by Dr.
Lawrence Wilson
August 2008, L.D.
Wilson Consultants, Inc.
All
information in this article is for educational purposes only. It is not for the diagnosis, treatment,
prescription or cure of any disease or health condition.
Taxes
are fees charged by governments.
This could be the federal, state, county, city, town or other
governmental bodies.
Taxes are
really user fees on people, businesses, property, automobiles, utilities like
electric power and natural gas, phone services and every essential area of
life.
They are
even put on activities like getting married, dying, traveling, renting a car,
flying in a plane, riding on a bus and so many more of our normal daily
activities.
To levy
taxes literally means to put on as a yolk around the persons neck. That is what taxes are, in fact. They are a yolk around peoples necks.
If one does
not pay ones taxes, one usually goes to jail. In times past, many people lived in dungeons for this single
reason. Things are little better
today, but not much in many nations of the world.
America
locks up more prisoners for crime than any other nation. However, most nations lock up many more
people for tax evasion than does America.
This is an important distinction, too.
WHY HAVE TAXES?
Taxes
exist for a number of reasons. One
older reason is to support the government, which technically does no work so it
has no income. This was the reason
for taxes in the founding documents of the United States of America.
The
American principle of government.
That principle is elaborated in the American Declaration of
Independence.
To paraphrase
it, it states all men are created equal (by the Creator) with inalienable
rights to life, liberty and the pursuit of happiness. It says nothing about government interference in the life of
the people.
The
government was not to own and operate businesses, as occurs in many nations of
the world, even democratically run ones.
The only role of the American government is to protect the rights of the
all the people to pursue their lives on their own. That is the sole function of the government of the United States of America,
originally.
However,
this has changed drastically today, little by little, over the past 100 years
or so.
The
move to socialism and communism. Today the
purpose of taxes is often to redistribute income from the wealthier people to
the poorer people or to special interest groups that the government deems more
worthy of support.
To these
people are given subsidies, free support of many kinds, tax incentives and
more favors. Meanwhile, other
groups of people, often poor groups, by the way, are forced to pay for these
favors with higher income taxes, gas taxes, property taxes, sales taxes on a
local level and many, many others.
The
disastrous change in America.
Let us discuss the change that has taken place in America in more
detail. It is basically a change
from a republican form of government, in which all are created equal, to a
different for of government that is properly called communist.
Communism
defined. Communism is not about Russia or
China. It is a philosophy best
described by its founder, Karl Marx, as from each according to his abilities
to each according to his needs.
This is the essence of communism.
This
philosophy sounds utopian and it is.
It imagines a society where everyone contributes to a large central fund
and then money and goods are given out freely to each person according to what
they need or want.
It sounds
great, but it does not work in practice at all. Every society that has tried it has failed, including
experiments with it in the United States and around the world.
It requires
a totalitarian government that makes all decisions for all the citizens. How else can anyone know the abilities of each person and
their needs?
Socialism
defined. Socialism is government ownership of
the means of production. It, too,
stems from Marxs writings. It is
a milder form of communism that is practiced in Europe, Canada, Japan and a few
other nations to a greater or lesser extent.
Problems
with communism and socialism.
1.
The government tends to give a lot more to some favored people than it does to
others in an arbitrary way.
In communist nations the party members, for example, or the loyal elites
drive nice cars and live in mansions while the rest of the people often starve
or live at poverty level.
2. This
causes bickering, unrest, high taxes, poverty, social unrest and often
revolutions.
3. Morals
decline as people become depressed and angry at each other and their
government.
4. The nation
becomes militaristic to have someone to blame for their problems. The people turn to military adventures
because life at home is so bad.
5.
The economy always suffers because free speech and free expression and
businesses are suppressed or even forbidden altogether. This stifles innovation and excitement
in the people, which makes them far less productive. Eventually, the nation usually cannot even feed itself for
this reason. This has led to mass
starvation in Russia, China, North Korea at present and other socialist and
communist nations.
6. Eventually the society falls apart for
the above reasons. It usually does not take more than a few generations for
this to occur.
