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How Many Taxes Do You Really Pay?

February 10, 2001

The power to tax involves the power to destroy." Chief Justice John Marshall

The income tax was begun in 1913 as an amendment to the Constitution, legally ratified by far fewer than the required 36 states. Is it legal? A bit of theft from the extremely rich, which politicians even then had decided, 'didn't need it.' That was the idea, and like all government plans to steal, transfer, and subsidize, it has become a monumental horror. Today, some corporations spend more on tax preparation than on any other single expense, including raw materials and labor. The IRS has become a social tool, the true "Elixir of Life" for the social manipulators and denizens of D.C.

"When we see achievers being milked like cows, it is a clear sign that proletarian theft has infected the body politic oriented values." - Ayn Rand from "Atlas Shrugged"

When I was a teen, beginning work in the early fifties, Uncle Sam took less than 3% in income taxes, and 1% out of the first $3,000 in wages, or $30 for Social Security, making less than $100 total a year for the average beginning worker. According to an article in The New Republic of Dec. 2, 1991, in 1948, a married couple with median income and two children, paid only 2% in state, federal, and Social Security taxes. In 1999, Social Security was 15.3%, plus 2.9% for Medicare, out of the first $62,700 in wages, or $11,411.40, and then perhaps 30% in federal taxes…if you were lucky. That is about an even 50%, plus hundreds of hidden taxes on every phone call you make, over 40 cents on every gallon of gas you buy, luxury and excise taxes, and hundreds more at the federal level alone.

There are taxes on payroll, personal property, pensions, severance, Social Security, corporation, stock transfer, tobacco, tonnage, transportation, utilities, accumulated earnings, ad - valorem, alcoholic beverages, amusements, apparel, business, capital gains, consumption, corporate income, dividends, employment, estate, excise, franchises, fuel, furnishings, gas, sales, gift, gross receipts, health care, holding company, income, inheritance, land, license, life insurance, luxuries, motor oil, motor vehicle, occupation, operators license, and the list of taxes can go on and on. Sales taxes at the local level are usually four to eight times higher than when I was a youth, and property taxes, especially in the east, can be a couple of hundred dollars a month for a small, rather ordinary home.

In 1916, the income tax law had a bit over 11,000 words. The 1996 version had over 7 million words, ten times the words as has the Bible. In 1928, the income tax was 1.5% on any income over $4,000, which is the equivalent of $100,000 today. It has all happened so gradually that we haven't noticed it. The old frog in water story applies here. If you place a frog in a pot of cold water, and very gradually raise the heat to a boil, he won't notice the difference; a painless execution. If total taxes had gone from 10% to the current 75% all at once, we would have mutinied. Yes, I said 75%. Think about it.

Everything we buy, has all or some of the above-mentioned taxes glued onto its price. Ajax widgets are made in a factory somewhere, employing people whose wages are taxed. That factory pays fuel taxes, property taxes, and a hundred other taxes, which go into the price of the widgets. Food and manufactured goods of all kinds have the makers' taxes included in their prices. A loaf of bread bought in a grocery store or bakery has property taxes for the farmer, bakery, garage for the delivery trucks, oil refinery, truck factory, tire factory, and the factories for every single part in the truck, tractor, and various pieces of machinery that go into making and delivering the bread. There are taxes on the property and workers for the milling of the flour, egg producer, maker of yeast, milk, wrappers, slicers, ovens, and even the printers who print the wrappers, and ink that goes into them. All these factories, shippers, farmers, stores, etc. have labor and property taxes to pay as well as telephone, fuel, and a host of other taxes, all of which add to the cost of that single loaf of bread. One economist 30 years ago, said that a $1.00 loaf of bread had $.95 in taxes. Then, of course, you pay your own taxes of probably 75%-counting sales, Social Security, income, property, telephone, etc. Is a 75% taxation estimate too low? I think so!

The National Taxpayer's Union says taxes have gone up 175,000% in the last 83 years.

