There are three methods of acquiring property: homesteading, voluntary exchange, and theft.   The first two methods are just, while theft is inherently unjust.  Taxation involves taking things without permission and must be classified as theft.

However, before deciding on whether or not taxation should be considered theft, the term “taxation” must be defined. I will define taxation as “a government mandated extraction of resources from individuals and/or groups, paid to support the aims of the government.”

The phrase, “mandatory extraction” is the key to understanding why taxation is theft. A mandatory extraction, by nature, is taken through the use of force or coercion, and not paid voluntarily.

Theft is always theft, regardless of who does the theft, how the theft occurs, and what excuses the thief makes to “justify” the theft.  The ONLY exception to this statement is when things are taken as restitution for a prior wrong (for example, if you stole $100 from a person, a court would be justified in taking $100 from you without your permission to repay the victim).

Before I go on, I must address a question that I will surely be asked by many readers: arent taxes special because they are taken by the government in order to provide people with their basic needs?

The answer to this question is a flat NO!

People have certain inalienable rights which should never be violated. It would be wrong of me to kill you, rob you, or physically harm you. Governments are made up of people, and are often created by people to secure their rights. Because governments are made up only of people, governments cannot have any rights that people themselves do not have. It simply does not make sense for this to be untrue. Rights are rights, people are people. Any claims that the government has more rights than anyone else is arguing that some people (the populace) should be considered inferior and subordinate to others (the government).

Taxation involves taking property from people without their consent; taxation is theft.

To quote myself: “If a man with a gun were to demand that unless you pay him 1/3 of your income he would lock you in a cage, he would be guilty of initiating the use of force with the intent of committing theft. It would not matter if the man promised to use this money to pay for a school for your children, for a new highway, or for a missile defense program. Taking things from a person without their permission is, by definition, theft.  Silver-tongued rhetoric may be employed to obscure this fact, but it cannot change it.

Taking something from another person without their permission is always theft and should be condemned as theft. It does not matter what the “reason” or “justification” for this action is.  It does not matter who committed this theft, what was stolen, or how many people told the aggressor to act.”

Examples of taxation as theft

Some of the taxes described below are not traditionally thought of as taxes, but they are taxes—they all meet the above definition of being a government mandated extractions for the purposess of supporting the aims of the government.

A government imposed minimum wage law prevents a person (a sovereign owner of him or herself) from selling their labor to a potential buyer at a mutually agreed upon price. This is theft of a laborer’s future earnings.

A government imposed ban on the sale of alcohol on Sunday prevents a person from selling their justly acquired resources to an individual willing to purchase them. This is theft of profits.

A government imposed business regulation prevents a business from using its justly acquired resources in the manner that it sees fit.  This is theft as well.

A mandatory income tax, imposed under penalty of imprisonment, enforced by men with guns is theft of the fruits of one’s labor. Stealing one’s labor is called slavery. A mandatory income tax makes the government a middle man in all labor transactions, and allows them to claim ownership of property that they did not justly acquire.

A mandatory property tax, imposed under penalty of imprisonment, enforced by men with guns is, by definition, a violation of property rights, and therefore is theft—no explanation should be necessary to prove this. But… property taxes are fees on products that have already been paid for. They are levied on the owner of a property. A mandatory fee on residents for the continued use of their own house is no different than the government charging a person rent to stay on their own property. Remember, a person who justly acquires property becomes the owner of that property, but if a person has to pay the government rent to occupy their own property, who is the real owner of the property, the homeowner, or the government?

A mandatory sales tax, imposed under penalty of imprisonment, enforced by men with guns is theft as well. A mandatory sales tax makes the government a middle man in all retail transactions, and allows them to claim ownership of property that they did not justly acquire. Sure, they can argue that sales taxes are imposed in order to pay for police, but this does not change the fact that this money was acquired through theft, and not through voluntary means. The mafia also forces businesses to pay a protection fee.

I would love to hear your comments on this article, but please dont post a comment or send me an email that says “taxes are necessary because without them, the government could not provide services.” I have addressed this above: taking money from someone without their persmission and then using that money to buy they something that they may or may not want is still taking something without permission [theft].

Please do not send me a message or post a comment telling me that taxation is “voluntary” and not theft because if I disagree with the taxes, I can move somewhere else. When it comes to taxes, we have three choices: paying a tax, or refusing to pay the tax and being arrested by men with guns and then locked in a cage, or leaving one’s family, friends, and property behind to search for a society that does not employ mandatory taxation. This fact should make it clear that taxation is not voluntary. A person who uses coercion to force another person to give up some of their property under threat of violence is guilty of extortion. Governments can have no rights that people do not have, and are therefore just as guilty of extortion as would be a person who acted in this manner.

