Speaking of Taxes…

Auditing a challenge to taxation

by Sean Carter
01/01/03

Now that the elections are over, politicians are openly discussing the prospect of raising taxes to shore up state and local budget shortfalls. Proposals are floating around to raise income taxes, excise taxes, sin taxes, capital gains taxes and inheritance taxes. In fact, if politicians get their way, when the meek finally inherit the earth, there won’t be much left after taxes.

However, there may be hope on the horizon for the American taxpayer. Recently, Citrix Systems, a manufacturer of computer systems, filed a lawsuit challenging the constitutionality of taxes. Of course, this type of lawsuit is not unusual. Each year, dozens of American taxpayers make similar claims based on various unorthodox theories. Most of these theories are proposed by infomercial spokesmen, who incidentally pay all of their taxes. Unfortunately, most judges don’t watch late night infomercials and therefore, taxpayers invariably lose their cases (and sometimes, their freedom).

For the record, the power of the federal government to levy taxes is well established. Although much of the Constitution reads like an e e cummings poem (only less well punctuated), the document is crystal clear on this point. The 16th Amendment states, "The Congress shall have the power to lay and collect taxes on incomes, from whatever source." In short, if you get it, the federal government can take it.

Interestingly, it was not always this way in America. The 16th Amendment was enacted in response to a case in which the Supreme Court ruled that the income tax was unconstitutional. To solve this "problem," the people ratified the 16th Amendment. Perhaps not surprisingly, the Constitution was amended again a few years later to ban the sale of intoxicating liquors.

Nevertheless, the Citrix challenge is causing a stir because Citrix is no ordinary taxpayer. Citrix is a multi-billion dollar public company that employs several high-powered accountants and lawyers (at least one of whom should really know better). The company is suing the Florida Department of Revenue for a refund of $5 million of corporate income taxes paid over the last five years. Citrix claims that, as an information provider, it is exempt from taxation under the 1st Amendment’s freedom of speech. In short, Citrix is arguing that freedom of speech should be literally "free."

Stop laughing! Citrix is absolutely serious. Okay go ahead and laugh a little bit more. After all, that’s exactly what the Florida Department of Revenue is doing.

However, Citrix’s attorney, Allen Libow, isn’t laughing. In an interview, he said, "We’ll see how funny this is when it winds up in court."

As a responsible journalist, I took a scientific poll of legal experts to get their views on the case. In other words, I called my best friend Larry, who although not actually an attorney, does watch "The Practice" each week. After rolling around in a fit of laughter and eventually suffering an asthma attack, he called me back from the emergency room to say that Citrix’s case looks doubtful to him. Of course, he was heavily sedated at the time.

In any event, Citrix should not let criticism from the so-called "experts" stop it from pursuing this case. In fact, I am personally rooting for Citrix. As a writer, I can certainly use this defense to reduce my tax liability. After all, you can only fake your own death so many times.

If Citrix is successful, then no one involved in the media will have to pay taxes. Moreover, it will only be a matter of time before other groups begin using this constitutional exemption. For instance, the 2nd Amendment arguably protects the rights of citizens to own guns. Under the Citrix theory, sales taxes on gun transfers and corporate taxes on gun makers would be unconstitutional. Likewise, the 4th Amendment provides for the right of the people to be secure in their homes. Under the Citrix reasoning, it would be unconstitutional to tax locksmiths, burglar alarm companies, the makers of "The Club," etc. The same would be true for criminal defense lawyers under the 6th Amendment and bails bondsmen under the 8th Amendment. And with a little creativity, almost everyone will have an exemption from paying taxes.

Of course, this would present a slight problem for state and local governments trying to balance their budgets. With almost no revenue coming in, they would be forced to either drastically cut spending or hire Arthur Andersen accountants to prepare their financial statements. I think we can all guess which option they would choose.

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Sean is a practicing attorney who writes a weekly humor column on current legal events called "Lawpsided." Lawpsided pieces appear in a growing number of general circulation papers across the country, including The Los Angeles Times. Moreover, his musings on the law appear on nationally recognized websites, such as jewishworldreview.com, findlaw.com, newsmax.com and etherzone.com, and legal publications, such as The National Law Journal and The Los Angeles Daily Journal. Lastly, he is a regular contributor to national magazines like Razor and Tirade. If you would be interested in publishing this piece or seeing other samples of his work, please feel free to contact him by e-mail, by phone at (626) 786-2095, or through his website at:

www.lawpsided.com