Thesis for course on Tax Law

Legitimacy without Enforcement: The Use of Moral Persuasion in Taxation












M. D.
Tax Policy Seminar
Draft Paper, 10/30/06
Professor B. B.
Review Copy















Ne mea dona tibi studio disposta fideli, intellecta prius quam sint, contempta relinquas.

--Lucretius

Introduction

It is difficult for democratically-minded American citizens to think about the history of the United States without feeling a sense of pride at the result of their unique political experiment. Prior to the Enlightenment, the ideals of which provided the fertile soil out of which the American experiment grew, sovereignty was a quality that entitled the rulers to govern their nations, and it was conferred via the sword, history, or divinity. With the onset of the American experience came a new idea about sovereignty that reversed thousands of years of precedent. Rather than power flowing from the governing class to the governed, authority could instead be predicated on the consent of the governed.
This emphasis on consent of the governed is deeply rooted in American jurisprudence and is enshrined in the United States’ most basic statement of political values: The Declaration of Independence. As demonstrated below, this form of legitimacy for any government carries with it the proverbial sword of Damocles, and such a government holds within itself the seeds of its own potential abolition at the hands of a body politic that no longer consents to its rule. The history of the United States has been a continuing battle between two factions as to the proper expression of consent, with rule-of-law and submission to authority in one camp facing off against civil disobedience and rebellion.
To safeguard the legitimacy of the United States, a citizen must be both vigilant and prepared to enter the fray of this historical battle. The purpose of this paper is two-fold. Firstly, this analysis is done with the intent of seeing that the battle lines between the two camps are made clear through an analysis of history and analogy to current events in the arena of taxation. Secondly, this essay will engage in a normative analysis designed to encourage the American reader to pick up arms in defense of tempering the restless spirit of America with adherence to rule-of-law.

I. Enforcement and Framework

It is difficult to imagine a government ruling for very long over a people who do not recognize the government’s claim to do so as rightful. History is replete with examples of popular uprisings, from revolts against Roman empire-building[1] to the American Revolution.[2] In order to function, a government must possess some minimal amount of loyalty from those over whom it governs; else those over whom it governs will attempt to throw off the chains of their oppression. Great thinkers in Western Civilization have grappled with whether this loyalty is achieved through fear or love,[3] but history has shown that loyalty must be garnered nonetheless.

Loyalty is a measure of the legitimacy necessary to sustain the state. Although legitimacy is difficult to define precisely,[4] a government that is seen as being legitimate gives cause to its citizens to obey the commands issued from their sovereign.[5] Legitimacy confers upon a sovereign an enforceable, but frequently unenforced, claim to have its commands followed. A sovereign who is legitimated must be viewed as having rightful authority over the will of an individual citizen, and to the extent that the sovereign must enforce the sovereign’s will on the citizenry, that legitimacy is in question. The greater the amount of legitimacy, the less often will a sovereign have to compel those it governs to abide by the commands issued from the sovereign because individual citizens will defer their own interest to the interest of the sovereign.

A sovereign must rely on legitimacy or enforcement whenever the interests of the sovereign run counter to the interests of an individual who is governed by the laws issued from the sovereign. Unfortunately for sovereigns, the interests of individual citizens will frequently run counter to the will of a sovereign in maintaining its regime, peace, order, and stability for the nation. Even the most basic commands a government might promulgate will likely be against the individual interest of some citizen,[6] and taxation laws are nearly universal in their adverse stance to the individual interests of at least some citizens.

Inasmuch as a citizen has an interest in acquiring property, a government which decides to take that property via a tax may face some strong opposition. This strong opposition is not unknown in the American experience[7] and can be seen in our storied history concerning tax protests such as the Boston Tea Party or the famous line from President George H.W. Bush: “Read my lips: no new taxes.”[8] While American independence and origins lay in conflicts over taxation, strong opposition to taxation is not unknown outside of the American experience, either. Many countries have experienced tax revolts with varying results.[9]

This is not to suggest that enforcement has no place in legitimating a sovereign. Rather, enforcement may serve as a deterrent to cement legitimacy in a political system that relies on violence for political authority. In a system like that of the United States, enforcement is indicative of a deep problem of legitimacy because it indicates that the law-breaker does not consider the government to be a rightful authority to which his own individual interests must defer.

The two foundations upon which stable, lasting governments rest are “legitimacy and a steady source of revenue.”[10] A government which lacks either of these two bases will fail to endure because it will either be unable to expect compliance from those it governs, will be unable to fund any actions it wishes to take, or both. The submission of a citizen to the expressed will of the sovereign is not only an exercise in showing the legitimacy of the sovereign’s rule, but also an act which reinforces and maintains that legitimacy.[11] When a citizen pays her taxes to her government as the sovereign wills, she is expressing her own submission to the rightful authority of the sovereign over her, and this voluntary act of acquiescence and deference bolsters or maintains the standing of the sovereign in relation to the governed citizen.

When a sovereign must compel citizens to obey the law, it indicates that the law-breakers do not view the sovereign as a legitimate authority that rightly governs their conduct. A citizen who has undertaken an act of cold-blooded murder has voluntarily placed his own will above that of his sovereign who has expressly forbidden precisely such an act. The relationship can be summarized as follows: submitting one’s self to law strengthens the legitimacy of the law-maker, and disobedience to the law weakens the legitimacy of the law-maker. The act of the law-breaker is more than a simple crime of murder. In a very real way, the criminal has declared a private war against the rightful authority of the sovereign to govern his conduct.[12]

A sovereign has a right to expect that the sovereign’s citizens will obey the will of the sovereign, because all citizens have a duty to defer their own independent and individual wills to the overarching will of a legitimate sovereign.[13] Particularly in cases where a legitimate sovereign issues a law which a private citizen feels to be unjust, a citizen must defer his own judgment to that of the sovereign.[14] In a system that allows citizens to legitimate the government through periodic expressions of consent, to place personal consent above obedience is to deny the sovereignty of the state, harming the sovereign’s ability to govern.

