by Dr. Lawrence Wilson
© January 2025, LD 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.
I. Introduction
II. The American Principle Of Government
III. The Move Toward Socialism And Communism
IV. Types Of Taxes and Tax Collection Methods
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Taxes are fees charged by governments. The government can be at any level: national, state or provincial, county, city, or other.
Taxes are really user fees on people, businesses, property, utilities like electric power and natural gas, phone services and every essential area of life.
Governments even add taxes to activities such as getting married, dying, traveling, renting a car, flying in a plane, riding on a bus and many more of our normal daily activities.
This is a very important core article because it is about government power and government abuse of power. To levy taxes literally means to put on as a yolk around the person’s neck. That is what taxes are, in fact. They are a yolk around people’s necks.
If one does not pay one’s taxes, one usually goes to jail. In the past, many people lived in dungeons for this 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.
WHY HAVE TAXES?
Taxes exist for a number of reasons. A basic reason is to pay for government and government programs. This is needed in some nations, including America, because the government is not supposed to own and run profit-making businesses. So it must get its support funds elsewhere.
Taxes are also used to control people, shape policy, punish enemies of the government and to reward friends of the government.
II. THE AMERICAN PRINCIPLE OF GOVERNMENT
This principle is elaborated in the American Declaration of Independence. It states all men are created equal (by the Creator) with inalienable rights to life, liberty and the pursuit of happiness.
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. 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 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.
III. THE MOVE TOWARD SOCIALISM AND COMMUNISM
The purpose of taxes and government has changed drastically in America today! It occurred little by little over the past 100 years or so.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.
The favored people are given subsidies, “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 Marx’s writings. It is a milder form of communism that is practiced to some extent 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 anger, 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, America’s 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.
OTHER WAYS GOVERNMENTS RAISE MONEY BESIDES TAXES
1. Plunder or steal from 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 the small nation of 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.
2. Inflate the currency. This is a standard method of stealing the people’s wealth is by reducing the value of their money.
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 people’s money becomes worth less. It effectively takes the people's money and transfers it to the government with very, very few people understanding what is happening.
As it becomes clear that prices are rising, people usually blame the wrong culprits, 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 don’t 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 worker’s paradise, as some believe in America, is a joke. Castro is very wealthy, but that isn’t 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 government’s 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 don’t need taxes to operate. However, many are still greedy and use the façade 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 ones, but others are possible:
Taxes charged against people directly:
1. A head tax. This is a tax paid each year paid by each citizen just to exist in society. It is an old type of tax that is not used much today. It is actually a better tax because it is transparent and simple.
2. An estate or death tax. This is money owed to the government when a person dies.
3. Welfare taxes. These are taxes forcefully taken out of one's pay check to pay for government welfare, government disability programs, government retirement programs and government health care programs. These are technically illegal in America, but they go on and have increased. Health care, welfare and retirement are supposed to be handled privately in America!!!
4. Inflating the money – meaning printing too much money so that the value of the money goes down and everything costs more. This is a hidden and terrible tax used by most governments today. They like it because the government gets free money and the people pay for it with higher prices but they don't understand it. It ruins your savings, your investments, and affects everything!
Taxes charged against goods and services:
1. An excise tax. This is the word for a tax on a product, service or activity. It is called an indirect tax because it is not a tax directly on people.
2. Duties and tariffs. These are also called import-export taxes. These are taxes paid when a product is brought in or out of the nation. These taxes are not transparent, meaning one does not know they are paid.
3. A sales tax. This is a tax on products or services that is added to the cost of the product or service when you buy it. It is a transparent tax, which is good, and it is fairly easy to collect and administer, although it is work for those who sell products.
4. Utility taxes. These are fees added to phone, water, gas, and electric bills. They are sort of like sales taxes, added when you pay your utility bill. They are often abused.
Taxes charged against activities:
1. A poll tax. This is another old type of tax that one pays in order to vote. It is simple and transparent, but not used much today.
2. An income tax. This is a tax on earning money. It is a particularly nasty tax that is technically illegal in America. It is a very expensive tax to calculate and a very invasive type of tax that ruins privacy in financial matters.
3. Property tax This is a tax one pays just to own land or a home. It should be illegal because if you don't pay it they take away your land or house. Instead, one should pay user fees.
Property taxes often include fees for water, sewage, police and fire services. They also include fees to pay for libraries, local colleges, other schools and much more.
4. Licensing fees such as occupational licenses. These amount to a tax that people must pay just to work in some professions. Examples of licensed professions are physicians, some nurses, contractors, real estate agents and many others today. These are technically illegal in America because they violate the right to contract freely and other rights, but they are used.
5. Car registration fees. This is a tax one must pay just to operate a car.
6. A business license. This is a tax one must pay every year just to operate a business. It is a low tax in America, but not in some other nations.
Other taxes charged against businesses:
1. Business income tax. This is a tax on the income of a business. The business just passes it on in the cost of their product. It is bad because it is not transparent. Things just cost more. Also, governments manipulate it to give favors to some companies that are their friends.
2. Business property tax. This is a tax on property such as buildings and factories owned by a business.
3. VAT or value added tax. This is a particularly complex and non-transparent tax used in Europe, Asia and Canada. Thank God it is not used in America at this time. 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.
This huge 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 people.
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, in most nations the income tax law is extremely complex. In America, it is about 6000 pages long, with all sorts of deductions and rules. It is very difficult to understand and it changes from year to year.
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 can’t 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.
The tax is transparent. That means it is clear to see on everything you buy. Thus the people know exactly how much the government takes and may resent paying it and vote the government out of office if it is too high.
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.
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.
What is the best tax? Some very excellent economists say the best tax would be a national sales tax. This is the easiest to administer 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 difficult to cheat on, though there are ways around it, of course, if one wants to try hard enough.
At the same time, a sales tax takes no work on the part of corporations or individuals in preparing “returns”. Isn’t 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 don’t like it, even if it is best for the people.
3. It is harder to manipulate for social engineering projects. This means it can’t 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 who had a reputation for being called “Dr. No”.
Dr. Paul is a doctor, actually, and he voted 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 stayed alive.
Ron Paul had the right idea. If a government activity is not authorized in the national Constitution, it is illegal, no matter how wonderful the program sounds. 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 The states can be even worse in some cases, although they are not allowed to run deficits, as is the national government.
This evil behavior by governments would be treason in the old days. Today it is business as usual, which must change to reign in spending. Nothing else will work!
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.. All else, however, is not the business of the national government.
Equally important is what is not in the Constitution as government’s 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 nation’s research and scientific expenses, which are also quite large.
Health care nationalization. The word nationalization is when a government takes over an entire industry and runs it, whether for profit or not.
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 more. But it is all the same.
This must be clearly understood. It is totally illegal.
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 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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