Corporate Fraud Is Common

White collar crime is a huge problem. It is more than seven times as big of a problem, for example, than all shoplifting in the country combined.

We provide a lower-bound estimate of the undetected share of corporate fraud. To identify the hidden part of the “iceberg,” we exploit Arthur Andersen’s demise, which triggered added scrutiny on Arthur Andersen’s former clients and thereby increased the detection likelihood of preexisting frauds. 

Our evidence suggests that in normal times only one-third of corporate frauds are detected. We estimate that on average 10% of large publicly traded firms are committing securities fraud every year, with a 95% confidence interval of 7%-14%. Combining fraud pervasiveness with existing estimates of the costs of detected and undetected fraud, we estimate that corporate fraud destroys 1.6% of equity value each year, equal to $830 billion in 2021.

Dyck, I.J. Alexander and Morse, Adair and Zingales, Luigi, "How Pervasive is Corporate Fraud?" George J. Stigler Center for the Study of the Economy & the State Working Paper No. 327 (January 2023) (Available at SSRN: https://ssrn.com/abstract=4590097 or http://dx.doi.org/10.2139/ssrn.4590097).

Quote Of The Day

The wheezes used to avoid paying the tax are, of course, manifold.

From this article by Andrew Gilligan writing for The Telegraph newspaper on October 24, 2014.

Apple's Irish Tax Scam

The company whose name is on two of the laptop computers and three of the phones in my family pays almost no taxes, largely due to an arrangement that books most of its income to Ireland which has graciously consented to tax almost none of that income in exchange for investments that boost the local economy.  The tax rate imposed by Ireland on Apple's profits is a mere 0.005%.  The boost is not insubstantial.  Apple's European headquarters is in Ireland and it's operations there create thousands of good Irish jobs.

How big of a tax break is Apple getting?  According to the European Union which says that the tax break violates E.U. treaties, about $14.5 billion.  In other words, about $3,000 of taxes avoided for every man, woman and child in Ireland.

Ireland, meanwhile, is doing its damnedest not to collect any of it, because it knows that Apple's love for Ireland is runs no deeper than the tax break it gets.

U.S. diplomats, in turn, also wants the E.U. to back off, not because it loves the fact that Apple can park tens of billions of dollars of untaxed cash in affiliated foreign companies, but because the U.S. Treasury will get a piece of the action should Apple ever wish to repatriate the funds.

The arguably legal techniques that Apple is using to indefinitely defer its income in a foreign tax haven are not new.

When I was an intern for a Congressman on the Ways and Means Committee while I was in college, one of the projects that was perennially on the to do list in the office, but never got tackled because it was such a daunting issue to understand well enough to know how to reform it, was the indefinite deferral of taxation of income allocated to tax havens of foreign affiliates of major U.S. companies.

A quarter of a century later, the tax break is still there and it has gotten obscene.

Tax Havens Considered In Light Of The Panama Papers

In the biggest leak of confidential law firm information since a junior employee leaked confidential information from tobacco tort defense firms that went on to devastate the industry, papers leaked from the records of Panamanian law firm Mossack Fonsecca have revealed a treasure trove of information about tax haven bank accounts of prominent international figures across the globe. Tyler Cohen collects some other related links to the economic issues related to the scandal at Marginal Revolution.

Few Americans are implicated because they prefer venues of common law legal traditions like Bermuda, the British Virgin Islands, the Cayman Islands, St. Nevis and St. Kitts, as well as domestic asset protection venues.  The Swiss, who invented the tax haven industry, have been out of favor for many years among both Europeans and Americans after having caved to pressure from foreign authorities to crack down on tax haven abuses.

Maintaining a Panamanian bank account is itself perfectly legal in most of the world.  

But, combined with shell companies and disregard for domestic tax laws that is impossible to detect without an improper leak of documents like this one, Panamanian bank accounts have been a global go to source for money laundering, tax fraud, fraudulent concealment of assets to hide the fruits of government corruption by top officials, to conceal assets from soon to be ex-spouses and creditors, and to hide patterns of influence.  

