Hooray for the Rich Who Don't Pay Taxes

First, a correction. A Bar regular writes…

“Joe Lieberman is not a Democrat. He is an independent, as he resigned from the Democratic Party. Don’t you ever check things out before stating them as facts?

“Wish you the best with your paranoia,”

“– Steve K”

This comes from one of our most-faithful, unswerving, persistent critics. A man who has dutifully read our material for years so he can tell us why we’re wrong about the economy, politics, art, science and love.

Our copy editing department called us on this, too. In our rush yesterday, we copied and pasted the pre-edited version of Jeffrey’s article…instead of the one that the copy editors had edited. So our apologies for that.

But if we were to be honest with you (and we always are), we would have to admit that while it may be technically inaccurate to count Lieberman among the Democrats, it is a matter of semantics that doesn’t amount to a hill of beans.

These political labels can be distracting. Personally, we don’t care what Lieberman calls himself. We care about what he does. The man is as well intentioned as he is clueless…which makes him especially dangerous. He bends most of his energy to coming up with more powers for the state under acts with comically Orwellian names.

Note that the reader who pointed out our error also wished us well with our paranoia. We suppose he means our worry about things like Lieberman’s insistence that the state should strip Americans of citizenship based on no evidence, should the state feel it necessary.

We are amazed at how the state grows from an annoying goblin into a sulphur-spitting archdemon…how it can start biting people in half (figuratively, of course) and spear infants on its trident, while its victims shrug their shoulders and mutter, “I really don’t see that there’s any cause for alarm.”

But that’s not what we’re here to talk about today. As disagreeable as it may be, we turn our attention to yet another political figure…

Mitt Romney recently released his tax information for the past couple of years. Wouldn’t you know it, he managed to lower his effective tax rate to 13.9%…by giving away millions to things he cares about.

That’s not what the headlines blare, however. What you see is that this man who earned millions of dollars per year paid far, far less a percentage of that income to the feds than middle-class suckers.

This is supposed to rouse the rabble. That’s certainly what the impressively eyebrowed Sage of Omaha, Warren Buffett, meant to do when he compared his tax payments with those of his secretary.

During our regular morning confab, LFB executive editor Jeffrey Tucker said of this, “The only really fair tax would be a fixed-dollar head tax. Like $1,000 per year. Or whatever.”

We had to push our seat back away from the table to give ourselves the room to laugh uproariously. A fixed-dollar head tax? Ha!

Sure, it makes perfect sense. But this is modern America. We are all progressives now, comrade. From each according to his ability. To each according to his need.

A man who makes more can afford to pay more. And he must. At least until he makes enough to employ some impressive loopholes in the purposely convoluted tax code.

“Of course,” Jeffrey pointed out concerning the progressive tax payment model, “if private enterprise did this, we would all see this as unfair exploitation.”

And of course, Jeffrey is right. Could you imagine if you had to pay more for your gas, meat and bread because you earned more?

Now, individual merchants can discharge their goods as they see fit, giving discounts to whomever they wish based on whatever criteria they wish: height, age, looks, degree of familiar relation…

A butcher may give his elderly widow neighbor endless credit that he never means to make her pay (like the Fed does for the U.S. government). Or that same butcher may give the shapely, unattached 20-something with the playful smile an extra cut of meat at no charge.

But those are the minute decisions of the free market based on factors that only the individual players know and can adjust to. Government with its heavy hand — and with eyes that can’t see all the details — just across the board charges more for its “services” based on the “customers'” ability to pay. And it’s not like you can take your business elsewhere if you don’t agree…

The individual seller’s rationale for any progression in pricing will reflect his intimate knowledge of conditions surrounding the sale and the marginal benefit to him of the price variance. And it’s important to note that the market itself will bear only so much progressive pricing. Most folks won’t mind that the butcher gives the widow a free ride…or even that he gives the prettiest girls a bit more meat…

But should that butcher charge the higher earners more, he would quickly lose the business of those higher earners. That’s the market at work. Buyers and sellers determining what’s fair. This kind of market democracy we like! (It’s the political kind that leaves us cold.)