Enforcing the law demands an investment from the sovereign. In the American system of government, this can include substantial amounts of invested time and effort by the police, prosecutors, defense attorneys, judges, and criminal justice personnel to carry out sentences. Each of the involved governmental parties must be paid for their time and service, and consume valuable and limited resources in the pursuance of their functions. Because resources are finite and fungible, absent the law-breaker’s private war against the sovereign’s authority, the sovereign could have elected to use the resources for ends not aimed at restabilizing the power of the government over the individual. This loss of valued resources weakens the legitimacy of the sovereign.

In the area of taxation, this loss of legitimacy from wasted enforcement resources is not great. Annual tax prosecutions by the federal government are relatively few, and generally decreasing.[15] Unfortunately, it is unknown whether there is any actual correlation between tax law violations and number of prosecutions.[16] Indeed, substantial and compelling reasons exist which actively militate against the idea that the number of prosecutions recorded in United States courts accurately reflect the actual numbers of tax law violations.[17]

Current tax enforcement actions occur after an Internal Revenue Service audit reveals an alleged deficiency in a taxpayer return. If unable to secure payment from the taxpayer, the Internal Revenue Service can refer the matter to the Department of Justice for prosecution. The Department of Justice does not pursue tax prosecutions as heavily as the number of Internal Revenue Service referrals might otherwise indicate.[18] The Department of Justice routinely declines to prosecute substantial numbers of cases that the Internal Revenue Service refers for prosecution. Since 1980, the Department of Justice has declined to prosecute large portions of the referrals from the Internal Revenue Service, and in no year in the data set did the Department of Justice prosecute more than 75% of the cases referred. In the past decade, the Department of Justice has declined up to 50% of actionable cases.[19]

There is no particular reason to suspect that the cases that the Internal Revenue Service refers to the Department of Justice are without legal merit. If the cases are meritorious, then there are instances of law-breaking which diminish the legitimacy of the sovereign. If the cases are without merit, there is still reason to suspect that there are more cases of tax law violation than are prosecuted by the Department of Justice, since a reasonable person cannot plausibly expect the Internal Revenue Service to catch more than a random sampling of violators. It seems likely then, that there are more cases of tax law violation than result in successful prosecutions.

If there are more tax law violations than successful prosecutions for tax law violations – a prospect which seems fairly certain - then the loss of legitimacy to the government is greater than the immediate data indicate. This supposition is supported by the compliance data received through IRS auditing, which suggests that as many as 14% of all tax revenue due the government in any given year is not submitted voluntarily.[20] This deficiency is greater than US $290 billion to the federal government,[21] with over 80% of that amount due to individual citizen “cheating” through underreporting of income or overreporting of deductions and credits.[22] Each dollar of this loss represents a loss of legitimacy for the sovereign.

As any loss of legitimacy causes harm to the government so deligitimized, the aggrieved government has an interest in repairing this damage proportional to the legitimacy lost in such a manner. This loss of legitimacy may be remediable through various channels as will be discussed in Part III below.

With the loss of legitimacy due to law-breaking and the loss of legitimacy due to investigation and prosecution of violators’ offenses comes another form of delegitimization. Anti-tax rhetoric poses a significant threat to the current authority of the government.[23] Anti-tax sentiment can be a general means of engaging in anti-government discontent.[24] It unifies and encourages dissent from the government.[25] Successful anti-tax rhetoric decreases the citizens’ deference to the authority of the sovereign to impose taxation, which both decreases legitimacy of the sovereign[26] as well as harms the second base of long-term successful governance: a steady stream of revenue.[27]

Anti-tax rhetoric is an integral part of traditional American patriotism and national character,[28] but the damage it does to the United States government makes American anti-tax rhetoric paradoxically anti-American. This rhetoric does not merely emerge from those dissatisfied with government from isolated ranches in the northern mountain states, but is actually a bulwark of the Republican Party in the United States. Many Republican theorists link lower taxation to increased liberty,[29] and seek to strip the government of funds in order to both expand the space available for private actions and to limit the power of the sovereign.[30]

By tapping into political symbols and patriotism, the anti-tax rhetoric of Republican Party decreases the legitimacy of the government. While couched in language concerning fundamental principles of democratic life in the United States (freedom, liberty, and property), the language is used by some as justification for avoiding the already expressed will of the sovereign instead of simply voicing their dissent at the next election. The authority of the State is being subverted by agents of the sovereign, and thus the sovereign has acquired an interest in relegitimizing itself.
In a government based on popular sovereignty, the sovereign authority of the United States is not the Congress, the President, or the Judiciary.[31] It is not the summation of these parts, either, since each of these branches of our government is an agent for the actual sovereign: We the People. The American Sovereign is an abstract entity that expresses the collective American People’s will through our political and judicial processes. Anti-tax rhetoric frequently delegitimizes the sovereign in yet another way by neglecting to recognize that the governed are themselves the ones who govern.

It is not uncommon in anti-tax rhetoric to employ divisive terminology that divides the government from the people whose consent legitimizes the government.[32] A common example of this phenomenon can be found in the idea that taxes are a simple exchange of money for benefits, contract-wise, with a foreign entity (the government).[33] Such a view of taxation encourages us/them views which separate the governed from the governing. It was, after all, ‘We the People’ who voted for the taxes in the first place in order to meet particularlized policy goals.

The American fascination with lower levels of taxation charts a dangerous course through already troubled political and ideological waters, but it is not the only way. A deeper understanding of the underlying dispute between pro-tax and anti-tax groups in American history is useful in determining the appropriate way to navigate through the current delegitimizing influences on American government.

