Over-Taxation and Over-Spending Are Major Contributors to the USA's Future Collapse

IS TAXATION THEFT?

Fiat currency and quantitative easing has become the norm, but many people are also under the impression that increased taxation leads to a more successful and prosperous country. If we give a portion of our income to the “experts” in charge, they are bound to use it wisely… right? Let’s take a moment to review the history of taxation in the U.S., as this will add some contextual clarity. In the beginning when Congress enacted the nation’s first federal income tax in 1861, they set a flat rate of 3 percent on incomes higher than $800. Over the next four years, Congress expanded the tax as members cut the amount of income that could be exempted and introduced higher, graduated rates. The same year that the Federal Reserve was created through the Federal Reserve Act of 1913, the Revenue Act of 1913 re-imposed the federal income tax after the ratification of the Sixteenth Amendment. This amendment’s ratification came nearly two decades after the U.S. Supreme Court in 1895 voided an income tax that Congress had approved a year earlier. That tax never took effect. The court declared the tax unconstitutional because it was not apportioned according to the population of each state, as the Constitution then required but does not require anymore.

“War involves in its progress such a train of unforeseen circumstances that no human wisdom can calculate the end; it has but one thing certain, and that is to increase taxes”. - Thomas Paine

Eventually Congress approved a new income tax as part of the Revenue Act of 1916, in which the law set out to raise $205 million in new revenue with more than half of that coming from the income tax. Today, we are seeing tax rates that completely dwarf the rates back in the early 20th century. In 1917, Lawmakers boosted the "normal" income tax rate from 1 percent to 2 percent on net incomes over $3, 000 ($4,000 for married couples). The 1913 law imposed a tax of 1 percent on income up to $20,000, for both individual and joint filers. However, exemptions from the tax — the first $3,000 of income for individuals and the first $4,000 for joint filers — meant "virtually all middle-class Americans" were excused from paying, according to W. Elliot Brownlee’s book, Federal Taxation in America. The law also put in place a graduated surtax on incomes above $20,000; the highest rate paid, 7 percent, applied to Americans making more than $500,000 (about $12.6 million in 2019 dollars). In 2019, this tax rate would be considered conservative, since the overall average tax rate for all U.S. citizens is now closer to 9%, rising considerably more as income increases ever so slightly. The 1913 tax also physically looks nothing like it does today. For example, the actual form and directions fit on a mere four pages in 1913, today they total an intimidating 106 pages. Bloated systems impossible to track… genius! Of course, tariffs and taxes on items aren’t anything new, with the most famous in the U.S. being the Tea Tax that resulted in the Boston Tea Party. But even modern sales tax as we know it today only started sometime in the 1920s - 1930s. This being after the introduction of the country to income tax, which at its core warmed citizens up to the overall idea that funding a government system that throws people in prison for not making payments means a happy country.

“We contend that for a nation to try to tax itself into prosperity is like a man standing in a bucket and trying to lift himself up by the handle”. - Winston S. Churchill

WHO STARTED IT?

Strangely, which state started the sales tax first isn’t entirely clear. It may have been West Virginia that started it in 1921 or Kentucky around 1930. One problem is the exact definition of sales tax wasn’t set, as tax on the purchase of items was unusual in the U.S. before then. What’s definitely known, though, is that the idea spread like wildfire. As the Great Depression boiled on and various states got closer to complete collapse, the politicians in charge naturally jumped on the sales tax idea – and so did its citizens, assuming that feeding the system would fix the underlying economic issues. At least 11 states had adopted a sales tax by 1933. By 1940, 18 more states had jumped on the bandwagon. Vermont held off until 1969. As of 2014, only five states haven’t adopted sales tax: Alaska, Delaware, Montana, New Hampshire, and Oregon.

