Some of the most glaring examples of unintended consequences throughout history have been the effect of government taxation on societal trends. In this paper we will concentrate on the United States Federal Income Tax and its implicit (and effective) encouragement of illegal activity.

There are some general assumptions I have necessarily made and which I will state here.

·        Some mechanism must exist in any governmental system for the collection of taxes from the governed. Otherwise that government could not function. Whether the functions of that government are just and derived from the governed is irrelevant for purposes of this paper.

·        Every society defines certain activities as illegal. Common examples are drug-dealing, robbery and not paying taxes owed to the government. Another such activity of particular interest to the United States at this point in time is that of illegal immigration.

·        Citizens of any society will tend to maximize activities that are in their self interests. That is just human nature. There is of course a balance between self interests and societal interests but unless there is a direct conflict the self interests usually win out.

The U.S. Government assesses Federal taxes in several general areas. On individuals, taxes are assessed on income attributed to that individual. There are 2 main areas of federal individual income taxes; ‘standard’ income tax and FICA. On organizations (chiefly corporations), taxes are assessed on profits.

The U.S. Government officially grants tax-exempt status to certain profit-generating organizations that it deems beneficial to society. For the most part these are charitable organizations. This is done to encourage activities these organizations perform.

In the individual arena, notice the fact that ‘income attributed to the individual’ is taxed. Ideally, that would be the same as ‘income earned by the individual’. However, this has never been the case throughout history and certainly is not in the present-day United States.

Income is ‘attributed’ to an individual if the individual voluntarily reports that income to the Government or if the organization employing the individual reports that income to the Government. Individuals engaged in illegal activities never report their income, of course, and not even all individuals engaged in legal activities report their income.

As already stated in the general assumptions above, not paying taxes owed to the Government is itself considered an illegal activity.

The IRS estimates that at least 30% of all income earned in the U.S. economy is never reported, and thus never taxed. The word ‘earned’ in some of these cases may seem strange, but what else would you call money ‘received’ from illicit activities? That 30% figure includes money made by overt criminals (drug-dealers, thieves, etc), illegal aliens and otherwise-legal citizens that just don’t report their income to the IRS.

Individual Federal income taxes in 2005 amounted to approximately $2 trillion. Estimates by the IRS as to ‘lost’ income taxes from unreported ‘income’ was $700 billion. The breakdown of that unreported ‘income’ estimate was $300 billion gained from illegal activities and $400 billion gained from legal activities (mostly involving cash transactions).

The effects of a Federal Income Tax in the U.S. in 2005 were as follows:

·        Americans who earned their income legally and paid taxes on that income were forced as a group to pay $700 billion (over 30% of the $2 trillion total) more Federal taxes than was their fair share. Assuming you were a legal American in 2005, over 30% of your Federal tax bill went directly to pay the tax bill of criminals.

·        Every dollar earned thru criminal activity was effectively exempt from Federal taxation. Every dollar earned legally was subject to Federal taxation. At average individual income tax rates of 30%, this means that ‘income’ from criminal activity benefits it’s ‘earner’ 30% more than the income of legal earners.

The first effect, forcing legal Americans to subsidize criminals, is immoral and some would argue un-Constitutional.  That it is immoral for any government to force its citizens to subsidize officially-recognized criminals should be clear. That it is maybe un-constitutional depends on interpretation of article 1 section 8 of The U.S. Constitution (‘all Duties, Imposts and Excises shall be uniform throughout the United States’).

The second effect, making criminal economic activity more profitable than legal economic activity, could be construed as a criminal offense itself. The arguments could be made that this is encouraging anarchy and acting as an accessory to crime.

Making criminal activities more economically profitable (dollar for dollar) than legal activities without a doubt introduces severe conflicts between self interest and societal interest.

It is highly doubtful that any supporter of the Federal Income Tax will ever address these unintended consequences. I will give our Government the benefit of the doubt that these consequences were indeed unintended, though it is also strange that our Founding Fathers clearly recognized the historical economic evils of an income tax in the 1780s but their wisdom was later ignored.

Plato, in The Republic, wrote that “When there is an income tax, the just man will pay more and the unjust man less on the same amount of income.” He wrote that over 23 centuries ago! It was true then and it’s true now.

