The two enemies of the people are criminals and government Thomas Jefferson
In a letter to Elbridge Gerry on Jan, 26, 1799, Thomas Jefferson wrote, “I am for a government rigorously frugal & simple, applying all the possible savings of the public revenue to the discharge of the national debt; and not for a multiplication of officers & salaries merely to make partisans & for increasing, by every device, the public debt, on the principle of its being a public blessing.”
The first attempt to change the constitution was in the forming of a national bank. In 1816 Congress had granted The Bank of the United States a 20 year charter. It was a private bank but had authority over the currency system of the United States. In 1832 the Congress passed a bill rechartering the bank. President Andrew Jackson believed the bank was detrimental to the country as well as being unconstitutional. He vetoed the bill and his veto was upheld and the national bank was dissolved. (Later, in 1913 another unconstitutional national bank was formed called the Federal Reserve).
During the Civil War, President Lincoln instituted an income tax as well as many other taxes. He also was able to have our Congress participate when in 1862 he promoted and signed a tax bill that contained 119 different sections, imposing hundreds of excise taxes, inheritance taxes, stamp taxes, gross receipt taxes and license taxes on virtually every occupation, service and commodity in the entire economy.
Lincoln was a big-government liberal which probably explains why he has been treated so favorably by our liberal historians.
There was also a tax on income with a top rate of 10% on incomes over $10,000. Many of the other taxes imposed were probably unconstitutional but there is no question about the income tax. That tax was unconstitutional and was finally repealed by President Grover Cleveland.
With those taxes the government was expanded to include bureaucrats that were performing functions that were not in the constitution and thus added costs to our government and functions that were not anticipated by our founders. Lincoln was not a conservative.
We had a recession in 1921 that was pretty bad – in fact worse than the one that hit in 1928. Our government did absolutely nothing and the economy recovered and we had a real expansion in our economy during the 20‟s as our Federal Reserve increased the money supply which helped bring on the
“great depression.” Then, with the stock market crash of 1928 another recession hit us and this time President Hoover tried to use the government to fix it.
First came the public works programs. The Federal Buildings program was funded for $400 million and the Department of Commerce established a Division of Public Construction. Hoover granted subsidies to ship construction and asked Congress for another $175 million for public works. Corporations were persuaded to keep wages high but with declining sales that meant they would employ less. Farm organizations were formed to control prices and production and assign subsidies and the result was chaos as these organizations tried to reduce production to raise prices and to generally take over the farm industry.
By 1930 the unemployment rate was at 9% and the federal reserve increased the money supply and lowered the discount rate. The Smoot -Hawley tariff was passed and really hurt imports and exports.
Hoover issued an executive order and stopped all immigration into the country.
With unemployment increasing and production of capital goods declining the Congress passed the Revenue Act of 1932, one of the largest tax increases in our history and the Great Depression was on. It is hard to believe that someone thought that a tax increase would help the economy but President Hoover proposed it and the Congress enacted it,
Franklin Delano Roosevelt campaigned as a conservative and was elected to take the government out of the depression. Instead, he continued Hoover‟s policies and in fact, added to them and increased the problems. Bank moratoriums and bank holidays led to people not trusting banks and thus not depositing money into them and that meant that money was not available to help start or continue businesses.
Public works added some employment but caused businesses not to hire for they would have to compete with lower wages. The Congress passed Roosevelt‟s programs – the Agricultural Adjustment Act (declared unconstitutional by the Supreme Court), the Tennessee Valley Authority, and the National Industrial Recovery Act (declared unconstitutional by the Supreme court). The Civil Works Administration was organized as well as the Works Progress Administration and the Civilian Conservation Corps came into existence. The Social Security Act was passed in 1935 and the National Labor Relations Act empowered unions.
By 1938 the depression reached its lowest point with 25% unemployed and the government causing much of the problem. The more they did the more that businesses were scared away and thus no new jobs were created and existing companies were afraid to expand. During the first two terms for President Roosevelt the average unemployment rate for that eight years was 18%. The government managed everything and produced unemployment.