II. Taxation and Order: Jurisprudential and Historical Perspectives

A. Jurisprudence
How individuals view taxation, both from personal economic and moral viewpoints is intimately tied to the history of the relationship between taxation and governmental legitimacy. An individual who finds it to be more palatable on a personal economic level to resist paying taxes can be expected to rationally do so if legal consequences are less onerous than the paying of taxes. An individual who finds a tax scheme to violate some fundamental principle of his morality can likewise be expected to resist paying taxes. Because legitimacy demands adherence to the will of the sovereign, any historical account of governmental legitimacy and taxation necessitates an examination of how individuals feel morally about taxation.
The current legal state of the relationship between taxation and morality is uncertain. Some legal authorities recognize the responsibility of a citizen to pay his or her taxes as a duty going beyond mere positive law. Some courts go further than others in their analysis, but several agree with the general proposition asserted by the case of Snyder v. Routzahn.[34] In Snyder, the court makes its position abundantly clear when it states that “there is always a moral obligation to pay taxes.”[35]
The Supreme Court has even gone a step further, recognizing that tax evasion’s moral character makes fraudulent tax evasion a crime of moral turpitude.[36] The Supreme Court also previously recognized that taxation serves more purposes than simply promoting social welfare.[37] The Second Circuit held explicitly that when evading taxes, the government to whom taxes are owed stands in the same relationship to the tax evader as would a person from whom the tax evader had stolen property.[38] In other words, evading taxes bears the same legal status as stealing property from a private citizen.
The history of Western thought regarding taxation uses moral language to describe an obligation to pay taxes. It has long been a principle of Western religious thought that temporal authorities can lay a moral claim against individuals, which the individuals are bound to obey.[39] This principle, enshrined in both the divine law of Christianity and case law, emphasizes both the moral deficiency of someone attempting to avoid paying taxes (because the act amounts to theft from the government) and also for his or her disobedience to a rightful civil authority. Since, as suggested above, disobedience to civil authority precipitates a crisis of legitimacy, a failure to pay taxes can be linked in natural law to delegitimizing the state.
Courts are not unanimous as to the moral dimensions of expressing obedience to the will of the state via voluntary submission to taxation. For example, Judge Johnsen of the Eighth Circuit stated that “[t]ax liability is necessarily an economic not moral question.”[40] Even given a light streak of judicial resistance to the purported principle of natural law as expressed above, taxation must interact with morality to convince citizens of their duty to pay taxes consistent with the will of the sovereign.[41] Without the threat of moral sanction, one expects individuals to determine their level of obedience to taxation based on the risks of legal consequences.[42] In a world where a taxpayer’s only considerations with regard to paying his taxes were issues of pure positive law, compliance with taxation could therefore be expected to be substantially less than the reader’s present reality, in which a normative analysis must also be given room on the field of a taxpayer’s attention.
Despite the obvious relevance of a normative analysis to taxation, most taxpayers do not associate morality and taxation, and many opt to evade taxation by cheating on their tax payments.[43] The mystery of this conclusion requires explanation. Anti-tax rhetoric and the rebelliousness of the American political culture shed some light on this issue.

B. History
Sovereignty, revolution, and taxation have a storied history in America. The American Revolution was fought as a revolution to gain sovereignty, and involved several issues of taxation as driving forces behind colonial discontent.[44] Revolution played an integral part in the political history of the United States in more than just the origin of the country. As stated above, the legitimacy of the United States has generally been understood to rest upon the consent of the governed. The people can withdraw this consent from the government, and, if withdrawn, the people have the right to alter or abolish the government.[45]
This right to revolt against the state is both necessary and dangerous. This right is necessary as a check against tyranny, as exemplified by the founding of the United States. It is dangerous as well because, once the door is opened, the People may believe that they ought to revolt every time they disagree with a governmental policy.[46] Throughout the history of the United States, a frequently violent sentiment has simmered underneath American political discourse, and has, on occasion, brought the country close to open warfare, as seen below. One side of this battle champions the right of revolution, and the other side represents the forces of law and order. Interestingly, adherents to both sides claim that their side holds the legacy of what legitimizes the state.
In the early years of the newly founded Republic, taxation was much on the minds of Americans and largely with a sentiment of discontent. Three separate tax protests formed much of the political culture of the time, and each was a violent struggle against the sovereign by individuals who were taxed by a government that required taxes. Shays’ rebellion, the Whiskey rebellion, and the Fries rebellion all were expressions of this underlying conflict over the proper role of disobedience to state authority with regard to taxation.

i. Shay’s Rebellion
In 1786, taxes needed by the federal government to pay for debts stemming from the Revolutionary War made it difficult for citizens to pay other obligations, and the banking institutions of the day took the opportunity to seize the collateral property on defaulted loans. Angered by the judicial system’s enforcement of these contracts, some citizens took up arms and closed down courthouses.[47] Ending with a failed attempt to take a federal arsenal, the tax revolt stirred the fears of many political figures as to the stability of their country. If the right to revolt, so necessary to the founding of their country, could be called upon to oppose a necessary function of the government (then the government instituted by the Articles of Confederation), then how long could the government truly last?
On the one hand, Alexander Hamilton, a man committed to law and order at almost any cost, and George Washington who was “mortified beyond expression”[48] by the rebellion, represented the law-and-order style democracy in this ideological battle. On the other hand, Thomas Jefferson represented protest and civil-disobedience oriented democracy, who, upon hearing of Shays’ rebellion, remarked that “…a little rebellion now and then is a good thing, and as necessary in the political world as storms in the physical.”[49] Many credit the trouble caused by Shay’s rebellion with the political change from the decentralized and weak federal government under the Articles of Confederation to the stronger and more centralized authority of the federal government under the U.S. Constitution.[50]

ii. The Whiskey Rebellion
In 1791, the anti-tax sentiment again reared its head using violent means with regard to an excise tax placed on whiskey by the Congress. Again, a tax measure designed to help put to rest debts incurred by the nation as a result of the Revolutionary War, the tax angered many influential citizens. The tax was largely collected without much difficulty[51] until 1794 when warrants were served upon seventy-five citizens who refused to pay the tax. The enforcement of the tax in court so angered those opposed to the tax that they began firing on tax collectors who came to collect.[52] Such was the gravity of this situation that President Washington called up the militia to put down the rebellion, noting that “…the very existence of Government and the fundamental principles of social order are materially involved in the issue…”[53] The rebellion largely fell apart,[54] but tensions over the issue continued in political discourse due to the trial of some of the rebels for treason. Then-President Jefferson who had not, from the beginning, seen their actions as detrimental to the Republic[55] pardoned those convicted of treason for their roles in the rebellion. To add a final victory to the Jeffersonian concept of democracy, Jefferson had Congress repeal the Whiskey tax.[56]