Law-abiding Americans should demand that their government stop giving economic enticements to criminals. This has gone on long enough! Replace the Federal Income Tax with a form of taxation where criminals can’t escape it just by mis-reporting their income.

There is a bill before the U.S. Congress to completely replace the Federal Income Tax system with a National Retail Sales Tax for spending above the Federal poverty level. Along with its many benefits is the fact that criminals cannot escape paying their share. If they eat they pay the tax. If they buy clothes or a car they pay the tax. They pay just like the rest of us, based on what we decide to purchase. But just like them, we law-abiding Americans get to receive all our income rather than having the Government confiscate it from us as it is earned.

This bill (HR25 / S25) is commonly known as The FairTax. It lowers the tax bill for every law-abiding American primarily because it forces the criminals to pay their own tax bill.

Now isn’t that Fair?

 

Current taxation by the U.S. Government is a travesty. Its purpose is to keep citizens in the dark about obscene fiscal policies yet fleece those citizens to the maximum extent without their knowledge.

And its successful. The vast majority of Americans have no real idea of how much taxes they pay and they blindly keep electing politicians who perpetuate the shell game we call ‘the U.S. Tax Code’.

The first step to any real reform must be to get the truth out so American taxpayers get angry; and they should be VERY angry.

There are currently 3 main vehicles for federal taxation.  One is actually called Federal Income Tax. That’s the tax vehicle whereby LAW-ABIDING wage-earners (not nearly everyone) have 20%, 30% or more of their paychecks confiscated and then are allowed to spend time and money to try and get a small portion of that confiscated money returned back to them on April 15^th. This form of taxation is proclaimed as being ‘progressive’ since it burdens lower-income Americans less than higher-income ones.

The second form of tax is called FICA, where LAW-ABIDING wage-earners (again not nearly everyone) have 15% of their paychecks confiscated in the name of 2 other BROKE shell games called Social Security and Medicaire. This form of taxation is definitely ‘regressive’ in that all below-$90,000 wage-earners pay exactly the same rate while higher-level wage-earners pay effectively a LOWER RATE.

The third form of tax is the most hidden (and regressive) of all. It is corporate income taxes. This tax is a cost of doing business just as is labor or material costs, so it is simply built into the price of American goods and services. Probably the biggest tax lie is that corporations somehow pay taxes. All they can do is collect taxes from consumers in the form of higher prices for their goods and services. These taxes (in the form of higher prices) are paid by not only the final consumer but by every manufacturer in every step of production along the whole production life-cycle. And prices are higher not only because of this insidious corporate income tax but also because of the huge compliance costs these corporations have to pay (lawyers, accountants, lobbyists, etc). It is estimated that 15-25% of the cost of EVERY good or service in the U.S. is attributable to the corporate income tax ‘scheme’.

Mad yet? Thought you knew from those infamous Federal Income Tax tables what your tax rate was? That published rate isn’t even close! In most cases, not even half-way. Thought that all Americans paid personal income taxes?  Nearly half don’t (mostly those that don’t rely on a conventional paycheck), leaving the other half to pick up their slack.

What’s the remedy? Well, how about telling the TRUTH about the rate of taxation. And how about SLASHING the REAL effective tax rate approximately in half from what it is now. And how about forcing all Americans to ACTUALLY pay their share of that tax.

There is legislation before the Congress to do just that! In the House of Representatives it’s called HR25. In the Senate it’s called S25. In plain English it’s called the Fair Tax.

Basically, the Fair Tax will consist of

·        A single sales tax paid for each RETAIL purchase

·        A single payment each month to every American to offset ALL sales taxes on essential spending

I will leave the specifics of The FairTax for you to discover, which I truly hope you will do. But the specifics all revolve around those 2 simple basics.

When our Founding Fathers formed this Republic, they never in their wildest dreams conceived of a populace having their income taxed. Taxation without representation was a call to arms that formed the United States. And taxation then was an import tax on luxury items, which the wealthy in effect chose to pay by their lifestyles.

