Taxation In New Texas

November 2, 2009

by Russell Longcore

In this article, let’s chew over the methods a new nation might use to collect revenue. Taxation is supposed to just collect revenue to fund government operation. Customarily governments use taxation to encourage or discourage certain types of behavior within the jurisdiction of that government. Inherent in that type of misuse of taxation is the desire of certain persons to avoid taxation at the expense of the remaining population. But who could blame them? Hence bad tax policy creates lobbyists.

The Gross Domestic Product for Texas in 2008 was $1.245 trillion dollars. The 2008-2009 Texas tax revenue totaled $167.8 Billion from all sources. The State of Texas spends an enormous amount of money annually on social welfare programs and myriad services that are mirror images of its daddy in Washington. I figure about half of the budget could be entirely eliminated in a New Texas.

Sales Tax

Most taxation allows a government to set a budget and then use all their methods of taxation to collect what they need. A sales tax forces a government to formulate a budget based on revenue received. Over time the government can more accurately predict expected revenue, but cannot just tax more heavily to make up shortfalls. A properly crafted constitution would prevent the State from coining money and regulating its value, which would also prohibit printing money to make up a tax shortfall.

This seems to me to be the most equitable form of taxation. But that even-handedness works best when it is tied to a monetary system of 100% gold and silver as money. Even if the new nation still chooses to inflate the currency through monetary policy and fractional reserve banking, and assesses taxes through inflation, the sales tax could still provide a useful governor on the engine of the State.

In an economy where sound money existed, every person within the boundaries of the nation would pay sales taxes on goods and services for personal consumption. The citizen, non-citizen resident and the visitor would all pay sales tax. I am not in favor of exemptions for anyone.

There are some folks in America that are promoting a national sales tax as the “Fair Tax.” But is it fair? Fairness is always open to interpretation. And I’ve always heard that “Fair” is a place you take your pig to win a blue ribbon. The fair tax would be levied once at the point of purchase on all new goods and services for personal consumption. Their proposal also calls for a monthly payment, made by the US Treasury, to all family households of lawful U.S. residents as an advance rebate of tax on purchases up to the poverty level. Seems unduly confusing and complicated and still exempts certain persons from paying tax. The present aberration promoted by radio talk host Neal Boortz , Rep. John Linder and Senator Saxby Chambliss is anything but fair.

My complaints about their “fair tax” are:

• That it seems to do nothing to curb Federal spending.

• They set their sales tax at 23%. I believe the rate should not exceed 10% and should be set in stone in the Constitution.

• The concept of the rebate and exemption for people who fall under a certain amount of income. Those people use government services, and should pay for them like everyone else.

Counties and cities could assess a maximum total sales tax burden of 5%. Even if it were 10%, it would be workable. Once again, the sales tax should be etched in stone in the Constitution, not changeable without a constitutional convention.

Don’t freak out about my percentages. I’m not an accountant or a state budget wonk. Even if the total national and local sales tax burden ended up at 20%, it would mean massive tax relief for Texas citizens, visitors, non-citizens and property owners. It would also mean strict spending limits for the New Texas.

There is also another sales tax that can be utilized. A SPLOST is a Special Purpose Local Option Sales Tax. This is a way that a tax can be levied by any county, for the purpose of funding the building and maintenance of parks, schools, roads, and other public facilities. A SPLOST has a time limit and the tax is customarily decided by a public referendum.

Income Tax

Happily, Texas has no personal income tax. Income taxes are universally hated by individuals, but loved by governments. The governments use income taxes to reward some and penalize others. They use it to create class conflict and class envy. And they use it to punish highly compensated individuals. In the US, normal due process is inverted and individuals are presumed guilty of alleged tax crimes. Countries with an income tax own the citizens and own their incomes. Individual liberty and income tax are not compatible in any way.

Tariffs

A tariff is a duty imposed on goods when they are moved across a political boundary. Tariffs, or lack of tariffs, encourage or discourage imports inside a nation. Tariffs encourage protectionism.

There are various types of tariffs:

Ad Valorem, or value added, is a set percentage of the value of the good being imported. It can be manipulated by the importer by declaring low values. Tariffs rise or fall based upon prices.

Specific tariffs that doesn’t vary with prices.

Revenue tariffs can be used against importers by countries that do not produce the good imported. For example, Iceland could slap a tariff on Columbian coffee, since it doesn’t grow coffee.

Prohibitive tariffs are set so high that almost no one imports that particular good.

Protective tariffs artificially inflate prices on imports and protect domestic industries. These are sources of enormous corruption and bribery.

Environmental tariffs are recent additions, assessed to punish the importers of other countries for perceived sub-standard environmental standards.

