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Tuesday, Sep. 2, 2014

Your View 7/2: Loophole is legal

Wednesday, July 2, 2003

When America fights wars, we always say we do it to protect liberty and freedom. That's true of course, but those terms should not be taken in an absolute sense. No one has an absolute liberty to do whatever they please or total freedom.

We are governed by laws passed by those we elect and scrutinized by our courts to be sure they don't violate our rights under the Constitution.

There's a line in the Jaycee credo that hits the mark pretty well I think. It says that government should be of laws, not men.

So, when the best among us pay the ultimate sacrifice to defend our way of life, what they are defending in literal terms is the rule of law and the protection of our citizens by that law. Sometimes that means protection from each other, and sometimes it means protection from the men and women of the government itself.

Some of us, each in our own way, will seek from time to time to test the status of our freedoms and this rule of law. When we do that, we cannot judge from those instances when we abide by those laws with which the government bureaucrats agree. We test it only when we do what the law allows, and for as long as the law allows it, when those actions are most disliked by these bureaucrats.

We pay government employees to execute and enforce our laws. But we expect them to be restrained by and limited to those laws. They may not supplant that law with their personal will, their likes or dislikes. Only then can we know we live under a government of laws, not men.

About a year ago, I established a grain company to allow non-farmers to take advantage of a loophole in Missouri's sales tax law that farmers have been using for years. It allows grain owners to trade their grain for motor vehicles (and anything else for that matter). If the value of the grain is equal to the value of the car, there is no sales tax due.

Since the sale of grain itself is exempt from sales tax, we knew we could simply sell grain to those who did not already own grain from having grown it. They could trade it for their vehicles, and we could then buy it back. That's precisely what we did, about 500 times.

Our courts had already declared that the car-buyers did not owe any sales tax from these transactions, but we got a Private Letter Ruling from our Department of Revenue confirming that anyway. We're entitled to do that by law.

To this day, not one person trading Corn for Cars has been assessed a sales tax on the value of the vehicle they purchased. All Title Applications have been processed and recorded without the payment of sales tax.

Several people warned us that the government would not like this. I had kind of predicted that myself and told them, "as soon as they change the law, we'll stop."

Others, including people I respect very much, told me they thought it was morally wrong, even if it is legal. On that point, I must respectfully disagree.

Our tax laws do not reflect a code of moral ethics. We do not owe a tax whether the law says we do or not. To pick just one example from the many thousands in the tax code, there is no moral difference between a computer bought by an engineer or architect in this state and one purchased by anyone else. Why then is the one exempt from sales tax and all the others not? The answer: better lobbyists. There's nothing moral about it.

Years ago this idea was put forth by one of the most respected jurists of his day, Supreme Court Justice Learned Hand. He said, "Anyone may so arrange his affairs that his taxes shall be as low as possible. He is not bound to choose that pattern which will best pay the Treasury. There is not even a patriotic duty to increase one's taxes."

The entire U.S. Supreme Court restated that principle in the case Gregory v. Helvering when it wrote, "The legal right of a taxpayer to decrease the amount of what otherwise would be his taxes, or altogether avoid them, by means which the law permits, cannot be doubted."

Several years ago, the Missouri Legislature required the Director of Revenue to compose and publish a Missouri Taxpayers Bill of Rights to set forth our tax laws in a "clear and concise manner." The very first principle in that Bill of Rights declares "You have the right to plan and arrange your finances in such a manner that you will pay the least amount of tax due under the law."

They either mean that or they don't. I'm testing that proposition right now. Other than the backing of the U.S. Supreme Court, the Missouri Supreme Court (in other cases), the Missouri Statutes, the Missouri Code of Regulations, the Administrative Hearing Commission, the Missouri Taxpayer's Bill of Rights and a declaration by Missouri's governor, we're on pretty shaky ground.

In the meantime, if the governor wants to close tax loopholes, I'm all for him. But close all the loopholes and close them for everyone.

Until they close this one though, I would say those people who feel a moral obligation to pay sales tax when purchasing a car, truck, trailer, boat or RV should do so, by all means. For everyone else, I'll be happy to sell you enough grain to trade for it sales tax free.

Of course, as soon as they change the law, we'll stop.

Josh Bill