Somewhere in the early 20^th century the Founder’s dreams went wildly wrong. In a nation founded upon a Constitution, an evil called ‘implied powers’ was naively adopted as a means of circumventing the document that was meant to be the blueprint for humanity’s grand experiment. What has resulted is a bloated, inefficient government where the vast majority of its functions have ABSOLUTELY no Constitutional basis.

And what feeds ‘implied powers’ and this runaway cycle of unwarranted federal expansion: MONEY.  It’s citizens’ money, in the form of taxes. So in 1913 an evil con job gets fostered on the Constitution to give the United States government a license to confiscate money from its citizens in almost unlimited fashion. That con was called the 16^th Amendment. And since then the money flow (and resulting growth thru ‘implied powers’) has never abated.

By the way, another fact about The FairTax is that it starts the Constitutional process for repeal of that 16^th Amendment.

As I have already pointed out, United States federal taxation is all based on lies and convoluted rules that can’t easily be comprehended. After all, no amount of ‘implied powers’ would be tolerated if Americans really knew that the 25% Federal tax rate they occasionally complain about was effectively more like 50%.

And even that obnoxious rate isn’t high enough for the Washington politicians of the past 50 years. We can’t even pay for the United States government to function each year, much less pay for the approximately $200 BILLION (and growing) interest payments on the accumulated national debt our esteemed leaders have piled up.

Taxation without representation really wasn’t all that bad when the alternative is TAXATION BY LIE (with representation, though)!

Few Washington politicians will ever expose the shell game, though. They can’t! A revolt would surely ensue. And if you think it makes a bit of difference whether those politicians are Democrat or Republican then you are just part of the problem. They all spend your money with reckless abandon. Their primary responsibility IS NOT to the United States but IS to promise increased spending to get re-elected.

That makes change entirely up to the American people. This is incidentally where the framers of the Constitution meant Governmental change to emanate from.

It’s called GRASS ROOTS. And don’t tell me it can’t work. I refuse to believe the United States of America is so far gone that we the people can’t effect our own government. I refuse to believe we can’t reclaim our Constitution.

Educate yourself on the Fair Tax. Visit www.FairTaxWarrior.com or www.fairatx.org and check out the facts. Read our arguments. Locate and attend local volunteer meetings. Get involved. Call your Representative and Senators.

We need all the help we can get. This country deserves to be put back on track.

 

 

 

I'm a passionate supporter of The FairTax, but this piece is not about that specifically. That’s a policy issue. I have NO doubt it is the best policy, but everyone has to come to that conclusion on their own.

I want to talk about IGNORANCE. Not ignorant people, per se, but ignorance about a slow cancer that has been perpetuated as gospel by U.S. Government leaders for nearly a century now. That cancer will lead this country to abdicate its world leadership role to China within the next decade. That cancer will bankrupt our Social Security and Medicare system within 2 decades.

That cancer is completely curable. But because of IGNORANCE the majority of this country doesn’t even see it for the cancer it is.

That cancer is our Income Tax system. ANY Income Tax system (current, Flat, etc).

The Income Tax is completely against anything our Founding Fathers dreamed of. In fact, they expressly forbid such direct taxation in The Constitution. It took some very sleazy political gamesmanship in 1913 to slide in an amendment to The Constitution to allow this farce by the Supreme Court. But after that, the taxing and spending floodgates have opened and we've never even tried to close them.

What are some of the many evils (sure, I’ll use that word) of our Income Tax Code?

• It forces tax-paying Americans to spend an additional 20% surtax (or about $500 BILLION per year) for NO other reason than to comply with Federal income tax regulations.

   That’s about 4 times more money than the Bush Tax Cuts that Republicans take so much credit for.
   When a ship is sinking fast, what genius can’t see that you plug massive leaks before you even start to worry about lightening the load.

• It makes all illegal activities TAX-EXEMPT.

   Criminals are essentially tax-exempt because they don’t REPORT income, which is the only income you have to pay taxes on under an income tax system.
   Tax-paying Americans currently subsidize such people to the tune of about $700 BILLION per year. Did any of you volunteer to give financial aid to drug-dealers? Let’s don’t even get into the moral concerns with that situation.

