Gary Gibson, Introduction…
Last chance, Whiskey Shooters. Gather ye nickels while ye may…
Fellow Agora Financial editor Matt Insley of the Daily Resource Hunter sent us this tidbit:
“NEW YORK (CNNMoney) — The U.S. Mint is facing a problem — especially during these penny-pinching times. It turns out it costs more to make pennies and nickels than the coins are worth.“And because of that, the Obama administration this week asked Congress for permission to change the mix of metal that goes to make pennies and nickels, an expensive recipe that has remained unchanged for more than 30 years.“To be precise, it cost 2.4 cents to make one penny in 2011 and about 11.2 cents for each nickel.”
“NEW YORK (CNNMoney) — The U.S. Mint is facing a problem — especially during these penny-pinching times. It turns out it costs more to make pennies and nickels than the coins are worth.
“And because of that, the Obama administration this week asked Congress for permission to change the mix of metal that goes to make pennies and nickels, an expensive recipe that has remained unchanged for more than 30 years.
“To be precise, it cost 2.4 cents to make one penny in 2011 and about 11.2 cents for each nickel.”
Consider, good patron, that while this post-1982 penny costs 2.4 cents to make…it contains only about a half-cent worth of metal, or half the face value of the coin.
During 1982, pennies went from being 97.5% copper to being 97.5% zinc with a mere copper cladding. But even this debased version of the penny had its metal content rocket to nearly its face value back in 2006, when zinc prices hit $3 per pound.
The nickel is similar to the penny in that its production cost is more than double its face value. Unlike with the penny, however, the metal content of the nickel is worth more than the face value of the coin. This has been the case for most of 2011. You could get up to $150 worth of metal for $100 by trading in your paper dollars for nickels.
Of course, it’s illegal to melt down these coins for the metal. But there’s no need to do that at all. People who think that smelting is necessary to trade the coin over face value evince a lack of understanding of markets and of history.
When the price of the metal gets high enough, a market will naturally become established for the coins, and that market will be use the higher content value, not the lower face value. This isn’t just conjecture. The same thing happened to both 90% and 40% pre-1965 silver dimes, quarters and half dollars. These coins have traded for their metal value since shortly after their production ceased. They currently trade around 24 times face value, with silver at $33 per ounce…but they’ve gone to over 35 times face value when silver was around $50 per ounce in 1980 and 2011.
As we’ve often said in these pages, the same thing is guaranteed to happen to the nickel. It could even happen to the debased dimes and quarters (both are 91.67% copper, 8.33% nickel) that replaced the silver ones and the debased pennies that replaced the copper ones (97.5% zinc, 2.5% copper), as the dollar continues to be inflated to worthlessness.
The only opportunity for getting underpriced metal courtesy of Uncle Sam, however, is still the nickel. The penny is as uneconomical to produce as the nickel, but it’s the nickel whose actual metal content is worth more than its face value.
That means when you go to the bank and exchange your paper bills for nickels, you are buying copper and nickel from Uncle Sam at anywhere from a 10-50% discount, with your local bank acting as the broker.
We’ve long said that this situation couldn’t last…that the feds wouldn’t always be willing to subsidize this exchange forever. It looks like the wheels are in motion. This window of opportunity is about to be slammed shut.
Saving in nickels isn’t a get-rich-quick scheme. It’s a risk-free way to protect your purchasing power. If you save in paper — or in the electronic paper substitutes that comprise your bank account holdings — then you are giving the feds free rein to steal from you via inflation.
Saving in metal coins gives you the protection guaranteed by the minting itself (the coins cannot fall below face value, which would be great if the dollar stabilizes or strengthens in the near term) and protection from inflation (the coins will trade at the metal value if inflation renders the face value increasingly worthless).
This is territory we’ve covered many times before at the Whiskey Bar. We bring it up again because Obama is looking to shut the party down…as we knew he would. There is no date announced yet as far as we know…but we would be surprised if the nickel retained its current composition much past the dawn of 2013.