Furthermore, the argument that if a person does not want to pay taxes, they can renounce their citizenship and leave the US to avoid taxes is false.  The US government does levy a tax on people who give up citizenship:

“Expatriation on or after June 17, 2008, may cause an expatriate to be subject to IRC § 877A, which was enacted as part of the Heroes Earnings Assistance and Relief Tax Act (HEART) Act of 2008. Generally, IRC § 877A imposes income tax on the net unrealized gain on property held by certain U.S. citizens or green card holders who terminate their US residency as if their worldwide property had been sold for its fair market value on the day before the expatriation or residency termination (mark-to-market tax). The Treasury Department and IRS have authority to issue regulations under IRC § 877A so further guidance is expected soon, though it has not been released yet.”

Finally, please do not send me a message or post a comment asking how things like schools, roads, or even national defense could be paid for without mandatory taxation. There exists a long history of voluntary provision of all these goods and services (check out this book for more information).

Furthermore, these items could be provided for through taxation in a purely voluntary manner if people were allowed to exercise their natural right to free association and choose their own government. Under voluntary government, taxation could no longer be considered theft, as those who did not wish to pay a tax could simply drop out of one government and sign a contract with another government.

Economist Walter Block argues that under voluntary government, one would have “the right to stay put, on one’s own property, and either to shift alliance to another political entity, or to set up shop as a sovereign on one’s own account.”

Governmental services can be provided on the free market as can any other service; a government would agree to provide certain services (possibly protection, roads, health care, or whatever) in exchange for a fee from a citizen. Thus, the citizen would be paying a purely voluntary tax.

In contrast to voluntary, contractual government, our government does not allow citizens to withdraw their support from the State.  It levies taxes on people without their consent.  These non-consensual taxes must be recognized and exposed for what they are: THEFT.

Americanly Yours,

Phred Barnet

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Commentary

State Tax Incentives a Bad Business

By Phred Barnet

Giving a tax incentive to a business to encourage economic development sounds like a great idea, but it is not. Tax breaks for businesses are little more than corporate welfare at the expense of hard-working Georgians. They amount to subsidies favoring a select few businesses over Georgia’s residents and existing businesses.

Proponents of tax breaks for new businesses argue the increase in jobs will make up for the reduction in revenue, but tax breaks for businesses rarely pay for themselves and often end up costing the state a great deal of money. That shortfall must be paid for by Georgia’s taxpaying citizens and business, which don’t have the benefit of that break.

Giving a business a tax incentive to move here may help that business in the short term, but in the long term the people who pay for that tax break also happen to be the employees and the customers of that company. Plus, it sends the wrong message to existing Georgia businesses: “If you stay in the state, we will use your tax dollars to subsidize your competitors.”

In June, after the North Carolina Legislature approved a $46 million tax break designed to induce Apple, Inc. to build data warehouses in the Tar Heel State, Scott Hodge, president of the Washington, D.C.-based Tax Foundation, had this response: “Too many legislators confuse targeted business incentives with policies that truly create a better business climate.”

“They are not. They only provide an excuse for lawmakers to avoid real tax reform. Targeted incentives are to a state’s economy what steroids are to the human body – short-term results that eventually weaken the bones, cause heart failure, or worse, impotency. Tax systems should not be used to pick winners and losers or micromanage the economy. Data farms in North Carolina might be a good thing, but it is much better for the marketplace to decide that, not government. The key to a prosperous economy is a tax system that provides a level playing field for all businesses and all industries.”

In Georgia, a new law gives the entertainment industry tax credits for up to 30 percent of production and post-production expenditures. Proponents argue that if Georgia does not do so, it will lose out to other states. This mentality leads to bidding wars that end up offering more and more incentives to the entertainment industry.

Former North Carolina Supreme Court Justice Bob Orr recently complained that “the industry has been able to play off North Carolina against South Carolina against Louisiana against Georgia. Louisiana raises its incentives, and it puts pressure on South Carolina, North Carolina and other states to do likewise.” In fact, only weeks after losing the new Miley Cyrus film to Georgia, North Carolina’s State Senate moved to increase their tax breaks for entertainers from 15 percent to 25 percent.

The chief economist for Louisiana’s legislative fiscal office, Greg Albrecht, estimates that in 2006, Louisiana gave the entertainment industry about $121 million in tax credits, but that only around 18 percent of that money was ever recovered in economic activity and taxes. He denounced the programs as “an expensive way to create jobs,” maintaining that “there’s no way you can say this makes money for the public.”