• It perpetuates a CERTAINTY of bankruptcy regarding our 2 biggest government programs: Social Security and Medicare.

   It is pure DEMOGRAPHICS. Not a policy issue, but a mathematics issue. But politicians (and most Americans) would rather play politics than apply simple math, I guess.

• It hides the amount of Federal taxes Americans pay (or have confiscated), effectively making taxation so COMPLICATED and MULTI-FACETED that no American can really know how much they pay.

   Income Tax, Social Security Tax, Medicare Tax, Corporate Tax, Payroll Tax, Capital Gains Tax, Estate Tax, etc. Get the idea. We don’t have a good idea of how much we really pay given all those taxes.
   Makes it pretty hard to do anything about excessive taxation when the taxation is in effect like hundreds of fluid little water filled balloons. If not invisible, it’s certainly hard to get a hold of.

• It makes American businesses inflate their prices 15% - 25% due to taxes. That price inflation:

   Further hides Federal taxation from Americans. After all, businesses are inflating those prices to in effect collect taxes from us to send to the Feds. The Feds, though, get to collect more taxes and have us blame big mean businesses when they’re just forcing those businesses to do their tax collection.
   Makes American goods and services artificially less competitive to foreign rivals. Then we wonder why manufacturing jobs are all going overseas and why our trade deficit is so horrific.

• It makes it very difficult for POOR Americans to actually climb out of poverty. Think about it.

   Mathematically the most REGRESSIVE tax by far is FICA. A minimum-wage waitress pays the same FICA tax-rate as her $90,000 boss. She pays a HIGHER rate for anything her boss makes over $90,000.
   Then she has to spend all of what’s left to feed her family, all of it on goods and services that have that artificial business price inflation due to taxes. Her boss, on the other hand, wisely saves money and only pays half his pay on those price-inflated goods and services. So, in effect, the waitress spends almost TWICE the tax-rate of her boss when measured in those hidden taxes brought about by business taxation.

With very few exceptions, every Washington politician and political candidate will chant the mantra of Tax Reform.

‘Elect me and I’ll REFORM the tax system. Your taxes will be lowered because I will ____________________’. Fill in the blank from below:

• Cut taxes on the middle-class.
• Raise taxes on the wealthy.
• Make the Income Tax FLAT.

None of those do ANYTHING what-so-ever about the problem. The whole idea of an Income Tax is systemically flawed and inconsistent with Capitalism and human nature.

There is no reform that will work. It was explicitly banned in The Constitution for a reason. IT IS A BAD IDEA.

The idea of income-based taxation has to be REPLACED.

There is only 1 REPLACEMENT tax plan that meets the following criteria:

• It effectively solves each of the Income Tax EVILS earlier mentioned, plus dozens of others. That includes SAVING Social Security and Medicare.
• It provides 100% revenue REPLACEMENT (that’s what the word replacement means, after all) of current Federal taxes.
• It cuts taxes an average of 20% for EVERY tax-paying legal American. It makes illegals, tax-cheats and criminals actually start paying taxes.
• It WILL bring about business growth, lower tax rates, higher savings rates, more home ownership, more jobs, etc.
• It has already been introduced in Congress.

That plan is The FairTax.

But again, The FairTax can only be appreciated if one understands the necessity of ridding this country of an Income Tax.

. . . they might say something like this . . .

#1 – The U.S. Government has been enforcing an unfunded mandate on
American taxpayers and businesses of $500 BILLION per year. This
amount DOES NOT go to the Federal Government as taxes and represents a
total drain on the U.S. economy. This amount also represents a figure
approximately 4 TIMES greater than President Bush's Tax Cuts. None of
my fellow candidates seem concerned about this massive unfunded
mandate. This mandate is 100% attributable to the U.S. Income Tax
Code. I, as President, will do all in my power to completely replace
that Code and keep that $500 BILLION back in our economy where it ha
always belonged. Oh, and all that can be accomplished without cutting
a single item from the budget.