So this
problem of socialism is worth understanding. Let us now go back to the subject of taxes.
Because of
the change above, and in relation to her past, Americas taxes are very high
today. It was estimated that in
1950, the tax rate was about 5%.
Today many people pay far more than this if one combines all the obvious
and the hidden taxes that we will discuss in this article.
However, in
relation to Europe, for example, tax rates are still lower in America. For example, most of these nations have
additional taxes such as VAT taxes that can add 100% to the cost of some
manufactured goods, for example.
The VAT stands for value added tax, a tax on companies that manufacture
all sorts of goods.
In America,
the government, so far, is not permitted to have its own businesses. It supports some businesses,
unfortunately, but it does not
outright own profit-making businesses, at least not officially.
The purpose of the US government is to
protect the peoples rights and that is basically all. In other words, its purpose is
administrative and military, not business.
Therefore,
it needs to raise funds in order to operate, just like any other administrative
organization. The idea was to make
this process very transparent so the people could control the purse strings of
the government.
The founders
knew that governments always tend to grow larger and fatter at the expense of
the people. So the taxing concepts
in the US Constitution were designed to prevent this abuse of power.
Therefore,
they prohibited arcane taxes like income taxes, originally, and instead
depended on fairly simple, straightforward taxes like import/export taxes or
duties or tariffs. This was
standard at the time. Sales taxes
were not used because they were hard to track before electronic money. Today, however, they offer a real
alternative we will explore later.
An older
type of tax that was rejected was the poll tax or a tax to vote. This had been used for years, but is
extremely regressive. This means
it falls much more on the poor and America was quite poor at the time. Import taxes, by contrast, fall mainly
on the wealthy and this is easier to collect and monitor as well.
OTHER WAYS
GOVERNMENTS RAISE MONEY BESIDES TAXES
1. Plunder its enemies when it wins a
war. When a nation is plundered,
it causes great resentment. It has
been used by armies throughout history to raise funds and as a way to rub it
in that the enemy is defeated.
However, the
defeat of Germany in World War I followed by the severe restrictions placed on
Germany caused the rise of Hitler Germany and another devastating world
war. This convinced the world that
it is far better to rebuild a defeated nation than to plunder it.
As an aside,
Russia plundered Georgia in their recent invasion, according to the news
reports. It was relatively minor
but was a throwback to the good old days of warfare that are fortunately now
pretty much behind us, hopefully.
Iraq, of
course, is a little different.
This was truly a war of liberation, which needs to be stated more
often. It is not an occupation,
as the left wing would believe.
America is getting out as fast as possible, not because we have to but
because our resources are needed elsewhere right now, such as Afghanistan and
Iran.
2.
Inflate the currency. The modern
method of stealing ones own peoples wealth is through inflation.
It works by
essentially diluting the money by printing too much. This money the government can use for
any purpose. Meanwhile, by
diluting the supply of money, the peoples money becomes worth less, thereby
one effectively takes their money and transfers it to the government with very,
very few people understanding what is happening.
As it
becomes clear that prices are rising, the people usually blame all the wrong ones,
such as big corporations or other nations, leading to anger, wars and more
socialism. This is what is
happening in America and all over the planet at this time.
3.
Nationalizing industry or taking over corporations on the sly. This is being used worldwide as well,
today. China is well known for
owning many corporations secretly.
In America, the Federal Reserve is running more and more banks and other
lending institutions that are supposedly broke.
Other
nations, especially socialist nations, use taxes for very different purposes. Communist and socialist nations rarely need
money to run the government.
This is an important point that Americans often forget.
Usually, these foreign governments own
plenty of businesses so they dont need money for that purpose. In fact, nations such as China, Russia,
Iran and many others have extremely wealthy governments, as many know. The leaders of these nations have
multiple Swiss bank accounts with billions of rubles or dollars in them.
Meanwhile,
their people almost starve and are given just enough wealth to keep them from
rebelling. This is an ancient
formula to control the people.
It is used
in Cuba, too, where the leaders are also extremely wealthy due to sugar cane
revenue. The idea that Cuba is a
utopian workers paradise, as some believe in America, is a joke. Castro is very wealthy, but that isnt
stopping his cancer, of course.