Roosevelt‟s actions frightened small businesses that employed over two thirds of our work force and their reaction was to “hunker down” and not take risks and not hire people. (We are seeing much the same reaction today to President Obama and the Democrat Congress). Roosevelt added bureaucrats and costs to our government at a time when the reverse should have been done. He really opened the door to the huge government we have now as well as prolonging the depression.
While Lincoln and Roosevelt acted in unconstitutional manners the real start of socialism was hardly noticed when it started. In 1913 the Progressives ushered in a new era for our government with the passage of the income tax amendment.
In addition, the Federal Reserve Act was passed in 1913 creating a national bank similar to the one President Jackson had vetoed. The title would lead one to conclude that the bank is a government organization. It is not. It is owned privately by the twelve Federal Reserve banks in the system. The governors of the system and the head of the “Fed‟ is appointed by the President and approved by the Senate. The Fed controls the amount a bank must have in its reserve (banks can loan much more than the money they actually hold); it establishes the discount rate at which banks can borrow from the Fed; it can reduce or increase overall bank reserves by selling government securities; it can set margin requirements for securities transactions and in general is in control of our economy. It has taken on itself the issuance of money which always leads to inflation.
It has not always been right in its actions. After the depression of 1921 which ended quickly without any government action the Fed increased the supply of money leading to rapid inflation setting the stage for the Great Depression. Their action in 1937 which reduced the money supply led to the deepest part of the depression in 1938. The increase in the interest rate during President Jimmy Carters‟ presidency led to the following recession and the election of President Ronald Reagan. During the 70‟s and 80‟s they took those actions that set the stage for the downturn in 2000.
Here in 2008 we are seeing the effects of the inflation caused by the Fed which has been reflected primarily in the price of oil. They have also been a major contributor to the collapse of our banking system by establishing and keeping an interest rate at a ridiculously low rate from 2003 to 2007. It is a little scary to think that our economy is under the control of one private company and that our economy is dependent upon one person rather than a free market system.
The issuance by the “Fed” of money was the primary cause of the downturn in 2008 but the Congress was also responsible for the economic collapse we are now involved in with their requiring banks to make bad loans. (That same government is now trying to place the blame on the banks who they forced to act stupidly). The establishment of Fannie Mae and Freddie Mac (privately held but government controlled) and the requirement that they purchase sub-prime mortgages helped that collapse substantially. However, that would not have been as possible without the low interest rate the “Feds”
instituted. Now, in 2008-2009 the increase in the money supply and the bailouts issued by the “Feds”
will lead to significant inflation which will soon appear. According to Reuters news service there are liabilities of $8.3 trillion which the “Fed” has funded. Congress has asked for information about this dispersal but the Fed has refused to provide details about their actions and commitments. They obviously consider themselves above the control of the Congress and with their actions it is time to consider if we should get rid of the Federal Reserve System.
Congressman Ron Paul has written a bill which would require an audit of the “Fed” and there are many who support that. Speaker Nancy Pelosi refused to allow the bill to be voted on but now with the new Congress we may be able to see all they have done. The Fed does not want to reveal what it has done with the money and what it intends to do. In 2009 the Fed produced a profit of over $52 billion and while most of that money will be turned over to the Treasury it would be nice to know how they made that profit, what bonuses they paid to their employees and what their expenses were. It would also be nice to know who they issued money to as they bailed out the world. They are resisting providing that knowledge to us.
Now, we turn to the income tax. The sixteenth amendment made an income tax legal for it was specifically prevented under our Constitution. The amendment did not place any restrictions on the amount of the tax nor on its application. In addition to providing our politicians with a source of funds to use for whatever purpose they see fit it has also spawned a huge industry.
In addition to the government bureaucrats involved with this we also have all of the companies involved in calculating the taxes. We also have departments in universities involved in teaching students the tax laws and all of these groups like our tax system and laws and rules and regulations and will resist any attempt to remove this system. Passing any significant change will be difficult for there are many people that benefit from the system. However, we must do it.
