Chapter Overview: 18

Kleptocracy

The United States of America is a kleptocracy, a country ruled by thieves. The federal and local states finance their operations by stealing. The theft is called taxation.

Theft consists in taking the property of another without the owner’s consent. Therefore, taxation is theft. Although some people may believe that they consent to be taxed, their consent is irrelevant. The state demands payment of the tax and backs up its demand with penalties for non-payment, forcible seizure of property and even imprisonment if the taxes cannot be collected by any other means.

Actor Wesley Snipes (with actor Ethan Hawke) was convicted of three misdemeanor counts in 2008 for failing to file tax returns from 1999-2001. He was sentenced to three years at a Federal Correctional Institution in Pennsylvania.

Actor Wesley Snipes (right) was sent to federal prison for three years. His crime: failure to file income tax returns.

The conventional ideological justification for taxes in a political democracy, such as the United States of America, is that taxation is authorized by law and that the laws represent the will of the people. However, few Americans have ever consented to be taxed.

The U.S. Constitution authorizes Congress to lay and collect taxes. The U.S. Constitution was the product of no more than fifty-five people.

The Constitution was ratified by state legislators chosen by the small minority of people then allowed to vote, namely white males who owned land. At the time, the right to vote was denied to women, slaves, children below the age of majority, and white males who did not own land. The makers of the Constitution have long since died. Neither their descendants nor the descendants of any of their contemporaries were ever asked to consent to taxation.

Suppose A asks and receives the consent of C before taking B’s stereo. C gives his consent, and then A takes B’s stereo. Is this no longer theft? What if A requests and receives the consent of a large number of people, such as a majority of the people living in the neighborhood where A and B live, or a majority of residents of the state, or of the country in which A and B live – is this no longer theft?

majority-rule

Tyranny of the Majority: In political democracy individuals are helpless to prevent theft of their property, justified as rule of the majority.

In political democracy the individual is helpless to prevent theft of his property by state coercion that is supposedly justified by majority rule.

 

It is indeed theft. This is because in each instance, B’s consent is lacking.

Andrew Galambos, whose lectures inspired this internet book and website, defines coercion as the successful and intentional interference with the property of another. Under this definition,  A’s taking of B’s stereo system is coercion, in the form of theft, no matter how many people agree to it, so long as B does not agree.

Through its political power the state collects its revenues through brute force. This claim of a legally sanctioned right to use force sets the state apart from all other institutions. In contemporary life no other institutions claim such a right—no business corporation or private organization of any kind can legally send people with guns to the home of an individual or to a business establishment to compel payment for its services or obedience to its rules. Only the state claims such a legal right.

eBay offices in San Jose, California. Can you imagine a business sending people with guns to your home to require you to pay for its service? Probably not. Yet that is effectively what the political state does in forcing you to pay taxes, fight in its wars, and accept its "services".

eBay, Inc. (headquarters shown above) has created a market place for individuals to trade with each other on the Internet. Like all other businesses, eBay does not and could not force anyone to use its services. In contrast, the state can  send people with guns to your home to require you to pay taxes for its “services” and to force you to fight in its wars

The justification for state taxation is the supposed security and services provided by the state. However, as we discuss in “Wars of the United States of America,” it is clear that the state has done a very poor job in protecting its citizens.

Taxes on Americans’ income

"The Tax Collector" by Paul de Vos (1595 -1678), a Flemish artist.

Taxation is as old as recorded history. “The Tax Collector” by the Flemish artist Paul de Vos (1595 -1678), depicts taxpayers at the mercy of a tax collector.

Taxation is as old as recorded history.

An individual residing in California who earned $60,000 in taxable income in the year 2012 would have had 37.5% of his income taken for federal and state taxes on earned income. A married couple with $60,000 of taxable income from one income earner would have had 29% of their earned income taken for federal and state taxes. The taxes include:

  • federal income tax
  • state income tax
  • payroll tax for Social Security
  • payroll tax for Medicare
  • federal unemployment tax
  • State unemployment tax
  • California State Disability income tax
  • state sales tax
  • state gasoline tax
  • federal gasoline tax

Starting in 2014 federal law requires employers to provide medical insurance or pay a tax, and requires individuals to buy medical insurance, or pay a tax, if medical insurance is not provided through employment. The likely cost of medical insurance for a healthy 40-year old non-smoker in California would be at least $3,000 a year.

The total of taxes plus medical insurance would come to 42% of income for individuals at the $60,000.00 income level and 37% for a married couple with $60,000.00 of taxable earned income from one of the spouses.

Assuming these taxpayers are renters, not homeowners, and spend $1,500 per month on rent (not a great deal in much of Los Angeles), after taxes, medical insurance and rent, only about $17,000 per year (28% of earned income) would be left for everything else (food, transportation expense other than gasoline, etc.)

