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Great article Steve. Tax Facts was enlightening. I think unlikely Ryan's plan will get any traction, but every four years the issue gets more and more strident. Eventually those paying taxes will be squeezed to be such a small percentage of the population that the pressure for change will be uncontrollable.

When? Soon? I dunno!

The increase in taxes as a percent of GDP isn't all that surprising in retrospect. After all, if nominal tax revenue rises by 14% a year, while the nominal economy grows by 6-7% a year, taxes must be taking a bigger slice of the pie.

Thanks for the chart. This type of stuff rocks!

However it would be even better with recession bars as well, showing the effect of recessions as well as the effect of long economic expansions.

I'd also give a lot to see the chart with an inverted curve showing top personal US income tax rates, as well as another line showing the top capital gains tax rate. It would be eye opening for lots of people.

CR,

Unfortunately, I don't know if I agree with your "pressure for change will be uncontrollable" conclusion. It seems to me that the biggest obstacle to tax reform, besides the fact that every deduction, loophole, and shelter has a lobby behind it, is that such a small percentage of our population pays a significant amount of income tax. Those who pay little or nothing in the way of taxes have no incentive to push for change. Essentially, our tax system illustrates the old "democracy is three wolves and a sheep deciding what to have for dinner" axiom. The worse that gets, the madder the "sheep" get, but the less power they have to do anything about it.

Just wanted to let you know I wrote my congressmen telling him to support this bill.

http://www.house.gov/writerep/

It would be even better if they could couple this with removing the cap on SS tax and lowering the rate while keeping the benefits the same and indexing for inflation. That may get us closer to a fix.

I'm willing to wager $1 (big gambler) that, unless something magical happens and polarization abates, there will not only be a tax rate increase on the highest incomes, but any tax reform, fair, flat or hybrid, has a snow balls chance.

I state this because I firmly believe that the next presidential and congressional elections, no matter which party wins, will lead to continued partisan bickering. And the reason I believe that is because I don't see either party garnering enough votes to claim a mandate and that is what would be needed to get us off the dime.

This is a fascinating proposal. I wish it could actually pass. It's way too easy to politically assassinate this bill, though. For instance, it's easy to characterize it as "a tax cut for the rich" because, as with any other flat tax scenario, the people in the lowest tax brackets wouldn't benefit from the flat rate. However, if someone who picked the traditional tax structure later increased their income enough to benefit from it, they wouldn't be able to switch, enabling the demagogues to say that it benefits only the already-wealthy and penalizes upwardly mobile members of the lower class.

Any discussion of income tax modifications obscures the real issue: all taxes are theft. Taxes are the State's way of stealing from people. Taxes are nothing more than market manipulation, wealth confiscation, and weapons of a controlling government.

The State gets away with it because it has convinced people taxes are necessary to provide essential services instead of letting market competition to occur and let people decide for themselves how to get
services they need.

In 1913 when Congress passed the Federal Reserve Act it also passed
the Federal Income Tax Act. Coincidence? No. The Federal Reserve is neither Federal nor is it a Reserve. The government claims the Federal Reserve is necessary to prevent runs on local banks but the Federal Reserve is nothing more than a system of twelve privately-owned banks who manipulate the money supply causing inflation and stealing from hard working Americans. The Federal Income Tax pays for zero government services. Every penny of Federal Income Tax goes to the Federal Reserve. It is theft, pure and simple.

Since you always focus on economic growth you should know by now the
path to explosive growth lies with the removal of market manipulation, the least amount of government possible, and government only within
the narrow confines of the Constitution.

Inflation would never be an issue if the Federal Reserve disappeared
and if the Federal Government operated within the confines of the Constitution.

The Libertarian ideals on which the United States was founded remain the bedrock upon which economic, cultural, social, spiritual, physical, emotional, intellectual, and metaphysical growth blossom.

The abandonment of Libertarian ideals and the embrace of statism
impedes growth, allows for wealth transfer, and creates endless
opportunities for the State to steal and rob from citizens.

Signed,

The Practical Skeptic

Any discussion of income tax modifications obscures the real issue: all taxes are theft. Taxes are the State's way of stealing from people. Taxes are nothing more than market manipulation, wealth confiscation, and weapons of a controlling government.

The State gets away with it because it has convinced people taxes are necessary to provide essential services instead of letting market competition to occur and let people decide for themselves how to get
services they need.

In 1913 when Congress passed the Federal Reserve Act it also passed
the Federal Income Tax Act. Coincidence? No. The Federal Reserve is neither Federal nor is it a Reserve. The government claims the Federal Reserve is necessary to prevent runs on local banks but the Federal Reserve is nothing more than a system of twelve privately-owned banks who manipulate the money supply causing inflation and stealing from hard working Americans. The Federal Income Tax pays for zero government services. Every penny of Federal Income Tax goes to the Federal Reserve. It is theft, pure and simple.

