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Doug Smith: The Power to Tax

15 May

doug smith

Doug Smith: Author, historian and regular contributor to Free State Patriot

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“The Power to Tax is the Power to Destroy”

John Marshall

 

“A cynic is a man who knows the price of everything and the value of nothing”

Oscar Wilde

Today is May 12, 2015. Congratulations. You are working for yourself. What, you didn’t know? If you have a job, you worked till April 24th for the government’s share before you start to work for yourself. It took you that long to earn enough to pay your “fair share” of taxes.

Last year, it was April 21st, in 2013 April 18th. That date has steadily moved forward for 100 years. You will pay more for your share of taxes than you will spend for food, clothing, and housing. You will work 114 days out of 365 before you are working for your own money.

I’ve been thinking of taking 2 year old granddaughter shopping. I’m going to give my credit card and check book to the cashiers, and then let her grab anything shiny or sweet that grabs her fancy. We’ll go through toys, and clothes, and candy, TVs, DVDs, you name it. We’ll hit it all. Spare no expense! Don’t consider the cost. If it seems like something she wants, just buy it.

Crazy, you say? Well, perhaps you are right. The two year old knows the price of nothing, and has a value system based upon what she wants. So giving her a blank check is perhaps, not the wisest course of action.

We might say that a Congressman is a person who knows neither the price nor the value of anything, or, if not, has the same system of values as that 2 year old. If it seems good, why then do it. Never consider the cost. Now why, do you suppose, that a Congressman and a 2 year old reason in much the same way?

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The two year old knows only that certain ways of persuasion get her what she wants. Pouting is less effective, but the sweet smile and eyes aimed at her Daddy or her Papaw will usually melt all resistance and get her what she wants at once. (Mommy, of course, is made of sterner stuff.) She does not know the value or the price of what she gets, for she has not yet had to pay for anything. Nor has she had to work for the valuta with which to pay. Is it worth it to spend the value of 8 hours labor for a cheaply made toy that will amuse her for an hour and then never be touched again? I can make the value judgement that it is not, (absent that smile and blue eyes pointed at me!) for I know what it is to work those 8 hours.

Now, we hope that before she is out on her own paying bills and balancing a check book, she will learn of value, and work, and reward. She will understand that to get something that costs 8 hours of her labor will, in fact, Cost her those 8 hours. A Congressman, however, will never learn that lesson. After all, it is my labor from January to June that pays for what Congress takes from me. Congress gets to spend on whatever is shiny and new, and give in the coercions of thousands of 2 year olds, albeit some of them chronologically much older.

How, in fact, can a Congressman ever hope to know of value when he spends the fruits of the labors of millions for the pleasure of thousands? If he worked a full year, instead of the handful of days he does, his labors would not earn what he spends in 5 minutes. If he worked his entire life, and gave all he earned, he still would not have paid the piper. How can he ever know the cost of what he is spending on my behalf? And if he does not know, and yet has the power to tax me as much as he wants, then we have a dangerous situation.

Somehow we need to have people in Congress who understand, and respect, both cost and value, before they undertake to spend and tax. Otherwise, they are as destructive as that 2 year old with a credit card, or a cannon.

Do you doubt that Congress can destroy using the tax? Consider this example.

The estate tax destroys many small family farms. When the owner dies, if the total of the farm land and equipment is worth over a million dollars, (not a lot for even a modest sized farm, and not enough to make the farmer a millionaire) the estate tax will reach as much as 40%. ( In 2012, Democrats in Congress cheerily proposed raising this to 55%) So his heirs, also not wealthy, are forced to pay taxes again on what he has worked for, and paid taxes for, all his life. Now, not having 400 grand lying about, his children have no choice but to sell off all or part of the farm to pay the taxes, or lose it all to the IRS and the State. In time, often in just one generation, a family farm ceases to exist.

At the same time we are wiping out small family farms by taking with the right hand, the left hand is spending like that proverbial 2 year old in the candy store in the form of “farm subsidies.” This is a brilliant program (designed by Progressives during the Depression to bolster farms) that pays someone who “might” farm, not to.

Farm subsidy payments are based on acreage, so the bigger the farm the bigger the subsidies. Commercial farmers, with an average income of $200,000 and net worth of nearly $2 million, get the majority of farm subsidies. From 1995 to 2005, farm subsidies went out to, among others,

John Hancock Life Insurance ($2,849,799)

Westvaco ($534,210),

David Rockefeller ($553,782)

Ted Turner ($206,948

Also to members of Congress, who get to vote on the subsidies, such as

Sen. Charles Grassley (R-Iowa, $225,041)

Rep. John Salazar (D-Colo., $161,084).

In one crazy instance, a farm was converted to homes, and the owners were sent farm subsidy checks for not growing soybeans in their back yards!

So in this instance we see Congress’ power to tax is destroying family farms while making payoffs to wealthy friends, and, themselves.