Simply put, it is a pain to have a foreign bank account, and typically, only people with illicit reasons or a tax evasion motive use them.  People with legitimate international financial interests usually establish accounts in non-tax haven jurisdictions where they do business or in legitimate major international financial centers like London or New York or Tokyo.

The dicey thing about tax haven/asset protection jurisdictions is that for the most part, these opportunities exist as a result of loopholed in domestic laws that permit them to be beneficial.  Tax havens typically have little economic activity of their own, and both the source of the funds and the places that they invest the funds are typically the countries that are the victims of these legal loopholes and have ample power to collectively punish tax havens if they wish to do so.  Indeed, there have been a couple of times in U.S. history when the U.S. military has intervened when countries in the greater Gulf of Mexico tried to stiff U.S. creditors.

In this respect, tax havens bear a great deal of resemblance to the Islamic fundamentalist Salafist movement that has in turn given rise to Islamic terrorism, which is funded almost entirely from the oil wealth provided by the Western countries these movements have sometimes targeted. Terrorist organizations, however, tend to be less sophisticated and traditional, than the corrupt international financial networks that are the lifeblood of international tax havens like Panama.

Focusing On Kingpins Is A Bad Way To Fight Organized Crime

It is an article of faith in many law enforcement circles that the secret to fighting organized crime is to take down the kingpins who run organized crime organizations.  Unfortunately, this widely adopted strategy, in practice, is one of the worst.  Consider the case of Mexico:

At least 18,650 people were murdered in Mexico in 2015. That is a 7.6 percent increase over 2014. The murder rate for 2015 was 16 per 100,000. The high point during the Calderon Administration (2006-12) was 20 per 100,000. Guerrero state remains the most violent. Its murder rate is 57 per 100,000. 

When Calderon was in charge he pursued a “kingpin strategy” which concentrated on cartel leaders and sought to arrest them or kill them while attempting to arrest them. The current president (Pina) initially criticized the kingpin strategy. However, once in office, Pena has followed a very similar path. By 2015 security forces had killed or captured several senior leaders in the Knights Templar, Sinaloa, Los Zetas and Gulf cartels. At that point it was believed that there were only two major cartels left. 

For many this was astonishing good news. Here is the bad news: several hundred “cartel factions” or splinter cartel cells are still engaged in violent organized criminal activities. This new claim contrasts sharply with another recent government assessment which said nine major cartels and around 45 smaller organized criminal gangs were operating in the country.

By comparison, in 2014, the U.S. murder rate was 4.5 per 100,000 and Louisiana was the state with the highest murder rate, 10.3 per 100,000.  The murder rate in Colorado (which has the most liberal marijuana laws in the nation), where I live, was 2.8 per 100,000.

Empirically, it is clear that taking down kingpins with a militarized approach to drug dealing organizations increases the violence of organized crime, which is the most important reason that we care about organized crime.  Columbia's drug war efforts took a similar approach to Mexico many years earlier, with similar results.  Indeed, Columbia lost effective control of much of its interior territory for something like a decade as a result and has only regained control with what amounts to diplomatic efforts in the last couple of years.

Kingpins come into being to organize economic crimes (vice, loan sharking, smuggling, tax evasion, and "protection rackets" are some of the most common) that are already rampant, in order to make it more profitable, usually by reducing violence between smaller criminal gangs and by mitigating law enforcement interest in the crimes with economic incentives, and reducing political will to fight the economic crimes by reducing its impacts on the neighborhoods where the economic crimes takes place.

By comparison, U.S. efforts to reduce methamphetamine production through regulatory oversight of legal pharmacies by closely monitoring purchases of Sudafed, an over the counter drug that was once widely used to synthesize meth, has been very effective. Maintenance drug based approaches to substance abuse have been much more successful at treating drug addiction and preventing recidivism among people convicted of drug crimes, while the mainstays of incarceration and Alcoholics Anonymous are not effective.

Public health agency driven limited legalization and/or harm reduction approaches to drugs in Portugal, the Netherlands and Switzerland have likewise been effective.