Other taxes were attempted, of course. When times are desperate most people will do anything they can to stay afloat. Taxes on things like labor were tried but didn’t stick since legislators were worried that a tax on direct labor would cause a lack of productivity. Sales tax, though, was a huge “success”. The economy in the 1930s was largely focused on selling goods, thus the sales tax was bringing in a ton of money. It was so successful that in 1970 sales tax became the largest source of income for states. Scraping the bottom of an extremely powerful economic bucket through forced coercion apparently yields tremendous results. This revenue source eventually began to be replaced by personal income tax in the 1990s - this eventual swap being just one of many hallmark signs of things to come.

Slowly, the U.S. economy has turned more service-based than goods-based. However, governments are still hesitant to put taxes on services, one service being the potential internet sales tax. Every time there’s trouble or a dip in sales, states try to figure out how to make up for the lack of taxes and Band-Aid the sinking boat. Often they’ll simply raise taxes, but that only goes so far. Will the online sales tax be the next incarnation of this not-quite-a-hundred-year-old tax? It’s looking that way, but it should be no surprise, considering the history of increased taxation by fearful politicians after markets stumble. Until states attempt other means of raising money they’re going to rely on the old methods, even if they don’t work like they used to during the Great Depression. If a car begins to show its age and the components start to occasionally fail, when does it become time to throw away the car and get an improved one?

“When plunder becomes a way of life for a group of men in a society, over the course of time they create for themselves a legal system that authorizes it and a moral code that glorifies it”. - Frédéric Bastiat

Can mankind create a system of growth “from nothing” or “ex nihilo” without it eventually collapsing? Well, it appears the nations of the world are trying their best to do just that. Ironically, the leaders of this central banking system may consider the Federal Reserve to be their “Great Work,” but the campaigns to “End the Fed” happening across the world reveal the perspective that the Federal Reserve may be our country’s “Worst Work”. Maybe the Federal Reserve is simply a reflection of the corrupted hearts of its creators?

MOAR WAR!

With quantitative easing and increased taxation being only a few of the contributors to the brokenness of the system, this country’s spending is also not slowing down. The United States military spending, for example, is inching closer and closer to a legendary one trillion dollars, with an over 700-billion-dollar one in 2019 (even though U.S. military spending already dwarfed the rest of the world exponentially). In fact, depending on when you are reading this book, if the system hasn’t collapsed yet, the U.S. military spending may already be at that point.

“In the councils of government, we must guard against the acquisition of unwarranted influence, whether sought or unsought, by the military-industrial complex. The potential for the disastrous rise of misplaced power exists and will persist”. - Dwight D. Eisenhower

The military has called the additional funding “necessary” to improve its ability to respond to international crises, while critics say Congress should not be giving a significant boost to spending at the Defense Department at a moment of relatively diminished U.S. military involvement around the globe. About 17 percent of America's $4 trillion federal budget goes to the military, according to the Congressional Budget Office. This dramatic increase in military spending will exacerbate America's debt hole by pushing the government further into the red and increasing the amount the federal government spends on debt interest payments. Congress's official budget scorekeeper recently projected the federal deficit will rise to more than $1 trillion a year by 2020, sparking concerns among both Republicans and Democrats in Congress that spending is growing at an unsustainable rate and could trigger higher inflation. The military's "base" budget, not including a contingency fund for overseas operations, will be the biggest in recent American history since at least the 1970s, adjusting for inflation. Including this contingency fund, which includes substantial wartime operation spending, America's military budget was bigger for several years in the Obama administration. The 2019 budget largely rose with inflation from 2018, which saw the bulk of the increase from 2017.