The power to destroy? At what point will people refuse to go to work and work for Congress to spend their money on others?  150 days? 182? At some point, if the trend of Progressive big spenders in Congress continues, working people reach the point where they cannot pay for essentials with what

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Fed takes record $341,591,000,000 in revenues from taxpayers – still not enough

1 Dec

Ponzi: Treasury Issues $1T in New Debt in 8 Weeks—To Pay Old Debt

November 28, 2014 – 2:37 PM

By Terence P. Jeffrey

Treasury Secretary Jacob Lew (AP Photo)ponzi 1

The Daily Treasury Statement that was released Wednesday afternoon as Americans were preparing to celebrate Thanksgiving revealed that the U.S. Treasury has been forced to issue $1,040,965,000,000 in new debt since fiscal 2015 started just eight weeks ago in order to raise the money to pay off Treasury securities that were maturing and to cover new deficit spending by the government.

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During those eight weeks, Treasury took in $341,591,000,000 in revenues. That was a record for the period between Oct. 1 and Nov. 25. But that record $341,591,000,000 in revenues was not enough to finance ongoing government spending let alone pay off old debt that matured.

The Treasury also drew down its cash balance by $45.057 billion during the period, starting with $126,568,000,000 in cash and ending with $81,511,000,000.

The only way the Treasury could handle the $942,103,000,000 in old debt that matured during the period plus finance the new deficit spending the government engaged in was to roll over the old debt into new debt and issue enough additional new debt to cover the new deficit spending.

This mode of financing the federal government resembles what the Securities and Exchange Commission calls a Ponzi scheme. “A Ponzi scheme,” says the Securities and Exchange Commission, “is an investment fraud that involves the payment of purported returns to existing investors from funds contributed by new investors,” says the Securities and Exchange Commission.

“With little or no legitimate earnings, the schemes require a consistent flow of money from new investors to continue,” explains the SEC. “Ponzi schemes tend to collapse when it becomes difficult to recruit new investors or when a large number of investors ask to cash out.”

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In testimony before the Senate Finance Committee in October 2013, Lew explained why he wanted the Congress to agree to increase the federal debt limit—and why the Treasury has no choice but to constantly issue new debt.

“Every week we roll over approximately $100 billion in U.S. bills,” Lew told the committee. “If U.S. bondholders decided that they wanted to be repaid rather than continuing to roll over their investments, we could unexpectedly dissipate our entire cash balance.”

“There is no plan other than raising the debt limit that permits us to meet all of our obligations,” Lew said.

“Let me remind everyone,” Lew said, “principal on the debt is not something we pay out of our cash flow of revenues. Principal on the debt is something that is a function of the markets rolling over.”

The vast amount of debt that the Treasury must roll over in such a short time frame is driven by the fact the Treasury has put most of the debt into short-term “bills” and mid-term “notes”—on which it can pay lower interest rates—rather than into long-term bonds, which demand significantly higher interest rates.

At the end of October, according to the Treasury’s Monthly Statement of the Public Debt, the total debt of the federal government was $17,937,160,000,000.

Of this, $5,080,104,000,000 was what the Treasury calls “intragovernmental” debt, which is money the Treasury has borrowed and spent out of trust funds theoretically set aside for other purposes—such as the Social Security Trust Fund.

The remaining $12,857,056,000,000 was “debt held by the public.” This part of the debt included $517,029,000,000 “nonmarketable” Treasury securities (such as savings bonds) and $12,340,028,000,000 in “marketable” Treasury securities, including bills, notes, bonds and Treasuring Inflation-Protected Securities.

But only $1,547,073,000,000 of the $12,857,056,000,000 in marketable debt was in long-term Treasury bonds that mature in 30 years. These bonds carried an average interest rate of 4.919 percent as of the end of October, according to the Treasury.

The largest share of the marketable debt–$8,192,466,000,000—was in notes that mature in 2,3,5,7 or 10 years, and which haf an average interest rate of 1.807 percent as of the end of October.

Another $1,412,388,000,000 of the marketable debt was in Treasury bills, which carry “maturities ranging from a few days to 52 weeks,” says the Treasury. These $1.4 trillion in short-term Treasury bills had an average interest rate of 0.056 percent as of the end of October, according to the Treasury.

The continual rolling over of these short-term, low-interest bills helped drive over the $1-trillion mark the new debt the Treasury had to issue in the first eight weeks of this fiscal year.

The Treasury has taken out what amounts to an adjustable-rate mortgage on our ever-growing national debt.

If the Treasury were forced to convert the $1.4 trillion in short-term bills (on which it now pays an average interest rate of 0.056 percent) into 30-year bonds at the average rate it is now paying on such bonds (4.919 percent) the interest on that $1.4 trillion in debt would increase 88-fold.

The business and economic reporting of CNSNews.com is funded in part with a gift made in memory of Dr. Keith C. Wold.

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