At best, these incentives can create temporary increases in economic activity. Yet these temporary increases do not pay for the costs of the programs themselves. There is no logic in Georgia subsidizing the enormous salaries of Hollywood actors, directors and producers while many of our own residents struggle to get by in this tough economy.

The most equitable tax incentive that Georgia could offer would be to cut taxes on individuals as well as corporations to make Georgia more attractive to individuals and businesses – both old and new. This would lead to investment and job creation, encourage more businesses to move to Georgia and send the correct message to Georgia’s current businesses.

Americanly Yours,

Phred Barnet

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Your policies idealistic and utopian.  You push your utopian views on the rest of us. They are proposed with no consideration of reality, practicality, present or future costs. Just because it sounds good doesn’t make it so. Every penny that our country borrows has to be paid back, either through taxation or inflation. There is no way around it. Yet, you continue to push for policies which will expand our national debt.

It is completely laughable that the Democratic Party Platform—the platform under which our current President was elected contains the following quote: “We will maintain fiscal responsibility, so that we do not mortgage our children’s future on a mountain of debt.”

Anyone who disagrees with your policies is slandered as “barbaric,” “unfeeling,” or is told that they “dont care about the poor.”  Your policies of statism are barbaric.  Your policies of welfare are hurting the poor.

Your policies are schizophrenic. You offer farmers price supports and subsidies to “help out poor farmers,” yet these measures increase the costs of food which end up hurting the poor non-farmers. The same is true in tobacco: you subsidize tobacco farmers, yet push for increases in tobacco taxes. You bailout auto companies to help them survive, then you set high emission standards on their cars and fund mass transit which reduces the need for automakers.

You want to tie us all together into you definition of society: a society where were all forced to care for each other and where we are all forced to help each other.  The want to sacrifice all individual rights for the collective rights of society.  It is not wrong to care for people, it is not wrong to help people, but it is wrong for the government to force people to do so.  I dont want to be tied to anyone.  If i choose to help people, let that be my choice.  Why should I be forced to pay for the health care of others?  Why should I have to pay for their mortgages?  Why should I be forced to pay for anyone to do anything?

You conveniently ignore data and facts. For example, I have showed that no matter how high or low income taxes have been, the government still collects 19.5% of GDP and that when income taxes on the rich are lower the rich pay a higher percentage of taxes collected. Yet, for some reason which cannot be explained, you want to punish the rich and make them pay for the needs of the poor and you want to do this by raising taxes on them. No amount of graphs, facts, or charts can change your minds.

You base your decisions on feelings, ideas, and emotions, rather than logic, rationality, and facts.

You claim to seek equality for all people, yet you somehow think that this can be accomplished by treating people unequally. For example, no matter how well intentioned, affirmative action is unconstitutional as it gives preference to one group over another.

You openly disregard vast sections of the Constitution of the United States of America.  You ignore the 2nd Amendment and push for heavy restrictions on firearms, failing to realize that if these measures pass, only the law abiding citizens will give up their guns. The criminals never will.

You ignore the 9th and 10th Amendments and push for greater Federal control over the States and the People.  And yet, you demand that the government recognize the right to privacy [a right that is not explicitly mentioned in the constitution, although it is definitely a right of the people] for the purposes of allowing abortion.

You cant have it both ways, either follow the Constitution, or dont. Instead, you follow it and refer to it when it is convenient and ignore it the rest of the time.

Implementing the national health care system that you are pushing would be such a quagmire.  It will be unnecessarily expensive, it will involve the expropriation of American businesses by the government, and it will be inefficient.  It will also stifle future research.  Government does not innovate.  Private industries innovate.  The only reason that we can even talk about having a nationalized health care system is because of the innovations and improvements made by private companies in the past 100 years.  Furthermore, it is wrong to make people pay for the bad decisions of others.  What can be the rationale of forcing a person, say a Mormon who doesnt drink, smoke, over eat, or do drugs to pay for the health care of a person who drinks, smokes, and overeats?  Should the person who has a healthier lifestyle be rewarded by having to pay less for health care?  Shouldnt the person who has an unhealthy lifestyle be punished with worse health and higher health costs?

How can you possibly oppose free trade?  Free trade is the natural extension of trade.  By trade I mean the buying and selling of goods and services.  By natural extension, I mean that on the lowest level, trade exists between individuals and that free trade only means extending this practice to allow individuals and businesses from other nations to engage in this practice with individuals and businesses from our nation.  Free trade benefits all.  It allows the best quality good at the lowest cost to be sold on the open market to any person who is willing to pay for it.