Since you always focus on economic growth you should know by now the
path to explosive growth lies with the removal of market manipulation, the least amount of government possible, and government only within
the narrow confines of the Constitution.

Inflation would never be an issue if the Federal Reserve disappeared
and if the Federal Government operated within the confines of the Constitution.

The Libertarian ideals on which the United States was founded remain the bedrock upon which economic, cultural, social, spiritual, physical, emotional, intellectual, and metaphysical growth blossom.

The abandonment of Libertarian ideals and the embrace of statism
impedes growth, allows for wealth transfer, and creates endless
opportunities for the State to steal and rob from citizens.

Signed,

The Practical Skeptic

That's funny, SOMEBODY was giving me paychecks twice a month back when I was in the navy. I guess it was the Federal Reserve.

Hey Kevin,

Read This!

Our Expansion Experiment
As Ron Paul asked the Fed Chair, how is it morally justifiable to deliberately depreciate our currency?

by Doug French

Financial pundits, led by CNBC’s Larry Kudlow, were rooting for the Federal Reserve to “shock and awe” the market with a 50 basis point cut on the Federal Funds rate at the central bank’s September meeting. Fed chair Ben Bernanke didn’t disappoint, and investors recognized further dollar devaluation and sent gold, stock and commodities markets through the roof and the U.S. dollar to the basement.

The Fed has been creating money at a phenomenal clip all year with the M-3 (that government no longer reports, but economist John Williams does on Shadowstats.com) growing at a 14-percent rate, a 34-year high.

But since the meltdown of the sub-prime mortgage market, the Fed has really been shaking its moneymaker. In a Sept. 6 alert to his subscribers, Williams noted, “M2 now has risen by $111.1 billion for the last two weeks, rising at an annualized fortnight growth rate of 48.2 percent.”

Even Countrywide Mortgage CEO Angelo Mozilo is panicked. While he has publicly urged the Fed to aggressively cut interest rates to help the housing industry, he has been aggressively cutting the number of shares of his company’s stock that he owns, selling more than $200 million worth just since the first of this year.

Mozilo isn’t going to miss any meals. Nor is Chairman Bernanke or the Wall Street fat cats the Fed is bailing out. The middle class and the poor will feel the pain. As Congressman (and Presidential candidate) Ron Paul asked Bernanke during hearings on Capitol Hill, “How is it morally justifiable to deliberately depreciate our currency?”

Bernanke’s terse reply was, essentially, that the inflation rate is low, so don’t worry yourself.

Meanwhile, on the other side of the globe, an ongoing monetary expansion experiment has completely decimated one of Africa’s richest economies. The country of Zimbabwe was once known as the “bread basket of Africa,” exporting wheat, tobacco and corn to the rest of the continent and beyond. Zimbabwe’s farmland is the most fertile on the continent, and the country is also host to one of the seven natural wonders of the world, Victoria Falls. The country is not only rich in natural resources; the country’s literacy rate is the highest in Africa at more than 90 percent.

Unfortunately, Marxist guerrilla leader Robert Mugabe’s ZANU-PF party won the 1980 general election and Mugabe has controlled the government, the ballot box and the money printing press ever since. His disastrous economic policy of out-of-control money creation – inflation – has turned the country from breadbasket to basket case.

Although Mugabe’s government says the inflation rate in Zimbabwe is 7,600 percent, others estimate it to be 25,000 percent, and the Associated Press reports that the International Monetary Fund believes that, by the end of the year, the inflation rate will be 100,000 percent.

One Zimbabwean businessman told the BBC: “I don’t even know if I’ll have a job at the end of the week, because there is so much uncertainty. There are so many companies closing down. It is quite interesting to see people going in banks with bags and sometimes even suitcases. You know that there are large amounts of money in there – which unfortunately are not going to buy much.”

So while there is plenty of paper money floating around Zimbabwe, with many of the bank notes having plenty of zeros, the food shortage has now put family pets in harm’s way. People can’t afford to feed their animals, not to mention themselves, but most can’t bring themselves to butcher and roast Fido for dinner, so animal shelters are full.

With the price of food soaring in Zimbabwe dollars, the Mugabe government thought it would solve the problem by ordering stores to cut prices. Of course, this exacerbated the food shortage, placing a premium on food scraps, and now aggressive rats are roaming beyond dumpsters for sustenance.

But, people do what they must to survive, and the black market is alive in Zimbabwe. Pet meat sells for more than 10 times the government’s fixed price on the black market, according to the AP.