iii. The Fries Rebellion and Nullification
The Fries rebellion concerned an excise tax designed to create revenue for an expected impending war with France. The protests surrounding this tax resulted again in protesters subjecting agents of the state to danger.[57] Tempers flared to outright violence when those resisting the tax were put on trial. A large group of men (nearly one hundred) armed themselves with the intent of freeing those who had been taken prisoner. Fearing a civil war, the government called up the militia to disperse the rebellion. When this proved not as effective as President Adams liked, he called in federal troops as well.[58]
Each of these rebellions illustrates the underlying controversy concerning a citizen’s obligation to obey a law with which he personally disagrees. This controversy is not limited to the years immediately following the Revolutionary War or adoption of the national Constitution. Echoes of this same battle sound again and again throughout American history. The 1828 Tariff Act of Congress so angered South Carolina that the South Carolina legislature resurrected a doctrine not seen since the early years of the Republic: nullification. The legislature of South Carolina asserted that if South Carolina disagreed with a federal law, then it could declare the law void. Tellingly, the original law of nullification on which South Carolina depended for its position came from an act created by Thomas Jefferson for the Kentucky legislature in 1798.[59]
South Carolina’s decision to legislatively nullify a federal statute anticipated a federal militaristic response as seen by the language of the statue below. Given that the rebellions on taxes from the earlier years of the Republic generated a ‘law and order’-style response, South Carolina’s inclusion of the following provision into their nullification declaration seems to make a lot of sense. South Carolina’s nullification declaration included the following language: “…we will consider the passage by Congress of any act authorizing the employment of military or naval force against the State of South Carolina… as inconsistent with the longer continuance of South Carolina in the Union.”[60] Unfortunately, the language used couldn’t but provoke a strong federal response.
Thus was the ideological battle of the prior rebellions presented to the United States, again. President Jackson quickly repudiated the nullification proclamation of South Carolina and stated that nullification was incompatible with the existence of the Union. In response, South Carolina nearly precipitated a Civil War. The South Carolina legislature appropriated money to purchase weapons, authorized a state military draft, and issued a call for volunteers – a call which over 25,000 people answered.[61] That a State legislature found 25,000 volunteers ready to engage in open warfare against the federal government over the applicability of a tax law should serve as a stark reminder of the powerful connection between taxation and disobedience to federal authority.
Other echoes of the battle between Jefferson’s revolution-oriented democracy and Hamilton’s rule-of-law democracy can be found in non-taxation related contexts as well. The writings of Henry David Thoreau and Martin Luther King, Jr. both recognize that a citizen does not have a duty to follow the expressed will of the sovereign in some contexts.[62] Indeed, the writings of each man indicate a strong principle which has been used to usher in social change – namely, that adherence to unjust laws makes one complicit in the injustices thereby committed.
The battle over taxation is a specter of a deeper ideological divide within American society, and whilst numerous other examples exist of this underlying dispute between competing ideas, taxation through American history has provoked some of the most powerful battles in that war as evidenced above. The victories and defeats for each side shape our current political climate and our current personal attitudes regarding taxation and the role of normative analysis in ensuring compliance.

III. Restoring Legitimacy through Moral Persuasion

As mentioned in Part I, a tax gap exists between how much money is owed the U.S. government in tax each year and how much money is actually collected through voluntary taxation. The Department of Treasury openly admits that eliminating the tax gap would require radical and fundamental shifts in the tax system which are largely infeasible without a commitment to massive reform.[63] Increasing compliance with tax law via a system of greater enforcement is largely an anathema politically,[64] and the costs of doing so would be legion.[65] Beyond a certain level, expenditures on enforcement would simply be too costly or politically disfavored to continue. We must recall, though, that there are two ways for a sovereign to engender service: out of fear and out of love. Enforcement via sanction is the second-best approach for reasons outlined in Part I. Taxpayers who sincerely believe in the legitimacy of the sovereign can be expected to obey the will of the sovereign even in the absence of sanction.
While compliance with taxation by means of moral persuasion will never be the sole means of encouraging citizens to obey the will of the sovereign, it can make a difference around the margins, and even a small difference (a narrowing of the tax gap by a mere 1-2%) would increase the legitimacy of the state and generate billions in revenue.[66] As noted above in the analytic framework of Part I, successful sovereignty must rest upon these two key concepts (legitimacy and revenue). What makes moral persuasion an especially attractive prospect is that, as a general policy, it requires very little in the way of resource investment.
By what means can an American sovereign convince its subjects to defer their own individual interests to the will of the sovereign, given the American experience with taxation? There are many potential arguments. This essay will attempt to outline some of these arguments which could be considered as persuasive.

A. Patriotic Duty
There is a long-standing idea that sovereigns have the right to tax their subjects, and that individuals should submit to such rightful civil authority.[67] Submitting to a civil authority because of the civil authority’s rightness is a departure from that historical argument, though. An argument stressing duty to country must rely on other sources to normatively justify the position. Terminology in this arena is heavily loaded with judgmental phrases, and depending on from what camp one may hail, such an appeal may be termed either an appeal to nationalism (Jeffersonian democracy) or an appeal to patriotism (Hamiltonian democracy).
Every individual in a society owes certain duties to the sovereign which rules over them.[68] An appeal to patriotism connotes ideation of self-sacrifice, and can extend even to calls during wartime that one should be prepared to sacrifice even one’s life for the good of the nation. For the moment, assume that precisely such a duty exists. Can voluntary submission of appropriate tax to the federal government be analogized to this duty to sacrifice even one’s own life? It can. Each case requires the individual citizen to be prepared to put his or her own individual interests behind the interests of the nation (as determined by the sovereign) in furtherance of the common good. If a citizen has a duty to lay down their life to prevent harm to the sovereign, surely a citizen should be prepared to sacrifice something of far less importance for the same end.

