Tax protesting within the limits of US law

I think something like half of all income tax dollars in the US (not Social Security or Medicare taxes) go to the defense budget, which right now means the war.

Tax protesters are small in number. Some don't believe the government has the right to levy taxes; that's an interesting philosophical question, but the legal grounds for the government to do so are unimpeachable.

Some, however, are protesting the numerous unjust wars the U.S. has engaged in. I've heard stories of people who basically live on cash. If you do in fact owe taxes, the IRS will levy your bank account and social security check. It's very difficult to run from the IRS, unfortunately, and living solely on cash is not easy.

A recent CNN Money story profiled this guy:

Few among us would want to settle for a drastically lower income just to avoid taxes. But David Gross did just that. After the 2003 invasion of Iraq, the 39-year-old technical writer decided that he didn't want his tax dollars funding the war. Only by earning less, he realized, could he stay within the law.

At the time his salary came to about $100,000 a year. He asked his employer to pay him far less - some $70,000 less - but was turned down. So he quit and launched a business from his apartment, strictly limiting his earnings.

In 2007 his income was $29,000. He put $2,850 in a health savings account, $4,500 in a simplified employee pension (SEP) and $4,000 in an IRA. Since he works freelance, he can deduct half of his self-employment tax ($1,850) and his health insurance premium ($1,200), leaving him with an adjusted gross income (AGI) of $14,600.

After taking the standard deduction and one exemption, his taxable income neared $6,000 and his tax was $493. Low-income earners like Gross are also entitled to a credit for retirement plan contributions. His came to $500 and - poof! - no tax bill.

Because he's saving so much, Gross has to pinch every penny. But even though he lives in San Francisco, one of the nation's most expensive cities, he says, "it turned out to be a lot easier than I thought." Most places he goes are within walking distance, working at home gives him time to cook, and he and his girlfriend (who does pay taxes) rely on Netflix-rented movies for entertainment.

Gross believes in the government's right to levy taxes - he still pays California taxes - but he's satisfied, he says, that he hasn't been financing what he calls "the hugely bloated military."

So, it is perfectly legal to reduce your income to the point where you pay zero taxes, or close to zero. It's not exactly very easy to live on that, though. Plus you do want to pay your Medicare taxes. State sales and local property taxes are harder to not pay, but as David points out, individual US States and municipalities aren't invading other countries in violation of international law.