That would require natural healing at this point, or a miracle. He is learning this bitter lesson, of
course, as do all people eventually.
However,
communist nations still tax their people heavily. They lie to them that the government needs their labor and
their money to operate their paradise, as they call it in Cuba and some other
nations.
Of course,
they do not but lying to the people is a universal feature of communism that
has infected America as well today.
Reasons why communist and some socialist nations tax the people include:
1.
To keep the people poor so they cannot rise up and rebel, except if it serves the
governments interests as it occasionally does, usually as an excuse to impose
martial law.
Recall that
most socialist and especially communist nations have governments that own loads of profit-making
businesses. So they dont need
taxes to operate. However, many are still greedy and use the
faade of taxes to take the remaining wealth of the people.
2.
To reward friends and destroy or punish their enemies. This is a very common use of the tax
code of all nations, but particularly communist ones. It means that certain industries, certain social programs
and other policies will receive tax breaks or subsidies while industries the
government does not like, such as cigarette companies, will be forced to pay
extra taxes.
Also, in
many nations, as soon as a new leader gets in, he or she orders audits on his
enemies and mysteriously finds cheating somewhere and this is the excuse to
arrest and often execute the person or group.
3.
To shape social policy.
For example, they might tax cigarettes or large automobiles to
discourage their use. Other
behaviors or activities are tax-free to encourage them.
This occurs
worldwide, including in America, of course. However, it is not in the Us Constitution and is therefore
technically illegal.
4.
To redistribute wealth among the people. Most communist nations, including many European nations that
are socialist, but not communist yet, redistribute wealth with the tax
code.
America does
this also, but to a lesser degree than in Europe. European nations often have 100% tax brackets for those who
make over $1 million per year, for example. This is far more confiscatory than America.
Once again,
the Democrats want this kind of taxation for the rich in America to put us on a
par with Europe. While this sounds
good, often it backfires and the poor somehow become poorer and not
wealthier. This is a different
subject so we will just mention it here and leave it for a later article on
wealth redistribution.
Now that we
know why taxes are set up, how are they administered?
Taxes
are of many types. Here are the
most common onese, but there are many others possible:
Taxes levied
against people:
1. Income taxes (tax on earned income and
investment income)
2. Estate or death taxes (money owed
when a person dies)
3. Poll tax (a fixed amount owed by
every person who votes or resides in an area. This is an old tax that is not used much any more)
4. Duties and tariffs if you bring
things in or out of the country
5. Sales taxes on everything you buy
retail.
6. Personal property taxes. In fairness, a little of this is user
fees for water, sewage, police and fire services. However, much of it is a tax to pay for things like
libraries, local colleges and other schools and much more.
7. Utility taxes added to phone, water,
gas, electric and other bills
8. Taxes on gasoline, car registration
and almost everything else today!
Business
Taxes:
1. Business income tax
2. Business property tax
3. Business license tax (needed to open
and maintain a business in many areas)
4.Annual corporation tax in some states
and nations
5. VAT or value added tax. This is used in Europe, Asia and
Canada. ( It is a tax at many levels of the manufacture of an item such as a
car or television set that is charged to the companies that make the parts or
the whole item)
6. Import/export taxes on goods and
services coming in or going out of the country.
7. Business property tax and business
inventory and furnishing taxes in many states and nations.
This
list gives one an idea why people become discouraged today when thinking of
starting a business, for example, or even owning a home because their time and
money goes for so many taxes.
The point is
that taxes have become a way of life and this is not healthful for any
society. It is demoralizing and
confusing for people and there is ample room for abuse when there are so many
taxes that are not coordinated at all.
When a
government and people choose what
kind of taxes to have, it must consider all of the following:
a) How easy
is it to collect?
b) How
acceptable is it to people?
c) How hard
is it to avoid cheaters?
d) How much
revenue can it generate?
e) What is
the cost of collecting and enforcing the tax, for the government and for the
citizens or businesses?
f) How
transparent is the tax?