B. Social Contract Theory
Social Contract Theory has many incarnations.[69], [70], [71], [72] Social contract theory posits that individuals must do as their sovereign bids them because the individuals have consented to receiving the benefits of living in their society. This attitude is seen quite explicitly in the analysis given by the character of Socrates in Plato’s Crito.[73] In Crito, the character of Socrates has just been unjustly convicted by an Athenian tribunal for heresy and corrupting the youths of Athens with his ideas.[74] As the dialogue unfolds, Socrates is found sitting in his cell awaiting his execution. His friends, under the guise of visiting their doomed companion, reveal that they have planned an elaborate escape for Socrates that will save his life by smuggling him into exile. If Socrates follows their plan, he will end his days living in a Greek City-State far to the north of Athens, and if he declines their plan, he will pour hemlock into his ear as decreed by the Athenian court.
Socrates chose the latter, claiming that he is bound to the will of his government, under a most sacred duty, because he had consented to all actions taken by his government that benefited him, even when those actions had harmed the individual interests of some other citizen.[75] How, without being supremely selfish, could Socrates ever decry the actions of his government?
A similar, though far less dramatic, argument can suffice to give rise to a duty to obey the will of the sovereign even when it harms some specific interest of the taxpayer (i.e., the taxpayer’s interest in keeping his own money). The taxpayer has freely accepted the benefits of living in his society by traveling on roads, sending his children to school, having a safety net of social services prepared for hard times, having police and fire protection for his person and home, and by living secure under the protection of national defense forces. Why should the individual, having freely accepted these numerous benefits which cost the sovereign resources, refuse the sovereign those same resources in return when they were expected by both parties all along? It is immoral and selfish, and such an act could be likened to breaking one’s oath or violating a contract.

C. Communitarianism
Much of the history of the United States has revolved around the notion of ‘rugged individualism.’[76] Rugged individualism champions the idea that rights are qualities possessed by individual persons, duties are owed to individual persons, and that individuals will succeed or fail based upon their own individual characteristics like effort, ingenuity, and talent. American-immigrant novelist Ayn Rand crowed the virtues of rugged individualism and capitalism as the stepping stones to building the ideal world of the future in two novels that heavily influenced many modern economic thinkers.[77], [78]
Underneath this apparent commitment to egocentric development runs a strain of communitarian thought, which emphasizes community, voluntarism, and an affirmative duty to aid. Under communitarian thought, not only does an individual have a duty to pay their taxes, but an individual might further be expected to make a more active engagement with his community by encouraging others to pay their taxes as well. Communitarian philosophy frequently finds more adherents among women than it does among men because it emphasizes relationships and community more than individual identity.[79] Such an appeal could have the potential to encourage citizens to obey, although it must be noted that individuals with a predisposition to communitarian philosophy would already be likely to be engaged in voluntary compliance.

D. Self-interest and Fairness
An appeal from self-interest and fairness may also be a significant source of moral persuasion to convince taxpayers to comply with tax law.[80] Moral argumentation and positive law can both be seen as remedies for a serious underlying problem: anarchy. This truth was recognized by Thomas Hobbes in his work, Leviathan, when he referred to the problem of the state of nature as ‘a war of all against all.’[81]
Modern Economics posits a similar solution to the problem of the single-iteration Prisoner’s Dilemma form game. A Prisoner’s Dilemma game can be summarized best by telling a short story that gives rise to its name:
Two individuals (criminal and co-conspirator) are brought into the police station after having been arrested for suspicion that each jointly participated in a kidnapping and murder. The two individuals are separated into different interrogation rooms and each offered the same deal. The DA informs each player that the police do not have enough evidence to charge the individual with murder, but that more than enough evidence is present to charge and get a conviction for the kidnapping of the deceased victim. If the prisoner will testify against his comrade sitting in the other room, then the prisoner will be credited for helping an investigation and will get away with only a minor weapons violation (a misdemeanor in this jurisdiction). His colleague, however, will be convicted of the murder and will spend the next 20 years behind bars. If both prisoners agree to testify, each will receive credit for doing so, and will only spend 10 years in prison each.
If the prisoner refuses to testify and his colleague will take the deal, the prisoner will spend 20 years in jail. However, if each man remains silent and refuses to help the DA with her case, then the murder charge will have to be dropped and each man will be convicted of only the lesser offense of kidnapping (5 years in prison each). What should the individual prisoner do?
A rational prisoner will always choose to testify in such a scenario. If his co-conspirator takes the deal, then the prisoner will be better off if he testifies as well (earning him only 10 years in prison as opposed to the 20 year sentence). If his co-conspirator does not cooperate with the DA, then the prisoner is sill better off testifying against his co-conspirator (earning him just the misdemeanor charge instead of the 5 years he could have been behind bars if he had refused to speak).
Unfortunately for both the prisoner and the co-conspirator, each rational man will perform the same calculus and each man will choose to testify against the other. This results in each man being convicted of the murder (with time credited for their cooperation) with a 10 year sentence. The irony is that had each man simply stayed silent, each would only serve a 5 year sentence for the kidnapping.
The Prisoner’s Dilemma form game teaches a student of rational choice theory that following one’s own short-term self-interest can generate sub-optimal outcomes for himself. This situation can be likened to the dilemma of taxation. No individual has a short-term interest in paying money to the government in taxes, but so long as most individuals do so, the rational taxpayer will abstain from paying taxes (or will abstain from paying as much as the taxpayer is obliged). A rational taxpayer who cheats on his taxes will still receive the benefits those taxes pay for, and will claim those benefits by driving on newly-paved roads and enjoying publicly funded parks. As long as it is true that a ‘cheating’ player can reap the benefits of his self-interest while still gaining the benefits of cooperation, two avenues of moral persuasion are open to argumentation.
Firstly, there is an argument from self-interest. The Prisoner’s Dilemma form game uncontrovertibly shows that in many situations, individual self-interest leads to sub-optimal outcomes for the individual player. The player could reap a better outcome if the player followed a higher-order rationality that emphasizes iteration of the game.[82] By constraining the selfish desire to follow short-term self-interest, the player can reasonably expect to have other constrained maximizers of expected utility engage in new form games with him. This strategy of constrained maximization will increase his realized utility faster than a strategy of unconstrained maximization, and is thus in his ultimate self-interest.
Secondly, there is a more humanistic approach to the lesson of the prisoner’s dilemma. A rational player will realize that it is always better off to follow his short-term self-interest in a single form game, especially when the other players all choose to constrain themselves through obedience to some guiding principle, because the defecting player can reap the societal reward without having to bear the societal cost. But to engage in this act requires the individual to be willing to do something that most people would find abhorrent: he must be willing to be the architect of unfairness and injustice.
It is a simple formulation of the notion of fairness that people situated similarly be treated similarly. Persons under the same obligation should bear that obligation in the same manner and receive similar benefits for doing so. To be the defector among a group that chooses to constrain their pursuit of short-term self-interest means that the defector must be willing to create an unfairness where prior to his act there was none. No person that truly cares about fairness or equality can do this in a morally permissible way.