All of the tariffs are penalties against others. When there are penalties, it affects competition and the free market. Seems to me that a nation without tariffs would enjoy the lowest prices for goods, both imported and domestically produced. All producers would have to compete on a worldwide basis.

Property Tax

Property taxes on real and personal property are confiscatory. If you own a piece of property, and you have to pay property taxes each year, you are in essence leasing the property from the State. Don’t believe it? Think that you own the property free and clear? Just stop paying your property tax. Eventually, the State will confiscate your property under threat of death. Don’t believe it? When the Sheriff comes to confiscate your property, resist with armed force. When you sell your real property, you are essentially transferring a lease obligation to the new property owner.

Property taxes have to be assessed based upon property value. The state or county assessor’s office sets the property values and is not that concerned with accuracy. It is in their interest to overvalue your property and force you to challenge it. It’s also in their interests to bestow tax exemptions as favors.

Property tax revenues also benefit from currency inflation. That’s one reason why governments like inflation. Property taxes are customarily assessed by local governments, such as counties and cities, to fund their operations. But they could also fund operations through sales taxes.

Excise Tax

Excise tax is a tax on the production or sale of a good produced within the country. Typical examples of excise duties are taxes on gasoline, tobacco and alcohol. The producer pays the tax directly to the government, but the consumer pays the cost of it, as it is included in the sale price of the product. The excise tax can account for as much as half the retail price of the goods, and sometimes more.

Excise taxes are often assessed to discourage the consumption of goods and services that the State determines to be harmful to our health and morals. So, they tax things like gambling or smoking. This is the Nanny State at its worst.

Death Tax

Estate tax is a tax on the total value of the money and property of a person who has died. There is a difference between “estate” and “inheritance” tax. Inheritance taxes seek to tax the beneficiary of the estate. This is another confiscatory tax imposed by the Feds and the state. An estate is the accumulated assets of a person, and most assets have already been taxed repeatedly during the accumulation period of a lifetime. This tax simply shows the rapacious appetite of the State.

Historically, there have been three estate taxes enacted, in 1797, 1862 and 1898 and each was repealed after a short time. The most recent estate tax was enacted in 1916 and has escalated ever since.

There is no good reason why estate or inheritance taxes should be assessed. They only redistribute wealth and are a disincentive to wealth accumulation and entrepreneurship.

User Fees

User fees could be assessed in three categories:

* fees that fund necessary services, such as for utilities;
* fees that fund services that add to the quality of life, such as for parks and recreation; and
* fees that fund regulatory and administrative processes, such as for licenses and permits. (Don’t get me started on licensure…another state ripoff)

But no government should be permitted to charge these fees unless voters agree. That way, citizens decide what services they want and are willing to pay for.

Conclusion

There are probably methods of taxation that I’ve missed, since there are so many methods that government uses to steal money from its citizens at the point of a gun. But I believe that the best method of collecting tax revenue is the sales tax. It seems to be the method that is most equitable to all individuals. It also seems to be the tax that most binds the government against acts of tyranny. But the sales tax should also provide the government with abundant revenue. Not all they want, but all they need.

During the Reagan administration, nominal income tax rates were lowered. Tax revenues went up significantly as this spurred a surge in entrepreneurship and investment. People had more of their money, and used some of it to make more money. Unfortunately, Reagan did not clamp down on spending, so his tax rate slash and runaway spending still made for bigger government.

I believe that a New Texas with a single sales tax as its source of revenue would be such a magnet for capital that nothing like it would exist on the planet, and nothing like it would have ever existed in the history of the human civilization. People from all over the earth would be emigrating to, and investing in, the New Texas.

Think about the freedom you’d feel if the sales tax was the only source of tax revenue assessed against you, the citizen. No income tax, no excise tax on gasoline or smokes, no tax on your investment income or savings, no property tax on your real and personal property, low prices on imported goods since there are no tariffs, and when you die, 100% of your assets go to whomever you choose.

Want to live in a nation like that? I know I do.

Remember that this sales tax solution must be inexorably linked to a sound money system for it to work as well as it should. But if the State enacts monetary law and banking law that facilitates inflation and the fractional reserve banking system, the sales tax as the single tax source for government revenue could still provide a useful governor on the engine of the State.

Also remember that I could be wrong about all of this. Check it out for yourself.

DumpDC. Six Letters That Can Change History.

© Copyright 2009, Russell D. Longcore. Permission to reprint in whole or in part is gladly granted, provided full credit is given.

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Money Issue May Be The Establishment’s Achilles’ Heel In Its War On “Islamic Fundamentalism”

November 2, 2009

PART 1 OF 7

(Editor’s note: I do not agree with Dr. Viera’s interpretation of the US Constitution, since I believe it is a constitution without authority. But his remaining scholarship should be read by all.)