The following information comes from the book, Flat Tax Revolution by Steve Forbes. Our present tax system has evolved since 1913 to an unmanageable, unknown mess. The Bible contains 773,000 words and the tax code and rules and regulations have over 9 million words. There are 66,000 pages of special-interest rules, regulations, loopholes, credits, and carve-outs in our tax rules today. It is so complex that H& R Block, the income tax company, under-reported its own tax liability by $32 million. It is estimated that around 8 % of the private sector employees in Washington DC are tax lobbyists. They are big contributors to our Congressmen and heavily influence the tax codes. A Roman historian, Tacitius, stated, “The more numerous the laws, the more corrupt the government” .
There are many companies such as H & R Block involved with helping fill out personal tax forms and many firms that calculate personal and corporate taxes. This whole industry produces nothing of value to anyone. Their efforts are wasted as far as adding to our country‟s growth and wealth. The Congressional Office of Management and Budget estimates that over $200 billion is spent each year in calculating and determining taxes and the Tax foundation estimates the cost at $250 billion per year. About 60% of tax payers now use professional help ( if you want to call it that) to determine their taxes. The tax codes and rules are so complex that no one really understands them. In 2004 it was found that IRS bureaucrats gave the wrong answers over 25% of the time to people trying to calculate their taxes and companies involved with calculating taxes have the same problems.
All of the above organizations are dependent upon the tax rules and codes for their livelihood and so do not really want to scrap the system. Our politicians also receive large campaign contributions from the lobbyists and companies in the industry and so they too are not inclined to fix the tax codes and rules.
For every tax rule there is a paid accountant, a paid lobbyist, and a campaign contribution to some Congressman.
The IRS writes the rules (laws), judges who violate or who adheres to those rules and assesses fines and penalties as they see fit. The Congress does not review those laws and rulings but allows them to operate freely. There is very little hope of improving the rules and regulations or of improving the competence of the bureaucrats so the only hope is to completely discard the system.
The Income tax is bureaucracy at its best (or worse).
The Flat Tax would put many of them out of business and we have a tax system which is inconsistent, misunderstood and not fair which provides benefits to those in the tax industry and to some of our politicians and that means it will be difficult to fix. Since 1986 when the tax code was last revised the tax code has been amended 15,000 times and it is probable that each amendment was accompanied by a campaign contribution. This system is a drain on our economy and will leave us less able to compete with those countries who have a flat tax such as Russia, Hong Kong, Romania, Lithuania, and Slovakia and it appears that China is also going to adopt a flat tax.
We should adopt a Flat Tax as proposed by Steve Forbes and then delete all the rules, regulations, exceptions, loopholes and guidelines that the IRS has issued and no one understands. A family of four would pay no taxes on income under $46,000 and the rate for personal taxes would be 17% on the income above the untaxed base. Businesses would also pay 17% on profits. There would be no capital gains tax, no taxes on social security, no Alternative Minimum tax and no more death tax. Forbes‟s book details this proposal and could be used to write this simple tax.
Fiscal Associates of Alexandria, VA an economic consulting firm, did an analysis of the Flat Tax and concluded that between 2005 and 2015, the Forbes Flat Tax plan would generate $56 billion more in new government revenue than the current income tax. Our best bet here is to throw out everything the IRS has written and start over and adopt the Flat Tax as proposed by Steve Forbes.
The FairTax may be an even better solution than the Flat Tax but does require a constitutional amendment to make it effective and that would involve securing the approval of two thirds of our states and many years to accomplish. It also has a big sales job to accomplish. It has some advantages over the Flat Tax for it removes all of the incentives that enable Congress to obtain campaign contributions and support their elections. It should also attract many businesses to our country and help our economy.
So, even though we have a Department of Treasury which is responsible for writing laws and collecting taxes it is not responsible for our banks and banking system.