Transparency is good for the citizens but governments usually do not
like it. It lets the people know
just how much their government is costing them.
h) Whom or
what behavior or activity does it punish and whom or what activity or behaviors
does it reward?
i) How easy
is it to manipulate by the congress, by special interest groups or social
reformers?
j) How
regressive or progressive is the tax?
This means, to what degree does it target the rich and not the
poor? As a principle, it is harder
to collect taxes from poor people and it is worse for society to try to get
money from those that have the least.
However, that is exactly how some of our taxes work.
All these
considerations mean that tax policy is complex in any modern society. Let us take a few examples of how these
questions are answered.
Income taxes. For example, an income tax is easy to collect by just
forcing everyone to keep detailed records of all income and expenditures and
file returns. However,
this is very costly for the American people, for example. It is estimated the number of hours and
money spent complying with the income tax is in the billions or even a trillion
dollars, more than the tax money itself.
Also,
cheating occurs quite easily with an income tax, especially with our complex
income tax code that is changing all the time, which confuses lawyers,
accountants and everyone.
Income taxes
also hit people when they make money, which is demoralizing to realize you
cant keep your money.
Sales
taxes. A sales tax is also easy to
collect by forcing merchants to collect it, and it is a little harder to cheat
on. However, it has the problem
that the tax is transparent. That
means it is clear to see on everything you buy. Thus the people know exactly how uch the government takes
and may resent paying it and vote the government out of office if it is too
high.
Another
problem with the sales tax is it affects poor people as well as rich. In contrast, the income tax only hits
the rich, or at least the rich who dont know how to cheat on it by setting up
corporations, tax shelters and so forth.
So
all these factors must be kept in mind when designing a tax policy for a
nation. America, by the way, has a
very poor tax policy in my view.
This is why this discussion is important.
The
ideal tax system. The best tax
is one that affects everyone so that all believe they are helping their nation. It also must be easy to collect and not
too obvious, so that it arouses anger.
It also
should hit the rich more than the poor, so that the poor do not bear the brunt
of the tax. This is just a
practical matter. It is far easier
to collect taxes when the money is there than when someone is starving to
death. The best tax should also be
easy to administer at all levels.
Yet America
depends today on income taxes for the bulk of its revenue. This, I would suggest, is a huge
mistake. And why is this method
used?
Because it
is easy to manipulate politically for any purpose the senators and congressmen
want. It can be tailored to
benefit the black businessmen, the oil people, the medical trust, and any other
group that will pay enough payola or bribe to the government.
Also, the
social butterflies love it because they can reward all the downtrodden groups
such as the blacks, the Hispanics, the homeless and so on. This, by the way, is the real appeal of
the income tax.
Otherwise it
is nightmare for the government and of course, for the individuals who have to
decipher the code, a very appropriate word for the horror that is the US tax
code. Even Russia has a much
simpler tax system than the US.
So
what is the best tax? The ideal
would be a sales tax. This is the
easiest to administrer by the merchants, who should be paid for their efforts
to collect it.
It is also
paid by everyone, which is good.
It is also fair, as it hits the rich much more than it hits the
poor. The poor could be issued a
voucher for their food, water, housing and basic expenses to offset any tax
they must pay.
It is also
relatively hardest to cheat on of all the taxes, though there are ways around
it, of course, if one wants to try hard enough. One could start a car business and then lose merchandise
by selling it without paying the tax.
But this is relatively difficult for most people.
At the same
time, a sales tax takes no work on the part of corporations or individuals in
preparing returns. Isnt the
language wonderful. This is a
joke. It is not a return unless
you believe the government owns all your money so you are literally returning
some to them. It is confiscation
of wealth of the people to pay for the government so it should be called a
stealing paper or something like that.
So
why do few nations use a national sales tax? Some nations, including America, have discussed going to a
sales tax, but none do it that I am aware of. The reasons, I suspect, are:
1. It is transparent
and would show the people, and any other nation that uses it, just how much
money the government takes every year.
2. It is
harder to manipulate politically to favor certain groups, certain businesses
and so forth. For this reason, the
legislators and lobbyists dont like it, even if it is best for the people.
