The Secret Taxes that Rob You Blind

What you don’t know won’t hurt you is the motto of the tax man. Write a check to the IRS and you will squirm and whine. Write a big enough check to the IRS and you will holler and maybe even protest in the streets. So the tax man cometh and figureth that his chances of getting away with your money are better if he uses the tactics of a pickpocket than of an armed robber. But be not fooled, for he is armed with the coercive power of government force, which does indeed include the ability to imprison and kill you.

Dead citizens, though, don’t pay taxes and incarcerated citizens can actually cost money so what the tax man wants is to keep you happily buzzing along in productive work while he skims as much of the money off your pay and profits as he can without alarming you. His favored way of doing this is to hide taxes from you so that you don’t even know you are paying them.

Inflation is a hidden tax and it is a tax that most directly affects and hurts those in the lower and middle economic strata. Inflation is not some natural phenomena that just happens to money like evaporation happens to water, even though we all take it just about as much for granted. Inflation is intentional. Inflation is not prices going up; it is the value of your money decreasing. What causes that? The government printing money, and more money, and more money.

Remember when your dad used to tell you that money didn’t grow on trees. He was saying of course that he went out and earned the dollars you were trying to wheedle out of him and that there was only a finite amount of them available. But consider for a moment if money did grow on trees. At first the thought is pleasant; you imagine just walking outside and stripping a handful of 20s off a tree like loose leaves as you head out to the grocery store. Fives and tens whirl about your feet as you cross the parking lot and the store is full of other shoppers, pockets stuffed with cash. The reality of course is that it all would be as worthless as the fallen leaves you ignore in the street today. The very easy availability of it would inflate its value down to nearly zero.

Now the tax man knows that he can’t get away with that level of inflation, but he has figured out that as long as he keeps the inflation rate at around 3 percent or so, you won’t squeal too much. So how does he inflate the money since it doesn’t grow on trees? Easy; he just prints it. Putting more money into circulation devalues it. As long as the devaluation is gradual and as long as people are able to demand cost of living increases to wages and salaries, the taxman has learned, the population will put up with it. The taxman then uses the printed money to pay for things like schools and roads and fighter jets and farm subsidies and you don’t object to the expenditures because you don’t realize that your taxes are steadily increasing to pay for them. You might even be under the impression that your tax rate is staying the same or even decreasing during the exact same period that the earning power of your dollars is eroding due to inflation.

This is a direct assault on representative government. The reason the Constitution gives congress control over spending and taxes is because congress is (ostensibly) closest to the people. The founders figured that this would put a natural cap on government spending because the citizens would be up in arms over the imposition of taxes that were driven too high by reckless spending. So instead of going to the people and asking them to support, say a 3 percent tax increase for buying up wetlands, they just write it into the budget, borrow the funds, and then print the money to pay what they borrowed.

Which brings us to another hidden tax. When the government borrows money, the government competes with everyone else who wants to borrow money: with the small business man looking to build a second gas station, with the town trying to get a mortgage on a school building, with the couple trying to get a condo in Florida. Everyone who wants to borrow money is in competition for the dollars with everyone else seeking to borrow and the demand determines the interest price. So the cost of interest becomes another hidden tax.

It really does not even matter if you are not in debt at all. You cannot avoid paying this hidden interest tax because the cost of this tax to your state and municipality will result in increases in income, sales, and property taxes. The cost of this tax to local businesses will be compensated for by an increase in the prices you pay. The cost of this tax to your own employer will increase his business expenses, restrain funds he might have otherwise paid you or used to grow his business and give you more opportunity for advancement.

Besides, the inflation itself encourages debt as everyone tries to figure out how to game the system by getting what they need or want today and paying for it with inflated dollars tomorrow. It punishes productivity, thrift, and savings. Here is an explanation of how inflation robs the spending power from a retirement account.

The hiding of these taxes created by government debt and the printing of money keeps out of public awareness the actual tax burden. It also obscures the fact that it falls, despite our so-called progressive tax rates (which charges higher incomes at a greater rate) proportionally more onerously upon the lower economic strata.

Here is how. Lower income people are more likely to be carrying a personal debt load than higher earners and more likely to have incurred debt for needs (as opposed to luxuries). They are also less likely to be lenders who benefit from higher interest rates than are those with higher incomes. (One does not have to be a “bank” to loan money; members of credit unions, corporate stock holders, etc. are lenders in the economy.) Those with lower incomes often face greater lag in “cost of living” adjustments, so that the effects of inflation hit them harder and they experience greater erosion proportionally of earning power over time.

None of this is an argument for increasing the progression of the current tax system. The entire system, with the happy collusion of congress — the branch that is supposed to be most responsive to citizens — is so constructed as to deny the principles of “government by the people” by obscuring from said people what is really being taken from them. The people will not get control of this government again until the tax system is put right and every single robber is put out.