You want the government to solve all of your problems.  Your policies expand the government run safety net and take away incentives to take risks. It is not the job of the government to provide the public with housing, health care, and welfare. Who is to pay for these things?

I support stem cell research too, but quite a lot of people in this country have serious moral issues with it.  I dont understand how one party can be so insensitive as to use taxation to force people to pay for a practice that they liken to murder.  Let private labs do their own stem cell research.  We have the greatest scientists in the world.  Lets set them free to do research, rather than placing them under government supervision.

You arent liberals either.  You have expropriated the term liberal and used it for yourself.  The term liberal was not used to describe people like you, in fact, it was used to describe people like me.  A liberal was known as someone who supported individual rights, civil liberties, property rights, free trade, free markets, and a gold currency standard. With the exception of some civil liberties, the Democratic party and most “liberals” disavow all of the above.

The term progressive is a far less accurate term than the term liberal. For the vast span of human history, the people were at the will of the government. The government provided the people with all of their needs, or chose to withhold the needs of the people, as it wished. It was only when classical liberal ideas like those listed above entered into the minds of the governments were people truly free to pursue their own interests. This freedom led to the progress that has been achieved in the past 250 years.

The United States of America was the first truly free society in the history of mankind. Our society stressed individual and property rights and in a relatively short span of time became an advanced nation. It is no accident that human history stagnated for so long when governments were in control of the people. It is no accident that it was 1,000 years after the fall of Rome—well into the Renaissance Age (a relatively free society) before standards of living rose to what they had under the Roman Empire.

The technological progress that we have seen in the last two plus centuries is wholly due to the fact that people have been relatively free to pursue their own interests in this period without government intervention, regulation, control, and most importantly without the government being responsible for the health and well being of its citizenry.

And yet, so called progressives continue to push for the very ideas, programs, and controls that are incompatible with continued progress.

You Democrats are proud to be a part of “The Party of Thomas Jefferson.”  If Thomas Jefferson were alive today, he would spit in your face and denounce you in the strongest terms possible.  Thomas Jefferson was a man who absolutely hated the idea of a strong central government.  He is the man who said “I consider the foundation of the Constitution as laid on this ground: That “all powers not delegated to the United States, by the Constitution, nor prohibited by it to the States, are reserved to the States or to the people.” To take a single step beyond the boundaries thus specially drawn around the powers of Congress, is to take possession of a boundless field of power, no longer susceptible of any definition.”

Six time Socialist Party candidate Norman Thomas said: “The American people will never knowingly adopt socialism. But, under the name of “liberalism,” they will adopt every fragment of the socialist program, until one day America will be a socialist nation, without knowing how it happened. I no longer need to run as a Presidential Candidate for the Socialist Party. The Democratic Party has adopted our platform.”

Prophetic words.

[if you are a liberal, dont think im picking on you and leaving conservatives alone--tomorrow ill be writing about conservatives and Republicans]

Americanly Yours,

Phred Barnet

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For years, income taxes have been accepted by most people as a necessary evil.  Recently, however, a growing number of us have realized that while they are an evil, they are not necessary.

Many people do not realize that the income tax in this country is less than 100 years old.  Thats right.  The 16th Amendment was ratified in 1913, meaning that we had survived as a Nation for 137 years without an income tax.

A tax is an inducement to change behavior.  If you want to decrease smoking, you levy a tax on cigarettes.  If you want to discourage consumption of fatty foods, you levy a tax on those food items, as the city of New York is doing.  If you want to discourage speeding, you levy a tax on speeding (through a speed limit and fines).  If you want to discourage driving, you levy a tax on gasoline. If you want to discourage pollution, you levy a tax on carbon emissions, as President Obama has proposed.

And yet, the same people who openly admit that the above facts are true fail to admit that a tax on income can discourage wealth accumulation.  Taxes on income create disincentives to save, disincentives to invest, and disincentives to engage is risky entrepreneurial activities including starting new businesses or investing in new technologies or potential inventions.

But, besides economic issues, there are moral issues that need to be considered.

This blog is my property.  I use my mind to think about what to write and I write using my own hands.  I have advertisements on this blog that pay me money in exchange for referring my readers to their services.  Any money that I make from these advertisements is a direct result of me using my mind to write.  The government forces me to pay income tax on these advertisements, effectively taxing the products of my mind.  Even worse, the government uses the money that it expropriates from my mind to “serve the common good.”  They use it to fund social programs for others, without my consent or approval.

