Vivien Kellems - Tax Resistance

Tax Resistance

In 1948, she refused to collect withholding taxes from her employees on behalf of the government, stating, "if they wanted me to be their agent, they'd have to pay me, and I want a badge." She was interviewed about her tax opposition on "Meet the Press" on September 26, 1948 at a time when women rarely appeared on the show. She has described herself in her book Toil, Taxes and Trouble. The Kellems case is presented also by Murray Newton Rothbard in his book For a New Liberty:

The withholding feature of the income tax is a still more clear-cut instance of involuntary servitude. For as the intrepid Connecticut industrialist Vivien Kellems argued years ago, the employer is forced to expend time, labor, and money in the business of deducting and transmitting his employees' taxes to the federal and state governments — yet the employer is not recompensed for this expenditure. What moral principle justifies the government's forcing employers to act as its unpaid tax collectors? The withholding principle, of course, is the linchpin of the whole federal income tax system. Without the steady and relatively painless process of deducting the tax from the worker's paycheck, the government could never hope to raise the high levels of tax from the workers in one lump sum. Few people remember that the withholding system was only instituted during World War II and was supposed to be a wartime expedient . Like so many other features of State despotism, however, the wartime emergency measure soon became a hallowed part of the American system. It is perhaps significant that the federal government, challenged by Vivien Kellems to test the constitutionality of the withholding system, failed to take up the challenge. In February 1948 Miss Kellems, a small manufacturer in Westport, Connecticut, announced that she was defying the withholding law and was refusing to deduct the tax from her employees. She demanded that the federal government indict her, so that the courts would be able to rule on the constitutionality of the withholding system. The government refused to do so, but instead seized the amount due from her bank account. Miss Kellems then sued in federal court for the government to return her funds. When the suit finally came to trial in February 1951, the jury ordered the government to refund her money. But the test of constitutionality never came. - Murray Newton Rothbard in For a New Liberty

She surrendered her case when continued pursuit of it threatened to bankrupt her company but continued to challenge that and other aspects of the income tax for the rest of her life, saying in a 1975 Los Angeles Times interview, "Our tax law is a 1,598-page hydra-headed monster and I’m going to attack and attack and attack until I have ironed out every fault in it." From 1965 until her death, Kellems reportedly only sent blank returns to the IRS. Her stands against the income tax system have made Kellems an admired figure to the tax protester movement.

In April 1951, the U.S. District Court for the District of Connecticut ruled that Kellems was entitled to a refund of income taxes assessed against her employees for which the government had been overpaid (that is, the tax had been collected from both the employees and Kellems). The Court also ruled that Kellems and her co-plaintiff David Kellems were not entitled to a refund of penalties they had paid on account of their refusal to withhold taxes, as the Kellems were unable to show that their refusal was with reasonable cause under the law. For another period in question, a jury did find that Kellems conduct was not willful, and that she was therefore entitled to a refund of penalty she had paid.

In 1973, the United States Tax Court ruled that Kellems was liable for a deficiency in federal income tax for the year 1965. The Court rejected her argument that the tax was unconstitutional under the Fifth, Ninth, Fourteenth, and Sixteenth Amendments and article I, section 2 clause 3 and article I, section 9, clause 4 of the U.S. Constitution.