Note: Death and Taxes: (Over?)Reaction to Section 1706 of the Tax Reform Act

“If you’re reading this, you’re no doubt asking yourself, ‘[w]hy did this have to happen?’”[1]  Indeed, many people across the country asked this very question after the events that took place on February 18, 2010.  At approximately 9:40 that morning, after setting fire to his home in North Austin, Texas, a man climbed into his Piper Cherokee PA-28 aircraft at Georgetown Municipal Airport.[2]  Just sixteen minutes later, that same plane crashed into an office building at 9430 Research Boulevard—seven miles from the state capitol.[3]  As the building burned and smoke plumed, details began to emerge.  One person missing.[4]  Twelve injured.[5]  The smoldering building housed the local office of the Internal Revenue Service (IRS).[6]  There also surfaced a name: Andrew Joseph Stack III.

In the hours following the crash, those investigating the situation discovered an online posting signed by “Joe Stack.”[7]  It quickly became clear that the events of that day were no accident.  Part suicide note and part manifesto, Stack’s online post railed against God and government, placing primary blame on the latter for devouring his savings and ruining his life.[8]  In particular, Stack cited a specific provision of federal tax law (Section 1706 of the Tax Reform Act of 1986), insisting that it had stripped him of his livelihood.[9]  Stack’s solution?  The closing lines of his online posting not only answered that question, but also offered a disturbing explanation for the events of that day: “[w]ell, Mr. Big Brother IRS man, let’s try something different; take my pound of flesh and sleep well.”[10]  In his final act, Stack had boarded his single-engine plane and targeted the group that he perceived as his greatest maligners: the IRS.

In the days, weeks, and months following February 18, 2010, Stack’s actions produced a wide range of reaction.  While his tactics drew everything from condemnation to commendation in the political realm, one of the more heated debates swirled around Stack’s harsh commentary on Section 1706.[11]  Stack viewed that provision as the origin of his financial woes.[12]  According to his colorful interpretation, Section 1706 declared him “a criminal and non-citizen slave,” stripping him of the freedom to decide how he would make a living.[13]  While most serious commentators provided a more muted framing of the situation than Stack himself, a surprising number of them agreed with Stack’s underlying premise that Section 1706 placed an unfair burden on people in his situation.  Evoking images of a destroyed American dream and stifled technological creativity, critics of the section denounced Stack’s suicidal actions, but agreed with the proposition that “something had to give.”  According to these commentators, the burden Section 1706 placed on a particular group far outweighed any perceived benefits.  In their view, the “discrimination” against individuals in Stack’s position had to end.

Proponents of Section 1706 did not remain silent.  Responding to those criticizing the law as unfair, several commentators defended the necessity of Section 1706; without it, tax avoidance by those similar to Stack would produce huge shortfalls in IRS collections as a result of exploitation.  These advocates of Section 1706 viewed Stack’s opposition to the provision as a concomitant of pure self-interest.  He objected to the law because it prevented him from cheating the tax system.  In this way, supporters perceived Section 1706 as accomplishing its intended goal of foreclosing the attempts of people like Stack to circumvent paying their fair share of taxes.  In short, the section served to prevent unfairness, not engender it.

In this note I will analyze the arguments for and against Section 1706.  First, I will explain the fundamental differences between an independent contractor and an employee, as well as the confusion between the two that required Congress to act.  Next, I will detail the enactment of Section 530 of the Revenue Act of 1978 and its effect on the problem of worker classification, explaining both the immediate aftermath and the long-term implications for workers.  Then, I will discuss the origin of Section 1706, detailing its impact on federal taxation and the technological community.  Finally, I will turn to the heated debate that began in the aftermath of Stack’s violent actions and determine whether, despite his methods, that angry taxpayer had a valid point.  Given the combustible nature of the present national dialogue, it is important to know if people like Andrew Joseph Stack have some method underlying their madness.

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Steven Cunningham: J.D. Candidate, Syracuse University College of Law, 2012; B.A. & M.A., Classical Studies, magna cum laude, Boston University, 2009.