Now, please understand that you could still get the same sort of protection from quarters and dimes. It’s just that nickels are currently the best deal. The metal content has been consistently and significantly over face value for the nickels. It may take a few more years of dollar debasement before the current version of dimes and quarters are in the same position.
This is Gresham’s law at work. Bad money is driving better money out of circulation.
This erosion of purchasing power by increasing the money supply…this inflation…is, of course, just a sneaky form of taxation (i.e., theft). It’s one you can protect yourself from by proving Gresham’s law true. Just hoard the good money. Simple.
The other more-obvious form of taxation — the kind in which the IRS engages — is not so easy to fight. In fact, it is downright impossible. Jeffrey Tucker explains why in today’s feature article. Taxes may always be immoral, but payment is never, ever voluntary. Read on below…
Is Taxation Voluntary?
Have you ever heard the claim that paying income tax is voluntary? The term “voluntary” is variously used in government documents, including the 1040 form itself, and some very naive people have actually taken this to mean that they don’t have to pay if they don’t want to. They think that “voluntary” actually means voluntary, as in the free exercise of human volition.
It’s an odd position that seems not to comprehend the meaning of the word “tax.” What makes a tax different from a contribution or a trade is that the revenue is extracted by force. You can choose not to comply just as you can choose to resist arrest. But then you must face the consequences. A truly voluntary tax is like a friendly insult, a peaceful war or a healthy cancer. The two words just don’t go together.
By the way, this point doesn’t apply to just the income tax. It is true for all taxes. You sometimes hear that excise taxes are voluntary because no one is forcing you to buy the taxed good or service. This is false. The point is that if you buy gasoline, cigarettes or anything else that is taxed at the point of sale, you have no choice but to fund the government with part of your purchase price. That is not voluntary.
Yet many people, convinced that they should take the government at its word, persist in believing otherwise. The courts have been dealing with these people for decades. They file what the government calls “frivolous lawsuits.” In fact, the IRS has heard this claim enough to actually address it on a special webpage it has created to address these and other far-flung claims made by people who imagine that they have a right to keep what they earn.
The agency writes:
“The word ‘voluntary,’ as used in Flora and in IRS publications, refers to our system of allowing taxpayers initially to determine the correct amount of tax and complete the appropriate returns, rather than have the government determine tax for them from the outset. The requirement to file an income tax return is not voluntary and is clearly set forth in Internal Revenue Code 6011(a), 6012(a), et seq. and 6072(a). See also Treas. Reg. § 1.6011-1(a).“Any taxpayer who has received more than a statutorily determined amount of gross income is obligated to file a return. Failure to file a tax return could subject the noncomplying individual to criminal penalties, including fines and imprisonment, as well as civil penalties. “[A]lthough Treasury regulations establish voluntary compliance as the general method of income tax collection, Congress gave the secretary of the Treasury the power to enforce the income tax laws through involuntary collection…The IRS’ efforts to obtain compliance with the tax laws are entirely proper.” United States v. Tedder, 787 F.2d 540, 542 (10th Cir. 1986).”
“The word ‘voluntary,’ as used in Flora and in IRS publications, refers to our system of allowing taxpayers initially to determine the correct amount of tax and complete the appropriate returns, rather than have the government determine tax for them from the outset. The requirement to file an income tax return is not voluntary and is clearly set forth in Internal Revenue Code 6011(a), 6012(a), et seq. and 6072(a). See also Treas. Reg. § 1.6011-1(a).
“Any taxpayer who has received more than a statutorily determined amount of gross income is obligated to file a return. Failure to file a tax return could subject the noncomplying individual to criminal penalties, including fines and imprisonment, as well as civil penalties. “[A]lthough Treasury regulations establish voluntary compliance as the general method of income tax collection, Congress gave the secretary of the Treasury the power to enforce the income tax laws through involuntary collection…The IRS’ efforts to obtain compliance with the tax laws are entirely proper.” United States v. Tedder, 787 F.2d 540, 542 (10th Cir. 1986).”
