His argument was, that since we were no longer on the gold standard, no one had “income” that could be taxed. He said the government could require you to file, so he recommended writing on the form that you refused to answer based on your 5th amendment rights.
It worked out really well for him. He had already lost his law and broker license, and he also got about a ten year sentence.
Most of his several hundred clients were not given jail, but their fines and interest on their late payments meant they all owed a lot more in taxes than if they had filed.

Guy must have been quite a bullshitter to convince people that he had figured out a loophole that no one else had exploited since the 1930s to avoid paying taxes.

Google "HJR 192." (This is the law that took the US off the gold standard.) Shrout invented the lie that HJR 192 meant no one could legally demand you pay anything, since the law had made all US currency invalid. There are a LOT of homeless people thanks to that one, because the banks really didn't agree with him.

I wouldn't call him a bullshitter. Shrout kept telling people to do all these things in the face of clear and convincing evidence none of them work. In fact, he CHARGED people to tell them things that would get them in hot water. This makes Shrout a Trump-level psychopath.

And people just ate it up?

I don't know which is worse, when they know they are scamming you or when they think they are on to some secret information.