The same is of course true for any job.  Anyone who works is forced to pay income taxes.  The fact that everyone is forced to do pay them does not make it any less wrong.  Anyone who refuses to pay their income taxes risks being thrown in jail, hence the above usage of the word “force.”

On top of this, the government takes these taxes levied on the labor of men and uses them to fund social programs.  These programs provide money, health care, or other services to selected groups of people.

Think about this.  The government taxes your labor through force and gives it to others for their benefit.  In other words, you are being forced to work for benefit of others.  A person who serves others against their will is called a slave.  By using forced labor to fund social programs, the government has turned all workers into slaves.

The 13th Amendment bans both slavery and involuntary servitude.  Any tax which has the result of forcing one to work for the benefit of others is a blatant violation of the 13th Amendment.

In the Soviet Union, workers were forced to labor in order to build roads, highways, other public works, and provide for the welfare of their fellow citizens.  Here in the United States, the fruits of the labor of hard working Americans is expropriated in order to build roads, highways, other public works, and provide for the welfare of our fellow citizens.

The Soviets were threatened with being sent to Siberian prisons if they refused to obey.  Here in America, we are threatened with prison if we refuse to obey.  The end result is the same:  obey or lose your freedom.

No matter how much you feel that we “need” these social programs, you cannot deny the fact that the government is using forced labor (taxes taken by force and derived from the labor of men) to fund these programs.  As I said above, this is a blatant violation of the 13th Amendment.

Besides embodying a form of forced labor, our tax system is intrusive and does not respect the privacy of Americans.  The Supreme Court cited the right to privacy when it declared abortion to be legal.  Intrusive income taxes are a violation of privacy rights in the most basic form of the right.

The government expropriation of private citizens income for the purpose of protection is no more moral than the mafia doing the same to businesses in its sphere of control.  The only difference between the two scenarios is that the governments’ actions carry the force of law, while the mafia’s actions are outside the law.  However, the fact that there is a law behind an action does not make the action moral.  There were laws supporting discrimination against Jews in Nuremberg and against African-Americans in the American South, yet the force of law behind an action does not make it correct.  In the above example, both the government and the mafia collect the money through extortion.  They will both cause you harm if you refuse to pay, and they both justify their monetary expropriations on the grounds of protection.

And the sad thing about the above example is that if you were to pay both the government and the mafia for protection and you needed a favor, there could be little doubt that the mafia would be the one who would deliver the favor.

Americanly Yours,

Phred Barnet

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I am not going to get into the philosophical reasons why I am opposed to income taxes in this piece article.  I am however going to explain why lower tax rates are better than higher tax rates.

Here is a chart that was sent to me by Mike at The Young Conservative Blog.  It shows the highest federal individual income tax rate.  It also shows the tax receipts received by the federal government as a percentage of GDP.

[Check out Mike's blog, theres a lot of interesting stuff there.  Also, here is a Wall Street Journal article about Hauser's Law.

I think this is pretty remarkable.  While the highest individual income tax rates in this country dropped from 91% down to 28%, and then rose back up to the current 35%, tax receipts as a percentage of GDP has remained at a fairly stable level of 19.5%.  Cutting the rates from 91% to 70% in a few years didnt really affect the receipt rate, nor did increasing them from 28% to 40% in a few years.

Now, you might say that the reason that the tax receipts as a percentage of GDP remain pretty much the same is that when taxes on the rich are cut, the tax burden falls more heavily on the poor.  However, you may recall the chart that I posted regarding tax burden.  I was able to find an acrhived copy of the chart that the government removed from its website here.  I dont know how long it will stay up.

This chart clearly shows that the rich have paid an increasing portion of the total income taxes collected since 1979.

In 1979, the top income tax rate was 70%.  The government collected about 19.5% of GDP through income taxes, and the top 20% of wage earners paid 64.9% of all income taxes.  The top 40% of wage earners combined paid 85.1% of all income taxes.

In 2005, the last year for which data is available, the top tax rate was 35%.  The government still collected about 19.5% of GDP through income taxes, however, the top 20% of wage earners now paid 86.3% of all income taxes (a higher percentage than was paid by the top 40% of wage earners in 1979), and the top 40% of wage earners paid 99.4% of all income taxes collected.

I know this seems counterintuitive, but cutting taxes on the rich--and all Americans--actually increased the tax burden on the rich.  2005's top tax rate (35%) was exactly half of what the top tax rate was in 1979 (70%).  Yet, the rich paid a much higher percentage of income taxes in 2005 under a lower tax rate than they did in 1979 under a higher rate.

