Chapter 5: Taxation
5.3 How to Cut Taxes
We have now seen how taxes used to be very low in this nation. We have seen—enough anyway—how that has changed over time. In an earlier section we talked about the “ratchet effect” in the size and power of government. The people cede gradual increments here and there until one day the chains of government are tightened to the point we can’t breathe. This is nowhere more evident in American history than in the issue of taxation. The question is, can we loosen the screws? Better yet, who’s got the bolt cutters?
First let’s discuss what needs to be done. Then we will discuss what practical things we can do to help advance the cause of liberty in taxation.
What needs to be done? Let me explain the real problem first. If you can grasp this problem, you can get very close to the heart of the loss of freedom in America.
Taxation is the wicked step-sister of spending. They are quite a tandem, let me tell you. Politicians love to promise low taxes, but they rarely talk seriously about cutting spending. Without cutting spending, there has to be either further taxation or increased debt. There is no other way to get around this. What needs to be done is a drastic cut in unnecessary public spending (most of it), and simultaneously a drastic cut in taxation to match.
While most attention is focused on the national debt, deficits, “debt ceilings,” and the specter of spending cuts—and all for good reason, as these should all are important issues—local spending and waste gets much less emphasis, even by those people who follow politics closely. But billions of dollars are wasted unnecessarily all over other nation in local governments, and most of this could be cut and taxes lowered. Local spending must be attacked and subdued. And if we can’t organize to stop the waste locally, if we can’t impose some fiscal discipline and even sacrifice locally, you can forget it at the State or national levels where the booty is greater by a factor of a thousand and the entrenched forces greater as well. Indeed, the local graft often provides the training ground for those who rise to positions of State and Federal power later.
Here’s an example: I just checked my local county commission’s minutes from the latest bi-weekly meeting. This was a random check. There was nothing special about this meeting, it was rather low-key. And yet, in this one meeting, the commission stamped $219,000 in new contracts and $59,000 extra for two existing contracts. Now, in terms of county budgets, a few hundred thousand is not much. But consider that 1) the board meets some twenty-five times or more per year, 2) that these are arguably not necessary public expenses, 3) that there are other projects going on (also arguably unnecessary) which have a price tag of tens of millions, 4) that we are still living with the effects of a great recession and on the precipice of a new one, 5) that the money has to come from taxation in some way, 6) that much of the tax money goes to contractors from outside the county, and 7) that the decisions to blow away millions of dollars on behalf of thousands of people are generally made by just a few people (this is inadequate representation). In other words, while average people are feeling a great financial squeeze and many have lost jobs and homes, local government officials are spending almost whimsically, without blinking, and with little to no input from the public in regard to the budget. And this is just one example. This is going on in every county and municipality in the nation.
In many cases, money is borrowed upon the collateral of future taxation. In other words, a government wants to spend more than it currently has. It goes to the bank and says, “Loan us money.” The bank looks at the government’s budget and sees income already maxed out with no surpluses on hand. It replies, “How will you pay back the loan?” This is hypothetical, of course; the bank already knows how the government will pay back. “We will raise a new tax,” is the reply. The bank looks at the legal situation: it sees that the government has the authority to tax, and it has the force (guns) to collect the taxes. Looks like a pretty safe investment for the bank (which stands to draw interest in the bond, by the way). (We will cover this relationship more in our topic of banking.)
Thus, the government borrows money it does not have on the promise of future taxation. In other words, on the decision of just a few people, an entire municipality or county is indebted by millions, with the politician’s promise to the bank that the government will extract more money from the people in the future to pay the loan with interest. In other words, I repeat myself, the commissioners say, “These people will pick up my tab.” This is implicitly saying that the people work for the government (and the banks), not the government for the people. The people are essentially slaves of their government.
The only thing standing in the way of such a maneuver is—in some cases—a vote from the people. Normally, people are opposed to increased debts and higher taxes, and such a deal would never fly. But the government and other interested parties (school boards, teachers unions, etc.) have tricks up their sleeves to get their funds. First, they try secrecy and quietness to keep voter turnout very low. They only publish the proposal to the minimum extent required by law, and hold the vote in a special election. With most average people busy with their lives and disinterested or complacent, very few people even hear about the vote, fewer understand the issue, and even fewer actually vote.
