Polygamous Tax Evasion

In the litany of evils perpetrated by polygamists, one evil stands out above the rest: tax evasion. Feel the chill? Yes, tax evasion.

O RLY? you might ask.
Yes, RLY. The proposed—but unenacted—Victims of Polygamy Act of 2008, included a finding that

The crimes perpetrated by [polygamous] organizations include child abuse, domestic violence, welfare fraud, tax evasion, public corruption, witness tampering, and transporting victims across State lines.

[Emphasis added, of course.]

This assertion leads to two questions: First, do polygamists evade paying the taxes they owe more than your average American? And second, if they do, does that derive somehow from their practice of polygamy?

Do Polygamists Evade Taxes More Than the Average American?

Probably. I mean, we can’t know for sure, because (a) individual tax returns aren’t public, and (b) there’s nothing to distinguish the tax return of a polygamist from any other taxpayer’s tax return.

Still, it’s pretty likely that polygamists evade taxes. But not for the reasons that have generally been articulated.

Stephen Singular testified before Congress that “The FLDS openly despises the American Government while taking its money, a tactic they call `bleeding the beast.'”[fn1] Carolyn Jessop testified that “bleeding the beast” meant that “F.L.D.S. members should avoid paying taxes at all costs and should also apply for every possible type of government assistance that is available, whether they are eligible or not.”

How? Among other things, Daniel Fisher testified[fn2] that plural wives file as “heads of household,” which provides for lower tax rates than filing as unmarried.

And that is almost certainly true. But that almost certainly doesn’t constitute tax evasion. As I explain (and appropriately footnote) in Taxing Polygamy,[fn3] they aren’t cheating by filing as heads of household. They almost certainly qualify (as long as they’re unmarried, their children live with them, and they provide at least half the support of their children).

So How Do Polygamists Evade Taxes?

Look, the U.S. has a pretty strong tax compliance rate: we pay roughly 83% of the taxes we owe when we owe them.

But that compliance rate is uneven among different groups. Specifically, people pay 99% of the taxes due on wage and salary income. The compliance rate falls to somewhere around 28% on farm income.

Why the difference? When I get paid my wages, my employer withholds some portion and sends it to the I.R.S. At the end of the year, my employer sends a W-2 to me and a to the I.R.S. If I claim a different amount of wages than the W-2 says, I run a very real, very significant chance of being audited.

But farm income–and, generally, self-employment income—doesn’t come with those same W-2s. To the extent a person is self-employed, or works in the less-formal economy, the lack of information reporting and withholding  reduce the costs of underpaying taxes.

And, according to my research, a significant percentage of Mormon fundamentalist polygamists work in the less-formal economy.

To the extent polygamists cheat on their taxes more than the average American, then, I suspect it is less a result of their polygamy and more a result of the types of jobs they do. If, then, we’re really concerned about polygamous tax evasion,[fn4] it seems to me the most effective way to attack it would be to transition polygamists into the formal economy, where their income will be subject to withholding and information reporting.[fn5]

[fn1] Note that the rhetoric of “bleeding the beast,” though more graphically violent, sounds a lot like the Republican goal of “starving the beast.” There are clearly differences—one appears to involve fraud, while the other involves making decisions about the level of taxation to impose. Still, both refer to the federal government as a “beast,” and both think the appropriate way to deal with it is by restricting its funding.

[fn2] (on p. 52)

[fn3] (p. 33)

[fn4] Which we’re not, really. (Note that, by “we,” I mean the various people at the Senate hearings.) Even at the high end estimate of 100,000 fundamentalist Mormon polygamists, that’s not a lot of dollars at stake. Honestly, this argument is largely pretext for further demonizing polygamists. Still, I’m invested in a fair tax system, and I would prefer that all taxpayers–polygamous, monogamous, and single alike–actually pay their taxes.

[fn5] One last thing: this isn’t a brief for returning to polygamy. I’m personally a big fan of the 1890 Manifesto, and accept it as a revelatory end to modern polygamy. But, for these purposes, that’s neither here nor there–in this post, my sole concern is with polygamous tax evasion.

Comments

  1. Kevin Barney says:

    That finding for the Victims of Polygamy Act of 2008 (an Act I wasn’t previously familiar with) seems problematic to me. It would appear to be an accurate finding with respect to FLDS polygamy. But the author seems to be conflating FLDS polygamy with all Mormon fundamentalist polygamy. The ideology of Bleeding the Beast is specifically an FLDS thing. It seems to me grossly unfair to paint more moderate groups, such as the Apostolic United Brethren, with this broad brush.

  2. The compliance rate of 28% for farm income is not surprising, and I’m betting compliance rates for sole proprietors are similar. I live in small town Mormon Corridor, and I know of a ton of small businesses that fail to report significant amounts of their income, and a ton that claim fraudulent deductions. When a sole proprietor gets paid in cash, it’s extremely easy to hide that payment from the IRS. And it happens frequently even in LDS communities.

  3. Kevin, not to mention, e.g., Muslim and Hmong polygamists, which likely have very little in common with Mormon fundamentalism in general, much less FLDS polygamy.

