Well thanks to Mr. Joe Stack, clearly the issue of taxes has once again been brought up. So I thought I’d add my two little red cents on the issue 🙂
To begin with, while most people think of taxes as “something you have to pay” to the government, they are actually the foundation of the government (of the USA) we have today and today’s government could not exist without taxes. Neither could the big banks and Wall Street “geniuses” but we’ll get into that.
A tax is any monetary fee assessed by the government that is essentially an “extra” cost. That is to say, the cost to you, an individual, to plant, harvest and sell an ear of corn does not inherently include money going to the government.
Just like ice cream, there are 500 flavors of taxes but they generally come in a few basic categories:
1- A tax on land and “real” property
2- A tax on production (most famously the VAT used in Europe)
3- A tax on imports from abroad (excise duties)
4- A tax on income (largely wages but also including capital gains, etc)
5- A tax on any exchange of goods or services (sales tax)
Now where it gets interesting is that the early period of the United States (likewise in England) were based almost entirely on #1 and #3. The original Congress of the United States (the “Continental Congress”) was originally modeled the same way. And during the entire period of the Revolutionary War, that kind of modality was employed.
The story supposedly goes that after the Revolutionary War, the Congress was “stymied” and rendered virtually “powerless” because it could not levy taxes other than (largely) excise taxes. So the Constitution (the current one) was written so that Congress gained TWO powers. The first one was the power to levy taxes beyond just #3.
The second and much more powerful change was the right to coin money. Now why does this matter and how does it relate?
Imagine you and your friends decide to loot a Monopoly board game and use Monopoly dollars as the medium of exchange (money) between all of you. If Abraham and Bill want to mow your lawn, you can pay them in Monopoly dollars. If you decide to sell Charlie some apples you grew in your back yard, likewise you can use Monopoly dollars. As long as all parties are in agreement then the mode of exchange can be anything. Heck you can use Russian rubles or seashells if you wish.
The only thing you can’t legally do is pay your taxes in Monopoly money or seashells or Russian rubles. To do that, you must pay in the money that only Congress has the power to create. So Congress didn’t just gain the power to tax but also to legally determine how that tax must be paid. You can’t pay your taxes in corn, rubles or anything BUT Congressionally-sanctioned currency.
During the Revolution and long afterwards, there was a plethora of currencies in use in the United States, from Spanish “pieces of eight” to Dutch guilders to different currencies issued by State banks to even different currencies issued by private banks. Absolutely the only time that Congressional money was mandatory was to pay federal taxes.
Interestingly enough, for the most part, those federal units of measure (money) were based on a standard weight of precious metals (gold or silver) actually held in possession of the United States. In other words, for any given federal dollar, there was a corresponding amount of precious metal held in lieu of the note, which could be redeemed at any time.
So for the first 150 years or so, that’s how it was. Then in the early 20th century, two massive changes were implemented. The first was the 16th Amendment (to the Constitution, natch) which gave Congress the power to implement an income tax.
In certain circles (and certainly the ones Joe Stark traveled in), the ratification of the 16th Amendment is in question. I’ve looked at it many times and while there’s certainly some room for doubt, in essence, in every legal sense the 16th Amendment is as good as passed so it is “de facto” in force.
The second major change was the creation of the Federal Reserve, essentially removing Congress’ power to coin money and giving it to a private entity. This means, in essence, that the government enforces the taxpaying (or tax owing) public to use a privately managed instrument (dollars otherwise known as Federal Reserve Notes (FRN), which is what you carry in your wallet).
Think of it this way. Imagine you have a special grove of trees in your back yard that grow blue bananas. The government then decides that all taxes must be paid with blue bananas and you are the sole legal supplier of said bananas. Nobody can take ordinary bananas and paint them blue – only YOU can.
Well the Federal Reserve has all the “blue bananas” and you cannot legally exist or live in the United States (or be an American citizen!) and not use this private organization’s blue bananas. While this seems to be virtually the same as before the Federal Reserve, it’s not, because a citizen always has recourse to their duly elected members of Congress and as we all know, we have no legal right to even see the books of the Federal Reserve.
Now why would anyone be angry about taxes? At least angry enough to kill themselves over it? Well I can’t speak for someone I’ve never met but it’s easy enough to understand where he’s coming from.
Let’s start with the income tax, which is what must be filed by April 15, etc.
The first gripe a lot of people have is withholding. This is where the government assesses your weekly (or biweekly) paycheck, predicts what income you will earn over the year and “withholds” a portion of the tax ahead of time (this practice started during WW2 and was supposed to be a temporary wartime measure LOL).
For simplicity’s sake, let’s imagine you make $1000 a week. At the end of the year your total income would be $52,000. Let’s imagine the federal rate for paying an income of that amount comes to 10% or $5,200. So every single week the government “withholds” $100 from your paycheck. At the end of the year, you do your calculations and voila, you don’t “owe” anything because the government withheld the correct amount. You are “even” with the government.
What most people notice (especially when you’re not wealthy) is that at the end of the year, somehow “mysteriously” the government has actually withheld too much tax and now you’re owed a “refund”.
This is, in effect, a free loan on on your behalf to the government. If that was something people agreed with then it would be fine. But the truth is that escaping the withholding is virtually impossible, especially if you’re working an hourly job, so it’s more of an obligatory loan of your money to the government.
Secondly, the tax code (aka laws) are byzantine, lengthy, obtuse and nearly impossible to understand. I’ve been to big libraries and seen the shelves and shelves necessary to hold the printed version of these codes. I think it’s safe to say that literally no one understands ALL the tax code.