The most effective single measure ever to reduce tax fraud in the United States, at the recommendation of the late Milton Friedman, was information reporting of business transactions which is usually done these days via IRS Form 1099, a preventative administrative measure, rather than a law enforcement or military approach.

Why Are Phishing Scams So Lame?

Maule points out the myriad flaws in a phishing scam he recently received in his e-mail in box. The low quality of the scam e-mail is typical. Why? One could have a much more polished scam e-mail with only a little effort, and presumably, it would catch more savvy recepients, dramatically increasing its yield. It isn't obvious that a better polished scam would be more easily traced. Someone sophisticated enough to conduct these scams should surely have the skill set to write better e-mails. Is this a case of predators deliberately choosing the dotty and the creduluous as victims in order to reduce the likelilihood that someone competent will be burned and in turn will devote serious attention to locating the perpetrators? Or are the perpetrators really just less sophisticated themselves than I give them credit for being?

Doug Bruce Convicted Of Felony Tax Fraud and Attempted Bribery

Colorado Pols summarizes the breaking news regarding Taxpayer Bill of Rights initiative (TABOR) author and former state legislator and county commissioner Doug Bruce's felony tax fraud and attempted bribery conviction this afternoon. He was convicted of not reporting about $190,000 of interest earned by a sham non-profits that he used as his own funds over a three years period (2005-2007).

Bruce's pro se defense (he is legally trained and was a deputy district attorney in California for six years, but has never been admitted to practice in Colorado and chose to represent himself in this case), was in typical Bruce style, "unconventional" a.k.a. delusional. He acted like a tax protester who didn't respect the court rather than someone making a bona fide claim of innocence of the charges against him.

Bruce faces up to six years in prison and a hefty fine at a February 13, 2012 sentencing date, in addition to any civil liability he may have for unpaid state taxes, interest and penalties. Of course, the Court would also have any number of other sanctions available to it at sentencing, such as probation. Leniency wouldn't be uncommon for a non-violent, white collar crime defendant with no meaningful criminal record (in 1995, he served eight days in jail for contempt of court), and a record of public service and civic involvement. But, the nature of his defense and his unwillingness to accept responsibility or even to acknowledge the wrongfulness of his actions makes this less likely in his case than in other white collar criminal cases.

An appeal from Bruce is almost certain, but is unlikely to prevail.

The prosecution was made in state court, but the federal government has every right to prosecute him on nearly identical civil and criminal federal tax evasion charges if it wishes to do so.

Bruce tried to evade subpoenas and faced investigations related to civil campaign finance non-disclosure charges in 2010. He was ultimately not held in contempt of court in September, 2010, after a several day long trial in which he was represented by an attorney, although he was ordered to provide testimony in that case. In December of 2010, in the same case, a charity he founded ("Active Citizens Together") was fined $11,300 for campaign finance violations in connection undisclosed initiative contribution.

He has also recently been accused of engaging in the unauthorized practice of law in Colorado and served with an order to show cause why an injunction requiring him to refrain from doing should not enter in June of 2011, while he was representing himself in a TABOR related lawsuit that he brought. He filed a bombastic answer in the case, Colorado Supreme Court case no. 10UPL058 aka case no. 11SA154, on July 7, 2011. The civil Colorado Supreme Court case in which a petition was filed on May 23, 2011, is currently pending against Bruce in the Colorado Supreme Court and requests fines as well as the injunction.

Suthers Indicts Doug Bruce For Failing To File Taxes

Colorado's best known anti-tax activist, Doug Bruce, has been indicted for failing to file taxes by the state attorney general's office. Colorado's attorney general, John Suthers, is a Republican.

If convicted of the charges, Bruce could face up to six years in prison and a $500,000 fine.

Colorado Springs police officers arrested Bruce Friday at a post office in Colorado Springs. He was booked on a $10,000 bond into the El Paso County Jail, where he remains.