“Inflation is the fiscal complement of statism and arbitrary government,” economist Ludwig von Mises wrote. “It is a cog in the complex of policies and institutions which gradually lead toward totalitarianism.”

Although it appears for now the Bernanke Fed is way behind Mugabe’s Reserve Bank of Zimbabwe in the inflation race, the man tracking the numbers at Shadowstats, believes “the onset of hyperinflation [in America] remains most likely at least several years in the future,” an unappetizing prospect.

This article originally appeared in Liberty Watch Magazine.

Hey Kevin,

Read This!

Our Expansion Experiment
As Ron Paul asked the Fed Chair, how is it morally justifiable to deliberately depreciate our currency?

by Doug French

Financial pundits, led by CNBC’s Larry Kudlow, were rooting for the Federal Reserve to “shock and awe” the market with a 50 basis point cut on the Federal Funds rate at the central bank’s September meeting. Fed chair Ben Bernanke didn’t disappoint, and investors recognized further dollar devaluation and sent gold, stock and commodities markets through the roof and the U.S. dollar to the basement.

The Fed has been creating money at a phenomenal clip all year with the M-3 (that government no longer reports, but economist John Williams does on Shadowstats.com) growing at a 14-percent rate, a 34-year high.

But since the meltdown of the sub-prime mortgage market, the Fed has really been shaking its moneymaker. In a Sept. 6 alert to his subscribers, Williams noted, “M2 now has risen by $111.1 billion for the last two weeks, rising at an annualized fortnight growth rate of 48.2 percent.”

Even Countrywide Mortgage CEO Angelo Mozilo is panicked. While he has publicly urged the Fed to aggressively cut interest rates to help the housing industry, he has been aggressively cutting the number of shares of his company’s stock that he owns, selling more than $200 million worth just since the first of this year.

Mozilo isn’t going to miss any meals. Nor is Chairman Bernanke or the Wall Street fat cats the Fed is bailing out. The middle class and the poor will feel the pain. As Congressman (and Presidential candidate) Ron Paul asked Bernanke during hearings on Capitol Hill, “How is it morally justifiable to deliberately depreciate our currency?”

Bernanke’s terse reply was, essentially, that the inflation rate is low, so don’t worry yourself.

Meanwhile, on the other side of the globe, an ongoing monetary expansion experiment has completely decimated one of Africa’s richest economies. The country of Zimbabwe was once known as the “bread basket of Africa,” exporting wheat, tobacco and corn to the rest of the continent and beyond. Zimbabwe’s farmland is the most fertile on the continent, and the country is also host to one of the seven natural wonders of the world, Victoria Falls. The country is not only rich in natural resources; the country’s literacy rate is the highest in Africa at more than 90 percent.

Unfortunately, Marxist guerrilla leader Robert Mugabe’s ZANU-PF party won the 1980 general election and Mugabe has controlled the government, the ballot box and the money printing press ever since. His disastrous economic policy of out-of-control money creation – inflation – has turned the country from breadbasket to basket case.

Although Mugabe’s government says the inflation rate in Zimbabwe is 7,600 percent, others estimate it to be 25,000 percent, and the Associated Press reports that the International Monetary Fund believes that, by the end of the year, the inflation rate will be 100,000 percent.

One Zimbabwean businessman told the BBC: “I don’t even know if I’ll have a job at the end of the week, because there is so much uncertainty. There are so many companies closing down. It is quite interesting to see people going in banks with bags and sometimes even suitcases. You know that there are large amounts of money in there – which unfortunately are not going to buy much.”

So while there is plenty of paper money floating around Zimbabwe, with many of the bank notes having plenty of zeros, the food shortage has now put family pets in harm’s way. People can’t afford to feed their animals, not to mention themselves, but most can’t bring themselves to butcher and roast Fido for dinner, so animal shelters are full.

With the price of food soaring in Zimbabwe dollars, the Mugabe government thought it would solve the problem by ordering stores to cut prices. Of course, this exacerbated the food shortage, placing a premium on food scraps, and now aggressive rats are roaming beyond dumpsters for sustenance.

But, people do what they must to survive, and the black market is alive in Zimbabwe. Pet meat sells for more than 10 times the government’s fixed price on the black market, according to the AP.

“Inflation is the fiscal complement of statism and arbitrary government,” economist Ludwig von Mises wrote. “It is a cog in the complex of policies and institutions which gradually lead toward totalitarianism.”

Although it appears for now the Bernanke Fed is way behind Mugabe’s Reserve Bank of Zimbabwe in the inflation race, the man tracking the numbers at Shadowstats, believes “the onset of hyperinflation [in America] remains most likely at least several years in the future,” an unappetizing prospect.