#2 – The U.S. Government has been granting TAX EXEMPT status to drug
dealers, child pornographers and common criminals for far too long.
Such criminals pay NOTHING on their ill-gotten income because they, of
course, never report it. THIS HAS TO END. The U.S. Income Tax Code
must be replaced with a tax that forces everyone to pay Federal taxes
when they purchase a retail item, not when they happen to report their
income. As President, I will do all in my power to replace that Income
Tax Code and stop forcing American taxpayers to in effect SUBSIDIZE
these criminals with their own hard-earned money.



#3 – The U.S. Government has known for years that DEMOGRAPHIC forces
will condemn America to bankruptcy with our current Social Security
and Medicare systems. That is a FACT that my fellow candidates don't
seem to want to address. The problem lies mainly in flawed funding of
these programs as specified in the U.S. Income Tax Code. By switching
funding of these programs to a consumption-

To the best of my knowledge, there are 2 (possibly 3) candidates for President with The FairTax as an official part of their platforms. If, as I do, you recognize that this is the over-riding issue of 2008 then you CANNOT support any of the other candidates who want to keep shackling the U.S. with this Income Tax EVIL.

The Republican candidate is John Cox. I have talked to Mr. Cox personally and know he is committed to The FairTax.

The Democrat is Mike Gravel. I don't personally know Mr. Gravel but he seems to strongly support The FairTax.

There is another Republican, Duncan Hunter, who is a co-sponser of HR25 (The FairTax legistion). However, he doesn't seem to want to officially mention The FairTax on his WebSite. So the jury is still out on him.

I won't address the other issues these 3 candidates champion. The ONLY issue that counts in this discussion is support of The FairTax.

ALL other Presidential candidates have views on this issue that can be summarized (in my HUMBLE opinion) as one of the following:

• Outright IGNORANCE of The FairTax. Some of them want to be elected President but are clueless about any Income Tax alternative. A few I'm sure even think that our Founding Fathers enshrined The Income Tax as the law of the land back in 1789. If elected, their ability to speak and chew gum should be suspect.
• Outright LYING about The FairTax. Many of them, especially the career politicians, are corrupt beyond hope already. They owe much of their power to the fact that they can manipulate the current Income Tax system. Lobbyists have probably bought their souls. If elected, the American People deserve to keep getting their own money stolen.
• Trying to play Americans for IDIOTS. Some will claim to want the Income Tax system 'reformed'  and want to do so by a scam called The FLAT Income Tax. It is an Income Tax. It does REQUIRE the 16th Amendment stay in place. It has almost all the EVILS of the 'BUMPY' Income Tax plus a few more. A few even try to say they support either The FairTax or The FLAT Income Tax. They are total opposite tax plans! These guys will try to sell snake oil to a bind man.
• Actual Income Tax supporters. See 'outright LYING'.

How about us getting these candidates to proclaim how they stand on this issue? No other issue has the economic impact of Federal Taxation. No other candidate (except The FairTax 3) have a clue what to do to address the Medicare and Social Security crisis.

Can't we at least agree that each candidate should come clean in the debates as to what side of the Tax Reform fence they are on?

I'm tired of listening to so-called Conservatives moaning about taxes and government over-spending when they are themselves complicit in the biggest inefficient, regressive, wasteful fraud in history. I speak of not just the U.S. Income Tax Code but in general any form of income-based taxation.

This blog was created to bring to light the sorry state of affairs in this country with respect to Federal Taxation. And unfortunately, few Americans (Right or Left) seem to recognize what's going on.

The current tax code in this country is completely against anything our Founding Fathers dreamed of. In fact, they expressly forbid such direct taxation in The Constitution. It took some very sleazy political gamesmanship in 1913 to slide in an amendment to The Constitution to allow this farce by the Supreme Court. But after that, the taxing and spending floodgates have opened and we've never even tried to close them.

What are some of the many evils (sure, I’ll use that word) of our Income Tax Code?

1. It forces tax-paying Americans to spend an additional 20% surtax (or about $500 BILLION per year) for NO other reason than to comply with Federal income tax regulations.

• That’s about 5 times more money than the Bush Tax Cuts that Republicans take so much credit for.

• When a ship is sinking fast, what genius can’t see that you plug massive leaks before you even start to worry about lightening the load.