It couldn't happen to a more deserving defendant. Some of the evidence regarding his tax fraud was developed in connection with his failure to comply with subpeonas regarding a ballot initiative (taht were ultimately defeated) which he supported in contributions that were not reported on campaign finance form in 2010. He filed a false tax return alleging that he had zero income in 2005 and filed no return despite earning considerable income that was funnelled into a non-profit organization that he used for his personal benefit in 2006 and 2007. The amount of income not reported was in the hundreds of thousands of dollars.

Doug Bruce is famous for getting TABOR (the taxpayer' bill of rights) into the state constitution, leading to serious problems with the fiscal viability of the State of Colorado during recesions.

Tax Havens Good?

A recent report argues that tax havens are good, ranking the OECD countries with that philosophy in mind.

Unsurprisingly, I am not impressed with the argument which mostly boils down to "taxes are oppressive."

Hovind Convictions Affirmed

Yesterday, the U.S. Court of Appeals for the 11th Circuit affirmed the tax crime convictions of Kent Hovind and his wife Jo Hovind. They are prominent evangelical Christian Creationists.

On the convictions which were affirmed "The district court entered a final order of forfeiture against Jo and sentenced her to one year and one day of imprisonment. The court sentenced Kent to 120 months of imprisonment and to supervised release of 3 years, and ordered Kent to pay restitution of $604,874.87." The forfeiture order substituted $430,400 of property not ordinarily subject to fofeiture, for property that had been fraudulently transferred by the Hovinds and removed from the jurisdiction of the Court.

While the U.S. Supreme Court could entertain an appeal from the ruling, this is highly unlikely.

At Least He's Not Your Boyfriend

Beware a boyfriend who sends you a 1099 for the $10,500 of "services" you provided him, which you thought were gifts. The IRS isn't very impressed by this behavior either.

Wisdom Out Of The Snipes Split Verdict

Wesley Snipes was prosecuted for both felony and misdemeanor tax fraud violations in connection with failing to file tax returns based upon a tax protestor justification. He was convicted of the misdemeanors but not of the felonies.

An interesting tidbit of commentary arising out of that case notes that this was not an accident. If the I.R.S. hadn't recommended felony charges, the charges would probably not have been filed. The U.S. Justice Department has a troubling policy of prosecuting misdemeanor tax offenses only if they are accompanied by felon tax crimes. It is troubling because misdemeanor tax prosecutions are often easier to prove (some are strict liability offenses), and can be almost as effective as felony charges (and considerably more effective than civil collection) at securing collection and compliance from taxpayers.

It is also troubling in Snipes case, because he contested venue in the case, and in the absence of the felony charges brought against him it is likely that venue in Florida would have been improper. I'm not enough of a federal criminal procedure guru to know if that venue issue was wrongly decided in any case, or whether it is subject to harmless error analysis (there is a good argument that Snipes did as well as he possibly could have done on the merits).

Also interesting, and probably connnected to the U.S. Justice Department policy, is that the federal sentencing guidelines make no distinction between felony tax evasion conduct and misdemeanor tax offenses. Only the amount in controversy matters. In effect, a penalty based upon acquitted conduct is built right into the guidelines without requiring any findings by the judge.

For what it is worth, the conviction of Snipes for misdemeanor failure to file charges, while acquittals of more serious tax crime charges, seems about right for the conduct he appeared to have engaged in that was prosecuted in this case. Willful failure to file your taxes should be a crime, but not necessarily a terribly serious one.

The Tax Fraud Lobby

Who would favor laws that facilitate tax fraud? Lots of people, it turns out.

[T]he National Federation of Independent Business, the U.S. Chamber of Commerce, the Small Business Council, and numerous other groups have created the Coalition for Fairness in Tax Compliance, which plans to block proposals . . . to close the [tax] gap . . . [with] a major expansion of reporting requirements for third party “middlemen.” For instance, stock brokers would be required to report not only what a customer sold his stock for but also what he paid for it, i.e., his or her taxable income, and auction sites such as eBay would have to report sellers who conduct more than 100 transactions per year. Finally, one of the proposals most vehemently opposed by the Coalition is a proposal that would require businesses that pay other businesses more than $600 a year to report the payment on a 1099, thus adding to the already current requirement that businesses report payments of more than $600 a year to unincorporated sole proprietors.

