Since the 2008 financial crisis, the "sovereign citizen" movement/conspiracy theory (previously) has grown by leaps and bounds, thanks to a combination of the rise of antisemitism (long a dogwhistle in the movement, now out in the open), an increase in financial desperation and a sense of betrayal, and the movement's ability to realize real cash for its members, who have systematically defrauded the underfunded and resource-strapped IRS of move than $1B.
Ashley Powers' long New York Times profile of movement leader Sean David Morton and his wife, Melissa Thomson, is a fascinating and chilling tour through the rise of a weaponized conspiracy movement with a business-model, a grift that sucks in people from the UFO believer circuit and other fringe nodes with promises of "debt relief" that turn out to be advice on how to defraud the government and a secret history of a cabal of Jewish bankers who are responsible for all of America's woes.
This secret history is like a prototype for Qanon and other far-right conspiracy movements, alleging that a bankrupt business somehow mortgaged every US citizen for $630,000 to the US government, and that this led to the establishment of the Social Security Administration (this is the most coherent part of the theory -- it only gets stupider from here on out). "Sovereign Citizens" believe that they can speak certain words or phrases, or point out certain alleged defects in the formalities of their courtrooms (for example, whether or not a flag has gold fringe) and that these act as incantations that neutralize the power of the state.
Believers also profess a solemn duty to defraud the US government and to that end they file I099-OID IRS forms with fraudulent claims for tax returns; they also issue fake bonds that they use to defraud the IRS. The starved and weakened IRS only catches a fraction of these (thought to amount to at least $1B in total), and when they do, believers say that they didn't realize they were breaking the law -- only exploiting "tax loopholes" like rich people do.
The movement has grown rapidly since the financial crisis, trading on the correct, widespread public perception that the finance industry is corrupt, that it deliberately trashed the US economy, and that it was bailed out at taxpayer expense afterwards.
The sovereign citizen movement has two prongs that attract new members: financial fraud and heavy militarization; sovereign citizens are to be found throughout the far-right militia movement, and are America's top domestic terror threat, and are prolific murderers of police officers.
Wherever armed, far-right terrorists are to be found, so too are sovereign citizens -- they're intermeshed with Cliven Bundy and his terrorist group. They also have historic and current ties to quack nutrition/health schemes, the John Birch Society, and UFO conspiracy movements.
This kind of nuttery has been around forever, but Powers skillfully demonstrates how inequality, the finance crisis, and financial desperation has supercharged the movement, bringing in vulnerable, scared people who know that rich people really do have secret ways of getting a better deal than anyone else, and who are ripe for being suckered with promises from con-artists who claim to have discovered those incantations. The sunsetting of the IRS's enforcement arm -- which started with the financial crisis and the Tea Party's war on the IRS based on the false story that it conspired against right-wing "non-profits" -- has only led credence to the movement's claims, because people really do get rich by following its fraud advice, and generally get away with it.
The founder of the antigovernment group Posse Comitatus, Mr. Gale aligned himself with an emerging movement of tax protesters who argued, for instance, that paying taxes was a form of involuntary servitude. In turn, he introduced them to his warped version of America, where patriots establish their own legal system and hang those who defy it. Mr. Gale’s specific gift was wrapping nonsense in enough legalese that it sounded real. “If you have this movement that offers you essentially a lot of magic words that you can say to get out of trouble, that’s going to really appeal to people who are desperate and angry,” Mr. Berger said. Mr. Gale’s outreach was a success. Over time, the line between thousands of tax protesters and Posse members blurred.
Take “redemption” — a theory popularized, in part, by a Gale associate. Remember how the corporation-slash-fake-government used us as collateral? According to sovereign lore, this means the government set up secret accounts in our names. Some believe they contain the oddly specific amount of $630,000. (To be clear, this is “pure fantasy,” according to the Internal Revenue Service.)
One way sovereigns try to make the imaginary money real is by abusing legitimate I.R.S. forms. Law-abiding taxpayers use Form 1099-OID, for example, to report “original issue discount” income. But some sovereigns write in fake OID income, and fake withholding, in order to claim illegitimate refunds. If you file such a return, you risk at the very least a large fine. Yet from 2012 to 2014, according to the Treasury Inspector General for Tax Administration, the I.R.S. received close to 7,000 sham OID filings.
How Sovereign Citizens Helped Swindle $1 Billion From the Government They Disavow [Ashley Powers/New York Times]