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  • Cooky642

    Which is exactly why we need to “throw the bums out!” and start over.

    I had an interesting coversation with my 17-yr-old grandson a few years ago. We were talking about athletic shoes; he had his eye on a pair that cost $100. While I know that’s not beyond reason, these days, it nevertheless caused me to reflect on my youth. First, I had to explain what Keds were–in those days, there wasn’t much else. Then, I told him about buying my own shoes in high school for $2 or $3 per pair. I was scandalized when I’d recently bought a pair and had to pay $12 for them. For about 2 seconds, he thought it was a funny story. Long pause. Finally, he said, “Wow, at that rate of inflation, it’s going to cost me $1,000 for one pair of shoes for one of my children!” Before I could say anything in response, he blurted, “Boy, I better study harder so I can get a really good job!” Enough said.

  • http://www.tell-usa.org Robert Struble, Jr.

    At the municipal level here, traffic tickets constitute another hidden tax. Speed limits are set low, speed traps strategically located, so as to collect “taxes” often unrelated to public safety.

    A municipal judge confided to me some years ago that city hall set speed limits on a long, downhill, four-lane grade, with a median divider, precisely for the purpose of raising more revenue. The 35 mph speed limit, when the natural flow of traffic was 50, had proven to be a big money maker — aka TAX.

    So how does the principle of taxation via representation work when the tax is imposed fraudulently upon the people by our representatives? In reality it cannot work, as Mary rightly points out, until “every single robber is put out.”

  • http://arkanabar.blogspot.com Arkanabar Ilarsadin

    It is worth noting, as the Western Confucian recently did, that inflation benefits borrowers and punishes lenders. The biggest borrower IN THE WORLD is …

    The United States Treasury Department.

    Convenient for them that they decide how big the money supply is, eh?

  • Warren Jewell

    Mornin’, ladies and gentlemen. God be with you.

    Now, I am also of the opinion that we just have WAY too few representatives. I say that any rep should have a constituency of 60-70,000 souls (not voters, but citizens). This would make for a current HoR of over 5,000 members; and at once dilute House floor power and increase closeness to constituencies. (Just the greater likelihood of truly local stump speeches [town-hall meetings?] tickles my intellectual imagination.) Lobbyists could not ‘buy’ enough rep votes and only the best ideas would likely even get full hearings. Plus, with hearings, etc., going on months in most cases, we citizens would get a better look at legislation before it could ‘assault’ us.

    Plus, return Senatorial selection and ‘reelection’ to state powers. Our ‘House of Lords’ would get that much less lordly, having to go hat-in-hand before a more local process; and our state officials would give us strong glimpses into their own fit for their jobs.

    I also predict that with the near impossibility of such as the MSM to manage to taint elections from the standpoints of their own elitist notions, bashing some candidates and not ‘covering’ other candidates, more end-of-career folks would think they could give a term or two near the end of their productive lives and then go into retirement, giving us effective and practically natural term limits in most jurisdictions. Such greater access would also mean that new political party organizations would have opportunities to be nurtured over time.

    I also believe in a ‘committee of the citizens’ to review laws for not only rightful common-citizen comprehensibility but expectably just fullness of legislation: that actions of bureaucrats are tied to the legislation rather than the legislation being bound by bureaucratic decisions. Heh-heh – really like this last part; no more lawyers writing for lawyers, in gross conflict of interest, but more persons from various professions developing laws for citizens.

    (I know, I know: “Lord, the man just never puts anything briefly!”) However, by way of parting, clearly, my tongue-in-cheek ‘Mary Kochan for President’ would have given us an executive leader with more talent while taking a nap than just about anything ‘leading’ in Wash. D.C. and most state capitals, now. For, we can’t just ‘throw the thieving bums out’. We have to replace them with talent to do the jobs needing doing.

  • cpageinkeller

    Mary Kochan is right on the mark. Inflation is the ultimate ‘stealth’ tax, and its greatest impact is on those who can least afford it. Inflation is largely the product of profligate government spending, including the $10 trillion plus spent in the “War on Poverty.” As usual, when government tries “compassion,” unintended consequences blossom: the very people targeted for help are actually worse off. That is why the government-defined “poverty” level has risen from its inital $12,000 to about $35,000. Soon, however, recognition and understanding of inflation won’t make any difference. Why? Because the voters won’t do anything about it.

    Here is the reasoning:(income tax)
    Currently the top 20% of earners make 53% of the income and pay 91% of the tax.
    Currently the bottom 50% of earners pays 3% of taxes
    Currently 40% of the population pay no taxes, and 1/3 get a govt. check.

