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Woman Beats IRS in Court Over Income Tax Protest

This is a partial transcript of The Big Story With John Gibson, August 12, 2003, that has been edited for clarity. Click here to order the complete transcript.

JOHN GIBSON, HOST: Every payday, Uncle Sam takes a good chunk of your paycheck. A woman in Tennessee decided enough was enough and stopped paying. The IRS (search) took her to court and, get this, she beat them.

Joining us now is Vernice Kuglin (search) and her defense attorney, Larry Becraft, who specializes in tax protester cases. And that's today's big question, Verny can anyone get out of paying taxes?

VERNICE KUGLIN, ACQUITTED ON SIX COUNTS OF TAX EVASION: Well, that's a difficult question. I can only speak for my case in which I was acquitted by a jury.

GIBSON: Of what?

KUGLIN: And that was of intent to willfully violate a law.

GIBSON: Okay. But just so we're not dealing with apples and oranges, you were acquitted of the criminal charge that would have sent you off to jail.

KUGLIN: That's correct.

GIBSON: But you're still on the hook for the taxes?

KUGLIN: I'll let [Larry Becraft] answer that.

GIBSON: Larry Becraft, is she still on the hook for the taxes?

LARRY BECRAFT, DEFENSE ATTORNEY: Well, John, that's a very important question. That's one that came up in court last week. Let me kind of put this case into context. Verny was charged back in April with six counts of federal income tax evasion (search).

GIBSON: Yes.

BECRAFT: And we tried the case last week. In a criminal case, the only thing that happens, the only question that the jury decides is whether or not the defendant that is on trial committed the crime. We had some very interesting facts that were presented to the jury. We had a theme for the defense. The jury bought that and found her not guilty. The next question of civil liability for the amount of taxes is further down the road. I would anticipate here that the IRS is probably going to be sending her a 90-day letter for the six years that were the subject of the indictment. And that might be coming in the next couple of months.

GIBSON: Okay, now, Larry, you're probably also going to want to answer this, but let me ask Verny. Verny, why did you think that you have the right, if not the duty, to refuse to pay the IRS your tax bill?

KUGLIN: It started in 1992 when I began hearing people talk about the constitutional restrictions on taxation by the federal government. I began reading the Constitution, listening to cassette tapes on the direct versus indirect taxes, then I was led eventually to court cases… after the 16th Amendment (search) was passed and then cases on down the way. And it raised a question in my mind as to the legitimacy of the federal government directly taxing a person's right to a common occupation.

GIBSON: But Verny, you look like a very reasonable citizen of the United States. And you probably would allow that it does take the money of the citizens to run all the services we avail ourselves of, highways, whatever. You were just objecting to the method of collecting these taxes by the federal government through the IRS, or you objected to taxation altogether?

KUGLIN: I believe that the founding fathers, through the constitution, set up a competent and workable tax structure and my objection is that that structure has been misapplied by the IRS.

GIBSON: Now, Larry, I have to ask you about this before we run out of time. It isn't always so wise to take on the IRS. Most people lose and lose big. Is Verny a trend or is she just an isolated case and everybody else should behave?

BECRAFT: I haven't made a determination in my own mind, although since the verdict has come back we've had a lot of media interested in the decision in this case. You know, I think that if we take a look at the situation going on out in California, if we take a look at the situation just across the nation, even in my home state, Alabama, we do have funding problems for state and federal governments. And this may be an indicator that the people are beginning to get a little bit fed up. My own personal conclusion is that in this particular case, the jury reached the only conclusion it could reach, which was that she had committed no crime. Whether or not this is indicative of some type of a change in the mood of the American people, I think we probably need at least an honest survey of the American people to make that determination.

GIBSON: Larry Becraft, thanks a lot. And Verny Kuglin, thank you for coming on today. Good luck. At least you're not going to jail, appreciate it.

BECRAFT: Thank you, John.

GIBSON: For most of us, legally avoiding the IRS seems like a dream come true, but can you really get away with not paying your taxes? Is it evasion or ingeniousness?

… This is a big fight that's been going on in this country for a long time. [Vernice Kuglin] is just the latest little case.

JUDGE ANDREW NAPOLITANO, FOX NEWS SENIOR JUDICIAL ANALYST: Right.

GIBSON: Is there a constitutional objection to allowing the federal government to take money out of your paycheck every week?

NAPOLITANO: Well, there was until the 16th Amendment was enacted in the early part of the last century. The Constitution specifically prohibited the federal government from taxing individuals directly. The 16th Amendment amended that. And it was challenged several times in two cases right after it was enacted. And those cases have been called intellectually dishonest. But no one seriously, successfully, has challenged the power of the federal government since then to tax individual income.

Now, nobody likes to pay tax. I don't know anybody who comes home at the end of the week and says, “You know what? They didn't take enough this week.” And she will probably still have to pay her taxes…

But, seriously speaking, this is a criminal case. And the only thing the jury decided was that the government couldn't prove its case against her. And the reason the government couldn't was that she begged them, she pleaded with them to explain the tax laws to her. They wouldn't answer her letters. They wouldn't return her phone calls. They wouldn't give her any explanation. I think the jury said, “Enough is enough.” She owes a lot of money. You're talking about $1 million worth of income and easily $250,00 in taxes for which they will sue her and for which they will probably get a judgment. And if she doesn't pay, they will levy on her assets. But she is not going to jail. The government has lost its shot to convict her of a crime.

GIBSON: Once again, does that make her one lonely soldier out there or is it a trend?

NAPOLITANO: I think it's one lonely soldier who found a sympathetic jury. I don't think it's a trend.

GIBSON: And you don't think it would be wise to try it?

NAPOLITANO: Absolutely not.

GIBSON: Judge Andrew Napolitano, thanks a lot.

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