Taxes on consumption by Americans

Even those Americans who pay little to no income tax are, nonetheless, heavily taxed. They are subject to payroll taxes for Social Security, Medicare, etc. They pay retail sales tax on much that they buy. In addition to retail sales tax, there are heavy taxes built into the prices of all the goods and services they consume. A relatively complete list of all the taxes on consumption would be lengthy, because there are so many of them. A few examples follow.

151 taxes on a loaf of bread. A study done during the 1960s concluded that there are at least 151 taxes on a loaf of bread

Gasoline.The CEO of a large petroleum company estimated that when the retail price of gasoline was about $1.00 a gallon (in 1998), absent all the taxes at every level of exploration, production, and distribution, an oil company could operate very profitably at a price of ten cents a gallon. If this CEO was right, then taxes account for 90% of the cost of gasoline at retail,

Airfare. A typical airline ticket is subject to 17 different aviation taxes and fees. They add up to about 20% of a person’s airfare.

Wireless telephone bills. Wireless telephone bills in California include $20 per month in federal and state taxes and fees as of the year 2013.

Taxes in Disguise

parking ticketTaxes come in a variety of ways that, at first impression, do not look like taxes, but have the effect of taxes. For years, the city of Los Angeles has been increasing parking fines. In 2012 the City Council voted to increase parking fines again (for the sixth time in seven years), which boosted the penalties for parking violations to a range of $63 to  $73. These parking citation hikes impact many low-income renters and young people who live in crowded neighborhoods in buildings that don’t provide parking. The city of Los Angeles brings in $150 million a year from parking citations. This, combined with the fact that politicians can hike rates without upsetting donors or unions, makes increasing parking fines an easy way to raise taxes.

Paying People for Not Working

In addition to taxes on consumption there are taxes exacted from everybody that increase the cost of everything that people buy through the taking of taxes from productive people to pay other people for not working; to pay people who do not need the payments; and to pay people for doing unproductive work. It is not uncommon for people to receive benefits under social welfare programs by fraud and abuse.

When the state pays people not to work, there are more than a few who will take advantage of the opportunity to choose unemployment and leisure rather than choosing work. This is especially so if the income from the state is nearly as much, equal to, or more than they could earn through work. Moreover, payment of welfare benefits on the basis of need has created a culture of dependency in which recipients by the millions lose incentive to provide for themselves.

unemployment cartoon

Numerous studies have been published that show the length of unemployment benefit payments has a high correlation to the level of unemployment throughout the various countries that provide unemployment benefits; and that reducing unemployment benefits reduces unemployment.

Activities of the state have at least doubled the cost of all goods and services

Although demonstration is not feasible within the confines of this chapter, it appears self-evident that the taxes taken by the state not only deprive taxpayers of the monetary benefit of their work, but also operate to at least double – perhaps even quadruple – the cost of everything that people purchase. This occurs via direct and indirect taxes on consumption, and depriving society of the benefit of work by otherwise capable people who are not productive because the state effectively pays them not to work, or pays them money they do not need for their existence.

There is a corollary to the principle that the state greatly increases the cost of consumption. That is, if costs were reduced greatly by the state going out of business, then the perceived need for state aid to the poor would greatly diminish, as society would produce such a cornucopia of consumer goods that the poor would not be poor in the traditional sense of the word. That is, they would be much better able to afford the necessities of life and many of the amenities of contemporary society as well.

German hyperinflation steals the wealth of the people

Before World War I Germany was among the most prosperous nations in the world. The German Mark was worth about US $0.24. By 1923 the German mark was essentially worthless and the Mark-Dollar exchange rate had fallen to 4.2 trillion marks (4,200,000,000,000) per dollar.

Post WW I German hyperinflation necessitated bringing trillions of Marks for even the smallest of purchases.

A common sight during German hyperinflation: using a wheel barrow to carry near worthless paper money for routine purchases.

The principal causes of this historic decline were actions of the German state in financing World War I by printing money, and then, after the war, by trying to honor its social welfare obligations with money created virtually out of thin air by still more money printing.

This gigantic inflation wiped out the savings of the country’s middle class.

Argentina

Once prosperous Argentina began a descent into economic chaos and poverty under the rule of the national socialist party of Juan Peron (1895-1974), commonly known as the Peronist party that has ruled the country most of the time since 1945.

Peron achieved popularity by virtually ordering a 70% rise in salaries as well as initiating a number of generous but expensive new social welfare programs. Tax collections of the Argentine state could not begin to cover its vastly increased costs, so the state printed money to pay these costs. The result was runaway inflation. Between 1976 and 1991 the cumulative inflation was 2.1 billion percent, an average of 164% per year, climaxing with a 26,000% increase in just thirteen months in 1989-1990.