    Obama tax law changes will lead to further mal-distribution of income taxes. Under the newly passed legislation, over 50% of voters will pay no taxes and most who make <$110,000 will get a government check of some time.

    Once the majority of citizens don’t pay taxes at all, taxation disappears as a viable political (campaign) issue. Alexis de Tocqueville was right.

  • goral

    Mary, we’re fighting an uphill battle, I don’t know if there is any chance that we, the sensible minority can actually affect a positive change or outcome.
    Our politicians are incorrigibly corrupt, most especially the ruling party.
    Our media is doing everything in its power to make sure that the prince of peace succeeds.
    Our institutions teach and produce just these types of Marxist ideologues.
    The electorate is too dumb and lazy to learn anything about our system and how it works. They only know what they desire and will always be hoodwinked by the serpentine charlatans.

    We do have the New Media, internet and talk shows that are holding back the socialist deluge but they/we failed in the last election.

    We have double digit unemployment and the news from Casa Blanca is that the recession is over. We’re printing more money to keep the smoke screen thick.
    Greedy capitalists already robbed the savings of the working class. Of course this was all designed and orchestrated by our gov’t agencies that are answerable to no one.
    This winter they’re going to keep us distracted with swine flu.

    Communist China is doing very well thanks to anti-communist US.
    The global money changers will dump the dollar for the yen or the rupee as soon
    as they smell percentage.

    We’re cooked and we know it. The solution according to the experts is more support for the prince of darkness.

    Am I despondent? I would be if it wasn’t for the One who said “blessed are the poor…

  • GaryT

    Mary,
    I believe that the real rate of inflation is actually considerably understated.
    Inflation is not calculated by looking at the increase in the same products over time. Rather it looks at the cost of typical products in one time vs. typically purchased products in another time. The formula actually changes the products purchased over time so there is no way to easily see the actual rate of inflation.
    Over the last couple of decades we have seen an unprecendented move of manufacturing to lower cost oversees locations and also huge computer-based process automation. All of these things drive down costs. Yet prices go up? We should have been experiencing price deflation due to changes in technologies and the move to overseas manufacturing.
    One industry that has been imune to these changes is higher education, where 75% of the costs are from salaries and benefits – a model that has changed very little over the last couple of decades. While consumer prices as measured by CPI-U grew by forty percent between 1990 and 2002, the cost of tuition and fees for four-year public colleges and universities grew by 120 percent. This probably represents closer to the real rate of inflation – and t-bills are basically paid back at no interest. No wonder the Chinese are concerned.

    Many families feel they have to have both parents working and/or limit their family size to cover costs and save for college education. This is the social costs of big government taxes and inflation.

  • ckrempec

    This article is right on. My husband was self employed last year. Now we write a check every three months to the IRS for “self-employment tax”. The first time I had to write that check, I thought of all I could do with that money for our family of eight. The next time I wrote it, I thought every person should have to write a check to the IRS for their income taxes. If they did, you can bet there would be none of this out of control nonsense spending from our representatives tolerated!! Most people don’t even realize that everything they earn from January to April goes right to the government!! When will we wake up and demand a change!! Let us keep our money!! Just a thought, but maybe we should have elections in April instead of November….

  • http://www.CarrilloWeb.com latinmcgyver

    Salutations;
    (Salutations = My Prayers and Greetings to you)

    I must reverently Disagree with you that Inflation is a Secret Tax.
    I will agree that inflation is a way for the Governments to keep people from gaining Wealth and Power over Government actions.

    Inflation was INSTALLED into the economic system before the time of Christ.
    This is why Jesus identified the money changers as “A Den of Thieves”.
    It is possible for the Global economic system to be repaired Without inflation within 30 days.
    However TWO things need to happen. First the Currencies value Must be stabilized. One value for all currencies world wide. This would mean putting an end to the FOREX market trading system. The second thing would be to establish a Global Labor Table.
    As an example. Why should an electrician in America earn 25 dollars an hour while in Bangladesh that same person is paid 3 dollars a day? Is not the job, education and labor the same?
    Inflation is NOT something that happens because of peoples wants, needs and desires. It is purposely Installed into the system for Power and control. To Prevent Democracy.

    For complete understanding of what I say Buy My Book. Scary Thoughts and Scary Solutions for the Planet Earth. The book is about Morality, Ethics and Solutions to repair the Global Economic System.

    On a different note; It is IMMORAL to be competitive. The Bible requires “Seek no Rivals”, “Love thy Enemy” and to “Put away thy Vanity”.
    Competition is mans Vanity. Read in YOUR Bible how Jesus Christ Tried to teach people to Cooperate with each other and NOT to Destroy one another.

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