"Earlier this year, both parties came together and decided on a massive expansion of defense spending and to not pay for it… We'll be near $1 trillion deficits next year, and the fact we're spending so much on defense means we have less resources for everything else and makes our debt more out of control”. - Marc Goldwein, Senior Vice President of the Committee for a Responsible Federal Budget

JUST STOP IT

Politicians on both sides of the aisle have expressed alarm about America's rising deficit, with Senate Budget Committee Chairman Mike Enzi (R-Wyo.) criticizing "chronic overspending" in the federal government and Sen. Claire McCaskill (D-Mo.) arguing that Republicans had "blown this deficit up to places one couldn't even imagine it could go”. Like most of their colleagues, though, both voted for the military budget increase. The military budget fell sharply under the Obama administration, as the Iraq War wound down and a Republican-led Congress sought to reduce overall federal spending. But military officials say that decline put America's armed services behind those of key foreign countries, as China has ramped up its military spending, and that they need bigger investments in cyber warfare, "next generation" combat vehicles and other high-technology military equipment to protect the nation's overseas allies. Defense officials repeatedly said they needed the additional funding to improve the military's "readiness," including the preparedness of troops for battle. The budget also gave a pay raise to the military's enormous workforce, which includes 1.42 million military employees and hundreds of thousands of civilian workers.

"Our regional competitors in the Pacific and in Europe have been studying our strengths and our vulnerabilities for more than a decade… Their modernization efforts are slowly eroding our competitive advantage, and this budget request addresses that, by providing the necessary resources to ensure the Army's superiority”. - Maj. Gen. Paul A. Chamberlain said in 2018

ANOTHER WORLD WAR?

But opponents say America is sending a signal to the world that it is preparing to go to war, in part through billions in new investments in nuclear weapons research, new nuclear warheads, updated aircraft carriers and ballistic submarines whose practical application some say is hard to imagine in a modern war. Pointing to the calamity following the invasion in Iraq, they also question the assumption that the United States can use military force to solve political or humanitarian issues around the world. "This is not only wasteful, it's dangerous: It tells other countries that the nuclear arms race is back on," said William Hartung, director of the Arms and Security Project at the Center for International Policy, "…. All of this money is being spent in service of the idea we can go anywhere and fight any battle, and the recent history shows that doesn't make a lot of sense or make us safer”. Critics also say the Pentagon is bloated with administrative waste and contracts, pointing to a 2016 internal report finding that the military buried evidence of $125 billion of bureaucratic waste. America spends more on its military than the next 11 countries combined, according to Matthew Fay, director of defense and foreign policy studies at the Niskanen Center. Pouring billions into the military also limits America's ability to spend on health care, child care and other key domestic spending priorities, Sen. Bernie Sanders (I-Vt.) said in a recent speech on the Senate floor, noting the nation has among the worst health and child poverty rates in the developed world. Once while Congress was shoveling billions into an already bloated military budget, President Trump said that he did not want to spend trillions of more dollars in the Middle East where we get nothing for our efforts. He’d “rather fix roads here in the U.S”., he said. The only reason we have a presence in other countries, he said, was to “get rid of terrorists,” after which we can focus on our problems at home. Of course, most politicians, Republican or Democrat, are only concerned with reallocating spending rather than reducing spending overall. The only way to fix the boat is to first stop sailing it into the open sea.

What's hurting the U.S. economy is total government spending. The deficit is an indicator that the government is spending so much money that it can't even get around to stealing all of the money that it wants to spend. But the tip of the iceberg is not what hit the Titanic - it was the 90 percent of the iceberg under water. - Grover Norquist

This bigger military budget is being accompanied by a roughly equivalent increase in spending on domestic programs, as part of an agreement reached by the two parties in March to lift caps on spending that Congress imposed earlier in the decade. The military budget elicited little dissent in the Senate. Sens. Rand Paul (R-Ky.), Mike Lee (R-Utah.) and Sanders voted against the measure, as did a handful of Democratic senators, including possible 2020 presidential candidates such as Sens. Kirsten Gillibrand (D-N.Y.), Kamala D. Harris (D-Calif.), Jeff Merkley (D-Ore.) and Elizabeth Warren (D-Mass.). Sen. Cory Booker (D-N.J.) voted for the measure. The Senate vote follows the approval of similar legislation in the House. The two bills are expected to go to a conference between the chambers to iron out the differences. The increase in military spending is one of the largest in modern U.S. history, jumping by 9.3 percent from 2017 to 2019, according to Todd Harrison, director of defense budget analysis at the Center for Strategic and International Studies, a think tank.

