Peter Schiff is an economist, financial broker, commentator, precious metals dealer, and host of The Peter Schiff Show. His father, Irwin Schiff, built a very different kind of legacy: He was the grandfather of the contemporary American tax protest movement, according to Forbes.
Irwin died in federal prison on October 16, 2015. He was 87. Schiff had been diagnosed with lung cancer, and his son Peter had been seeking compassionate release so his father could die at home. His request was denied.
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His theory and the courts’ rejection
Irwin Schiff’s argument was built on a close reading of Supreme Court decisions from the era surrounding the passage of the Sixteenth Amendment, particularly Brushaber v. Union Pacific and Merchants’ Loan and Trust Co. v. Smietanka. His interpretation was the federal income tax applied only in very limited circumstances and that ordinary Americans were deceived into paying it voluntarily.
He promoted these ideas through his books, including How Anyone Can Stop Paying Income Taxes; Federal Mafia: How It Illegally Imposes and Unlawfully Collects Income Taxes; and The Biggest Con: How the Government Is Fleecing You.
According to evidence presented at trial and cited in a Department of Justice (DOJ) press release, beginning in 1995, Schiff and his associates led thousands of taxpayers into filing false federal income tax returns reporting zero taxable income, despite having earned “large amounts of reportable income.” His business, Freedom Books, sold more than $4.2 million in materials encouraging customers not to pay income tax.
No federal court ever agreed with Irwin’s theory, but Peter Schiff and his brother Andrew have stated that they believe their father’s legal theories were correct, but also notably advised people not to follow them.
The consequences
This was not Irwin Schiff’s first run-in with the law. According to the DOJ, his 2005 conviction was the third time he had been convicted of federal tax offenses, having previously spent more than four years in prison for earlier tax crimes.
In October 2005, a federal jury in Las Vegas found him guilty on all counts: tax evasion, filing false returns for the years 1997 through 2002, conspiring to defraud the U.S., and aiding thousands of other taxpayers in filing false returns.
According to the DOJ’s February 2006 announcement, he was sentenced to 163 months in federal prison — 151 months for tax fraud and an additional 12 months for contempt of court — and ordered to pay more than $4.2 million in restitution. Then, a 2008 resentencing added an additional 11 months for criminal contempt.
What the IRS says
The IRS maintains a detailed public resource specifically rebutting tax protest arguments like Irwin Schiff’s. According to its “Truth About Frivolous Arguments” guidance, courts have repeatedly rejected the claim that paying federal income tax is voluntary, and those who act on such positions risk civil repercussions, including up to a 75% fraud penalty, as well as criminal prosecution.
As one federal court memorably put it, “Like moths to a flame, some people find themselves irresistibly drawn to the tax protester movement’s illusory claim that there is no legal requirement to pay federal income tax. And, like moths, these people sometimes get burned.”
To be clear, though, Irwin Schiff wasn’t burned. He was imprisoned. And that distinction, which also mirrors the difference between a compelling argument and one that’s legally correct, cost him his freedom and, ultimately, his final days with his family.
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This article originally appeared on Moneywise.com under the title: Peter Schiff’s father sold $4.2 million in books claiming income tax is illegal. He died in federal prison
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