In other words, you are free to comply. If you choose not to comply, you could go to prison. As proof that this is law, the agency cites court cases from 1938-88. Guess what? The courts, as creations of the government, have sided with the government’s right to collect taxes from your income. But you say that this is not fair. This is not just. This is un-American. This contradicts the government’s own claim that its system is voluntary.
Well, if you are writing the dictionary, you get to define words however you want to define them. However the government uses language, the reality is that the money is being taken from you without your consent. The only real difference between the robber (such as what was once called a “highwayman”) and the government, as Lysander Spooner said, is that the robber doesn’t claim to be doing this for your own good:
“The highwayman takes solely upon himself the responsibility, danger and crime of his own act. He does not pretend that he has any rightful claim to your money, or that he intends to use it for your own benefit. He does not pretend to be anything but a robber. He has not acquired impudence enough to profess to be merely a ‘protector,’ and that he takes men’s money against their will, merely to enable him to ‘protect’ those infatuated travelers who feel perfectly able to protect themselves, or do not appreciate his peculiar system of protection. He is too sensible a man to make such professions as these. Furthermore, having taken your money, he leaves you, as you wish him to do. He does not persist in following you on the road against your will, assuming to be your rightful ‘sovereign’ on account of the ‘protection’ he affords you. He does not keep ‘protecting’ you by commanding you to bow down and serve him; by requiring you to do this, and forbidding you to do that; by robbing you of more money as often as he finds it for his interest or pleasure to do so; and by branding you as a rebel, a traitor and an enemy to your country, and shooting you down without mercy if you dispute his authority or resist his demands. He is too much of a gentleman to be guilty of such impostures and insults and villainies as these. In short, he does not, in addition to robbing you, attempt to make you either his dupe or his slave.”
What strikes me about the legions of marginalized people who file “frivolous” lawsuits is not that they hate the government, as people often believe. It is not that they have lost confidence in the system or otherwise treat their public servants as their enemies.
My impression is exactly the opposite. They have actually underestimated the depth of the problem with the system. They believe that the courts really are independent and will side against the interests of the government. They imagine that the system is surely and fundamentally just and fair, and once challenged, it will take their side. They imagine that agencies of the government will stick to their word. They imagine that the system is not so corrupt as to not give them a fair hearing.
Keep in mind that there was no income tax in this country for the 126 years after the Constitution was ratified, except for a brief period during the Civil War. Even after the Constitution was amended to make income taxes possible, only a few actually paid. It was much later before it hit most every American. Before that, your income was your own, period. Imagine! Most people can’t.
The 16th Amendment represented a fundamental change in the nature of the American regime. From that point forward, there was a shift in ownership over national wealth. It belonged first to the government, and then to you only as the administrative apparatus permits.
These “frivolous” people who claim taxes are voluntary are doing what good citizens do. They are reading founding documents. They study the American Revolution. They contemplate the words of Jefferson, Paine, Madison and all the others. They take their words and ideas seriously. They look at the current system and see that it resembles the founding vision only in the most superficial ways. And they imagine that it is their right, as Americans and as human beings, to stand up to the powers that be.
What they lack is that critical intelligence to comprehend that the present regime does not agree. There is no real consent of the governed. There is no authentic social contract. The government isn’t really of, by and for the people. To realize this is the beginning of true political wisdom. On this core point, it appears that both libertarians and the tax police are in full agreement.
A Parting Shot:
Another article on CNNMoney lined up the tax plans of the various presidential candidates for comparisons. They noted that Obama was the only one who clearly wanted to raise taxes. Meanwhile, snowball in hell Ron Paul wants to repeal the 16th Amendment, end the income tax and shut down the IRS.
How do you honestly thing this is going to turn out?
Of course, Ron Paul will not become president. The IRS and the income tax aren’t going anywhere.
But could you just imagine it?
Letting Americans keep what they earn…and a gold standard that guarantees their savings won’t lose value over time…and letting the market do what it does best and drive the price of things downward…
Ha, ha! Forgive us, good patrons. We got lost in our own fantasies for a moment there.