“I saw that publishing all over the world was deeply constrained by self-censorship, economics and political censorship, while the military-industrial complex was growing at a tremendous rate, and the amount of information that it was collecting about all of us vastly exceeded the public imagination”. - Julian Assange

Since the Reagan administration, the military has increased by comparable levels only a handful of times: jumping by 23 percent in 2003 the buildup to the Iraq War; and by about 8 percent for three straight years between 2006 and 2008, during the troop buildup, according to Harrison. "If you want the military to maintain all of our existing security commitments around the world, then you need a defense budget like this," Harrison said, "… But if you are willing to reduce some of those security commitments, you could make do with a much smaller defense budget”. While presenting the 2018 National Defense Strategy (NDS2018) of the United States on Friday at the Johns Hopkins University, Secretary of Defense James Mattis painted a picture of a dangerous world in which U.S. power – and all of the “good” that it does around the world – is on the decline: “Our competitive edge has eroded in every domain of warfare – air, land, sea, space, and cyberspace,” he said, “and it is continually eroding”. With an over 700-billion-dollar defense spending budget in 2019, we can see a signal that a shift away from concerns about rising deficits is happening even more. Defense Secretary Jim Mattis appears onboard with the increase, though, when he unveiled a strategy that proposes retooling the military to deter and, if necessary, fight a potential conflict with major powers such as China and Russia. This represents a setback for deficit hawks such as Mick Mulvaney, director of the Office of Management and Budget, who last year pressed for an increase in defense spending that could be offset by cuts to domestic programs. This is a 13 percent increase over 2017 when the United States spent about $634 billion on defense. What's behind this massive surge in "defense" spending? Here are the highlights from Secretary Mattis’s speech, on January 19th, introducing national defense strategy for 2018:

“This defense strategy was framed ... by President Trump's National Security Strategy… It is, as was noted by the dean, our nation's first National Defense Strategy in 10 years... We will continue to prosecute the campaign against terrorists that we are engaged in today, but Great Power competition, not terrorism, is now the primary focus of US national security… We face growing threats from revisionist powers as different as China and Russia are from each other, nations that do seek to create a world consistent with their authoritarian models, pursuing veto authority over other nations' economic, diplomatic and security decisions. Rogue regimes like North Korea and Iran persist in taking outlaw actions that threaten regional and even global stability. Oppressing their own people and shredding their own people's dignity and human rights, they push their warped views outward… We're going to build a more lethal force. We will strengthen our traditional alliances and building new partnerships with other nations. History proves that nations with allies thrive”.

OFFENSE OR DEFENSE?

In regard to Mattis’s speech, Mark Cancian, a defense analyst with the Center for Strategic and International Studies (CSIS), said, “What Mattis is saying is that you can’t have the best military in the world on an Obama budget… the proposed increase is a huge deal… It’s a big jump in defense and means that the Trump administration is putting resources against an extremely aggressive defense strategy”. Unfortunately, the various regimes of government we have in the past decades seem to be incapable of considering the idea that U.S. intervention and occupation of foreign countries contributes to instability and feeds terrorism. Continuing to do the same thing for more than 17 years (more U.S. sent bombs to “stabilize” the Middle East) and expecting different results is hardly a sensible foreign policy. In fact, we could safely label this as insanity. Until we realize that over-spending is a source of, rather than the solution to, our problems, we will continue to wildly spend on our domestic and military empire until the dollar collapses and we are brought to our knees. Then what? As the United States continues to break its own debt record each and every year, with 23 trillion dollars in debt as of 2019, the chance of another currency taking control while the USD is down increases. We can clearly determine that the indefinite existence of the current form of fiat currency is highly unlikely, considering it is being abused in economic manipulation, over-taxation, and government spending. The continued existence of this country, which relies on this imaginary currency, is also unlikely – we are indebted to neighbors also reliant on imaginary currency. This is not a good situation to be in, and our leaders’ hearts don’t appear to be pointing in the right direction.