Yesterday's entry Welcome to the Predatory State of California--Even If You Don't Live There generated dozens of emails recounting similar stories of "we don't need no stinkin' due process" looting and "fishing expeditions" by California and other state/local governments.

Let's begin with correspondent (and Arizona resident since 2001) R.T.'s experience of his account being looted without prior notice or due process by the state of California to the tune of $1,343. R.T. finally reached an employee of the State Franchise Tax Board and received an explanation.

The state representative stated that "we don't try to contact the person involved," i.e. the taxpayer whose account is about to be looted. The rep went on to explain that the state had received a 1099 from a financial institution for the year 2006 and had promptly stolen the citizen's money in the event that tax was owed to California.

Everyone who believes the government is "here to help disadvantaged people" needs to wake up and ask what kind of government we have when due process has been replaced with "legal" looting. R.T. reported the income in question on his 2006 Federal and Arizona tax return. Wouldn't common sense, not to mention common law, suggest that the state of California should be required to ask the citizen who now resided in another state if the income in question had been reported in that state?

How about notifying the citizen of the state's claim and his/her rights to present facts relating to the state's claim?

There was no due process. How can this be legal in a nation that is nominally governed by rule of law? First the state steals the $1,343 and authorizes its parasitic predatory bag-"person" Wells Fargo Bank to steal another $100 for handling the state's theft.

A week or two later the citizen is notified of the theft as a fait accompli. Now the onus is on the law-abiding citizen to attempt to reclaim his own money from a distant, all-powerful Kafkaesque state agency. How can this be legal in a nation supposedly operating under rule of law?

Let's be very clear about what happens here in America on a daily basis:

1. The state (or other agency of government) steals citizen's money without due process.

2. Then, in a move akin to the executioner making the condemned buy his own death bullet, the state authorizes the "too big to fail" corporate bank which received billions in taxpayer bailouts to steal $100 from the citizen for the digital theft of his money by the state.

3. If the citizen needed that money to pay rent, buy medication to stay alive, etc., tough luck, Buckwheat, the state of California has your money before they notify you of the purported tax liability or provide due process or recourse and now you enter the Kafkaesque insanity of pleading for a "refund" of your own money from an agency designed to thwart transparency and the reclamation of your own money.

So if you get evicted and are living in a cardboard box and pass away due to inability to buy your meds, hey, the State of California's political class and special interests could care less: they want your money and the rule of law means nothing to them.

If you understand that a purported tax liability is one issue and due process is another far more important issue, then you understand that we now live in an authoritarian nation where "rule of law" is only invoked at the convenience of the political and financial Elites for propaganda purposes.

The state of California has three basic methods of looting law-abiding citizens:

1. The old "you didn't pay a $25 filing fee, the fine is now $499 which we took from your bank account." Never mind you have the cancelled check endorsed by the state, proving they received it and cashed it; the Board of Kafkaesque Authority claims "we didn't get the check" and loots your account for the $499 (true story.)

2. "Fishing expeditions" where companies and citizens are dunned for taxes and fees they might owe, though there is no evidence they do in fact owe fees and taxes. I received many emails describing these fishing expeditions, for example, merely having a license is "evidence" that you must have unreported income.

3. Enforce all sorts of dubious claims, most importantly:

A. That anyone collecting a pension from work performed while residing in California is liable for California taxes on that pension, regardless of where they live;

B. Any income resulting from something invented in California must be reported as income in California, regardless of where the income is derived from or where the inventor now lives.

In other words, residency has no meaning. Any income remotely connected to California--for example, you had the idea while residing in the state--obligates you to pay California income tax on that idea in perpetuity.

Lest you think this far-fetched, please consider this report sent to me by correspondent J.J.: Will California Gamble in Las Vegas? The Stakes are High in the Gilbert Hyatt Case:

To summarize, the California FTB sued Gilbert Hyatt, an inventor of a microprocessor chip, for tax fraud. The FTB claimed that Mr. Hyatt did not file a return for the income derived from his invention. Mr. Hyatt claimed he was already a Nevada resident at the time he invented the chip; California claimed otherwise. Whether that case has merit is still to be decided and could lead to a recovery of around $50M for the FTB, including penalties and interest, which account for over 80% of the total.

The real issue, however, is the FTB’s misconduct in pursuing Mr. Hyatt in Nevada. According to Bill Leonard, a member of the California State Board of Equalization, as published in his newsletter:

Tax agents rummaged through his trash without warrants, visited business partners and doctors, and shared his Social Security Number and other personal information with the media. This is outrageous behavior and I call on the FTB to rein in their agents. What really galled me is the FTB testified in open court that this level of harassment was only a typical audit. If true, then the stormtroopers are alive and well at the FTB.

Mr. Hyatt sued the FTB for torts and other misconduct. The FTB claimed it was immune from being sued under the doctrine of comity- defined by the Nevada Supreme Court as “an accommodation policy, under which the courts of one state voluntarily give effect to the laws and judicial decisions of another state out of deference and respect, to promote harmonious interstate relations.”

The Nevada Supreme Court sided with Hyatt. The FTB appealed to the United States Supreme Court who ruled 9-0 against the agency.

There are two key questions that the taxpayers of California need answered: were any employees of the FTB disciplined? Will California continue to pour money in this case by appealing in what could be called a hostile environment?

