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Stack was upset that §1706 did precisely what it was designed to do: Deprive him of the chance to exploit independent contractor status to avoid paying taxes through non-filing or through the understatement of income, overstatement of deductions, and avoidance of income tax withholding. In spite of the overwhelming advantages attendant to employee status, Joe Stack desperately wanted to be treated as an independent contractor for one simple reason: It would have made his tax protesting easier.4 Footnotes: ¹  We have met many taxpayers who worked as independent contractors for years without so much as a peep of protest until they realized, ex post facto, that it might have better for them to have been treated as employees. In our experience, workers tend to be content with their independent contractor status until one of the following happens: They get fired or quit They get hurt on the job They get sued for something they did while on the job They need a bank loan (and employment verification)  ²  If Stack had been an independent contractor and was subsequently “fired” by his principal, my hunch is it would have taken him less time to file a claim for unemployment compensation than it takes Apolo Ohno to finish short track. ³  Indeed, §1706 was included in TRA ‘86 because the CBO had estimated that the government was losing up to 30% of taxes because independent contractors were either not reporting all of their income on their tax returns or were claiming fraudulent or questionable deductions against that income. 4   Like all tax protestors, Stack knew that once the IRS had collected his taxes through payroll withholding it would never give it back to him based on previously refuted tax protestor arguments. Consequently, his only chance of avoiding taxes was to control his own tax payments and then use his frivolous arguments to evade or at least defer paying taxes.

However, tax experts say that if you want to really annoy the IRS, you could do one of three things: Fail to file a return completely; loudly maintain that the tax code doesn’t apply to you; or cheat on employment tax filings for your workers. Stack appears to have done all three. And if the tone of his letter is any indication, he not only hit all of these IRS hot buttons, he hit them with a belligerent attitude that could have further exacerbated his tax woes. “The IRS is toughest on people who reject the whole concept and authority of the system, who are not accepting that we do have income tax laws that we are all subject to,” said Philip J. Holthouse, partner at the Santa Monica tax law and accounting firm of Holthouse, Carlin & Van Trigt. “If the anger expressed in this posting is consistent with how he interacted with the government representatives, it would not have enhanced their compassion.” Stack’s note refers to meeting with “a group” in the early 1980s who were holding “tax readings and discussions” that zeroed in on tax exemptions that make “the vulgar, corrupt Catholic Church so incredibly wealthy.” He said in the post that he then began to do “exactly what the ‘big boys’ were doing.” “We took a great deal of care to make it all visible, following all of the rules, exactly the way the law said it was to be done.” Since Stack wasn’t a church, this is like waving a red flag at a bull. The IRS apparently considered this foray into tax avoidance the real corruption. Stacks letter says: “That little lesson in patriotism cost me $40,000.” Incidentally, the notion that anyone (other than a legitimate charity) doesn’t need to pay income taxes is one that’s well familiar–and refuted–by not only the IRS but every legitimate tax preparer in the country. So-called tax protestors or “tax defiers” take bits and pieces of the law, string them together in incomprehensible ways to come up with arguments that they say exempt them from tax. They can sound convincing, so the IRS publishes a long list of “frivolous” tax arguments on its web site, explaining when and where each argument was refuted, in an effort to keep innocent taxpayers from drinking the tax protest KoolAid. But that wasn’t all. Stack also says in his letter that he drained a retirement account and didn’t pay tax on any of that money–didn’t even file a return. The penalties for not filing a tax return are roughly ten times worse than for not paying your taxes. That’s one of the reasons that accountants tell their clients to file returns, even when they don’t have the money to pay, said Holthouse. Finally, Stack rails about independent contractor rules. Experts said the only way this rant could make sense is if Stack started a company that employed other people, who he maintained were independent contractors rather than employees. If an employer maintains he’s hired only independent contractors, he doesn’t need to pay Social Security and Medicare taxes on their wages. But the IRS audits these claims carefully. When an employee is improperly classified as an independent contractor so that the employer can avoid these taxes, the IRS prosecutes aggressively because it considers it tantamount to stealing from workers Social Security and Medicare accounts. Notably, the IRS has a Taxpayer Advocate’s office that helps resolve disputes when taxpayers have a legitimate problem with the agency. People who can’t pay tax bills promptly; have a dispute over the validity of a deduction or think they’ve been improperly penalized are often given some slack. But these are not areas where you’re going to get a lot of sympathy.