As I mentioned in a previous post, I found this spreadsheet when I was trying to prove to someone that President Bush's tax cuts favored the rich and hurt the poor.  I was wrong.  In 2000, the top 20% of earners paid 81.2%of all income taxes.  By 2005, this proportion had grown to 86.3% of all income taxes.  The tax burden of the top 40% increased from 94.7% in 2000 to 99.4% in 2005.  In fact, every quintile in the "bottom 80%" of wage earners paid a smaller proportion of the total income taxes in 2005 than they did in 2000.  Broad based tax cuts benefit all wage earners.

Cutting taxes allows Americans to keep more of their hard earned money.  This in turn leads to increased spending, savings, and investment.  These three factors lead directly to increased GDP growth.  Increased GDP growth means higher tax revenue for the government (which will always collect around 19.5% of GDP through income taxes).

I have already demonstrated that the government will collect roughly the same percentage of GDP--19.5%--through income taxes no matter what the top tax rate is.  This is true whether that rate is 92% or 28%.  I have also demonstrated that cutting taxes on the rich and all Americans has actually increased the tax burden on the rich.  Finally, I have explained that cutting taxes leads to higher GDP (which equals higher tax receipts).

I see no further arguments against cutting taxes on all Americans including the wealthy.

Rather than raising the tax rates on the wealthy back to what they were in 2000, the President and Congress should consider drastically cutting income taxes for all Americans.  This will lead to increased economic growth which will in turn lead to higher tax revenues for the government.  Most importantly, doing this would allow all Americans to keep more of their hard earned money.

Americanly Yours,

Phred Barnet

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Thats a ton of money–to put it lightly.  But, unfortunately for your wallet, it didnt end there.

Bloomberg recently reported that “[t]he U.S. government and the Federal Reserve have spent, lent or committed $12.8 trillion” over the past 20 months.  “The money works out to $42,105 for every man, woman and child in the U.S. and 14 times the $899.8 billion of currency in circulation. The nation’s gross domestic product was $14.2 trillion in 2008.”

This means that in the past 20 months, the government has committed about 90% of our country’s GDP to bailouts and “stimulus.”  [emphasis added by me] Roughly 1/3 of this money has already been spent, while the remaining 2/3 has been committed but not yet spent.

The article breaks the spending by category.  This is pretty scary stuff.  Please pass this along to your friends and family.  Also, get involved.  There are Tea Parties coming up across the country on April 15th.  The Facebook group representing the Tea Parties has over 24,000 members.  We are expecting between 5,000 and 10,000 protesters in Atlanta for next weeks event.  These protests are being held in cities, both large and small all across the country.  Here is a map listing the locations of many of them.  Join the struggle before they spend another $42,105 of your money!

Americanly Yours,

Phred Barnet

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It is not fair to target one group of people–a group who are disproportionately from the lower class and who are addicted to a a product–and tax them for the benefit of others.

From the article I linked to above:

“The rate of adult smoking in the United States is, in fact, directly related to household income, dropping in linear fashion as income rises. Overall, 21% of American adults smoke… A different way to look at this smoking-by-income data is that slightly more than half of today’s smokers (53%) earn less than $36,000 per year — making cigarette taxes highly regressive.”

Here is a chart from the CBO on what percentage of taxes are paid by what range of wage earners.  I found this about a year ago when I was looking for evidence that President Bush’s tax cuts benefited the rich way more than the poor.  It turns out that I was wrong about that, but more on that in another post.

I want you to look closely at this chart.  It will make the next couple of paragraphs make a lot more sense.  The lowest 20% of wage earners pays .8% of all federal taxes, the second 20% pays 4.1% of all taxes, the third 20% pays 9.3% of all federal taxes, the fourth 20% pays 16.9% of all federal taxes, and the top 20% pays 68.7% of all federal taxes.

This includes all income taxes, social insurance taxes, and excise taxes.

I like this chart because it allows you to look at excise taxes by themselves.  Scroll down to the bottom of the chart and they have the numbers for who pays the excise taxes in this country.  In this case, the bottom 20% pays 11.1% of excise taxes, the second 20% pays 14.4% of excise taxes, the third 20% pays 18.1% of excise taxes, the fourth 20% pays 21.9% of excise taxes, and the top 20% pays 34.1% of all excise taxes.

You can easily see that excise taxes fall much more heavily on the poor than do the average federal taxes.  In fact, you can see from the chart that the bottom 40% actually pay no income taxes and even received money back from the government, while the third 20% pays only 4.4%.  Combined, the bottom 60% of wage earners pay only .6% of federal income taxes, but pay 43.6% of all excise taxes.