A large share of the $345 billion of taxes owed and not paid involve income not subject to third party reporting requirements, and the biggest offenders are small business people. About half of that comes from unreported business income and self-employment income.

Small business tax fraud is epidemic and largely attributable to a lack of third party reporting.

“Where taxable payments are reported to the IRS by third parties, the IRS generally collects well over 90 percent of the tax due. Where taxable payments are not reported to the IRS by third parties, compliance drops precipitously to a range from about 20 percent to about 68 percent, depending on the type of transaction.” In particular, the noncompliance rate ranges from 1 percent for wages, salaries and tips to 57 percent for small business income and 72 percent for farm income.

Most small businesses, and almost three out of four farmers, cheat on their tax returns.

While big business often engages in complex schemes that try to twist the tax laws on the books to legally reduce tax burdens, big businesses rarely outright lie about how much they received in revenues. The need of these businesses to maintain internal controls overwhelms their ability to do so.

Previous initiatives to improve reporting verification, such as the requirement to include social security numbers of dependents and the creation of the 1099 and the W-2 information reporting returns have dramatically increased tax collections with relatively modest compliance costs.

No well run business should have any difficulty running a Quickbooks report of the vendors to whom they have paid more than $600 in a year. The costs associated with this initiative are modest.

Stealing From Yourself

The reality of the modern publicly held corporation is that CEOs can without much difficulty, arrange to have a corporate board of directors increase their pay or give them legitimate loans without much difficulty. So, why do they fall to such pathetic lows as using company money to buy party favors for children's parties? Sure, it isn't really their moeny, but if they had asked for it, in this case and similarly in the Tyco case, they very likely would have gotten it as legitimately compensation.

Also, how is it that the whole charade is unveiled by a military journalist, rather than the company's auditors?

Tax Protester Idiots With A Death Wish

Tax protester idiots with a death wish are, of course, in New Hampshire. Via How Appealing. The story has an interesting footnote:

There are 250,000 to 500,000 people in the United States who are tax protesters, says JJ MacNab, a financial analyst who has written a book on the issue and testified before Congress on behalf of law enforcement.

Some, she says, are elderly, uneducated or disenfranchised people who buy into tax evasion scams. Others are disgruntled — sometimes dangerous — citizens who believe the wording of tax laws does not make them liable to pay.

"The tax laws are almost 100 years old, and no one has ever won," she says. "Thousands and thousands of people have challenged them. It's a constant flow of the same tired arguments over and over."

A summary of the case law on frivilous tax arguments from the IRS can be found here.

Feds Screw Up KPMG Criminal Tax Shelter Case

The federal government indicted 19 people in connection with allegedly criminal tax shelter activities by mega-accounting firm KPMG. It also pressured KPMG not to provide legal defenses for its employees, and declined to indict (and in turn destroy) the firm as payback. The trial court judge in the criminal case has now dismissed the federal criminal cases against 13 of those defendants as a result of the federal government's attempt to prevent KPMG from helping to fund the employee's criminal defense counsel.

One defendant pleaded guilty. Cases against 3 ex-KPMG employees who likely wouldn't have gotten legal defense assistance from KPMG anyway, and 2 non-employees remain, but a huge part of the prosecution case has now been destroyed. More intelligent commentary, suggesting that Justice may have screwed up a shot at an appellate review they were trying to get of the trial judge's decision may be found here.

The defeat is more than a mere defeat in one case for the government. It repudiates a major strategy of the federal government which is a Justice Department policy, for prosecuting white collar cases.

Bottom line: 13 people who might very well have been guilty, but had a fighting chance at trial are off the hook; 5 more are in a better position than they were before, and the government has egg on its face.

I don't know how parallel civil proceedings (and I assume that they exist) fared.

Attorney Tax Protester Fined

A tax attorney, George E. Harp of Louisiana, who engaged in tax protester tactics in filing his own zero income tax returns has predictably faced the consequences of his actions.