    Tim, I’m kind of under the impression that sole proprietors are in the 50-percent-ish compliance rate (though there’s undoubtedly variation within the group of sole proprietors). But still, pretty horrible.

  4. Chris Kimball says:

    Sam, you must be right that under-reporting is the big dollar item and perhaps the only clear or generalizable instance of tax evasion. However, there is also a sense that the head of household brackets, the child and dependent credit, the earned income credit, and more, were not written with polygamous families in mind. That even if they are applied literally and correctly under current rules, they would likely be different if we had a do-over with plural marriages taken into account. And so there is a sense of “taking advantage” by the letter of the law. (An argument, not a proof.)

    Also, with respect to under-reporting generally, I have always believed that the rate of under-reporting was best correlated with cash — the number and dollar amount of cash transactions — and less with the SIC code. (Although I bet there’s a statistically significant correlation between cash and SIC code, just to compound the analysis.)

  5. I don’t dispute that there is likely substantial non-compliance with the tax code by sole proprietors, but it seems odd to call the self-employed part of the “less formal” economy. Do you really want to turn all independent businessmen and -women into wage slaves?

    I suspect that the self-employed are no more dishonest than the wage slaves whose “honesty” is compelled by the information-reporting requirements of the IRC. They just have to face the issue head-on when reporting another dollar of income means paying another 50 cents in taxes. If wage earners’ income was not reported to the IRS, and if taxes weren’t withheld at the source, I suspect that their compliance levels would look more like those of the self-employed.

    Besides, one person’s “dishonesty” is another person’s “aggressive tax strategy.”

  6. Chris, that may well be true. But to fault polygamists for using tax provisions that are expressly available to them, even if their situation was not anticipated—and moreover, to use them straightforwardly (that is, by having kids and supporting the kids), not in a sneaky, underhanded way—makes accusing them of tax evasion pretty petty, not to mention misleading.

  7. Last Lemming says:

    When the head of household brackets, earned credit, etc. were enacted, lawmakers were fully cognizant that there were men fathering children by multiple women (the vast majority of whom have nothing to do with fundamentalist Mormonism). Disqualifying certain women from those tax benefits on the grounds that they had undergone a religious (but not civil) marriage ceremony with the father of their children would have been bizarre, even for the tax code. (And Congress has had multiple do-over opportunities during which the subject has never even come up.)

  8. Agreed — using “tax evasion” for such concerns is petty and misleading. No argument there. Those concerns are part of a bigger topic, which is that our legal systems are not built for polygamy, with dozens of examples ready to hand. Whereas under-reporting has relatively little to do with polygamy (as a cause) and more to do with cash economy (i.e., correlation.with polygamous families).

  9. lastlemming: To the extent you are replying to me, I agree. Under-reporting from the cash economy is definitely an issue and concern (although the politics around better collections are horrendous). But as Sam points out, that is not distinctly a polygamous issue. For brackets, credits, deductions, etc., I doubt polygamy is more than a smudge on the horizon in a federal income tax discussion.

  10. Forget the federal issue–the big tax evasion problem for the FLDS, at least, is that they intentionally leave their dwellings looking unfinished so they don’t have to pay local property taxes.

  11. . . . and to give credit to Sam’s “Taxing Polygamy” article, what I find interesting is not polygamy or taxing polygamy itself, but what the questions tell us and cause us to think about marriage–how it is respected or not, costs and benefits, whether it’s about marriage per se (joint income and assets) or about children (dependents and society’s interest in promoting the welfare of children), etc.

  12. Polygamist or not, some people evade taxes. To single out one group of people doesn’t make a lot of sense. Some married and single people alike evade taxes. The problem with saying one group does “this” or “that” more than another group, rarely makes a point.

    We all have faults. We all have been/are dishonest. What I want to know is–are we trying to be better today than we were yesterday? Are we judging less and forgiving more? The marriage culture in the United States has changed and will continue to change. Single mothers and single fathers are now the norm. The definition of married couples (same-sex couples) is being redefined. Change must happen for growth. We can say we don’t like it, but it’s impossible to un-ring a bell. With same-sex marriage becoming legal, living with multiple partners regardless what you call them (sister wives), change has already happened. We need to love and not judge. I didn’t say, agree with their choices, but we can still love them for being our brothers and sisters. Can’t we?

  13. “We all have faults. We all have been/are dishonest.”

    Yeah, but although telling a little white lie and tax fraud and lying about where you buried the body are all types of dishonesty, there are vital differences between them, and they need to be treated differently by society and the government.

  14. I agree that those who commit tax fraud should be held accountable.. My point is that we shouldn’t lump only plygs into that category. Tax fraud can be committed by anyone. My additional point, labeling is pointless. ANYONE can have faults regardless of what group they are lumped with.

  15. i’ve heard lots of arguments for and against this practice but never have I considered the tax implications.. hmm

  16. “They just have to face the issue head-on when reporting another dollar of income means paying another 50 cents in taxes.”

    Thankfully their effective tax rate will be far less; this is the United States, after all, not a European welfare state.

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