And voter turnout can lead to terribly deceptive conclusions. To illustrate, in my little semi-rural county, the school board has indebted the public to the tune of $146 million over the space of the past decade or so (this tyrannical debt is mild compared to many other places). Tax revenues have not covered what was projected (surprise!), so a vote was required to extend a tax increase for a few more years. This would cover, allegedly, $55 million in outstanding debts. The vote came in: 55% for and 45% against the tax extension. That sounds pretty standard until you look at the numbers involved:
Out of about 71,000 registered voters, only about 33,000 showed up—well less than half. This number in higher than normal because the bond issue was tacked onto the ballot for the 2010 national mid-term elections. Thus it was a general ballot which drew far more people than a special election. Of these, only about 31,500 voted on the school-bond tax. Of these 31,500, only about 17,500 voted for it, making up the 55%, with 14,000 against.
In other words, it was not 55% of “the people,” but rather 55% of those few people who decided to vote specifically on the issue. In the end, the 17,500 pro-tax votes represented only about 25% of the registered voter base; and the margin of victory, 3,500 votes, made up less than 5% of registered voters. Thus, 5% of the voter base determined the imposition of a special tax on everyone else.
These are absolutely pitiful numbers, and yet they are nowhere near as pitiful as what happens when there are no national and/or state personalities on the ballot. This particular school bond tax vote was the fourth of its kind in fourteen years (1997, 2001, 2006, and 2010). It was the previous three that actually acquired all the bond debt, and thus these three were responsible for the outstanding millions at the heart of this latest round. Well, the previous three were all conducted via special elections, and as a result, not one saw a total voter turnout higher than 4,000 (the numbers were 3,905, 1,385, and 2,299 respectively). In other words, only a couple thousand people in favor of more debt and higher taxes—and in truth, only the few hundred who provided the margin of victory—were required for indebting and taxing the whole population. This means that only a tiny, tiny percentage determined the issue for everyone. And now there is no escape from it. If that’s not tyranny, if that’s not ridiculous, I don’t know what is.
I have labored these facts to make the point that low voter turnout favors higher taxes and greater government debt. This is exacerbated when turnout is so low that only a few hundred votes can swing the outcome. In this case, it is mostly those who stand to benefit from the money—teachers, administrators, officials, contractors, etc.—who will be “in the know” and will like to keep competition (taxpayers) from opposing them in the vote. Thus the very people who call for the issuance of the bond, and who also control the public relations in regard to it, are the very ones who wish to keep voter turnout to a minimum.
And this is only their first trick. Another is more commonly known, but also more commonly fallen for. It’s the emotional appeal. If public relations become an issue, then you can pick your emotional appeal: if it’s a tax for education, it’s “for the kids” and “for a better tomorrow,” and if you oppose it then you despise children and want us all to be uneducated, knuckle-dragging hillbillies with no hope for tomorrow. And since most people cannot imagine a world in which the government is not the single central benefactor in education, they actually believe this nonsense. If it’s a tax for police or fire, then you can be sure you will hear lots of appeal about “safety” and how brave and selfless every single policeman is, always there to protect and serve; and if you oppose more of this then you are promoting higher crime, kids hooked on drugs, women being raped on the streets, houses being left to burn to the ground with children and kittens inside, and illegal immigrants fleeing the scenes of accidents leaving little old ladies paralyzed for life. This is not to say there are not some great policemen and firemen, but the romance novels written by propagandists here are endless—and people in love with them.
Of course, it’s funny, all those people who want bonds issued to pay for their children’s education for a better tomorrow—they totally ignore the fact that their children will be the ones paying off those debts, along with the fat pensions of the public officials and teachers who called for them to begin with, in the future. Some “better tomorrow.”
Then there is the theft of hope trick. It says, “We’re going to have to pay for this somehow anyway, so you might as well vote for it.” This is a false choice. In my local example, the deal was this: if the increased sales tax did not pass, then the county was going to use its authority to increase the school bond portion of property taxes anyway. Since, to most people, a 1% sales tax sounds less ominous than 3.6% higher property taxes, they jump at the deal. What remains unspoken is that there wouldn’t have been any tax increased needed at all if the money had not been borrowed and spent to begin with.
Another trick deals with PR and public ignorance. Perhaps voters will turn out, so the big spenders will have to make their expenditure look like a good thing on the ballot. Thus, the very way in which the bond issue is represented on the ballot becomes of interest. When the voter reads the issue (probably for the first time), he or she must be made to believe voting for it is a net good. By presenting the issue as the promotion of education in general, for example, the vote stands a greater chance of passing an apparently small tax than if the emphasis were placed on the millions of dollars in debt, the few it will actually help, the graft and waste involved, etc. Indeed, the amount of debt may not necessarily be legally required to appear on the ballot. Only some very brief and general description, like: “Provision 001: A vote to temporarily extend an existing 1% sales tax for bonds issued for Public Schools.” Nothing is mentioned of even the alternative increase in property taxes, or anything else. Thus, many voters are essentially uninformed, and functionally misinformed at the ballot box.