Conclusion

This essay has highlighted the difference between Hamiltonian democracy and Jeffersonian democracy, and it has attempted to show that Hamiltonian democracy and its accompanying emphasis on orderly recognition of dissent through elections is preferable to Jeffersonian democracy and its concomitant commitment to expressing dissent through noncompliance to established law. It is the position of this essay, and this author’s contention, that Hamiltonian democracy provides the most solid basis for understanding the history and contemporary context for the debate over obedience to tax law.
Obedience to rightful civil authority is a tradition grounded both in civil and natural law. Noncompliance with tax law harms the legitimacy of the sovereign in that it exemplifies defiance to the authority of the sovereign. This defiance harms the sovereign in many ways, and there are two main methods to deal with violators of law: sanction or reason. Sanction is costly, politically unsavory, and inefficient. Moral persuasion, through appeals to the reason of the taxpayer, may be a method by which the sovereign can attempt to restore the rightful legitimacy which is lost through an act of citizen defiance. This essay presented several potential arguments which can be made to this end.
Paying taxes is simply a duty of every citizen to his or her sovereign, and while it may be unpalatable, it is morally abhorrent to evade this responsibility and to shift the burden which was assigned to a particular citizen onto the back of another. Legitimacy, sovereignty, and morality all compel the same result, and it is high time for all individuals to take heed.


