McLaughlin v. C.I.R., 87-1497

• Decision Date: 30 October 1987
• Docket Number: No. 87-1497,87-1497
• Citation: 832 F.2d 986
• Parties: -5772, 87-2 USTC P 9601 Dan E. McLAUGHLIN, Petitioner-Appellant, v. COMMISSIONER OF INTERNAL REVENUE SERVICE, Respondent-Appellee.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 986

832 F.2d 986

60 A.F.T.R.2d 87-5772, 87-2 USTC P 9601

Dan E. McLAUGHLIN, Petitioner-Appellant, v. COMMISSIONER OF INTERNAL REVENUE SERVICE, Respondent-Appellee.

No. 87-1497.

United States Court of Appeals, Seventh Circuit.

Submitted Oct. 1, 1987.

Decided Oct. 16, 1987.

Amended Oct. 30, 1987.

Dan E. McLaughlin, pro se.

Michael L. Paup, Chief, Appellate Section, Tax Div., Dept. of Justice, Washington, D.C., Roger M. Olsen, Ann B. Durney, John J. Doyle, Asst. Atty. Gen., for respondent-appellee.

Before CUMMINGS, CUDAHY and FLAUM, Circuit Judges.

PER CURIAM.

Tax protesters, those who persist in pressing losing arguments in an attempt to challenge the legitimacy of the federal income tax, are thorns in the side of the federal judiciary. Cf. Coleman v. Commissioner, 791 F.2d 68 (7th Cir.1986). In this case, Dan McLaughlin, a tax protester proceeding pro se, appeals from a decision of the United States Tax Court which (i) dismissed his petition for failure to state a claim, (ii) awarded statutory damages to the respondent Commissioner, and (iii) sustained the Commissioner's determination of deficiencies and statutory additions to tax. For the reasons set forth below, we substantially affirm the Tax Court (modifying only its award of damages) and, in response to the government's request, impose sanctions of our own.

The course of this litigation is well-known to the parties. Moreover, in view of the complete lack of merit of the instant appeal, there is no sense in undertaking to restate the facts underlying McLaughlin's groundless contentions. This case has already consumed more than its fair share of judicial resources.

The Tax Court's decision sustained the Commissioner's determination that for the years 1980, 1981 and 1982 McLaughlin received wage and interest income in the respective amounts of $36,403, $30,621, and $24,510. For those same years, McLaughlin filed no federal income tax returns, reported no income tax as due and had no taxes withheld from his wages. McLaughlin has not and presently does not dispute the Commissioner's computation of deficiency or statutory penalties; rather, he argues that he is, for a number of reasons, exempt from the payment of income tax. Because McLaughlin's petition for review of the Commissioner's assessments alleged no factual errors, as required by Tax Court Rule 34(b)(4) and (5), ¹ the Tax Court granted the Commissioner's motion to dismiss, sustained the deficiencies and additions to tax and awarded the Commissioner the maximum damages permitted under 26 U.S.C. Sec. 6673, to wit: $5,000.

On appeal, McLaughlin posits three arguments: (1) that his liability for federal income tax is contractual in nature and he has rescinded that contract; (2) that his religious scruples prevent him from "entering into contracts with the inhabitants of the land;" and (3) that he receives no benefits from the state and therefore owes nothing to the state. Each of these arguments has been previously addressed by the courts and soundly rejected; by raising them again in the Tax Court and on appeal to this court McLaughlin has understandably provoked judicial ire.

The notion that the federal income tax is contractual or otherwise consensual in nature is not only utterly without foundation but, despite McLaughlin's protestations to the contrary, has been repeatedly rejected by the courts. See, e.g., Newman v. Schiff, 778 F.2d 460, 467 (8th Cir.1985); United States v. Drefke, 707 F.2d 978, 981 (8th Cir.), cert. denied, sub nom., Jameson v. United States, 464 U.S. 942, 104 S.Ct. 359, 78 L.Ed.2d 321 (1983). Furthermore, case law in this circuit is well-settled that individuals must pay federal income tax on their wages regardless of whether they avail themselves of governmental benefits or privileges. See Coleman v. Commissioner, 791 F.2d 68, 70 (7th Cir.1986); Lovell v. United States, 755 F.2d 517, 519 (7th Cir.1984). And finally, McLaughlin's contention that his religion excuses him from having to pay income tax is forestalled by the Supreme Court's decision in United States v. Lee, 455 U.S. 252, 102 S.Ct. 1051, 71 L.Ed.2d 127 (1982), where the Court held that "because the broad public interest in maintaining a sound tax system is of such high order, religious belief in conflict with the payment of taxes affords no basis for resisting the tax." Id. at 260, 102 S.Ct. at 1057. See also First v. Commissioner, 547 F.2d 45 (7th Cir.1976) (per curiam).

We turn next to consideration of the Tax Court's award of statutory damages of $5,000 against McLaughlin. Title 26 of the United States Code provides at Sec. 6673 for an award of damages, up to a maximum of $5,000, to the United States "[w]henever it appears to the Tax Court that proceedings before it have been instituted or maintained by the taxpayer primarily for delay or that the taxpayer's position in such proceedings is frivolous or groundless...." While heartily concurring in the Tax Court's decision to award damages to the government under Sec. 6673, we are uneasy upon review of the...