The Tyranny of Shadow Taxes

Tax after Tax after Tax

Ernie Hooker

We’ve all heard, endlessly, about reducing taxes for the middle class and how the rich are getting a free ride. We are conditioned to think of tax as only witholding, social security tax, sales tax, etc.  We are also seduced into believing the rich are getting a free ride.

We are told by politicians that the rich don’t pay near enough taxes. As close as I can figure, the politicians are talking about corporations and anyone making a certain amount of money (never defined the same way twice). These corporations have stockholders; many are friends and neighbors who attempted to retire on their stock dividends. You may be part of the guilty, preying on the poor, due to windfall profits (sometimes called a 401K), if you own a fund with any corporation. How can we be expected to make sense of the government’s “logic” then the politicians can’t seem to make sense of each other? I prefer to judge them on what they do, instead of what they say.

Who’s Making the Profit?

The issue of profits is important. The oil companies are making the outrageous amount of eight percent! Then we have to ask eight percent of what, before or after taxes? Who said it is outrageous? Primarily, it came from our politicians and most of the media who are chanting endlessly about the bad guys out there. On top of that, most of the oil is controlled by foreign countries, due to our politician’s policies for the last 30 or more years.

There is also an issue of why is it fair to take, say, ten percent out of a $30,000 income (which is $3,000), yet not nearly enough to take $10,000 out of a $100,000.  I would like a rational explanation of the fairness of increased percentages as you make more money. Any reasonable person knows it is a con job.  Inflation is somewhat higher than the government  tells us and the best proof is when you pay your bills (they have admitted ignoring certain highly inflated items).

A few years ago housing was very high. Have you ever wondered why so many home builders went broke or quit early on, when the housing market dropped only slightly? It had to do with the fact that most were operating on a very narrow profit margin. The same is true with most other businesses.

Many of us avoid entertainment such as amusement parks because of the crowds. But, what happens if they don’t have the pushing, shoving, claustrophobic crowds; you guessed it–they go broke. Doesn’t it make you wonder why profit margins remain so narrow? Am I the only one who is sick of having to be in a line for everything I buy, and if there isn’t an endless line of customers at high prices, they soon fold because they no longer can stay financially solvent?

Going Back a Few Decades

I believe to understand what is going on we need to go back a few decades and look at what our expectations were and why we believed what we were being told. It was a common belief, not many years ago that the way technology was increasing productivity, it would increase so much that a family would be able to live comfortably on what one person could earn in 20 hours a week. Technology has succeeded well beyond those former expectations. One person now can produce as much as several could a few decades ago. Why then does it take two people working 40 or more hours a week to just get by? Why, when you go to Disneyland (if you still have room on your credit card), are you charged an exorbitant amount of money and treated like canned sardines? If you feel like a hamster on a treadmill that is going faster and faster, but never fast enough, I believe there is a political answer as to why. Even casinos in Las Vegas have to have ridiculously high traffic or they go broke. Some have recently.

I would expect if we could ask those on the Titanic which part of the iceberg was the most dangerous, they might say the part below water that you don’t see. So, where did the money go? It really is very simple–it went to hidden government fees, fines, charges, and taxes.

 

Examples of Fees and Hidden Taxes

An example is in housing; the builder has to pay in many cases well above $20 a square foot for a permit and this is only the beginning. There are fees and more fees, and then they often have to make concessions to the city to put in utilities, roads, parks and other requests, which do not directly have anything to do with the actual home they build. Take lumber, for instance. All the way from the forest to the home there are taxes and fees added on, that ultimately the consumer has to pay. The builder has almost endless requirements for taxes, insurance, and legal requirements all added to the government fees. This is only a small sample of the taxes and fees that accumulate, so there is tax on top of tax in an endless cycle; when the consumer buys the house only a small portion of the money is spent on actual labor, building materials, profit for the builder and land. If we, the consumers, don’t pay all this, plus a modest profit to the builder there won’t be any new houses to buy for long. Of course, the consumer will be buying this home with money which has already been taxed.

What is true of housing is true of everything we buy. Several times I have heard politicians confronted about a tax that doesn’t generate as much revenue as it takes to collect it. They never change it, and rarely even answer the question. Recently when Obama was asked about such a tax he said, “Because it wouldn’t be fair to take it off.” Now, don’t get the idea that this is a hit only on the Democrats; it is just as true of the Republicans. The only ones that ever utter anything faintly resembling the truth on taxes are some of the Independents who never get air time again.

The Point is Control

So, what is the point of all these taxes and fees? Some say it is all about money. However, when collecting fees that cost more to collect than the revenue they receive and the government still hangs onto the tax or fee; I suggest that money is only part of the plan or a means to an end.

The real goal is increased control of the people. Power, apparently, is the ultimate goal of most of our politicians, and there is never enough. The more you have control of the money, the more you control the people. Bureaucrats are rewarded for creating bigger and bigger bureaucracies. If you think this is a new idea watch the history channel and you will see this theme over and over. Read the history books (if they haven’t been revised). The poor are supposed to blame business, one race is encouraged to blame another race, democrats are told to blame republicans–anything except holding the government to the same standard as they hold us. No matter how many thousands of pages of regulations there are, any failure (according to the government) is due to not enough regulation. Few seem to notice that originally it was congressional action that forced us and business into this no-win situation. If there is any difference, it is that now they have done a better sell job by getting us to blame each other, commodity traders, corporations, and anyone but the real scoundrels. Government takes $10 out of your pocket, gives you $1 back, then tells us what we have to do with it.

Now, the local and state governments try to play the same game; however, the Federal government always wins and gets most of the money. The state governments start going broke and beg the federal government for some money. The Feds give back a small amount and then tell the state what they have to do with it. The state robs from the local government and then they go broke. The money can only originate from individuals such as you and me, because the Feds don’t have any money of their own. So, the local government then starts going broke.

More Sneaky Ways

And, here is another sneaky way we have to contribute to the feds insatiable demand for our money. A sidewalk in front of your house breaks up because a tree the city planted in an easement in front of your house causes a problem. Who pays for it? You do. You no doubt have already paid taxes and fees that were supposed to fix the problem; however, you get to pay again, thus once again the Feds win.

There are Miracles

The real miracle in all this is, although, the federal government has succeeded in draining off the lion’s share of our economy, we have survived. That is a testament to the cooperative productivity of our workers and business leaders. Imagine if our government, federal, state and local, only confiscated say a total of 20% of our productivity–how that would change our lives. Families might be able to really afford vacations, have time together and generally relax. Consider the possibility of amusement parks, theaters and other entertainment being able to survive without overcrowding and pushing, pushing, pushing. Maybe entertainment could be, well, really entertainment, instead of a contest of endurance on how to get through the line and the parking lot without burnout. And, possibly more people would enjoy their jobs, less people would burn out, and those who really wanted to would stand at least an even chance to start their own small business and thrive. Then, consider the magic of your 401K plan. It could benefit from our productivity, and the Federal government could only acquire a reasonable and necessary amount of our money.

A Solution

If there is any answer to this, it might be the need for real transparency at every level of the government, so that at city, state, and federal levels we regularly can see reports of the actual income, where it originally was solicited by the government, and exactly where it was spent. Then we could hold our politicians responsible for the job they are supposed to be doing. They need to answer to us, not us answering to them. I suspect that, if we as citizens don’t become more active, thoughtful and support the right new people on these issues we will very soon turn into a third world country.

We have expected too much from our politicians, and they have done too much; but not what we expected. Ultimately, the buck stops with us, not them.