Rummaging through trash without warrants and harrassment is precisely the sort of conduct that occurred when Federal agencies ran roughshod over the Constitution in the COINTELPRO campaigns of domestic spying and subversion.

What exactly is the difference between the jackboot behavior of the California Franchise Tax Board, the Federal agencies that conducted COINTELPRO and any other run-of-the-mill fascist agency doing the dirty work of the Elites and special interests by ignoring legal rights and due process?

It's very simple: either we have due process and everyone is equal under the law, or we have an authoritarian regime that is only nominally democratic for PR purposes.

Naive citizens might suggest alerting our fearless elected representatives to these systemic abuses by the state. This overlooks the fact that the agencies are conducting the looting at the behest of the elected toadies and their owners, the special interests and corporate lobbyists. Your complaint about being legally looted will go straight into the round file (or digital equivalent), and your name forwarded to the "hit squad" for harrassment and worse.

You know the dominant emotion that the government at every level generates in law-abiding, taxpaying citizens? Fear. People don't want their names used in reporting these kinds of outrageous abuses because they've heard too many stories of the COINTELPRO-like harrassment that the jackboot agencies unleash on anyone who dares to question their looting and lawlessness.

Our fearless elected representatives, meanwhile, are too busy brown-nosing their donors to care what happens to mere citizens. After all, the citizens don't fund their campaigns, the special interests do, and the special interests care about one thing: raising more revenue to fund their fiefdoms. They don't care how the state raises the revenue, and so neither do the political lackeys they fund.

What sort of government do we have when the typical response of law-abiding citizens is fear of retribution? When state looting and concerted campaigns of harrassment are "legal," then what sort of rule of law do we have?

Answer: none. The only action that will change things is to vote with your feet and leave the oppressive states where due process has been rendered meaningless and find states where rule of law and equality for all before the law still has meaning.

Are "fishing expeditions" and looting unique to California? Unfortunately not, as author/Iraq vet and midwest resident Chris Sullins reported two years ago:

Last week I received tax return forms in my name mailed to my address by a nearby city government. I've never worked in that city and as the letter states my physical address is not within that city's limits. I've lived at the address for over 10 years and this was the first time I've received such a notice.

I sent this letter in response with copies of the forms they had mailed to my address:

NOTICE TO CEASE AND DESIST

To Whom It May Concern:

My spouse and I recently received City of X individual tax return documents which stated a “return must be filed by April 30, 2010.” This letter you are now reading serves your agency notice that we are not required to file a tax return with the City of X. I will make it clear that we do not work in the City of X. Likewise, the mailing address your agency used to contact us is not and never has been within the city limits. Therefore, you will cease and desist from attempting to collect money outside of your legal authority.

Any future attempts by your agency toward collection of taxes on person(s) employed outside the city or at this address which is outside the physical boundary of the City of X will be considered harassment. Therefore, it would be in your agency’s best interests to remove our names and our address from your tax collection rolls posthaste.

Sincerely, Chris Sullins

I'm sure this overreach was done by the city due to their lower revenues, lost income and property taxes. But, to do this under the color of law is nothing short of official fraud. However, proving official misconduct is another matter. There was no official's name on the forms and I can't imagine I'm going to find a signed memo authorizing this new attempt at collection outside of the city's limits.

In the meantime I wonder how many people who reside on the same road also received the same tax forms? How many of them are just going to fill out the forms and send checks to the city without any protest? How many of them will ignore it altogether? But the important question is out of how many households did anyone bother to write a letter of protest? How many actually told them NO? This last question is the most important when considering the extent of the local MacRib Test.

If enough people don't say No early enough, things often tend to go past the camel's nose in the tent. I can imagine the local city continuing to extend its boundaries in the future and/or performing other actions under an air of legality. I can imagine situations in which cities overreach their boundaries and authority, yet still convince judges or a state administrator (aka bureaucrat) to garnish citizens' paychecks for supposedly unpaid taxes and fines which were never owed in the first place.

This outright theft would continue until the citizen trudges through an onerous Kafkaesque process of "proving" they didn't reside within the city and that the tax wasn't ever really owed. The city/judge/administrator could then play the "oops" game and blame a computer error or some other complexity of the system which they had purposely misused. Of course, the costs for the citizen to challenge such an "error" will be designed in advance to exceed the cost of submitting to the "error" in the first place.

Citizens must box in any attempts by government to exceed its authority. They must frame and contain any acts conducted under the color of law. This does not require violence. The simple act of refusing to comply is enough. This was evident in the many peaceful revolutions that took place in 1989 when people said NO to communism across Eastern Europe. Although governments hold the threat of force in reserve to force compliance, the American government will not use it against the citizens over taxation at this time.

You know what would be refreshing? A state government which openly declared itself committed to rule of law, due process, transparency and respect for taxpayers and taxpaying enterprises. If they followed through on their commitment with action, they would quickly attract a flood of the best and brightest fleeing parastic predatory states that have long since abandoned rule of law for looting and servitude to special interests.

If this recession strikes you as different from previous downturns, you might be interested in my new book An Unconventional Guide to Investing in Troubled Times (print edition) or Kindle ebook format. You can read the ebook on any computer, smart phone, iPad, etc. Click here for links to Kindle apps and Chapter One. The solution in one word: Localism.


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