An alternative tax thinker is trying the Puerto Rico gambit

A similar term to Brian Swanson is a tax protester, defined by Wikipedia as someone who refuses to pay taxes on the grounds that tax laws are unconstitutional or otherwise wrong. In 1998, Congress banned the IRS from calling people “illegal tax evaders,” but that hasn’t stopped others, including the courts, from using the term. I still don’t like it, so what I’m going to call Brian Swanson is an alternative tax thinker.

I first heard from Brian in 2018 and we’ve been kind of email buddies ever since. In his first email, he told me that he read Peter Hendrickson’s book and based on what he read, he corrected the charge and received a full refund. Peter Hendrickson with his Lost Horizons website where he teaches you to “crack the code” may be the leading alternative tax thinker right now. I’ve been covering Hendrickson since 2014. Recently, one of Hendrickson’s students was convicted of seven counts of knowingly and fraudulently. Filing false income tax returns and some bankruptcy related charges.

doing his own research

However, Bryan “did his own research” and decided Hendrickson was wrong. He wrote his own book correcting what he believed to be Hendrickson’s errors and gave me an electronic copy to review. This book was based on the theory that Americans do not understand the difference between capital and income. His brief explanation was:

The 16th amendment only applies to income, it does not apply to capital. A person works to create capital and earns income from invested capital. Referring to capital as “earned income” is an attempt to liquidate personal finance capital and trick people into paying more tax than they owe. Employment income is capital and investment income is income, and my book explains why. “

The Constitutional Tax Structure: Why Most Americans Pay Too Much Federal Income Tax It’s affordable, but it’s on the expensive side and I can’t really recommend it. He also has a website called Capital VS. Income that explains the theory. The idea is that labor income is not income but creates capital. Income is only income from capital. An accountant who thinks twice about Brian’s theory doesn’t even make a good fool of himself.

When Brian wrote to me in 2018, it was kind of a heads up. He was not interested in becoming more famous. He’s a really nice guy and doesn’t get mad when I tell him his ideas are stupid and practically beg him to quit. I was not successful. He has enough of a court record to make himself newsworthy. I found he had eight cases in PACER. Several of them echo his opposition to the people of Georgia voting for their senators given that George had not ratified the Seventeenth Amendment. The rest is tax. There was also a case in the tax court.

I’ll still be a little fuzzy on some of its details, even though they’re public record. He is in his fifties and receives a federal pension. He also teaches high school. He has a degree in systems engineering from a reputed college. He believes that income taxes should be paid on federal pensions, but not on high school wages.

He explained why wages are not taxable income by saying:

“I’m not a judge, a lawyer, and I don’t have any formal or informal legal training. What I do know is that law is an abstraction. It doesn’t exist in the real world. It’s literally like code. Computer programming code. It works like that.

A computer programmer can create variables and then define their value. A computer program can define a variable called “apple” and assign it as an integer variable and give it the value 10. “Apple
” = 10. In the real world, an apple is a fruit, but in the code it can be 10. This is an abstraction. In the tax code, variables are called “legal terms” and are usually expressed in quotation marks, meaning that the term does. In the code, it does not have to have the same meaning as In the real world. The various subroutines in the tax code are like subroutines in a program. They are independent and run independently, and the functions of each routine do not function outside of it. Its defined subroutines without permission.


The key to engaging with alternative tax thinkers is how much history you study and how much time you spend thinking about the Constitution. There is a big difference in the constitution between direct and indirect taxes. Ordinary people don’t think much about it because we don’t have direct taxes because they’re not really practical. Direct taxes should be distributed among the states. What happened with the income tax was that in 1895, in Pollock v Farmer’s Loan and Trust, the Supreme Court ruled that the income tax, insofar as it taxed income from property, was a direct tax and therefore had to be redistributed, which effectively destroyed it.

The Sixteenth Amendment, passed in 1913, allowed the imposition of an income tax on income from any source without apportionment. That is, are income taxes direct or indirect taxes? who cares They should not be distributed independently. Brian cares, and you can read about it in the 11th Circuit Supreme Court decision where he was sanctioned for being frivolous.

