha Stewart you know they they offered her a plea bargaining and she turned it down oh sure absolutely but she was just thought she could she could be them she obviously had lied through her teeth and when you do that you better I think one of the worst cases we ever had was O.J. Simpson, because he didn't testify.

1:17:19But the reason he didn't testify is that they would have acquitted him if they'd had

1:17:55I'm in South Central Los Angeles when the crime was committed out in Brentwood, and if it's right about there, it would not have had a really sympathetic jury, and he would never have gotten out of that. I could never understand why the lady that did the prosecution got $6 million for her book. I mean, she's so bloody incompetent, why in the world would you give her a nickel? I followed that case, and when I knew they were going to try it down in South Central Los Angeles, I said, that's case over. They'll never convict him. Apparently there was a problem of where was you keeping? They didn't have adequate jail facilities out in the Superior Court where the crime was committed.

1:18:42So keeping locked up, but not have to commute every day with OJ, that they say, well it's right there by the court, right where the jail is and so forth. So it was kind of a practical solution, but it was a stupid solution because, okay, so you drive him out there every day. At least you get a fair jury and you don't get people who were prejudiced against the police

1:19:40Well, the justice system isn't fair to them. If you look at the percentage of blacks who are in prison, compared to the percentage of whites who are in prison,

1:20:10Well, we're at 3.30 and we're at Friday afternoon, and thank God it's Friday, and you've been It's been a great group. I've really enjoyed it. I'm happy to have been here and happy to talk to you. It's been my pleasure, my honor.