Over six years he failed to pay about $32,142 (the IRS reconstruction of his income based on bank deposits). He also incurred substantial penalties of $37,144. In addition, of course, there will be interest and probably court costs as well.

While it wasn't addressed in this opinion, it is fair to guess that Harp will be disqualified from the practice of law before the I.R.S., and disbarred from the practice of law generally, in short order.

Will he face criminal prosecution as well? It would be an easy case to make, but it isn't clear if the I.R.S. will be bothered to do so.

Is Tax Compliance Is A Serious Problem?

Tax professor and blogger James Edward Maule thinks that the compliance burden of the tax code is a big deal. This, in turn, leads him to conclude that:

Is it me or does it seem obvious that taxpayer burden will not be alleviated until the tax law is simplified and fixed? Does Congress need a hearing to make this determination? What’s next, hearings on whether the earth is flat? Yes, I know about the Flat Earth Society and I know there are people who think the tax law is child’s play.

The numbers are big. But, viewed in context, I don't think that the number's that he's citing are the important ones.

For example, he notes that "in 2006, taxpayers will spend more than 6 and a half billion, yes, billion hours complying with the tax law." My question is, so what?

There are about 300 million people in the United States, before you even begin to consider about 30 million small businesses, several hundred thousand large C corporations, several million trusts and estates, and a not insubstantial number of non-resident taxpayers. Thus, the average American spends about 20 hours a year complying with federal tax laws, which works out to about three days a year, with generous lunch breaks. Better organized people can spend about an hour a month, plus one day of tax preparation work when your return is due. It isn't a perfect, but compliance costs are a quite small portion of the total economic burden of taxation in general on the average person.

For the 80% of people who are neither business owners, nor high income people with substantial investment income, compliance costs are usually trivial in proportion to either their total tax burdens including compliance costs, or their incomes. For the small number of big businesses that make up a huge proportion of all economic activity in the United States, compliance costs are high, but they have to be weighed against the immense overall tax burdens involved. Hiring a big tax accounting firm to do your tax work isn't so overwhelming when your bottom line is in the vicinity of ten billion dollars a quarter.

There is a tax compliance cost problem in the United States, but it isn't that average tax compliance burdens are high. The problem is that select subgroups, like low to moderate revenue small businesses, incur high compliance cost relative to their incomes (and often still muck it up, in part due to willful, self-serving neglect), even though others, like wage and salary earners and big businesses, incur quite moderate compliance costs relative to their revenues.

If you are a sole proprietor whose has $100,000 of revenues, mostly in small transactions, and $70,000 of expenses encompassing a full range of business expenses, including employees, you have tax compliance costs quite similar to a business ten or a hundred times as large, and far higher than someone who simply make a $30,000 salary. Of course, on the other hand, the odds are good that you will fail to report about $15,000 of your correct net income.

I'm also not terribly surprised that "three-fourths of the compliance burden imposed by the federal government is on account of taxation." Many federal programs, like national defense, making interest payments on the national debt, Medicaid, Medicare, Social Security, TANF, Food Stamps, and the national highway and commercial air travel systems cost quite a bit of money, but impose very few regulatory burdens on the average person. The compliance burden associated with taxation is to a great extent an irreducible burden associated with having a functioning government. The fact that other federal programs impose a very low compliance burden on most people is both proof that federalism works (a large share of compliance costs are state and local) and proof that the federal government is overall run in a quite citizen friendly manner.

Tax complexity, of course, can be a problem. But, I worry much more about the capacity of the tax code to distort economic decision making in negative ways on a widespread basis, than I am about the cost of filling out tax forms and collecting records to do so. For example, the potential downsides of our existing tax system's bias in favor of debt over equity funding for publicly held corporations makes our economy more prone to major business failures during economic downturns. It takes only a small number of unnecessary Chapter 11 bankruptcies to make tax compliance costs look like small potatoes.

Who Doesn't Pay Their Federal Taxes?

