Income tax foe, IRS wrangle over '01, '02 filings

Noted Libertarian says agency erred

A leader of the movement to eliminate the state income tax in Massachusetts is enmeshed in a dispute with the IRS over what the government says is nonpayment of federal income tax for 2001 and 2002.

Michael E. Cloud, who cofounded the organization that petitioned to place the antitax Question 1 on Tuesday's statewide ballot, owes $10,580 to the federal government, according to a tax lien filed by the IRS in 2006.

Cloud, who played a lead role in the 1996 and 2000 presidential campaigns of Libertarian candidate Harry Browne, said he paid federal taxes on his income in the years in question, but did not do so for reimbursements for campaign expenses, such as airline tickets he purchased on his credit card and repaid with campaign funds. The IRS mistook those reimbursements for income, he said.

In an interview this week, Cloud described the matter as "a disagreement with the federal government about a tax bill, where it's their tax court and I have to work my way through the federal courts at a [legal] cost of $27,000."

Cloud called the matter a personal dispute unrelated to his campaign to end the 5.3 percent Massachusetts income tax.

The federal tax lien was recorded June 5, 2006, in Clark County, Nevada, where Cloud previously lived. The lien equals the amount the IRS said Cloud owed for his 1040 filings from those two tax years, according to a clerk with the Clark County Recorder's Office.

An IRS spokeswoman said the Internal Revenue Service cannot comment on individual tax cases.

The IRS files a lien, which gives it the right to seize and auction personal property and which can affect a person's credit rating, if a series of notices about lack of payment or inadequate payment are unsuccessful. The lien is not released until full payment is received, so a record of a lien could mean either that the taxpayer owes the amount in full or is paying it off in installments, spokeswoman Peggy Riley said.

Cloud, who said the matter is being resolved, said the IRS recorded the lien after ignoring 17 explanatory letters that he sent by registered mail.

"I don't owe a dime," he said. "It's very easy to file a charge against somebody."

Among Libertarians, Cloud is a nationally regarded writer, speechmaker, candidate, and fund-raiser. He is the author of "Secrets of Libertarian Persuasion," which is described as a guide to attracting friends and neighbors to the cause of small government, individual liberty, and personal responsibility.

As a 1998 US Senate candidate in Nevada, Cloud and his 8,000-plus votes were viewed as a difference maker in a victory for incumbent Harry Reid, now the Senate's majority leader, over Republican John Ensign decided by roughly 400 votes.

Cloud ran for US Senate from Massachusetts in 2002, when he won 19 percent of the vote against incumbent John F. Kerry in a race without a Republican on the ballot.

To protest his lack of media coverage, Cloud declared himself to be on a hunger strike and accused newspapers and television stations of starving voters and turning him into an "Orwellian nonperson" and "Ralph Ellison's invisible man of Massachusetts politics."

Cloud and Carla Howell cosponsored Question 1 to repeal the income tax in 2002, when it received 45 percent of the vote, and again this year as cofounders of the Committee for Small Government.

Although each has been the Libertarian Party nominee for several offices, they describe this movement as nonpartisan.

"This isn't Democratic, Republican, Libertarian, Green," Cloud said. "This is everybody. This is our tax cut."

Supporters say Question 1 would return the roughly $12.5 billion raised annually through the state income tax to workers' paychecks, helping middle-class families, creating a better climate for small business, and forcing government to become smaller and more efficient.

Opponents, who have organized as the Coalition for Our Communities, say it would force drastic cuts in public services, destabilize the economy, and prompt increases in other taxes and fees to make up the difference.

Steve Crawford, spokesman for the Coalition for Our Communities, declined to comment about Cloud's tax history.