[1] NOVA: Ancient Refuge in the Holy Land, (WGBH Educational Foundation, air date unknown), at
http://video.google.com/videoplay?docid=3560238467536024101
[2] Adam Goodheart, The Nation: Celebrating July 2, -- What if…; 10 Days That Changed History,
N.Y. Times, July 2, 2006.
[3] See, Niccolo Machiavelli, The Prince (George Bull, trans., Penguin Classics 2003) (1512).
[4] Robert W. Tucker & David C. Hendrickson, The Sources of American Legitimacy, Foreign Affairs, Nov./Dec. 2004. (“Legitimacy arises from the conviction that state action proceeds within the ambit of law, in two senses: first, that action issues from rightful authority, that is, from the political institution authorized to take it; and second, that it does not violate a legal or moral norm. Ultimately, however, legitimacy is rooted in opinion, and thus actions that are unlawful in either of these senses may, in principle, still be deemed legitimate. That is why it is an elusive quality. Despite these vagaries, there can be no doubt that legitimacy is a vital thing to have, and illegitimacy a condition devoutly to be avoided.”)
[5] This essay will use the term sovereign to refer to the source of legal authority within a
governmental system. Common parlance uses the term generally to denote a monarch or similar unitary governmental leader. This author uses the term in the manner of many legal positivists to describe the entity which gives rise to positive law. A sovereign may be a monarch, a parliament, a judge, or even an abstract entity such as ‘We the People…’
[6] Commands given in law will nearly always be counter to the immediate individual interests of a
citizen. Even a command forbidding a citizen from killing another citizen in cold blood – a command most all readers will agree is necessary for the maintenance of a civilization – is counter to the interests of those whose personal well-being could be heightened by removing potential and actual rivals from their society. Virtually all criminal laws fall under this general category, and absent reliance on the sovereign’s legitimate claim to forbid such actions, individuals would be free to carry on such endeavors. This is not to suggest that the government’s commands are the only constraints on human conduct. Many people are guided by personal codes of ethics and morals, religious precepts, ‘common-sense’, and intuition in their dealings in a society. It is of paramount importance that a sovereign’s will be the overriding principle in guiding human conduct when these other forces are silent or contradictory, at the minimum. This essay will not attempt to establish that the will of the sovereign should override these other forces in all scenarios.
[7] Marjorie E. Kornhauser, Legitimacy and the Right of Revolution: The Role of Tax Protests and
Anti-Tax Rhetoric in America, 50 Buff. L. Rev. 819, 822 n.6 (2002).
[8] President George H.W. Bush, Republican Party Nomination Acceptance Speech (August 18,
1988), at http://www.presidency.ucsb.edu/shownomination.php?convid=4
[9] In a particularly noteworthy tax revolt from antiquity, Holy Roman Emperor Charles V answered
a refusal to pay taxes with violence. After attacking the offending city, the Emperor forced guildsmen “to walk round the city walls wearing nooses round their necks.” Clare Thomson, “Star Struck in Flanders,” INDEP. (London) Sept. 26, 1988, at 22 (as quoted in Marjorie E. Kornhauser, Legitimacy and the Right of Revolution: The Role of Tax Protests and Anti-Tax Rhetoric in America, 50 Buff. L. Rev. 819, 822 n.6 (2002).)
10 Marjorie E. Kornhauser, Legitimacy and the Right of Revolution: The Role of Tax Protests and Anti-Tax Rhetoric in America, 50 Buff. L. Rev. 819, 820 (2002).
[11] Id., at 826-27.
[12] The overall legitimacy of a sovereign’s rule is not dependent upon the acquiescence of a single
individual, of course. It is the sum total of all individual citizen’s subjection to the will of the State which determines whether the government is legitimized by their actions. The fewer the number of law-breakers, the greater is the legitimacy of the sovereign.
[13] John Finnis, Natural Law and Natural Rights (1980) at 361-2.
[14] Wojciech Sadurski, Law’s Legitimacy and Democracy-Plus, 26 Oxford J. Legal Stud. 377, 388
(2006). (presenting a standard argument concerning a citizen’s duty to obey).
[15] Total Federal Tax Prosecutions According to U.S. Courts, Transactional Records Access
Clearinghouse, Syracuse Univ. (2005)., at http://trac.syr.edu/tracirs/highlights/current/aousc.html
Federal prosecutions have fluctuated between 1981 and 2004, including some multi-year trends where prosecutions increased. For example, between 1983 and 1987, federal prosecutions went up by nearly 50% (from 1,060 prosecutions in 1983 to 1,550 prosecutions in 1987). This single span and slight single-year variations aside, the general trend of the data reviewed indicate that there are fewer federal prosecutions for tax violations over time. If measured from the highest number of prosecutions (in 1987, at 1,550 prosecutions) to the last available year of data (2004, with 541 prosecutions), a reduction of nearly 65% is measured.
[16] A reduction in the number of prosecutions may indicate a reduction in the numbers of violations
of tax law, but it may also be explained by many other situations as well. The Internal Revenue Service may not be catching as many tax evaders, the Department of Justice may lack the resources to pursue violators of tax law, or the Department of Justice may lack the motivation to pursue tax law violators as robustly as they were able two decades previously.
[17] Internal Revenue Service Staff (employees at close of year), Transactional Records Access
Clearinghouse, Syracuse Univ. (2005)., at http://trac.syr.edu/tracirs/trends/v10/irsStaff.html Records indicate that during the year in which there were the largest number of tax prosecutions (1987), the Internal Revenue Service also employed more individuals than it has at any time during the past decade. In 1987, the Internal Revenue Service employed 114,018 workers compared to only 94,575 workers in 2004. This loss of workers may indicate a reduction in resources and ability to pursue investigations and referrals to the Department of Justice as vigorously as they once did.
[18] Outcome of IRS Criminal Investigations, Transactional Records Access Clearinghouse, Syracuse
Univ. (2005)., at http://trac.syr.edu/tracirs/trends/v10/irscriminv-2.html
[19] This is not to suggest that the Department of Justice does not secure convictions for many of the
cases which it does choose to prosecute. The number of cases in which prosecutions result in convictions is fairly high. In 2004, for example, the Department of Justice argued successfully for conviction in more than 80% of the cases it prosecuted. Id.
[20] Office of Tax Pol’y, U.S. Dep’t of Treas., Pub. No. HP-111, “A Comprehensive Strategy for
Reducing the Tax Gap” (2006), at http://www.ustreas.gov/press/releases/hp111.htm
[21] Id., at http://www.ustreas.gov/press/releases/reports/otptaxgapstrategy%20final.pdf
[22] Id.
[23] Marjorie E. Kornhauser, Legitimacy and the Right of Revolution: The Role of Tax Protests and Anti-Tax Rhetoric in America, 50 Buff. L. Rev. 819, 823 (2002).
[24] Id.
[25] Id.
[26] Id.
[27] Id., at 820.
[28] Id., at 824.
[29] Id., at 888.
[30] Id. While still a presidential nominee, President George W. Bush stated that “[A] government with unlimited funds soon becomes a government of unlimited reach.” Id., at 888 n.193.
[31] There are many sources a political theorist may look to in order to legitimize a sovereign. Tradition, coercive force, self-interest, and moral obligation have all been argued for. This author is only considering ‘consent of the governed’ as an applicable measure of legitimacy for the purpose of this article, due to the historical and ideological underpinnings of the uniquely American experience.
[32] Id., at 892
[33] Id.
[34] 55 F.2d 396 (N.D. Ohio 1931).
[35] Id., at 397.
[36] Jordan v. De George, 341 U.S. 223, 229 (1951).
[37] Hill v. Wallace, 259 U.S. 44 (1922).
[38] United States ex rel. Berlandi v. Reimer, 113 F.2d 429,430-31 (2nd Cir. 1940).
[39] Christian religious texts indicate that an individual bears an obligation to pay taxes to temporal