The latest information (from 2001) on the amount of taxes that are not paided in sufficient amounts, on time, called the tax gap, are out. They are federal figures, but since Colorado's individual and corporate income taxes track the federal income tax, the numbers should also reflect Colorado's tax gap.

About 44% of it ($148 billion a year) comes from income and self-employment taxes owed by closely held businesses. About 16% comes from understated non-business income (disproportionately from investment income not subject to information return requirements such as capital gains and rental income), and about 9% comes from overstated deductions, exemptions and credits. About 33% comes from other sources (mostly underreporting of corporate income taxes and employment taxes).

Non-compliance rates vary greatly by type of income. About 1.2% of potential wage and salary tax revenue are not collected. About 4.5% of potential dividend, interest, pension and taxable Social Security income tax revenue are not collected. About 8.6% of potential tax revenue alimony, partnerships, S-corporations, capital gains, and overstated deductions and exemptions are not collected. And, about 53.9% of potential tax revenues from farms, rents and royalties, and sole proprietorships are not collected. The biggest factor in tax law compliance is the degree to which income appears on information returns. Taxpayers whose income isn't reported by third parties are much more likely to cheat.

More than a third of returns with capital gains incorrectly report that amount of the gain. Indepenent contrators omit on average 17% of income not subject to information returns, but just 3% of income subject to information returns.

The I.R.S. is not funded at at level that maximizes compliance. It estimates that for every additional dollar spent on enforcement, it could collect about $14 of additional tax revenues.

While there are some issues for actually collecting taxes owed, 90% of tax revenue loss comes from returns that incorrectly state how much is due, rather than from non-payment of taxes that taxpayers admit that they owe.

A leading cause of audit for lower income taxpayers is the earned income tax credit. The earned income tax credit is so complex that "the likelihood that the IRS had obtained the right result the first time [it conducts an audit] is not much better than a coin toss [43%]."

In short, your average tax cheat looks a lot like your stereotypical Republican voter.

Kent Hovind Arrested

Kent Hovind, a leading Florida creationist, known as "Dr. Dino" has been arrested on federal charges including tax evasion and threatening investigators. He wife Jo was charged with evading bank reporting requirements.

This is hardly the first of his legal troubles.

Kent Hovind, who often calls himself "Dr. Dino," has been sparring with the IRS for at least 17 years on his claims that he is employed by God, receives no income, has no expenses and owns no property.

"The debtor apparently maintains that as a minister of God, everything he owns belongs to God and he is not subject to paying taxes to the United States on money he receives for doing God's work," U.S. Bankruptcy Judge Lewis Killian Jr. wrote when he dismissed a claim from Hovind in 1996. . . . [A] grand jury alleges that Kent Hovind failed to pay $473,818 in federal income, Social Security and Medicare taxes on employees at his Creation Science Evangelism/Ministry between March 31, 2001, and Jan. 31, 2004. . . .

Among the ways he is accused of doing:

* Filing a frivolous lawsuit against the agency demanding damages for criminal trespass.

* Filing an injunction against an IRS special agent.

* Filing false complaints against the IRS for false arrest, excessive use of force and theft.

* Making threats against investigators and those cooperating with the investigation. . . .

Over Kent Hovind's protests, the judge took away his passport and guns Hovind claimed belonged to his church. . . . .

In April, Circuit Judge Michael Allen ordered the buildings at Dinosaur Adventure Land closed because Hovind failed to obtain a building permit during the 2002 construction. The outdoor theme park was allowed to stay open.

Members of Creation Science Evangelism said at the time that building permits violated their "deeply held" religious beliefs.

While the building permit case was tied up in a four-year court battle, ownership of the theme park was turned over to Glen Stoll, who works with Hovind on legal issues and is based in Washington.

Last year, the U.S. attorney in Seattle filed a lawsuit against Stoll, charging him with encouraging people to avoid tax payments by claiming to be religious entities, according to news reports.

In short, Kent Hovind is a crook.

Hat Tip to Daily Kos diarist fightcenteristbias. Citations to prior tax cases involving Hovind can be found here.