Tax Relief After a Century
From 2006.
It’s contest time!
What 108-year-old wartime tax was declared illegal by four Federal district courts, with zero effect on the Internal Revenue Service policy?
A fifth decision by a district court has finally led the IRS to repeal the tax . . . and even offer interest on the last three years of taxes so collected.
[Warning: You must fill out a special form to claim your refund. Does this surprise you?]
Name that tax!
Give up?
For the answer, click here.
I’ll bet you didn’t know. I’ll bet you had to click the link to find out.
Because of the number of refund-eligible American taxpayers (probably 90%), this information should have been front-page news: for amusement’s sake, if nothing else. It should have been a human-interest story on the Evening News. It wasn’t.
Does this surprise you?
[Note: Even with tax-free money on the line, some readers did not click the link, and of those who did, 80% will forget to file the form. The IRS knows its victims as surely as con artists know theirs . . . but I repeat myself.]
TAXES: HIDDEN AND NOT SO HIDDEN
Inflation is a tax, but it is hidden. It redistributes wealth. Better yet, from a politician’s viewpoint, its negative effects can be blamed on capitalists — “exploiters” and “speculators” — while its main benefit, meaning an economic boom, can be claimed by the government.
In 1945, an Australian statistical economist named Colin Clark made an important observation. Whenever the total national tax burden in relation to national income climbs above 25%, the government’s central bank invariably begins to create money in order to purchase the growing national debt.
In other words, whenever all levels of government tax the people to the tune of 25%, tax resistance/avoidance commences. Then the national government must run deficits: sell its debt rather than raise taxes. But if it sells debt, this has the effect of crowding out private debt markets, either by raising interest rates or by transferring capital out of the private markets. This capital-transfer effect reduces capital investment. This in turn reduces economic growth.
To keep long-term interest rates from rising — initially, anyway — the central bank creates fiat money to buy the government’s debt. It then appears as though new capital has been made available to businesses by savers. But this is an illusion. The new capital isn’t there. Only new fiat money is there.
Clark did not argue that government spending had to reach that 25% limit in order for its central bank to debase the currency. He argued only that once the tax burden climbed above 25%, monetary inflation becomes politically irresistible to fund the deficit.
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Published on June 28, 2006. The original is here.