The government’s pricing rationale (taxes are the price we pay for government…which is not synonymous with civilization), however, is not quite so sound…

The government says that it should take more from the rich than the poor on grounds that the marginal dollar is actually worth less to the higher earner than it is to the lower earner. But how can we know this for sure? Value is subjective, and you can’t compare the worth of money between any two people.

Further, one could argue with more substance that there is even less reason to take money from the wealthy since that money is likely to be invested, saved or donated. Taxing the rich thereby taxes society more directly than when you tax poor people who mostly consume all they earn.

So back to Jeffrey’s fixed tax on each person…

“$1,000 per person per year would yield,” he notes, “about $300 billion all together. That was the cost of government during the Ford administration. Was government too small then?”

“Not sure,” we replied, “We’d say it was already too big by the Washington administration. And that the wooden-tooth bastard ought to have been hanged for treason after the Whiskey Rebellion…

“But I’m assuming that children would be subject to the tax, too,” we continued, “and that either parent would have to pay for them…?”

“Precisely so, but not that it matters that much. Say it’s only on everybody over 18 or some arbitrary age at which the state allows people to sell their skills in the marketplace. There were only about 75 million persons under 18 in the U.S. in 2011. So you still have very nearly $300 billion in taxes collected with just $1,000 per eligible taxee.”

“Hell, even panhandlers can come up with that,” we said. “Or would they even have to pay? They certainly don’t file income tax forms now…”

“Fine, reduce it to official households. There are over 130 million of those. So $130 billion in tax revenue. Which puts us squarely in the middle of LBJ’s crazed plan to bankrupt the country with guns and butter: 1966.

“One thing I want to make clear,” Jeffrey said. “Say you have a tax of 10%. Flat, right?

“No. 10% of $1 million is far more — 10 times more — than 10% of $100,000. High-income earners are punished far more. That’s why a head tax — as strange as it may seem to some — is the only flat tax.”

And we’re not really offering solutions. Because our suggestions amount to theorizing for now. We do, however, try to make sense of the degrees of our disgust.

We never saw a tax we actually liked. But there are taxes that make us want not quite want to revolt. If we had to pay some centralized warmongering nannies (and we do), we could live with a fixed tax like the one described above.

We hate when the government tries to incentivize anything, but a truly flat, fixed tax would indeed incentivize people to try to earn more. Earning more would reduce the impact of a fixed tax as a percentage of their incomes.

Of course, this won’t fly in modern America. The rich can pay more for the government we all get. So pay more they shall!

Local and even state taxes are another good example of taxes we can’t hate as much as the progressively looted chunk we send off to the feds every quarter. With more local taxes, we are clearly getting something of use for our money after all.

We can argue till our brown face turns blue about how much more efficiently the market would provide every single service the government does (though the shape of these things would likely be quite different)…

But concerning local government services — and the money extracted to pay for them — at least we can overwhelmingly agree with what our tax money pays for. This includes things like the sidewalks and roads we use and the police and fire protection.

Federal taxes are quite a different beast, however. The bullets used to tear into foreign brown skins…the guns used to fire them…the food and clothing of the soldiers holding the guns…the bombs dropped on insurgents and collateral wedding party attendees and teenage goatherds.

Which brings us to a letter we received today…

“Hi Jeffrey, Gary et al.,

“As always, I love your articles and critiques of how the America we love is slowly eroding away.

“I have a query, but first a little background…

“I am an Irish-American citizen living and working in Ireland since 2006…so I have seen this Irish economy collapse in sync with the economy I left in Michigan back in that hazy summer…

“To cut to the chase, my wife and I were blessed with our first child, born December 2011…

“Now she is eligible for Irish citizenship and she has her birth certificate to prove this. BUT she may also obtain her U.S. citizenship, care of me..

“My query?

“Given the near- and long-term future of the U.S….endless wars, increased poverty, insurmountable debts, increased taxes (and filing taxes even if she never lives/works in the U.S.) destruction of the middle class and the $$…etc.