What needs to be done is an immediate spending freeze and drastic cuts in unnecessary local budgets in every local government in the nation. (The same is true for State and Federal government as well, but good luck on that. We must start local.) This also means that all local public borrowing—all bond issues—should stop immediately as well, for it is the most insidious form of spending.
What can average individuals do to advance such a cause? The first is what I have already said, set up a monitoring website. As part of such a site, there needs to be a clear section regarding all public finance. Use requests for public information to your public officials for all the documents, facts, and figures you can get. Keep up with commission meetings and or other public officials’ meetings. Most today are posted online. Learn and post any agenda item that will cost public money or imply increased taxes or debts. Make all of this information as simple and clear to the public as possible—extract it from the obscurity of meeting minutes, detailed reports, etc. Just publish the clear and pertinent info.
Second, all public bonds on all occasions are anathema, period. No more public debt, no more taxation on the backs of our futures and our children. It would be good to oppose such systematically at the polls, and inform your local representatives to do so as well. If people think some things are so important to fund, then let them organize and raise funds to do it privately. If it’s worth doing, the money will not be hard to come by. Forcing everyone to pay for services only some use is a tyranny.
Third, if you profit from public contracts, especially based on bond issuances, then you should stop. If you have greatly enriched your business and/or yourself on such, then you should consider yourself like Zacchaeus (Luke 19:1–10)—and you should pay restitution. Except, since it would be difficult to pay back every single taxpaying individual, I would recommend giving the money to a reputable public charity.
Fourth, start a local group—if one does not already exist—dedicated to spreading this information locally and increasing voter turnout. Give flyers and cards to local businesses, the chamber of commerce, radio stations, etc. If you have a small non-profit foundation, you can take advantage of public service announcements on radio. This will help spread awareness and hopefully increase turnout. You can even use all of these outlets to inform the public of important details they will not get from the bond issuing authorities themselves, or the ballot, or anywhere else. If you have some wealth and are looking for a way to serve the public, setting up such a foundation would be a great idea (after donating to American Vision, of course!).
Fifth, there are other avenues to pursue. Investigate into your local public salaries and pension plans. These may very well be high, or even luxurious or exorbitant. Check it out. If you find something objectionable to the public, then let the presses roll. Post it all clearly online. For the really adventurous, you could rent a public billboard or portable sign (check for legal places to put one first!) that largely and clearly exposes the waste. There are many ways to expose these things to the public; be creative.
There is no doubt that the single most important measure for lowering taxes is to cut spending and oppose public bonds. The appeal to cut taxes must come simultaneously. It will do no good to leave revenues the same while cutting spending for a time. It would be no time at all before the government finds other ways to spend the revenue. We need simultaneous spending cut and tax cuts.
A loftier goal would be bond and tax referendum reform. It is absolutely ludicrous that a bare majority of even a tiny voter turnout is sufficient to indebt a whole population. There should be very high requirements: such as at least a two-thirds majority of all registered voters. Even this is not biblical for bonds, and is dubious for taxation, but it would at least make the default answer in the case of voter complacency, ignorance, propaganda, or deception (all very likely) to be “No” rather than to favor government spending. It would at least greatly hinder government spending and taxation. It would require great energy, organization, and personal expenditure on the part of anyone wishing to advance a new debt or tax. And even then, those who do not use the system should get tax exemptions.
This can, of course, only come through political change. It must include a movement to abolish all unbiblical forms of taxation, and minimize what taxation may remain. Of course, before such a movement can begin, we need to see the rise of private alternatives—particularly in that main artery of local public expenditure, public education. That’s why this project starts off with private education (and a call for tax exemptions for those who don’t use the system). Then it goes to privatizing social insurances. There is no reason society could not also privatize police, fire, and EMT, or at least privatize and contractualize the way they are funded. These few things would negate enormous chunks of public expenditures, and taxes should be slashed to match. In the meantime, there will be no viable and sustainable political pressure toward cutting spending and taxes if we do not first pull our kids from public schools, establish our own future funds and insurances, and take care of our own families, parents, etc. in these regards. These are the things we can do as average individuals; and we must do them in order to establish the moral high ground for future change. We can also immediately work, learn, and expose corruption, graft, and excess at the local level. There is nothing stopping us here, and it can have significant effects on slashing spending and taxes in the future. We must create both public will and public self-discipline. While we prepare for these things, we need to focus our efforts and our children’s attentions on the details of local business, local politics, local issues, local culture, and local finance more than national.
Beat the bonds, break the taxes.
Next section: Freedom in money and banking