2. It makes all illegal activities TAX-EXEMPT.

• Criminals are essentially tax-exempt because they don’t REPORT income, which is the only income you have to pay taxes on under an income tax system.
• Tax-paying Americans currently subsidize such people to the tune of about $700 BILLION per year. Did any of you volunteer to give financial aid to drug-dealers?
• Let’s don’t even get into the moral concerns with that situation.

3. It perpetuates a CERTAINTY of bankruptcy regarding our 2 biggest government programs: Social Security and Medicare.

• It is pure DEMOGRAPHICS. Not a policy issue, but a mathematics issue. But politicians (and most Americans) would rather play politics than apply simple math, I guess.

4. It hides the amount of Federal taxes Americans pay (or have confiscated), effectively making taxation so COMPLICATED and MULTI-FACETED that no American can really know how much they pay.

• Income Tax, Social Security Tax, Medicare Tax, Corporate Tax, Payroll Tax, Capital Gains Tax, Estate Tax, etc. Get the idea. We don’t have a good idea of how much we really pay given all those taxes.
• Makes it pretty hard to do anything about excessive taxation when the taxation is in effect like hundreds of fluid little water filled balloons. If not invisible, it’s certainly hard to get a hold of.

5. It makes American businesses inflate their prices 15% - 25% due to taxes. That price inflation:

• Further hides Federal taxation from Americans. After all, businesses are inflating those prices to in effect collect taxes from us to send to the Feds. The Feds, though, get to collect more taxes and have us blame big mean businesses when they’re just forcing those businesses to do their tax collection.
• Makes American goods and services artificially less competitive to foreign rivals. Then we wonder why manufacturing jobs are all going overseas and why our trade deficit is so horrific.

6. It makes it very difficult for POOR Americans to actually climb out of poverty. Think about it.

• Mathematically the most REGRESSIVE tax by far is FICA. A minimum-wage waitress pays the same FICA tax-rate as her $90,000 boss.
• Then she has to spend all of what’s left to feed her family, all of it on goods and services that have that artificial business price inflation due to taxes. Her boss, on the other hand, wisely saves money and only pays half his pay on those price-inflated goods and services. So, in effect, the waitress spends almost TWICE the tax-rate of her boss when measured in those hidden taxes brought about by business taxation.

With very few exceptions, every Washington politician and political candidate will chant the mantra of Tax Reform.

‘Elect me and I’ll REFORM the tax system. Your taxes will be lowered because I will ____________________’. Fill in the blank from below:

• Cut taxes on the middle-class.
• Raise taxes on the wealthy.
• Make the Income Tax FLAT.

None of those do ANYTHING what-so-ever about the problem. The whole idea of an Income Tax is systemically flawed and inconsistent with Capitalism and human nature.

There is no reform that will work. It was explicitly banned in The Constitution for a reason. IT IS A BAD IDEA.

The idea of income-based taxation has to be REPLACED.

There is only 1 REPLACEMENT tax plan that meets the following criteria:

• It effectively solves each of the Income Tax EVILS earlier mentioned, plus dozens of others. That includes SAVING Social Security and Medicare.
• It provides 100% revenue REPLACEMENT (that’s what the word replacement means, after all) of current Federal taxes.
• It cuts taxes an average of 20% for EVERY tax-paying legal American.
• It WILL bring about business growth, lower tax rates, higher savings rates, more home ownership, more jobs, etc.
• It has already been introduced in Congress.

That plan is The FairTax.

It replaces the current COMPLEX, INEFFICIENT Federal Income Tax Code (all 60,000 pages of it) with a SIMPLE, EFFICIENT plan that can be summed up in 1 sentence:

A Federal tax on all retail consumption within the U.S. above the level necessary to maintain a poverty-level lifestyle.

That’s it. To implement that 1 statement there are 2 simple rules, one to collect the taxes (same exact rate for every American) and the other to ensure EVERY American’s poverty-level spending is un-taxed.

That’s a long intro to this blog, but there it is. I can’t stand by while EVERY major candidate of both parties perpetuates this Income Tax farce. A goal here will be to try and force these pretenders to really address this issue. Another will be to heap praise on those few brave candidates who are opening themselves to scorn by daring to point out this national disgrace.