Poorer citizens were especially hard hit because their assets, if any, were in cash and they lacked the sophistication and ability to get their financial assets out of the country. In 1989-1991 the country was reduced to a state of virtual anarchy with constant protest demonstrations and sometimes bloody and fatal rioting in the streets.

Since then, Argentine leaders have pursued a variety of strategies to finance its profligacy including borrowing heavily from other countries (ultimately defaulting on the debt), and confiscating portions of its citizens’ bank accounts. All these tactics have proved disastrous for the people of Argentina and as of the writing of this chapter in 2013, the country’s economic troubles continue.

Argentines rioting, 2001. The sign in the photograph reads: "Bank thieves, give back our dollars"

2001 riots in Argentina. The sign in the photograph reads:
“Bank thieves, give back our dollars”

The public debt of the United States of America: stealing from future generations

The total debt of the United States of America, including the unfunded social welfare liabilities, is $211 trillion.

Jillions government debtAccording to actuaries working for the Trustees of Social Security and Medicare, the unfunded liabilities for these programs consist of the amount by which estimated future benefits exceed estimated future tax revenues to pay the benefits.

The $211 trillion of total federal debt is roughly three and one-half times as much as total U.S. household net worth in 2012. That is an amount beyond the ability of the American people ever to pay. Americans’ household net worth includes home equity and all other investments of any kind. All of such assets would have to be sold to pay even a part of total federal debt.

Who would be able to buy all the assets consisting of Americans’ household net worth? No other individual country has that amount of money available in cash.

Would Americans be willing to give up all (100%) of their assets to pay federal debt and social welfare benefits?

The answers to these questions are self-evident. There is no one able to finance payment of the total debts of the U.S.

The U.S. Congress has committed America to living and spending beyond the means of its citizens.

Debt Cartoon from CartoonStockTo pay even part of the federal liabilities would require Congress literally to confiscate—that is to steal—from the generations now gainfully employed and from future unborn generations.

An attempt to pay these debts will create a conflict between generations—between older generations expecting the benefits they have been promised, and younger generations that will be called upon to pay them. This conflict would cause enormous social upheaval similar to what the world has seen turning into rioting in the streets of Argentina, Cyprus, and Greece. However, since so many nations trade with and sell to the U.S., the upheaval would likely have an impact internationally.

Taxing the rich to finance U.S. obligations: a chimerical “solution”

There is a popular political, supposed solution to the U.S. debt problem: taxing the rich more heavily.

That is not a solution. Rather, it is a chimera. No matter how one defines the term “the rich,” such people do not have enough income or wealth the seizure of which could make any meaningful reduction in federal debt and deficits.

In the year 2009 the 400 wealthiest American families had an estimated total net worth of $1.27 trillion. The federal deficit in 2009 totaled $1.29 trillion. Had the U.S. confiscated 100% of the assets of the 400 wealthiest American families that would have come close to eliminating the federal deficit for 2009. However, it would have been a one-time event, as those family fortunes could not be rebuilt for a second plucking.

Rather than outright confiscation of accumulated assets, proposals for taxing the rich focus on increasing the amount of their annual income tax. That, too, is no solution.  A “tax the rich” proposal for higher income taxes advanced seriously in the year 2011 hypothetically could have reduced the federal deficit for 2011 from $1.3 trillion to $1.2 trillion.

Conclusion

In the lexicon of Andrew Galambos, “freedom is the societal condition that exists when every individual has full (i.e. 100%) control over his property.” Someone whose property is controlled by another is not free. Rather, such a person is enslaved.

In the United States of America, the federal state and the local states, through their taxing powers alone, control much of the property of individual Americans. Americans are enslaved by the state to the extent that the state controls their property.

Worse still, in the teaching of Galambos and Snelson, is the enslavement of the minds of Americans by the fraudulent idea that taxes are the price that must be paid for the security and services provided by the state. A great many Americans are so convinced that is true and correct that they could respond to the ideas in this book with the comment: how could society possibly function without taxation?

It is true that the state could not exist without taxation. However, America as a nation separate from Great Britain came into existence to escape the coercion of Britain, to establish a land of freedom.

It is also true that thanks to the spirit and traditions of America, its citizens and permanent non-citizen residents enjoy more freedom than people in any other country.

Nevertheless, it is a poor sort of freedom in which the American people have conceded to the state the power to steal their property to provide services they may not need and may not want, including the power to drag the country into foreign wars that many Americans despise and abhor.

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2 Responses to Kleptocracy

  1. Lou Carabini says:

    Hi Mark
    Interesting piece…thanks…thought you might like to see a little different take on the tax bit from response B1-B3 at site below
    Regards
    Lou

    http://archive.lewrockwell.com/orig13/carabini1.1.1.html

  2. Romana Hausn says:

    I AM IN TOTAL, ABSOLUTE, UNQUESTINABLE

    A G R E M E N T !!!!!!!!!!!!!!!!!!!

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