Beware the Self-Styled Tax Advisor

The Social Security Swindle—How Anyone Can Drop Out, by Irwin Schiff, Hamden, Conn.: Freedom Books, 256 pp., $12.95

If you have been reading the pages of this magazine awhile, it will come as no surprise to you to learn that the Social Security system is the greatest fraud ever successfully sold to American taxpayers. It is not "insurance." It is not a "retirement fund" into which you pay during your working years in order to finance your leisure ones. There is not (nor has there ever been) any special "trust fund" into which contributions are paid, accumulate, and later drawn down.

Social Security is a fraudulent insurance pyramid scheme that would be illegal if anyone but the federal government were perpetrating it. In fact, it occurred to me when I was running for governor of New York several years ago that if the administrators of Social Security were to be bound by the regulations of the Insurance Department of the State of New York, they might be serving jail sentences even now.

Face it, if you haven't already: the fact that your paycheck stub has a separate deduction on it for FICA (Social Security) "contributions" means nothing. Those deductions are taxes on your income, and just like other taxes, you will never see that money again.

Irwin Schiff knows what Social Security is and is not. The value of his book, The Social Security Swindle, lies in his easily read explanation of exactly how and why the system is a scam. He also presents a fairly well documented history of the legal battles surrounding Social Security over the years, and it did this reviewer's heart good to discover that there was an occasional federal judge who saw the system for what it was. To the extent that Schiff's analysis and history of Social Security will enrage some readers and perhaps motivate them to act, it may be a useful work. But there are some serious problems with the book.

A not-so-serious problem is that the book is full of typographical and grammatical errors. "Freedom Books" appears to be Schiff's own publishing company. If he was his own publisher, he might also have been his own editor, and that is unfortunate for the book's literary integrity. Schiff's earlier book, How Anyone Can Stop Paying Income Taxes, was a Simon & Schuster publication and was eminently more readable, though it shared many of the same substantive problems with this new one.

The problems with Schiff's books, lectures, TV appearances, and other preachings stem not so much from what he says about taxes, Social Security, economics, and government (most of which is accurate), but from what he suggests people do about these things. The Social Security Swindle, like his other books, contains do-it-yourself letters, forms, legal papers, and so on, all supposedly designed to provide the reader not just with a method of refusing to pay but, by implication, with a method of refusing to pay and getting away with it.

When it comes to making a decision about the payment of taxes, there are really only a few rational choices available to those who believe that taxes amount to government theft. We can pay (while exercising the best tools available to us for legal tax avoidance, thus minimizing the bite), on the theory that we can be more effective agents of reform if we are not in jail. Or we can refuse to pay and take a principled, albeit risky, stand that amounts to civil disobedience, all the time remaining fully aware of the potential consequences to us of violating the law.

I have a great deal of respect for both positions. Unfortunately, what Schiff implies to his readers is that his methods amount to a way to refuse to pay without having to be concerned about the consequences of breaking the law. Sorry, but you can't have it both ways. Whether or not their collection procedures are legal or constitutional is of no concern to the IRS. When they receive your do-it-yourself forms and letters in which you claim that you have no legal obligation to pay, they are not going to respond with, "Oh, nuts, someone else read Irwin Schiff's book and discovered our secret loophole for not paying taxes. Oh well." No, they will seize your property if necessary.

After all, they seized Schiff's. In its April 2, 1984, issue, Forbes reported that the IRS seized $135,000 of royalties held by Simon & Schuster that were due Schiff for, ironically, his book How Anyone Can Stop Paying Income Taxes. And, on May 2, 1984, the Wall Street Journal reported that Schiff, "who was jailed in 1981 after claiming that no one need pay taxes," was ordered by the tax court "to pay $30,114 in taxes and penalties for two years for which he didn't file valid returns."

If you're going to refuse to pay taxes, I say, "Bravo." But don't deceive yourself (or be deceived by tax-protest movement writers) that the government will roll over and play dead because you can quote the Constitution, Black's Law Dictionary, and Irwin Schiff all in the same breath. Before you make such a decision, you would be well-advised to read what I consider the most important passage in Schiff's book. It can be found on the page behind the title page, and it is a theme that is not repeated in the body of the book:

This information is not provided for purposes of rendering legal…services, which can only be provided by knowledgeable professionals.…The author and publisher disclaim any responsibility for any…loss incurred as a consequence of the…application…of any advice…presented herein.

John Northrup is director of the Graduate School of Professional Accounting at Northeastern University.