The point here is that excise taxes excessively burden the poor when compared to other taxes.  As the numbers from Gallup above showed, smokers are disproportionately poor.  It sounds simple, but increasing taxes on a product used primarily by the poor amounts to an increase in the taxation of the poor.

This brings me to my next point.  Here is an article from the AP criticizing Mr. Obama for raising cigarette taxes and calling it a violation of campaign promises.

A couple of key quotes from the article:

“”I can make a firm pledge,” he [President Obama] said in Dover, N.H., on Sept. 12. “Under my plan, no family making less than $250,000 a year will see any form of tax increase. Not your income tax, not your payroll tax, not your capital gains taxes, not any of your taxes. [emphasis added by me]“”

“No one making less than $250,000 under Barack Obama’s plan will see one single penny of their tax raised,” Joe Biden said, “whether it’s their capital gains tax, their income tax, investment tax, any tax. [emphasis added by me]“

To me, the word “any” means “any.”  I dont have ANY idea why it wouldnt.

And of course, this tax was enacted in the name of the “public good.”  The money will go to fund S-Chip–a program which gives medical care to children of the poor.  I find this ironic for two reasons.  The first is that the government is essentially taxing the poor to provide their children with a service.  The second is that the government is also claiming that an increase in the tax on cigarettes will lead to a decrease in the number of smokers.  Im sure that this is a correct assumption, but the government is missing (or masking) the point here.

From the Danville Register and Bee:

“The twisted logic of this tax increase as a way to modify behavior shouldn’t go unnoticed. If higher cigarette taxes convince more people to quit smoking, won’t the S-CHIP program need a new source of federal dollars in the future? Won’t that lead to different taxes being raised to continue to cover the same number of children?”

The cigarette companies themselves realized that an increase in federal cigarette taxes would decrease the number of consumers using their products.  Can you guess how they responded?  Altria, the maker of Marlboro, increased their prices by 71 cents per pack for Marlboros, but 81 cents per pack for their menthol cigarettes (which tend to be smoked more often by the poor than other cigarettes) to cover the anticipated losses in smokers due to the new tax.  This means that those who dont quit are being forced to spend at least an additional $1.33 per pack of cigarettes.

I have a friend who supports the cigarette tax increase–he said “its about damn time smokers pay their share.”  But he is missing the point too.  Smokers pay their share–they have the same income tax rates as everyone else in the country.  They are being taxed to pay for a program that they may not use.

Our system of government is supposed to protect citizens against tyranny of the majority, and so I must reiterate my point from above:  It is not fair to target one group of people and tax them for the benefit of others.  It sets a bad precedent and only sounds good until the government decides that it wants to tax a product that you enjoy.

Americanly Yours,

Phred Barnet

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Here are a few articles for yall to read this morning while I think about what to write on later:

A Sowell article.

A Larry Kudlow article on government intervention.

An interesting article on “freeing the job creators.”

Also, if you havent already done so, please become a fan of my site on Facebook.

Americanly Yours,

Phred Barnet

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“People who talk incessantly about “change” are often dogmatically set in their ways.  They want to change other people.”

“Much of the social history of the Western world over the past three decades has involved replacing what worked with what sounded good.  In area after area – crime, education, housing, race relations – the situation has gotten worse after the bright new theories were put into operation.  The amazing thing is that this history of failure and disaster has neither discouraged the social engineers nor discredited them.”

“One of the sad signs of our times is that we have demonized those who produce, subsidized those who refuse to produce, and canonized those who complain.”

“The next time some academics tell you how important ‘diversity’ is, ask how many Republicans there are in their sociology department.”

“The first lesson of economics is scarcity: there is never enough of anything to fully satisfy all those who want it.  The first lesson of politics is to disregard the first lesson of economics.”

“Prices are important not because money is considered paramount but because prices are a fast and effective conveyor of information through a vast society in which fragmented knowledge must be coordinated.”

“A recently reprinted memoir by Frederick Douglass has footnotes explaining what words like ‘arraigned,’ ‘curried’ and ‘exculpate’ meant, and explaining who Job was.   In other words, this man who was born a slave and never went to school educated himself to the point where his words now have to be explained to today’s expensively under-educated generation.”

“No matter how disastrously some policy has turned out, anyone who criticizes it can expect to hear: “But what would you replace it with?”  When you put out a fire, what do you replace it with?”

“Capitalism knows only one color: that color is green; all else is necessarily subservient to it, hence, race, gender and ethnicity cannot be considered within it.“

“Each new generation born is in effect an invasion of civilization by little barbarians, who must be civilized before it is too late.”