“Why should my daughter become an American citizen?

“What are the reasons, given the glum future of the USA, to become one of us?

“Do the same reasons, land of the free and the brave, still hold through, or should she just stay Irish till her dying days?

“Would love to get your and your readers’ views on this..



We would love to get views from the Whiskey patrons as well! Good patrons, please send those views here. ggibsonagora@gmail.com

And a hearty congratulations on the arrival of your daughter, Tim! We’ll buy you a shot should the chance present itself.

As for her citizenship…your Whiskey editor is torn on the subject. And far from qualified to offer any real advice. Especially in a legally binding sense. But we can share our biased, but considered opinion, for this is a matter we struggle with all the time.

We aren’t even U.S. citizens. Merely a legal resident who has lived here since he was a toddler. Many of the people we respect have been cutting their ties to the U.S., either just leaving physically…or actually giving up the legal right to live and work on these shores indefinitely.

Our own situation is different. Our own native land is small, poor and given to collectivist politics. We thus effectively possess refugee status. Our options for a long-term home should we fling our green card at a border guard and spit, “Here! Take it, for I no longer want any part of your warmongering, police-nanny state!”…well, those options are limited and poor.

We wouldn’t go back to the Caribbean. We suppose we could bounce around South America as long as someone paid us to write…and we could afford to leave various countries every few months to satisfy the visa requirements.

We are not experts (and we suggest you talk to one about this)…and we hesitate to be hypocrites. We do not even have U.S. citizenship, yet we remain in the U.S. Our first inclination is to tell you to spare your daughter of the burden (for the benefit-to-cost ratio of U.S. citizenship may continue to mount for the worse as she approaches adulthood).

But note that despite it all, we remain in the U.S. unwilling to break the inertia of our own living habits. We cast about the nation in search of a comfortable, quiet corner to call home. But we’re not quite ready to leave just yet…though each outrage brings us closer to the limits of our tolerance…

There is a good case for you to keep your daughter from ever becoming a tax cow for the U.S. Again, let’s put this to our Whiskey Shooters and see what we can come up with. We’ll probably run your responses this weekend. So get cracking: ggibsonagora@gmail.com.

In the meantime, let us consider this letter, which we received just minutes later…

“Mr. Gibson.

“It appears that you use the words citizen and national synonymously. They are not.

“The 14th Amendment (proposed by a Congress that lacked a quorum) was a solution to the 1850 Dred Scott decision, wherein the Supreme Court ruled that negros of African descent could not be citizens. The amendment granted a form of citizenship to those who were born in the United States and completely subject to its political (lawmaking) power. (It was a subsequent decision in which the court ruled that the subjection of the 14th Amendment was complete subjection in the feudal sense.)

“Before the 14th Amendment, citizens of the states established the qualifications for citizenship within their respective states, not the federal government. Citizens of the United States were so because of their immediate citizenship in the political body known as a state of the union. The sates of the union created the United States, so these sovereigns could not be completely subject to the lawmaking power of the United States in the feudal sense. Under certain circumstances, they could be subject to its civil, but not its political, jurisdiction. The United States was not their sovereign liege lord; sovereignty was vested in them, not in the government, state or national.

“As the court ruled in the Slaughter-House cases, the 14th Amendment gave nothing to state’s citizens. What it did do, and what you evidently do not see, is that the 14th Amendment created a new class of citizenship: citizen-serf, a human resource, part of the capital of the federal government, PROPERTY of the United States, aka, U.S. person.

National is the word used by government today to describe what was formerly known as a state citizen, the person in whom the sovereignty is vested. He may or may or may not elect to be treated as though he is the property of the United States. According to the 13th Amendment, he has a choice.”

Wait a minute. Are you trying to tell us that the U.S. government, like every government everywhere else all throughout history, see itself in a feudal relationship with its citizens? That to the political class, we are not “purchasers of order and civilization,” but instead nothing more than cows to be milked for tax money?

OK, yeah, we see where you’re coming from.


Gary Gibson

The Daily Reckoning