authorities, so long as the payment of such taxes does not interfere with the discharge of an individual’s other duties as imposed by the religion. This proposition is founded upon a narrative from Matthew 22:15-22, in which the figure of Jesus is questioned regarding an individual’s duty to submit to taxation from the Roman Empire. The response from the character of Jesus begins with a command to “[r]ender therefore unto Caesar the things which are Caesar’s…” This command is still carried forth in modern Catholic doctrines. The Roman Catholic Church recognizes a moral duty to obey law and pay taxes. “Obedience to authority and co-responsibility for the common good generate a moral obligation to pay taxes, exercise the right to vote, and share in the defense of the country. Pay to all what is due them – taxes to whom taxes are due; revenue to whom revenue is due; respect to whom respect is due; honor to whom honor is due.” Catechism of the Catholic Church, Pt. 3, sec. 2, art. 4, §2240.
[40] Marienfeld v. United States, 214 F.2d 632 (8th Cir. 1954).
[41] Leo P. Martinez, Taxes, Morals, and Legitimacy, 1994 B.Y.U. L. Rev. 521, 522 (1994).
[42] Id.
[43] Eugene Bardach, Moral Suasion and Taxpayer Compliance, 11 Law & Pol’y 49 (1989).
[44] Marjorie E. Kornhauser, Legitimacy and the Right of Revolution: the role of tax protests and anti-
tax rhetoric in America, 50 Buff. L. Rev. 819, 840 (2002).
[45] “We hold these truths to be self-evident, that all Men are created equal, that they are endowed by
their Creator with certain unalienable Rights, that among these are Life, Liberty, and the Pursuit of Happiness. That to secure these Rights, Governments are instituted among Men, deriving their just Powers from the Consent of the Governed, That whenever any Form of Government becomes destructive of these Ends, it is the Right of the People to alter or abolish it , and to institute new Government, laying its foundation on such Principles and organizing its powers in such form, as to them shall seem most likely to effect their Safety and Happiness.” The Declaration of Independence para. 2 (U.S. 1776).
[46] This concept is also embodied in the Declaration of Independence. The sentence immediately
following the passage quoted in footnote 45, supra, reads: “Prudence, indeed, will dictate that
Governments long established should not be changed for light and transient causes; and accordingly all experience hath shewn that mankind are more disposed to suffer, while evils are sufferable, than to right themselves by abolishing the forms to which they are accustomed.” The Declaration of Independence para. 2 (U.S. 1776). After making this point, though, the document proceeds to reiterate its main thesis. “But when a long train of abuses and usurpations, pursuing invariably the same Object evinces a design to reduce them under absolute Despotism, it is their right, it is their duty, to throw off such Government, and to provide new Guards for their future security.” The Declaration of Independence para. 2 (U.S. 1776).
[47] Gary North, “John Hancock’s Big Toe and the Constitution,” World Wide Web, at
http://www.lewrockwell.com/north/north247.html
[48] Letter from Thomas Jefferson to James Madison, in Daniel A. Smith, Tax Crusaders and the
Politics of Direct Democracy, at 174. (1998).
[49] Id.
[50] Marjorie E. Kornhauser, Legitimacy and the Right of Revolution: the role of tax protests and anti-
tax rhetoric in America, 50 Buff. L. Rev. 819, 843 (2002).
[51] Some violence was associated with the collection of the whiskey excise tax, and at least one tax
collector was tarred and feathered for trying to collect on the excise tax. Id., at 845.
[52] Id., at 845-46.
[53] Id., at 846.
[54] David J. Depippo, “I’ll take my sin taxes unwrapped and maximized with a side of inelasticity,
please,” 36 U. Rich. L. Rev. 543, 546 (2002).
[55] Marjorie E. Kornhauser, Legitimacy and the Right of Revolution: the role of tax protests and anti-
tax rhetoric in America, 50 Buff. L. Rev. 819, 846 (2002).
[56] David J. Depippo, “I’ll take my sin taxes unwrapped and maximized with a side of inelasticity,
please,” 36 U. Rich. L. Rev. 543, 546 (2002).
[57] The danger associated with the collection of the tax seems not to have been quite as great as in the
previous two tax rebellions. The tax protest was termed the “Hot Water War” after an angry housewife poured hot water on a tax assessor who had come to collect the excise tax. Marjorie E. Kornhauser, Legitimacy and the Right of Revolution: the role of tax protests and anti-tax rhetoric in America, 50 Buff. L. Rev. 819, 850 (2002).
[58] Id.
[59] Id., at 854.
[60] Id., at 855.
[61] William Freehling, Prelude to Civil War: The Nullification Controversy in South Carolina 1816-
1836, at 275 (1968).
[62] Robert L. Hayman, Jr., Nancy Levit, & Richard Delgado, Jurisprudence - Classical and
Contemporary: From Natural Law to Postmodernism, 2nd ed., 42-53 (2002).
[63] Office of Tax Pol’y, U.S. Dep’t of Treas., Pub. No. HP-111, “A Comprehensive Strategy for
Reducing the Tax Gap” (2006), at http://www.ustreas.gov/press/releases/reports/otptaxgapstrategy%20final.pdf
[64] Eugene Bardach, Moral Suasion and Taxpayer Compliance, 11 Law & Pol’y 49, 66 (1989).
Indeed, it appears as if political support for increasing tax enforcement is not nearly as strong as it could be. Refer to the evidence of resource shortage given above (fn. 15, fn. 17, supra). At the time of Bardach’s writing, a poll of U.S. taxpayers showed that only 7% of taxpayers were in favor of increasing enforcement tools like withholdings, a mere 6% wanted more auditors and collectors, and only 24% were willing to consent to increased prosecution for tax evasion. Id., at 63.
[65] Id., at 66.
[66] Id.
[67] See discussion of natural and divine law sources at note 39, supra.
[68] A study conducted before the Bardach’s writing indicated that 79% of a national sample of
taxpayers believed there was a patriotic duty to pay taxes. Eugene Bardach, Moral Suasion and Taxpayer Compliance, 11 Law & Pol’y 49, 67 (1989).
[69] Jean-Jacques Rousseau, On the Social Contract, in The Basic Political Writings 144 (Donald A.
Cress ed. 1988)
[70] John Locke, Second Treatise of Government (Richard Cox ed., Croft Classics, 1982).
[71] Thomas Hobbes, Leviathan (A.P. Martinich ed., Broadview Literary Texts, 2002).
[72] Plato, Crito, in The Trial and Death of Socrates: Four Dialogues 43 (Shane Weller ed. 1992).
[73] Id.
[74] Id.
[75] Id.
[76] The notion of rugged individualism was brought to the fore of American consciousness during the
presidency of Herbert Hoover who spoke at length on the subject following World War I. President Herbert Hoover, Rugged Individualism Speech, 1928 (at http://www.civics-online.org/library/formatted/texts/hoover_individualism.html).
[77] Ayn Rand, Atlas Shrugged, 1957.
[78] Ayn Rand, The Fountainhead, 1943.
[79] Although the data are still under intense scrutiny, Difference Feminist theorists have produced
impressive evidence that men and women develop vastly differing moral senses. According to Carol Gilligan, men will more frequently apply an ethic of justice, stressing individual rights and responsibilities, while women typically apply an ethic of care, which focuses more on relationships and inter-relatedness. Carol Gilligan, In a Different Voice: Psychological Theory and Women’s Development, 1993.
[80] Eugene Bardach, Moral Suasion and Taxpayer Compliance, 11 Law & Pol’y 49, 56 (1989).

[81] Thomas Hobbes, Leviathan 93-98 (A.P. Martinich ed., Broadview Literary Texts, 2002). Hobbes
envisioned a ‘state of nature’ in which government did not exist. This existence would be ruled by those who were the most ruthless and violent, and would be ‘red in tooth and nail,’ and where an individuals existence would be “solitary, poor, nasty, brutish and short.” Id., at 95-96. So terrible would this anarchy be that mankind would lay aside most any natural right to secure order and tranquility.
[82] David Gauthier, a Canadian who studies the intersection of Game Theory and Philosophy, argues
in his book, Morals by Agreement, for precisely this proposition. Maximization of expected utility, unconstrained by an agreement to abide by rules which take on the form of morality, leads to sub-optimal outcomes. To combat this problem, morality is invented to constrain individuals from pursuing this strategy in the form game. Individuals who choose a strategy of unconstrained maximization lower the expected utility of any interaction for themselves because constrained maximizers refuse to interact with them. David Gauthier, Morals by Agreement (1986).