Wednesday, April 1, 2009

Why is It The Busiest Tax Court?

We recently pointed out that the landscape of US tax law is a murky place. Now we want to point out that the Federal District Court offers a jury trial by one's peers. But it is a place where only the wealthy, along with their expensive lawyers, tend to venture.

For the rest of us, the US Tax Court does from 85% to 95% of the tax cases, depending on the year.

The number of cases filed in The Tax Court, after 1999, has grown consistently:
# filed .......... year

31,450 .......... 2008
30,442 .......... 2007
26,993 .......... 2006
24,801 .......... 2005
24,931 .......... 2004
22,451 .......... 2003
20,291 .......... 2002
14,649 .......... 2001
13,545 .......... 2000
One wonders why, when a taxpayer's chances of winning in that court are extremely slim. Some reports show a 7 - 3, or even an 8 - 2 ratio (IRS wins 8 out of 10 cases, taxpayers win 2 out of 10 cases) in that court:
... an examination of raw numbers shows ... the taxpayer doing better in the general jurisdiction district court than in the specialized tax court. Some studies show that the taxpayer wins only 5% of the time in tax court as compared to 20% to 30% of taxpayers winning in the district court, with other studies acknowledging at least a 20% percent differential (Geier 1991. p. 998). The data used for this study show a 12% differential, with taxpayers winning 20% of the time in tax court and 32% of the time in the district court. These differential rates have led some scholars to argue that the tax court is ... biased in favor of the [IRS] ... Kroll 1996 ...
(Fed. Dist. Ct. vs Tax Court, PDF). My reading of the published cases over the past 10 years is not so promising, and I would say that it is more like 9 - 1. That is, IRS wins 9 out of 10 cases in the Tax Court.

But that ratio could be because the government needs money more at some times than it does at other times.

Which could mean that the pressure which deficits put on IRS and the Tax Court causes variation in decisions for taxpayers from time to time.

The US Tax Court is the court for the poor and middle class, and the US District Court is for the well to do:
Of course, litigating in the tax court is not the only option for the taxpayer. The major alternative to the tax court is the United States District Court, the court of general trial jurisdiction in the federal system. To sue in this court, the taxpayer must pay the disputed tax, and then sue for a refund in the United States Federal District Court ... The taxpayer files the claim, and the case is tried in the taxpayer’s local district. The taxpayer can, and usually does, request a jury trial. Decisions of these courts can be appealed to the circuit within which the court is located.
(ibid, emphasis added). The poor and middle class who can't afford a lawyer and who can't afford to pay the tax out front, then ask for it back in a District Court, must go to the tax court.

Once there most often they try to win pro se (representing themselves without a lawyer).

The middle class and the poor who go to the Tax Court can't have a jury decision. Instead they must rely on the Tax Court judges. The very Tax Court judges whom the scholars have said are biased in favour of the IRS:
These differential rates have led some scholars to argue that the tax court is ... biased in favor of the agency (Kroll 1996; but see Maule 1999). One scholar notes it is this potential for bias that has led Congress often to resist creating other specialized courts (Baum 1990). While most scholarship has failed to develop a coherent theory for why such bias exists, posited reasons include such factors as ideology, institutional design and structure, prior IRS work experience, the type of litigant, attorney representation, and even social and personal characteristics of the judge.
(ibid, emphasis added). Yesterday on the floor of the House of Representatives one of the Carolina representatives said that there was a surge in the increase of Boston Tea Party gatherings in his area.

He went on to say that taxpayers do not like it when their money, earned from hard work done before their shower, is taken from them and given to the banksters who work after their shower.

Why is that not surprising?

The answer to "why all the filings in the Tax Court?" is desperation. Both the government and the people are desperate for money.

Which has absolutely nothing to do with the fact that the tripling of tax cases in the tax court happened in the same years (2000-2008) that the Bush II regime ruled the roost (wink, wink).


  1. Thanks for an informative,insightful,well-written article.
    I found it to be very convincing.

  2. DJ Useo,

    Thanks and welcome.

  3. It may get much busier ... delinquencies are on the rise now ...

  4. Damn right we don't like it. Especially after learning the truth about the INCOME tax:

  5. khenck,

    In an earlier post on this blog we said:

    "Then there are the tax protesters. Those tax vandals and barbarians who rush headlong past every sign and warning, yelling and whooping with no consideration whatsoever of any tax norms.

    Even though countless tax court decisions, for decades, have rejected their time-worn mantra ("there is no such thing as an income tax"). A mantra which they incessantly recite to judges who struggle with judicial patience, but who seem to always impose fines upon them.

    The website you link to in your post is a tax protester website.

    I urge all Dredd Blog readers to avoid that website like the plague, because it is an ignorant, carpet bagger, and wrong headed website.

    We Americans pay our taxes so that others may benefit. That is our duty under our laws.

    Those who wrongfully deal with the tax dollars once we pay them are as wrong as the tax protesters.

  6. Taxation is extortion; it just gets a friendlier name when the State does it. When the government steals half of everything you make, you're a serf not a citizen.

  7. Hi,

    This is an interesting perspective. Thanks a lot for sharing this useful information and look forward to see more from you.

    Once the IRS takes action against a taxpayer, potential disaster is on the way! Taxes can be assessed and then assets may be seized. The taxes may or may not be owed. Once assessed, tax liens will be filed along and other collection action taken.

    In many cases, if you disagree with the proposed Internal Revenue Service action, you are allowed to go to Tax Court and have a judge review the actions of the IRS to determine if they are proper and warranted. Positive results can often be attained when a judge decides the matter as opposed to pursuing other IRS avenues.