“If you are not prepared to use force to defend civilization, then be prepared to accept barbarism.”

“If you have always believed that everyone should play by the same rules and be judged by the same standards, that would have gotten you labeled a radical 60 years ago, a liberal 30 years ago and a racist today.”

“It is amazing that people who think we cannot afford to pay for doctors, hospitals, and medication somehow think that we can afford to pay for doctors, hospitals, medication and a government bureaucracy to administer it.”

“Liberals seem to assume that, if you don’t believe in their particular political solutions, then you don’t really care about the people that they claim to want to help.”

“Mistakes can be corrected by those who pay attention to facts but dogmatism will not be corrected by those who are wedded to a vision.”

“Mystical references to society and its programs to help may warm the hearts of the gullible but what it really means is putting more power in the hands of bureaucrats.”

“Prices are important not because money is considered paramount but because prices are a fast and effective conveyor of information through a vast society in which fragmented knowledge must be coordinated.”

“Socialism in general has a record of failure so blatant that only an intellectual could ignore or evade it.”

“Tariffs that save jobs in the steel industry mean higher steel prices, which in turn means fewer sales of American steel products around the world and losses of far more jobs than are saved.”

“The most basic question is not what is best, but who shall decide what is best.”

“The most fundamental fact about the ideas of the political left is that they do not work.   Therefore we should not be surprised to find the left concentrated in institutions where ideas do not have to work in order to survive.”

“The real goal should be reduced government spending, rather than balanced budgets achieved by ever rising tax rates to cover ever rising spending.”

“Too much of what is called “education” is little more than an expensive isolation from reality.”

“What ‘multiculturalism’ boils down to is that you can praise any culture in the world except Western culture – and you cannot blame any culture in the world except Western culture.”

“Would you bet your paycheck on a weather forecast for tomorrow?  If not, then why should this country bet billions on global warming predictions that have even less foundation?”

“The assumption that spending more of the taxpayer’s money will make things better has survived all kinds of evidence that it has made things worse.   The black family- which survived slavery, discrimination, poverty, wars and depressions- began to come apart as the federal government moved in with its well-financed programs to “help.””

“Most people who read “The Communist Manifesto” probably have no idea that it was written by a couple of young men who had never worked a day in their lives, and who nevertheless spoke boldly in the name of “the workers”.”

“Despite a voluminous and often fervent literature on “income distribution,” the cold fact is that most income is not distributed: It is earned.”

“It is hard to imagine a more stupid or more dangerous way of making decisions than by putting those decisions in the hands of people who pay no price for being wrong.” [bureaucrats]

What is ominous is the ease with which some people go from saying that they don’t like something to saying that the government should forbid it.  When you go down that road, don’t expect freedom to survive very long.

Americanly Yours,

Phred Barnet

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Of course, even Mr. Obama has admitted that there is no guarantee that these plans will work.  Even more interesting, he has said that these plans will have little effect before 2010.  This is particularly interesting because the non-partisan CBO recently estimated that the recession will supposedly be over in mid 2009 even if these “stimulus” plans werent passed, meaning that Mr. Obama’s plans wouldnt even begin working until after the economy has already started to heal itself.

But, lets pretend that Mr. Obama’s boldest predictions are correct and that this plan will create 4 million new jobs (although he says it will create or save 3-4 million jobs).  Let us also assume that each of these jobs is a high paying job of $100,000 a year and that these jobs are permanent jobs that will never go away in the future, regardless of future circumstances.  According to both H&R Block’s tax calculator and the Heritage Foundation’s much simpler tax calculator, a single person earning $100,000 pays $19,472 in Federal taxes.  So, the 4 million jobs that we are pretending this plan will create will return $77.888 billion in taxes per year to the federal government.  Excluding any interest (which will likely be a hefty sum and will go countries like China), it will take the government about 35.5 years to recoup the money!

If, however, this plan still creates 4 million jobs but these jobs pay $50,000 per year instead of $100,000, the government will collect $6,606 in taxes per person totaling $26.424 billion in taxes per year.   Under these circumstances, it will take the government 113.5 years to recoup the money!

However, I made a little Excel spreadsheet assuming that the government would have to pay 3% interest on these new loans.  This is a generous assumption, considering that the average rate on treasury bills has been much higher.  I used both of the above jobs assumptions in my calculations and found that the government will actually never be able to recoup this money if interest is factored in! Check it out for yourself.

Americanly Yours,

Phred Barnet

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