Why haven't the President and Senate Democrats pulled the reconciliation trigger before now? I haven't spoken directly with the President or with Harry Reid but I've spent the last several weeks sounding out contacts on the Hill and in the White House to find an answer. Here are the theories. None of them justifies waiting any longer. Reconciliation is too extreme a measure to use on a piece of legislation so important. I hear this a lot but it's bunk. George W. Bush used reconciliation to enact his giant tax cut bill in 2003 (he garnered only 50 votes for it in the Senate, forcing Vice President Cheney to cast the deciding vote). Six years before that, Bill Clinton rounded up 51 votes to enact the Children's Health Insurance Program (CHIP), the largest expansion of taxpayer-funded health insurance coverage for children in the U.S. since Medicaid began in the 1960s. Through reconciliation, we also got Medicare Advantage. Also through reconciliation came the COBRA act, which gives Americans a bit of healthcare protection after they lose a job ("reconciliaton is the "R" in the COBRA acronym.) These were all big, important pieces of legislation, and all were enacted by 51 votes in the Senate. Use of reconciliation would infuriate Senate Republicans. It may. So what? They haven't given Obama a single vote on any major issue since he first began wining and dining them at the White House. In fact, Senate Minority Leader Mitch McConnell and company have been doing everything in their power to undermine the President. They're using the same playbook Republicans used in the first two years of the Clinton administration, hoping to discredit the President and score large victories in the midterm elections by burying his biggest legislative initiative. Indeed, Obama could credibly argue that Senate Republicans have altered the rules of the Senate by demanding 60 votes on almost every initiative - a far more extensive use of the filibuster than at any time in modern history - so it's only right that he, the President, now resort to reconciliation. Obama needs Republican votes on military policy so he doesn't dare antagonize them on health care. I hear this from some quarters but I don't buy it. While it's true that Dems are skeptical of Obama's escalation of the war in Afghanistan and that Republicans are his major backers, it seems doubtful R's would withdraw their support if the President forced their hand on health care. Foreign policy is the one area where Republicans have offered a halfway consistent (and always bellicose) voice, and Dick Cheney et al would excoriate them if they failed to back a strong military presence in the Middle East. This is truer now than ever. Reid fears he can't even get 51 votes in the Senate now, after Scott Brown's win. Reid counts noses better than I do, but if Senate Democrats can't come up with even 51 votes for the health care reforms they enacted weeks ago they give new definition to the term "spineless." Besides, if this is the case, Obama ought to be banging Senate heads together. A president has huge bargaining leverage because he presides over an almost infinite list of future deals. Lyndon Johnson wasn't afraid to use his power to the fullest to get Medicare enacted. If Obama can't get 51 Senate votes out of 58 or 59 Dems and Independents, he definitely won't be able to get 51 Senate votes after November. Inevitably, the Senate will lose some Democrats. Now's his last opportunity. House and Senate Democrats are telling Obama they don't want to take another vote on health care or even enact it before November's midterms because they're afraid it will jeopardize their chances of being reelected and may threaten their control over the House and Senate. I hear this repeatedly but if it's true Republicans have done a far better job scaring Americans about health care reform than any pollster has been able to uncover. Most polls still show a majority of Americans still in favor of the basic tenets of reform - expanded coverage, regulations barring insurers from refusing coverage because of someone's preexisting conditions and preventing insurers from kicking someone off the rolls because they get sick, requirements that employers provide coverage or pay into a common pool, and so on. And now that many private insurers are hiking up premiums, co-pays, and deductibles, the public is even readier to embrace reform.

Reconciliation was created through the Budget Reform Act of 1974 in an effort to streamline the budget process, strengthen the ability of Congress to make tough decisions regarding deficits, and to make legislative decision-making more efficient. Congress quickly expanded on the types of measures that could be considered under reconciliation until 1985 and 1986, when the Senate passed rules proposed by Sen. Robert Byrd that limited what could or could not be included when using this process. Before moving forward, Democrats must consider two questions. The first is whether using reconciliation to pass health care is legitimate or an abuse of the process. Republicans have charged that this would be akin to forcing the program through the chamber rather than passing the bill through negotiation and compromise. On this question, the answer is easy. Reconciliation has been as much a part of the Senate in the past three decades as the filibuster. According to an article that was published in The New Republic, Congress passed 22 reconciliation bills between 1980 and 2008. Many important policy changes were enacted through this process, including the Children's Health Insurance Program, COBRA (which allows people who switch jobs to keep their health care), student aid reform, expansions in Medicaid and several major tax cuts. NPR's Julie Rovner reported that most of the health care reforms enacted in the past two decades have gone through reconciliation. President Ronald Reagan was one of the first presidents to make aggressive use of reconciliation when he pushed through his economic program in 1981. Senate Majority Leader Howard Baker said then that speed had been essential because "Every day that this is delayed makes it more difficult to pass. This is an extraordinary proposal, and these are extraordinary times." Presidents Jimmy Carter, George H.W. Bush, Bill Clinton and George W. Bush all used reconciliation as well. It is worth noting that these presidents, particularly George W. Bush, also made use of sweeping executive power to circumvent Congress altogether. The second question is more difficult and it involves perceptions. If the Democratic leadership wants to use this tactic, they have to convince enough members of their own party that this won't scare off independent voters. This argument was harder to make in 2009 than in 2010. But after a year of dealing with paralysis in the Senate and highly effective Republican obstruction, more Democrats are coming on board. The leadership must be proactive in responding to the criticism about reconciliation. They will have to explain that reconciliation is a legitimate process by pointing to the history. They will also have to connect the dots for voters frustrated with the ineffective government by explaining that the constant use of the filibuster has turned the Senate into a supermajority institution where both parties have found it extraordinarily difficult -- virtually impossible -- to pass major legislation.On this point, Republicans and Democrats actually agree. Indeed, as Democrats make this decision, Kentucky Republican Senator Jim Bunning is objecting to a unanimous consent order and single-handedly preventing the Senate from passing an important bill to assist unemployed workers.