This article originally appeared in Liberty Watch Magazine.

You've convinced me. I'll never move to Zimbabwe.

Arrrrrggggggghhhhh!! A Ron Paul acolyte infestation. Preserve us. It wouldn't be quite so bad if they could just boil it down a bit. You know, laissez-faire good, Fed Reserve bad.

I'm pretty much a free market anarchist, but Ron Paul and his band of pitchfork wielding peasants is not living in the same as I am. Ah, well.

Anyway, it's our moral duty to tax high earners, darn it. That's what we elect Democrats for.

Arrrrrggggggghhhhh!! A Ron Paul acolyte infestation. Preserve us. It wouldn't be quite so bad if they could just boil it down a bit. You know, laissez-faire good, Fed Reserve bad.

I'm pretty much a free market anarchist, but Ron Paul and his band of pitchfork wielding peasants is not living in the same as I am. Ah, well.

Anyway, it's our moral duty to tax high earners, darn it. That's what we elect Democrats for.

Practical Skeptic -

Here's my response to your first post.

Regarding "All taxes are theft":

The people of the United States of America have enabled our government, through the Constitution which governs it, to tax us. We have specifically authorized this. It is not theft. What pretty much everyone wishes to change is the amount that is taxed, the manner in which we are taxed, and what the money is spent on. People just have wildly differing opinions on the specifics.

Regarding "it has convinced people taxes are necessary to provide essential services"

Well, they convinced us of it because it's correct. For instance, try to imagine if our military received no tax money. The privately owned military groups would have to ask people to pay for the service of protecting the nation, which seems extremely unlikely to result in a viable military. I feel that many things handled by the government could be more effectively privatized, but that doesn't mean that everything could or should be.

"Inflation would never be an issue if the Federal Reserve disappeared
and if the Federal Government operated within the confines of the Constitution."

That's a bit like saying that if we returned to using leeches for blood extraction, we would eliminate the risks associated with using hypodermics. While the gold standard may have had fewer periods of overall inflation, that's because it had many periods of deflation, which in turn resulted in severe economic contractions. The Federal Reserve system allows us to prevent long term deflation and greatly lessen other shocks to our economy.

Your second post seems to compare Bernanke's policies with Robert Mugabe's. It makes far too little sense to refute.

JorgXMcKie - Indeed. I'm a Libertarian, or at least I'm someone who's very fond of Hayek and Friedman. Ron Paul and his followers, however, seem rather prone to silly conspiracy theories.

Ariah-

While I agree with a lot of your post, I must disagree with one thing. The Federal Government does not tax us because they need to raise money for government operations, like the military. They tax us to enforce a value on the fiat dollar. We NEED dollars because that is all we can pay our taxes with, so as long as there are taxpayers in the country, there will be demand for the dollar.

The Federal Government controls the money supply, so it could pay for everything that it wants or needs through deficit spending. It doesn't need to "raise" money from anybody.

Cheezedawg, you sound like you'd prefer some other medium of exchange to the U.S. Dollar fiat currency.

What is it? Go ahead, say it, let it out. What do you want to spend?

Absolutely not! I completely support the concept our our fiat currency. I just think it is often misunderstood.

ah, OK Cheezedawg. Just that so often comments like that are often followed by advice to declare yourself a sovereign nation and to quit paying taxes!

I guess I will have to figure out how to make that point without sounding like a gold bug, or worse, a Ron Paul supporter! :)

Let me reiterate certain points to refute the lies, misunderstandings, and mud flung at my earlier posts.

All taxes are theft.

Americans never authorized the U.S. government to tax us.

Corrupt politicians bent on acquiring more money and more power along with greedy central bankers itching to use the U.S. Treasury for their own profits ramrodded through the Federal Income Tax Law in 1913 the same year that the Federal Reserve Act was enacted.

Taxes are not used to provide "essential" government services. They are used to service the debt specifically to pay interest on the debt to the Federal Reserve which never created the money in the first place.

Governments always inflate fiat currency which devalues it. History is full of examples from France to Germany to Rome.

Today's dollar is worth 95% less than what it was worth in 1913 because the Federal Reserve has manipulated the money supply which is why it no longer publishes the M3 figures and no longer makes it available to Congress.

Non-asset backed fiat currencies are always manipulated for the benefit of the wealthy.

This money manipulation is a "hidden" tax on the poor and middle classes.

I support Ron Paul because he speaks the truth.

You can dismiss me and others as conspiracy theorists and insult Ron Paul all you want but you cannot refute the truth.

Remember this site is designed to promote intellectual discussion of ideas and theories not to foster personal attacks on posters or on presidential contenders.

Focus on the theories and ideas not the people.

The Practical Skeptic

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