It may seem surprising but quite honestly a lot of countries get by with tax codes that are far simpler and easier to understand. I think part of the arcane nature of taxes in the United States is simply because there are so many special situations. These are often written into the law on behalf of lobbyists.
The most famous of these taxes was supported by none other than George Washington himself, called the “whiskey tax”. Essentially individual producers who turned grain into alcoholic spirits had to pay a tax but large, volume producers (such as Mr. Washington) did not. This led, by the way, to one of the first civil insurrections in the history of the United States, essentially forerunners to Mr. Stark’s recent actions.
I remember a few years back going to some workshop or something and there were people there advocating that self-contractors purchase SUVs or large trucks because there were tremendous tax benefits in doing so. It was actually cheaper to buy a big SUV than a small, efficient car due to this tax loophole, which is good for the individuals but not so much for the planet. And of course, there are millions of these special situations.
What makes all this so onerous is that there is very little that the citizen can do about this. The only legal currency is in the hands of a private organization and all taxes must be paid with this medium. Furthermore, all citizens are required to pay taxes in this currency using a code (tax laws) that is almost impossible to understand. At the end of the year you are literally forced to sign a document (under penalty of law) that you have no way of truly understanding.
That’s a heck of a thing right there!
If you’re rich enough, of course you can employ tax “specialists”. And what do these specialists do? They comb through the special exemptions and mix and match your paperwork and activities to best “benefit” you – aka pay less taxes. Sometimes these schemes are called “tax shelters”, in which your income “shelters” from the withering storm that is the government 😛
Many years ago I found an old paperback book written in the 1980’s showing how many rich and powerful people (including Ronald Reagan when he was governor) manage to “shelter” their income so efficiently that they literally owed no taxes at the end of the year.
Meanwhile the ordinary person, with no recourse to expert advice, may end up paying taxes they don’t “have to” because they are unaware of loopholes and special exemptions.
There are other options as well, some of them dubious or semi-legal, including offshore banks, registering corporations overseas, etc. If you have an extra $50,000 lying around, let me know because I know a few countries who will sell you a passport no questions asked 😉
So far I’ve just been talking about individuals. Corporate taxes are largely the same as with an individual, in the sense that income is taxed, etcetera. Big corporations are like wealthy individuals though, in the sense that they use “professionals” to find legal ways to not pay taxes. Every year or so there’s some scandal about how Corporation X paid no tax that year (the oil giants are particularly adept at this).
Furthermore, because corporations sponsor the majority of lobbyists and those lobbyists pressure Congress to write favorable laws (in the tax code), corporations quite often get tremendous benefits. I know one of the most deplorable is the fact that most fast food restaurants get special tax benefits for hiring people. This sounds great until you examine the turnover rate in the industry and realize the corporations are getting financed by the government to hire someone but not to retain them. Fun stuff.
A bizarre and insane law which probably doesn’t affect all of you is that legally, all income by American citizens, no matter where in the world, is taxed by the government of the United States. This means if I sell a banana in my shop here in Romania, legally I’m required to pay taxes in the United States on that income. Ridiculous! Especially since there’s an exemption for American citizens doing business in Puerto Rico.
And of course none of this addresses the relative inequality of even what the notional tax rate is supposed to be. That is to say, percentage-wise, people with lower incomes pay more than people with higher incomes. And that’s before all the shelters and exemptions and what have you.
And last but not least, there’s also the bizarro legal situation where if you commit armed robbery, you’re presumed innocent until proven guilty but if you owe taxes you are presumed guilty until proven innocent. How that’s a sustainable part of a justice system is something I do not understand.
Now time for the “conspiracy” stuff:
As I mentioned, there’s considerable debate over whether the 16th Amendment was properly ratified in the first place.
Secondly, there’s the whole issue of the Federal Reserve and whether that’s even constitutional (since the original set-up was that only Congress has the power to create money). The circumstances of how those laws were drawn up are suspicious at best and involve things like midnight votes, etc.
Third is the “Puerto Rico” and “Admiralty law” issue. If you dig into the tax code long enough and deep enough, you will see that there’s a lot of really dense language based on what gives the IRS authority to collect taxes. Some of that code seems to suggest that the IRS is a private corporation registered in Puerto Rico and is not actually a department of the federal government.
The “admiralty law” goes into exactly what kind of legal system is used to adjudicate tax matters and whether this is based on maritime law or the same style of court as for other criminal matters. The super short version of this conspiracy is that essentially the same legal framework used to prosecute pirates on the high seas is what the government uses to enforce tax codes.
The last linchpin in the tax “conspiracy” is whether or not the law even specifically mandates that individuals (versus corporations) must pay taxes in the first place. It’s true there doesn’t seem to be anywhere that specifically states “all citizens must pay taxes on their income”. That being said, I’ve seen this line of thought come under detailed analysis and it doesn’t seem to hold much water.
And last but not least, quite simply put even the taxes you do freely pay seem to be wasted, whether it’s bail outs, TARP, savings and loan crises, levees collapsing, you name it. You’re paying a third of your income or so and what do you get in return for it (in terms of government service)? Not much.
In terms of federal dollars, what I personally find the most onerous is that literally 50% or more goes straight to the military. It’s easy to cheer on Mr. Emerson and Mr. Thoreau for their bravery but very, very difficult to do it yourself and stay out of jail.
Another huge portion of your taxes goes to paying off the interest of the national debt of the United States. Which means nothing productive is being done with your money whatsoever, all you’re doing is paying the cleaning bills for a party someone else threw (probably before you were born).
There are probably as many flavors of tax reform policies as there are taxes but it’s pretty easy to see why people are frustrated and bitter about the whole thing.