While you are likely still recovering from Tax Day, don’t be lulled into thinking that the pain is over. Your property is never fully safe from government confiscation.
One of the few areas of innovation in which the state excels is how to extract ever more wealth from the productive class, and one of the fastest growing sources of revenue for insatiable governments is civil asset forfeiture (CAF).
What Is Civil Asset Forfeiture?
Law enforcement agencies engage in CAF when they suspect that your property was either used in the commission of a crime or if your property was gains from the commission of a crime. Officials do not need to prove anything in court in order to seize your property; rather, they simply take it and you are forced to prove the “innocence” of your property in order to get it back.
Courts have attempted to justify this disregard for property rights by creating the legal fiction of having the case being against the property rather than the owner (resulting in case names like U.S. v. $10,000 in Cash), thus bypassing 4th and 5th Amendment protections. Perhaps also as disturbing are the perverse incentives of CAF legislation, which often allow law enforcement agencies themselves to keep the majority or all of the proceeds from forfeiture for their own budgets.
Taxation and Theft
There are some interesting parallels between the historical development of the federal income tax and civil asset forfeiture. Early on, both were rather limited in who was subject to them.
In the American context, the earliest example of legal proceedings similar to modern CAF involved marine merchants whom the state suspected of not fully paying customs duties. Often these merchants would be out at sea. Because it was deemed impractical to await their return, they were essentially tried in absentia and the case would officially be against the property to be seized. Outside of cases like these, CAF was not used much until the Prohibition Era.
However, the 1984 Crime Control Act laid the groundwork for turning CAF into the monster we see today. In the name of fighting the War on Drugs, Congress tried to “take the profit out of drug crime” by allowing law enforcement to seize drug traffickers’ means of production (such as vehicles used to transport drugs), their revenue, and keep it for themselves. Police respond to incentives and decided to allocate more resources to the drug war and fewer to protecting property.
Indeed, it is as if the “cops vs. robbers” dichotomy has become even more blurred. As of 2014, the total annual value of assets seized by American law enforcement was greater than the estimated total property loss due to burglary.
Local and Federal Police Share the Plunder
Similar to how the income tax has become the primary source of funding for the federal government, many police departments have become dependent on CAF to pad their budgets. In a survey of 1,400 county sheriffs and municipal police departments, 40 percent of responding agencies agreed that forfeiture provides a necessary budget supplement.
The federal government too has become addicted to this source of revenue. In late 2015, Attorney General Eric Holder issued restrictions on equitable sharing of asset forfeiture between federal and local law enforcement, only for these to be later rescinded. The equitable sharing program provides a way for local agencies to bypass state restrictions on CAF by sharing proceeds with the feds. Whereas some state laws require that forfeiture proceeds be earmarked for education spending, through participation in equitable sharing, agencies in these states are able to keep 80 percent of their plunder by sending the other 20 percent to the federal government.
The IRS Wants a Cut, Too
The development of the income tax and civil asset forfeiture have now converged, where a cross pollination between the wars on drugs and terror has led to a situation where the IRS is seizing assets directly from bank accounts without even suspecting a crime has been committed.
As detailed in a new report by the Institute for Justice, the IRS has been seizing the assets of businesses engaged in completely normal practices for the appearance of “structuring,” that is, breaking up large transactions into smaller transactions to avoid the reporting requirements banks have when customers deposit or withdrawal more than $10,000. As a result, small businesses have had their assets seized for making regular deposits and withdrawals around $3,000. One can see how the on-going war on cash will make it even easier for the Feds to confiscate assets in this manner.
While the criminalization of “structuring” may have developed as a measure in the war on terror, the IRS uses it as a tool for revenue collection, not fighting terrorism or money laundering. This is self-evident when half of their forfeitures between 2005 and 2012 were for less than $28,000. (Another example of the cross pollination between the wars on drugs and terror is the use of NSA domestic spying to gather intelligence for the DEA, who also shares it with the IRS.)
Where’s the Outrage over Taxation?
Observers across the political spectrum, even those without any particular commitment to property rights, are rightfully shocked upon learning of the ubiquity of civil asset forfeiture, presumably because of the fact many of its victims have engaged in no wrongdoing.
What I find troubling to explain, however, is why these same individuals don’t feel the same way about the income tax. On what reasonable basis can asset forfeiture be thought of as more outrageous than the income tax?
Neither case requires the victim to be convicted of any wrongdoing — therefore both take resources from those presumed to be innocent. And certainly the presumption of factual innocence should be stronger for income taxpayers.
The best explanation of the general revulsion to CAF that I can think of is a human’s natural visceral reaction to seeing someone getting their property taken against their will; that is, it looks more like what people think of when they hear the word “theft.” But in the most ethically relevant ways, there is little to distinguish civil asset forfeiture from the income tax.