A Tax Day Lament and a Warning

Your editor is as rueful as can be today, Shooters…absolutely full of rue…

I’m like a former child star, tidying up the cell he shares with his prison boyfriend and wondering where it all went wrong…

How many of you are wondering on this latest April 15 — as I am — how this present slavery became so thorough?

I just grudgingly did my taxes. Turns out I owe my lecherous Uncle Sammy more money in fees and surprising amounts of progressive taxes than I can truly hope to pay in one natural lifetime. How could this have happened?

It’s a sad and sordid tale of misspent youth, ruinous debt and the women and booze that caused them. You see, I wasn’t always the stalwart Austrian economic schoolboy and ascetic doomsayer you’ve come to know and love. Like my fellow benighted consumer statists, I prayed in the same temple of credit worship and government trust.

I thought Citibank would lovingly provide my electronic toys and shiny vehicles at negligible interest forever and ever. I thought the government was giving me the best of every world with social security and the stock-boosted defined contribution plan.

Live and learn.

The 401(k) is a trap. The banks and the government — as usual — have given the populace enough rope to hang themselves with credit and intimations of retirement security…and the ability to borrow from the retirement account or even withdraw from it…at very high cost…

Try to take out that money you’ve been saving. I dare ya. See, the deal is that you cannot use it before the age of 59 ½ except under a narrow band of circumstances. If you contract with the devil, don’t be surprised when you wind up in hell.

If you need that money before you’re halfway through your 59th year — say to pay off those enormous debts that the banks were so happy to let you run up — then expect to pay a 10% vig off the top and then have whatever you save count as income on the year. In a progressive tax system, that means you get to watch roughly half of it disappear.

The 401(k) only works under circumstances that don’t exist in the real world. The fiat currency in which you save won’t be worth diddly by the time you are allowed to get it. Try to take it out before that and the government will kill you with fees and progressive tax.

And I certainly hope you don’t still believe the one about growth and interest outpacing inflation.

Looking back, the come-on does bear a strong resemblance to those internet scam letters I get in my inbox. The maliciousness of the scammer and the greed of the victim have to work together closely and well for the crime to take place.

“We’ll let you save pre-tax (taxes we impose in the first place) dollars, and guard your account (forbid you from taking it out without making it extremely costly).”

When I jumped ship from my last job to become your editor, I made the mistake of demanding all the money I’d trusted to Fidelity under the rules of the defined benefit plan. I wanted nothing further to do with them or the banks…but they sure don’t make escape easy or cheap.

For the love of God and the sake of liberty, don’t do it. Steer clear of these complications.

Having the government guard your retirement money is more than a little like putting a wolf on watch duty at the door of your hen house.

Much like Morgan Freeman’s character in The Shawshank Redemption told the parole board: I wish I could meet the young man I used to be, talk some sense into him. I’d tell him that the bankers and the government were not his friends, that those mortgages, credit cards and tax-deferred government accounts were not in his best interest.

Alas, it is too late.

I entered into this bondage willingly, but ignorantly. I didn’t have a clue how dangerous bankers and government gangsters were. I accepted the promises of ease and plenty and I’ve been justly rewarded for my gullibility. I suspect I’m not alone.

I don’t believe, however, that most of my fellow slaves have woken up yet. More and more, however, are starting to stir.

Surely millions of them will be sending off a hefty check to their masters even as they stew about how the government is bailing out rich, evil banksters.

As you read this I will indeed be joining a few folks that have some notion that government by its nature uses money that it doesn’t earn. They demand at least a little accountability, a little representation to go with the taxation. Roving Whiskey reporter Samantha Buker and I will be attending the Tax Day Tea Party in both Annapolis and Baltimore. (We’ll let you know how it goes.)

These Tea Parties will be held nationwide today. Folks want to know what the hell is going on with the money continually hijacked from their paychecks. But how many of them wonder at the criminality of the income tax itself, no matter what it goes to support? How many realize that greedy conmen in nice suits are eating out their substance, legally but immorally? Does anyone question the notion that government must be funded?

An income tax and a fiat currency: what a fine pairing. The one is a gun in the face and the other is a shell game. Both break the Eighth Commandment and both will lead to complete ruin.

Far be it from me to incite you Shooters more than I normally do. Whether or not you fund the fraudulent thug that is government is between you, your god and those with the power to investigate and arrest you. This tax day, I just want you to think very carefully about the whole shebang.

At the very least, stay the hell away from any enticements the government may offer. You have to earn an income in their paper and odds are there’s no way to keep them from tracking everything you collect…but instead of a 401k, you may want to look at gold and silver.

For those of you already entangled in the web of the defined benefits plan, tread very carefully. As we say here in the Whiskey Room: sometimes there is no forgiveness, only punishment.

And today your editor accounts for the sins of his youth.

Oh well, Baltimore is a fantastic place to make less money and ride out an economic disaster all while owing obscene amounts of money to the imperial government. The city never really picked itself up from the postwar urban freefall. Won’t be so good in the event of the collapse of industrial society, but if you’re gonna be down and out, this is the place to do it.

Gary Gibson

April 15, 2009

The Daily Reckoning