No careful student of history can fail to be impressed by the interconnectedness of ideas and events in every civilization’s rise and fall–especially that bad ideas inevitably engender worse consequences. That may soon become painfully apparent once again.

Foremost among the bad ideas that should come to the mind of every patriot are the unconstitutional and dishonest monetary and banking systems that today beset the United States, as well as the entire Western world, in the form of the Federal Reserve System and other central banks that emit legal-tender fiat currency and “monetize” public and private debt. The worse consequences that few people foresee are the destruction of these systems–and the ensuing economic, political, and social chaos that will engulf America and all other Western countries–if any one of a number of quite predictable events occurs.

This Commentary addresses the possibility that Muslims throughout the world will turn from fiat currency and electronic bank credit to gold dinar and silver dirham coins as their media of exchange, thereby employing the full force of economics in a decisive counterattack in the global war that the West’s Establishment has so imprudently launched against “Islamic fundamentalism”. And leading to fulfillment of the prophecy in the Musnad of Imam Ahmad ibn Hanbal that “[a] time is certainly coming over mankind when nothing will be of use except a dinar and a dirham.”[1]

A. Consider first the bad ideas and their consequences in the United States.

1. By refusing to use silver and gold coin as this country’s official media of exchange, although the Constitution requires it, and by creating a corrupt connection between the General Government and private fractional-reserve banks, although the Constitution prohibits it, the Establishment has rendered America hostage to:

*
economic mismanagement and political manipulation of her monetary and banking systems–in particular, the Federal Reserve System–and of the supposedly free markets for securities and commodities that the System’s operations so strongly, and often perversely, influence;

*
banking, monetary, financial, and other economic crises–and the social and political disruption, destabilization, and destruction they bring in train;
*
the imposition of an intrusive, abusive, and oppressive financial police state, subversive of Americans’ fundamental constitutional liberties; and now even

*
world war, waged through both military and nonmilitary means in every corner of the globe in which prices of goods and services are measured in money.

2. This last concern is no exaggeration. But realizing why requires returning to basic principles.

Constitutional money and banking require:

*
the silver dollar of 371.25 grains (Troy) as the monetary standard, no less invariant than any other standard of weights and measures;[2]
*
gold coinage regulated in value in units of (silver) dollars, according to the rate of exchange the free market sets between silver and gold;
*
free coinage of silver and gold by the Treasury for all holders of specie;
*
unimpeded circulation of silver and gold coins as Americans’ normal media of exchange in truly free markets;
*
the General Government’s and the States’ use of only silver and gold coins (or private electronic gold or silver currencies absolutely convertible into such coins) as their official media of exchange;[3]
*
no emissions of paper currency (or its account-book or electronic surrogates), whether designated “legal tender” or not, by the General Government, the States, or private banks acting as alter egos, agents, or accessories thereof; and
*
statutory controls on all fractional-reserve practices of private banks and other financial institutions, including: (i) prohibition of all fraudulent fractional-reserve practices, (ii) mandatory complete disclosure (i.e., beyond what would be necessary simply to obviate charges of common-law fraud and misrepresentation) to the banks’ customers of the existence, operations, and risks involved in all permissible fractional-reserve practices, (iii) proscription of any form of what used to be called “suspension of specie payments” (whereby banks refuse to perform their contracts to depositors and noteholders, but otherwise remain in business collecting from their debtors), so that any bank that fails to redeem its notes or pay its depositors will be put immediately into receivership; and (iv) the imposition of personal liability for compensatory and punitive damages on all partners, directors, officers, trustees, and shareholders of any fractional-reserve bank that violates the law to its depositors’ or other creditors’ loss.

These changes cannot be expected to come through the courts. First, the judicial process is too slow to effect meaningful reforms before serious economic crises break out. Second, the judicial process is not given to broad, prospective legal restructuring, only to sequential, retrospective tinkering, one case at a time–in fact, the courts of the General Government (the so-called “federal courts”) lack jurisdiction to give “advisory opinions” about sets of circumstances not actually before them. Whereas, legislatures can draft comprehensive statutes, taking into consideration a myriad of possible future situations and scenarios that cover the entire field. Third, the courts have no body of precedents on which to rely for the necessary reforms, because fractional-reserve banking has long been treated as an exception to the traditional common law of contracts and torts applicable to every other business. So, even if the most that were desired would be to compel fractional-reserve banks simply to abide by the traditional principles of common law in those areas, statutes would still be necessary to instruct the courts to enforce that requirement, and in how to do it. Fourth, fractional-reserve banking is already regulated all too favorably by numerous complex statutes that would have to be repealed or carefully amended, each in relation to the others, for a comprehensive reform to work. The courts, of course, have no authority to make such changes in statutory law.

