Tax Day is upon us in the USA, and everyone must pay. The phrase about the two inevitabilities in life, death and taxes captures the essence of the issue. Most people accept that death will come one day, but many think that taxes are, or should be, for the rich. If there is any case to be made for better economic education in the United States, it is to be made here. There is far too little understanding that under our current regime, taxes are as inevitable as death, even if one actually gets a check instead of sending an additional one in to the US Treasury after negotiating with the IRS.
The first tax is the one most understand, which is the money you never see because the government has dragooned your employer into collecting it from you. Your paycheck reflects your pay, but the actual money deposited has had federal income tax, Social Security and Medicare, federal programs mandated before most American were born, removed, and it was your employer that was forced to take it from you. But here is where the taxes are even higher than they seem. Your employer has to match your Social Security portion, current at 6.2 percent. So, 6.2 percent comes off your paycheck, and your employer matches it, and that money is money that can’t be given to you. You are actually paying more like 12 percent, in direct and indirect costs.
The second and third tax inevitabilities are factoring into the prices you pay to live.
With the money you are allowed to keep, you buy things. These things are made or provided by someone, and they must pay taxes on the money you give them in the form of business or corporate taxes. Where does that money come from? It comes from you, since the price of the goods sold must be factored into the cost of what you buy. It’s an indirect tax, but it’s there, and you pay it.
Finally, there is the most insidious and corrosive tax, which is the inflationary tax that is built into the economy by the government borrowing and money printing. If the federal government can borrow in an unlimited fashion or just create new money, the price of everything rises. Inflation is a monetary phenomenon over the long term, every time, and it’s a tax in the since that the government gets money, and you pay it. This is a bedrock economic fact that occurs in every economy since the beginning of economics, and it’s corrosive because, like the price of the goods that reflect the underlying taxation scheme, inflation is difficult to trace back to it’s source. But its source is known, and it’s the money supply, which is controlled by the same entity that takes money from your paycheck. Think of all the free ‘stimmy’ money the government was pushing out during Covid: it’s all being given back, dollar after dollar, in the form of higher prices. It’s a tax, and it’s there, and everyone must pay, and then die.
These three factors, income tax, corporate tax, and the inflationary tax, are but a tiny portion of the taxing powers in the United States, and clearly, these system are being gamed or ignored by some, but even the most sophisticated tax evasion scheme can’t evade inflation. The effects of many of the government plans are hidden in these mechanisms, and for a reason, If most people knew how much they are losing to direct and indirect taxes, they would be deeply incensed, but it’s so complicated to calculate, it just never gets done. But, the amount each person pays does exist, even if no one knows it and it is getting bigger.
At some point, we’re all working for the government, like it or not, and we can’t really hold to being a free people anymore. Government is a common good, and must be paid out of some sort of common purse, but we’re generations past the common good in both government services and in the taxation scheme. Complaining about taxes is as old as taxes, but our country and culture has been profoundly changed by the depth and breath of the taxing powers of both state, federal, and local government. With each new tax, the benefit to cheating or only conducting business illegally rises. Thanks to abusive tax practices, there are whole nations where the majority of the economic activity is unrecorded. The government gets 100 percent of nothing, but typically, it just borrows and prints to meet its needs, and people just accept that all taxation will be paid in inflation. These sort of economic situations are particularly miserable for the poor, and so those kinds of nations and governments fall into chaos and revolution. Taxes can do that. They can ruin a nation, and it takes a while, but it happens every time, eventually. Societies fall slowly, and then very quickly. On our Tax Day, a good think on what we’re doing and how long it can go on is as important as keeping the IRS wolf form the door.
TomRoushOnline 