3. It is
harder to manipulate for social engineering projects. This means it cant be tailored to reward certain behaviors
and punish others, such as the opponents of the current administration.
It is not a
coincidence that the counties surrounding Washingon, DC are among the
wealthiest in the nation, though there is little industry there. The industry is bureaucracy and the
bureaucrats of America are among her wealthiest citizens.
This is a
shame, as they are also among the least productive people in America. This is all truth that needs to be
shared widely.
The
next topic is what should taxes go for?
Today they are used for war, for energy policy, medical research,
welfare, (the biggest cost by far in America and other advanced nations) and
for roads, infrastructure and much more.
It
is tempting to say that taxes should go for everything that is needed in
society. However, the US
Constitution is very clear about what taxes are to be used for. This is because the founders knew how
governments abuse the taxing power, so they were very, very clear.
Most of the
taxes in the US are thus unconstitutional. Here we must applaud Ron Paul, the congressman from Texas with
a reputation for being called Dr. No.
Dr. Paul is
a doctor, actually, and he votes no on most legislation because the
authorization for it is not in the US Constitution. This is very courageous, by the way, and we wonder how he
stays in office. However, he is
persuasive with his constituents.
I would have
loved him to be vice president.
However, Sarah Paylin, too, will be excellent and in some ways she is
stronger and younger and more idealistic than Ron Paul ever was.
Ron Paul has the right idea. If it is not authorized, it is illegal,
basically, no matter how wonderful the program is. With this in mind, let us examine the correct use of taxes
in America.
USA
one of very few with tax restrictions. Before doing this, just a note to say that no other nation
has such restrictions on the use of taxes. The others just leave it up to the parliament or president
or whatever. This is an open
invitation to abuse, though America is now full of abuse as well because they
ignore their constitutions, federal and state, and the states even worse in
some cases. This, by the way,
would be treason in the old days.
Today it is business as usual, which must change to reign in
spending. Nothing else will do it,
I am afraid to say.
Legal
use of taxes in the USA. The
legal uses for taxes in the USA are listed in the US Constitution. They include the military, making
treaties with other nations, the post office system, building roads and other
needed infrastructure, salaries for government employees, forts, docks,
operations of Congress and a few other jobs that government is decidedly better
at doing than any individual or state, for that matter. All else, however, is not the business
of the federal government.
Equally important is what is not in the
Constitution as governments legitimate activities for which taxes may be used.
This includes education, welfare, health care (a huge government expense
today), Social Security (the other huge expense) and most of the nations
research and scientific expenses, which are also quite large.
So you can
see why Ron Paul is Dr. No if he follows the US Constitution. In order for these to become legitimate
government expenditures, a constitutional amendment is required and none has
been passed. Especially troubling
is the idea of taking over the entire health care industry. Let us look at this current Democrat
proposal.
Health
care nationalization. The word to
use when a government takes over an entire industry and runs it, whether for
profit or not, is nationalization.
We read this word often in the news because this is what dictators do
all the time. They just take over
factories, refineries or whatever because they feel like it. It is wholesale stealing and nothing
more.
This is what
the Democrat party is advocating for health care in America. They use all sorts of fancy words such
as universal care national health care and so many more. But it is all the same. This must be clearly understood. It is totally illegal and we salute ron
Paul as he is the only voice in Congress, very, very sadly, who has come out
and said this is illegal, not just a bad idea.
It is also
totally immoral. Let us
explain. Health care is and always
will be a personal matter. What
you eat, how you live and more is a matter of personal choice and can never be
delegated or given to an administrative agency.
Yet that is
the effort – to control how people eat, live, sleep and more. This is why we say it is immoral as it
violates privacy totally and completely.
This is the way it works in Canada and Europe already and Americas
HIPPA regulations do the same here – namely, take away any privacy
between doctor and patient. The
American people are so stupid they accept these regulations as good, when they
are terrible.
This will
conclude this introduction to taxes and how they affect your life. Future articles may elaborate on many
of the ideas, but these are basics that I have found are hardly ever taught in
high school, where they should be taught, much less college or even graduate
school.
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