What we will likely get is Obama, he who openly praises taxation and wants to see a bit more of it. This is a man who says with a straight face — and perhaps a hungry gleam in his eye — that 30% is about right for a floor on income taxes for high earners.
How does he know? Why isn’t the ideal tax rate a tenth? Or nine-tenths?
Ah, you see, the political class has learned that 100% taxation — full-blown state communism (voluntary communism is fine) or total slavery to the state — really is too much. The system works much better when the serfs labor under the illusion that they are free. The state collects more taxes when it doesn’t tax too much because the serfs are more productive when they get to keep a certain chunk of what they earn. The less the serfs keep, the more depressed and less productive they get.
Of course the state has a hard time keeping the right balance. The temptation is always to extract bigger and bigger chunks. But that really is killing the goose that lays the golden eggs. Progress demands incentive, and increasing taxation destroys incentive.
That results first in stagnation…and eventually decline…till society reaches the preindustrial level of comfort it had before the veneration of free markets.
We don’t think it’s going to get as bad as that on these shores, however. Sure, we might get another four years of an openly tax-loving president…but there are forces at work that will turn this ship around. These forces of the market are going to trump those of politics.
It starts with you. Those aware of what’s going on will preserve and provide the capital to carry the world back from the brink.
You can start by shielding your purchasing power with gold, silver and copper (especially nickels right now while you can, but quarters and dimes, too, as the dollar slides more). The next step is to fund innovation…and multiply your wealth by doing so.
Progress demands that people be rewarded for serving consumer needs and improving standards of living…that people be allowed to get obscenely wealthy…that they be rewarded for putting up their capital to fund progress.
For one way to do just that…and create the kind of wealth that would make a commie cry…just click here.
What I find amazing about this article is the absolute apearence that the author simply give is to an absolutely UNCONSTITUTIONAL tax! The SCOTUS ruled that the 16th NEVER gave the CONgress ANY NEW taxing authority. The 16th merely stated the obvious as to the fact that what was already taxable prior to the 16th, could now be taxed at the source. A Constitutional Amendment CANNOT “CHANGE” the Constitution, it can ONLY further define or address previously unanswered questions. OTHERWISE the 16th would have been found UNCONSTITUTIONAL on its face!!!
The system is corrupt yes… And it is no mistake that the 16th and the Fed Reserve Act (yet another UNCONSTITUTIONAL “law”) happened in the same year.
The fact is, We the People need to upend the corruptness that we are burdened with and take our Republic back! The “you can’t fight city hall” attitude has to be turned on its head! This country was born by “fighting city hall” in the form of flipping the bird at King George!
Grow some mr author! We need everyone on board!
Pingback: Other • Is Taxation Voluntary? « lessbull.com
Jeffrey, you should try actually reading the IRC. Also, the earnings of private persons domiciled in the 50 states is not income. This was established in the 1921 decision in Merchants Loan and Trust Co. vs Smietanka. The legal definition of a taxpayer is somone who is LIABLE for a tax. If there is no liability established, then there is no “taxpayer.”
Jesus, it’s only been 117 years since the Pollock decision, which was upheld by the 1916 Brushaber decision, AFTER the 16th Amendment was NOT legally ratified.
One more thing. The Internal Revenue Code is NOT positive or statutory law. It is prima facie evidence of law.
I have to agree with frodo here. Try reading the definition of “employee” in the IRC, off the top of my head it reads, “Employee- an officer or employee of the united states, a state, the district of columbia, any federal territory or possesion or any political sub-division of any of the foregoing, or an officer of a corporation.”
Now, mind you that you had better go look up the definition of “corporation”, because it doesn’t mean Joe Schmoe’s corporation but a FEDERAL corporation (of which I believe there are several hundred such as the SEC, fannie, freddie, etc…).
Further the W-2 is a hearsay allegation by your paymaster that you have engaged in federally privilleged activities from which a tax is rightfully collected. You must rebut this allegation as to be silent on the matter is to give the agency “tacit procuration”……
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