3. America needs constitutional money and banking for two primary reasons:

First, because a specific rule of law requires it: the monetary powers and disabilities of Congress and the States as delineated in the Constitution.[4]

Second, because the goals set out in the Preamble to the Constitution require it. In any era, “the general Welfare” requires it: Americans would be better off, politically and economically, with constitutional money and banking. Constitutional money and banking are honest money and banking, and therefore contribute significantly to “establish[ing] Justice”. And particularly in this era of “the war on terrorism”, “the war on drugs”, and other occasions and excuses for creation of a pervasive police state in America, “provid[ing] for the common defense”, “insur[ing] domestic Tranquility”, and especially “securing the Blessings of Liberty to ourselves and our Posterity” require constitutional money and banking to protect Americans from the untoward economic and political consequences of unconstitutional money and banking.[5]

4. All this being so, the question nevertheless remains: Why does America not have constitutional money and banking here and now?

a. It is not because the Establishment cannot put the Constitution into practice.

*
The Establishment can mint proper specie coinage. Indeed, the Treasury of the United States is even now striking silver Liberty and gold American Eagle coins in amounts supposedly sufficient to meet public demand. These coins, however, do not contain the weights of precious metals, or carry the denominations of “Value,” that the Constitution requires. Yet those defects the Establishment could easily cure, either by Congressional statute or administrative action by the Secretary of the Treasury.
*
The Establishment can remove all legalistic impediments–particularly “sales” and “capital-gains” taxes–to the exchange of Federal Reserve Notes and base-metallic (“clad”) coinage for silver and gold coin, and to the general circulation of silver and gold coinage as Americans’ ordinary currency.
*
The Establishment can repeal existing statutory legal-tender privileges for fiat paper currency and base-metallic coinage, and make the legal-tender power of silver and gold coins contingent upon their compliance with constitutional standards. (E.g., a coin stamped “One Dollar” need not be accepted as such unless it actually contains 371.25 grains of fine silver; and a coin containing less by dint of honest wear and tear may be exchanged for a coin of full weight at the Treasury on demand.)
*
The Establishment can separate bank and state by disestablishing (that is, completely privatizing) the Federal Reserve System, and allowing it to sink or swim in the free market on its own. As part of this disentanglement, Federal Reserve banks would be prohibited from labelling their paper currency “dollars”, or even calling that currency “notes” payable in dollars, unless the currency were redeemable on demand out of 100% reserve funds maintained for that purpose (that is, in effect were warehouse receipts for coin). And,

*
The Establishment can prohibit all forms of fraudulent fractional-reserve banking, and require bankers who employ legitimate fractional-reserve operations to provide the public with full disclosure of their policies and practices, the pitfalls these contain, the protections against those dangers the banks provide, and the penalties imposed by law in favor of the public when bankers fail to make such protections available.

So, if the Establishment wanted constitutional money and banking, America could, and would, have them tomorrow.

Footnotes:

1, Ibn Hanbal founded the Hanbali school of law, and is one of four individuals whose interpretations of the Qu’ran and the hadith (the sayings of Muhammad and reports about his actions) the majority of Sunni Muslims follows.
2, To put this into the most obvious practical terms, even modern politicians do not propose steadily to “depreciate” the ounce, or the foot, or the minute as a matter of legislative policy for the purpose of redistributing wealth or “stimulating the economy”. Why, then, should anyone tolerate a policy of systematically “depreciating” the dollar?
3, See my three-part Commentary, The State Electronic Gold Currency Plan. In effect, electronic gold currency units constitute physical, and thus fully secured, “checks” or “orders” payable in gold or silver coin. As long as electronic gold currency units must be convertible into their free-market value in gold and silver coin, as a condition of their use by the government in any transaction, the overall transaction can be deemed to occur in such coin, and thus to conform to the command of Article I, Section 10, Clause 1 that “[n]o State shall * * * make any Thing but gold and silver Coin a Tender in Payment of Debts”. This would never be true for redeemable paper currency, however. For such currency always amounts to “Bills of Credit”, which no State may emit under Article I, Section 10, Clause 1, and Congress has no power to emit under Article I, Section 8, Clause 2.
4, See generally, Edwin Vieira, Jr., Pieces of Eight: The Monetary Powers and Disabilities of the United States Constitution (2d rev. ed. 2002).
5, See my earlier Commentaries: (i) “Homeland Security”–for what and for whom?, (ii) Are monetary and banking crises inevitable in the foreseeable future?, (iii) Will a monetary and banking crisis be the cloud with a silver lining that will provide America with a golden opportunity for real reform?, (iv) Americans cannot depend on Washington, D.C., to protect them from monetary and banking crises, and (v) Is self-help the best way for Americans to solve this country’s monetary and banking problems?

© 2006 Edwin Vieira, Jr. – All Rights Reserved