What We Need Is a Good Old-Fashioned Tyranny

by Gary North
by Gary North

April 15: this is the day we love to hate. All over America, men are frantically filling in forms. All day, people will be driving to the Post Office to get their envelopes into the mail to be stamped with a date, proving that they did not miss the deadline.

Others will be sending in the form that allows late filing. That postpones the paperwork – though not the money owed – for a few more months.

People will be filling out IRA forms, hoping for that retroactive deduction.

WHY APRIL 15?

Election day is in November. Tax filing day is in mid-April. This is not random.

The politicians know that we have short memories. Six months is usually the longest that any issue stays in the public’s consciousness unless it is reinforced by the media.

November is seven months later April.

What if tax-filing day were the first Monday in November? Americans vote on Tuesday following the first Monday in November in even-number years.

Also, what if there were no tax withholding from every paycheck? What if taxpayers had to come up with the money in one lump sum, the way they did in 1942, the year of my birth?

How would they vote? Politicians would rather not find out.

CHRISTMAS CLUB FISCAL POLICY

Of course, like members of what used to be called Christmas clubs, some taxpayers today are dreaming of their refunds.

For those of you who don't remember Christmas clubs, they were the invention of some genius marketer for the banking industry. A Christmas club was a zero-interest savings account that people joined in order to force themselves to save money for the following Christmas. They agreed in writing to deposit money, paycheck by paycheck, or else they would suffer a penalty: the bank would extract a portion of their deposits and pocket the money. The banks loved Christmas clubs.

The government deliberately overtaxes us for 12 months. Then it mails us a check, without interest, for the overcharge. Voters rejoice. "It’s free money from the government!"

The government overtaxes us for these reasons:

A good sting operator understands the larceny in the hearts of his victims. That’s what the great Paul Newman-Robert Redford movie was all about. It’s what George C. Scott’s delightful movie was all about: The Flim-Flam Man. Scott’s character, Mordecai Jones, taught his apprentice, "You can’t cheat an honest man." Then he cheated everyone in sight. And this: "A man will buy anything if he thinks it’s stolen."

We have bought the income tax system because we think we can get our hands on stolen goods.

There is an old slogan: "If you can’t tell who the mark is in a room after 30 minutes, then you’re the mark."

Today, a hundred million marks will send in proof that Mordecai Jones was right.

WORSE THAN PHARAOH

The Book of Genesis records Joseph’s administration of the bureaucracy under the Pharaoh. In preparation for a great famine, the Pharaoh taxed everyone except the priests at a 20% income tax rate. The tax was collected "in kind" – grain. This had been Joseph’s recommended strategy.

Unlike all other central planners, according to the Bible, Joseph really did know that a famine was coming seven years before it came.

There was something else. Joseph had been a slave in Egypt. He understood that the people worshipped Pharaoh as a god. It was a slave-based society. So, he dished out a little of what he had personally experienced. "You like slavery? Have I got a central plan for you! You believe in a divine ruler? Have I got a ‘Christmas club’ savings program for you!"

And the famine came. The people came to the state’s warehouses for food. Joseph sold it to them, cash on the barrelhead. The Genesis account is long, but it reminds us of what the state is all about: a strict taskmaster and a hard bargainer.

Egypt became the model of tyranny for the Israelites. Again and again in the Bible, the writer invoked the tyranny of Egypt as the model of what God has delivered the people from.

What was that? Slavery. Egypt was a massive bureaucracy that extracted 20% from all of its own people. The message was clear: avoid the Egyptian model.

Today, to get the tax rate back to the tyrannical rate of 20%, the West’s governments would have to cut taxes by 50%.

The voters do not care. They cannot distinguish between liberty and tyranny.

SAMUEL’S WARNING

Sometime around 1,000 B.C., the people of Israel came to Samuel, who had served both as a prophet and a civil judge, and demanded a king, just like the other nations had. This was rebellion against God.

Here was democracy in action. The people had spoken. God said to Samuel, "They deserve what they will get. I will give it to them good and hard."

Those who had been delivered out of Egypt were, once again, clamoring to get back in. They wanted the old tyranny. Samuel was told to warn them against this, yet do what they demanded: anoint a man to be their king. They would pay the price. The king would tax them unmercifully.

We read about this and cluck our tongues. The fools!

God gave them good warning.

Then we go down to the Post Office and mail in our tax forms.