"Thou shall not steal." - Exodus 20:15 - King James Version

Taxes are theft, defined as obtaining someone else's property through force. Almost everyone is willing to be hurt, stolen from, or taxed a little, in order to do a great good. A good such as catching thieves and punishing them, administering justice, or protecting our shores, but finally a point is reached when we won't do it, revolt, or at a minimum, cheat on our tax return. We may still harbor a love of what taxes should do, but deeply resent what they are doing, such as redistributing wealth, being used as a tool of the pigheaded politicos' ideas of social justice, or other incongruous schemes. Upon realizing what tax money is being used for, most will do everything in their power to avoid what has become a pestilence.

The consequence of taxes being levied on everyone and everything, are that the average single wage earning family is rare, and almost extinct. We have become a virtual feudal society, with the boss man being the federal government. Mom has to work, as does Dad, just to survive. So many taxes are hidden and obscure, that most families actually believe both parents are working "to make ends meet," or to raise their standard of living, rather than what is really going on, and that is to pay the taxes. Taxes consume the entire second income, and most of the primary, if all the hidden taxes are included. Politicians perhaps never intended to cause marital breakups and both parents having to work…just to survive…but they have. The consequences of the current tax system and the myriad of hidden taxes, are that poverty is widespread, people can't seem to "get ahead," home ownership is impossible for many, marriages fail due to stress, and of course delinquency is common among those kids who do not come home to a mother, but may be classed as "latchkey" kids, or who may have to go to a daycare center. No one in his or her wildest dreams in 1913 could have envisioned what has happened to the size of government and the abuse poured on us by the IRS. "The hardest thing to understand is the income tax." - Albert Einstein

Taxing income encourages hiding it, and discourages saving it. Taxes on spending, rather than income, makes far more sense…if you believe that such is necessary. Rich people have more dollars, and spend more, so they would pay a higher tax…automatically graduated by their own habits, not government gobbledygook. How better to collect a graduated tax than to collect it on spending? With a tax on spending, known as an excise tax, there would be no income tax forms, no IRS, and taxes would be paid at each purchase, not deducted out of the paycheck. The retailers would collect, not the hated IRS. No individual tax forms would be needed, and the so-called "underground economy" would be taxed, because their dollars are also spent.

Another observation on the tax situation seems appropriate at this time, and that is the matter of "equality." For decades now, cantankerous baby kissers have attempted to legislate "equality" in everything, even though that is impossible. Everything that is, except income taxes! How does a graduated tax satisfy "equality?" A graduated tax was one of Karl Marx's ten points to destroy the capitalistic world. If everyone is supposed to be equal, treated equally, equal under the law, and every other non-sensual area, why are not income tax rates 'equal" for one and all? How is it fair or "equal" for one person to pay nothing, and another to pay 36% or more? To be fair and "equal," all should pay the same rate, with none exempt or gouged.

With the constant "added liquidity" (sic) to the economy, the bucks constantly become worth less and less, making everything we buy cost more and more dollars, pesos, yen, francs, or marks. "Adding liquidity" is a polite way of saying "run the presses even faster," so we can all be proud of our increased "wealth," from various financial transactions…other than the NASDAQ of course. Look at the M3 graphs in other columns on Frightening. When I was a kid, a hundred dollar bill was a thrill to see, and now they are so common as to not even rate a second glance. The 13 cent hamburgers at McDonalds and quarter car washes in 1962 have faded as snow in springtime. Same hamburgers, and same car wash, only they both cost exactly six times as much. And then taxes are about six times as high also, so no wonder in that my small town in the year 2,000, foreclosures were six times as high as in 1999. Ain't government grand? Let's see now, you can fool all of the people all of the time…or something like that.

Don Stott has been a precious metals broker for over 23 years, has written 5 books, hundreds of articles, and considers himself an Austrian School economist. He once had the privilege of brokering gold for Mrs. Ludwig von Mises. His web site is

It is estimated that the total amount of gold mined up to the end of 2011 is approximately 166,000 tonnes.
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