“This question should not be moot because this court has already answered the question in Brushaber and Knowlton, but many appellate courts seem to be contradicting this court’s decisions. In its decision, the Eleventh Circuit found that:

The Supreme Court has recognized that the Sixteenth Amendment authorizes a direct, undivided income tax on United States citizens throughout the country. See Brushaber, 240 U.S. at 12-19. (App. 3)

Eleventh Circuit cites Brushaber for this erroneous holding. However, the Supreme Court has not said anything like that. Brushaber actually states that:

The argument that the amendment treats the income tax as a direct tax, though exempt from apportionment and therefore not subject to the rule of uniformity, because such a rule applies only to taxes which are not direct, thus destroys the two great classifications. which were recognized and enforced from the beginning are also completely baseless. See Brushaber, 240 US 18 .

In one sentence, the Supreme Court destroys the idea of ​​undivided direct tax and single direct tax at the same time. Direct taxes are not exempt from redistribution and direct taxes cannot be uniform. Nevertheless, under the Eleventh Circuit, Brushaber permits a direct, undistributed income tax on United States citizens. how can this Will this court refuse to correct this error?”

I think he may have a point about how appellate courts inconsistently interpret the Brushaber decision. I don’t think the whole system will collapse anytime soon because of this. Before Pollock, income tax was considered indirect, subjecting it to the rule of uniformity. Pollock said that in some ways it was a direct tax. The Sixteenth Amendment removes the apportionment requirement to the extent that it was one. It would probably be nice to clear up this confusion, but in the meantime, you, Brian, and I have to keep paying. Income tax should not be apportioned. It should probably be uniform, but who cares because it is uniform and there is no danger at this point that Congress is going to change it.

But Brian has other inspiration as he sees a flaw in the uniformity.

But what about Puerto Rico?

This is really great. Let’s put aside our Brushaber concerns and go with the idea that income tax is indirect. Well, then it should be uniform, which it almost is. When you move from New York to Massachusetts, you may have different state paychecks, but the federal paycheck is the same. It doesn’t work that way if you move to Puerto Rico. If you become a bona fide resident of Puerto Rico, you may not need to file a federal tax return at all. Puerto Rico has its own income tax, but it’s different enough from the federal income tax that we don’t have uniformity.

So Brian thinks he’s found the key to breaking the system. He is particularly excited about a recent Supreme Court decision (United States v Vaello Madero, April 21, 2022) that touches on Puerto Rico’s complicated status history. Madero collected SSI while living in New York. He moved to Puerto Rico. SSI is not available to residents of Puerto Rico. He still managed to collect and sued for more than $28,000. Madero argued that the denial of SSI to residents of Puerto Rico violated the equal protection component of the Due Process Clause of the Fifth Amendment. District and appeals courts agreed with Madero, but the Supreme Court ruled 8-1 in favor of the government.

“The differential rational basis test applies. And Puerto Rico’s tax status—namely, the fact that residents of Puerto Rico are generally exempt from federal income, gift, estate, and excise taxes—provides a rational basis for similarly discriminating Puerto Rico residents. Rico offers additional protections from state residents. For purposes of the Income Benefit Program.

Overall, Justice Kavanaugh’s opinion does not appear to help Bryan’s contention that he is not taxed as a single. What worries him is Justice Gorsuch’s concurring opinion. Puerto Rico’s disparate treatment is supported by several early 20th-century Supreme Court decisions known as the “insular cases.” Justice Cavanaugh had to agree because neither party argued that the Insular Cases had been overruled.

The Insular Cases arose out of a dispute over how the Constitution should apply to territories that came under US rule as a result of the Spanish American War, including Puerto Rico. You can understand the type of thinking that was going around when you note that the US administration of these territories inspired Rudyard Kipling to write a poem.Take the white man’s burdenThe Constitution essentially did not apply to such people. Judge Gorsuch writes:

“Isolation cases have no basis in the Constitution and are based on racist stereotypes. They deserve no place in our law.”

Brian has a case live in the United States District Court for the Southern District of Georgia – Brian Swanson v. USA – where he makes his case. It defies an easy summary, but you can read it here in his response to the government’s motion to dismiss.

My legal brain trust doesn’t have much patience for alternative tax thinkers, so I’ll have to leave my analysis. If the Insular Cases are overturned, it does not mean that those of us living in the nifty fifty will not have to pay federal income tax. In fact, Judge Kavanaugh’s opinion addresses this possibility.

“And if this Court were to require identical treatment in terms of benefits, residents of the States could presumably seek to impose federal taxes on residents of Puerto Rico and other territories in the same way that those taxes would be imposed on residents of the States.” “

I have to say I have some admiration for Brian Swanson, even though I wish he’d found a new hobby.

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