To get back to the tyranny of the kings of Israel, the Federal government alone would have to cut taxes by over 50%. That doesn’t count the $400+ billion in borrowed money this year.

Nationally, taxes would have to be cut by 75% to get back to Israel’s self-imposed tax tyranny.

American taxpayers would thank God that they had been delivered – not out of tyranny, but into it.

There is a pattern here.

The voters cannot tell the difference between liberty and tyranny – not in Samuel’s Israel or our America.

The Israelites did not heed Samuel’s warning. They got themselves a king. Taxes got worse and worse. Finally, there was a tax revolt four kings later (I Kings 12). Israel was split into two kingdoms. Secession ended the centralized government. Only under the post-exilic gentile kingdoms – Medo-Persia’s, Alexander’s, and Rome’s – was the nation reunited. But the tax money flowed through Jerusalem and then out of Israel. This was seen as tyranny by the Israelites. The stolen goods were supposed to stay inside the Promised Land, to be divvied up among the local politicians.

IN LESS THAN A CENTURY

The first great tax grab in the West took place in Great Britain in 1909–10. The income tax was imposed by the government of David Lloyd George.

In 1909, Congress voted to allow the voters to vote for or against a Constitutional amendment to authorize a Federal income tax, which the Supreme Court had declared unconstitutional. In 1912, Americans voted. Because of the amendment’s conflicting wording in the state-run elections, this vote technically failed to pass, but the Federal government announced that it did pass, and the public accepted this official word. (The story of this deception is provided in the 1985 book by Benson and Beckman, The Law That Never Was. Still, the amendment did have the support of most voters.)

World War I changed everything in the West. Prior to the war, national tax rates in the West were under 5% of income. After war mobilization proved that the sheep could be fleeced by five to one over pre-war taxation rates, the politicians never looked back.

The economist who saw this first, Joseph Schumpeter, was an Austrian who had studied under Austrian School economists at the University of Vienna, but who never became an Austrian School economist. In a 1918 essay, Der Steuerstaat, he argued that pre-war tax limits had forced the politicians to say "no" to groups demanding money from the central government. Now the politicians would say "yes." And so they did, and still do. There are always limits, but the spending limits today are at levels undreamed of by all but the Communists in 1913 – four years before the Bolsheviks captured Russia.

Today, millions of Americans will shrug their shoulders and mail in their 1040 forms. They will await their refunds, which will serve as down payments. "So much to buy on credit – so little time!"

THE ONLY GAME IN TOWN

Millions of Americans gamble. They know the odds are against them. They know the games are rigged in favor of the house. They know, statistically, that most gamblers lose. Yet they go to the casinos and put their money down.

If you ask the players why they play a game that is rigged against them, they tell you: "It’s the only game in town."

They vote just as they gamble. They know that the tax collectors will keep their fair share – more than the casinos keep: in the range of 50%. They know that more tax money will flow into Washington than will flow back. They know that, as a nation, the taxpayers always lose. Yet the voters refuse to vote the Casino on the Potomac into bankruptcy. Voters are as fond of it as gamblers are fond of Las Vegas. "Shut down the game? Now? Are you crazy? I’m going to get my Social Security in a few years." We have heard this before:

What we see today is nothing new. We marvel at the seeming insanity of the self-abasing groveling Egyptians, who thanked the state for confiscating 20% of their property forever. Yet they actually did get a benefit: food during a famine. What do voters today get? A farm subsidy program that pays huge agribusiness firms not to farm – all in the name of saving the family farm. Yet we think the Egyptians were ninnies!

CONCLUSION

We will mail in our tax forms. We think nothing of it. We cluck our tongues at the Egyptians, who lived under a tax system that we would regard as liberation. We cluck our tongues at the Israelites of Samuel’s day, who demanded a system of centralized government that would tax them at historically unprecedented levels: 10%. "How could they have been so foolish?" we think to ourselves. Yet we would rightly regard a return to the tyranny of unified Israel under the early kings as a politically miraculous contraction of the national government.

The Egyptians heralded a savior Pharaoh and got tax tyranny as their peculiar blessing. The Israelites heralded kingship, and got tax tyranny as their well-deserved reward.

What do we have? More important, what did we praise to high heaven in order to be given what we have obviously got?

April 15, 2005

Copyright © 2005 LewRockwell.com

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