The Chairman's Report May 29 2020

The Chairman's Report May 29 2020
Photo Credit: Steve Hayes by is licensed under
The Reaction To The Handling Of Covid19 Marks The Beginning Of The End Of The Ruling Class Control Of America?

In a very thoughtful article entitled, “Don't Expect Losers Of Shutdown To Sit Idly By Forever” posted on the RealClearPolitics site, Jay Cost made some points about the possible consequences of the COVID-19 shutdown which apply equally to the income/payroll tax system.   Some of his points about people’s willingness to obey a law are:
1.  People must believe the law is proper and just, and therefore it’s their civic duty to follow the law
2.  People expect obedience to the law will provide them benefits they cannot otherwise enjoy
3.  People fear disobedience will impose costs upon them they can avoid if they obey the law
4.  The most important motive for obeying the law is a conviction it’s just, or at least the regime who promulgated it is just

I would add a 5th point, “The law is clear and specific so people all know if they are obeying or breaking the law”.

Mr. Cost’s points and mine directly apply to the income/payroll tax system.

His first point is people will continue to obey a law they believe it’s proper and just.  While there may be an extremely small minority of taxpayers in the U.S. who believe the income tax code is proper or just, the OVER-whelming vast majority believe the system is unfair and benefits some more than others.  A great number of people pay their income taxes only because they don’t have any choice.  Their employers have their taxes withheld from their paychecks.  Others are afraid of the penalties they might suffer if they don’t comply.

This point is driven home by the Evasion Study by Dr. Cebula which predicts over $9 trillion of income tax evasion over the next decade.  More and more people are finding ways to underreport income or exaggerate deductions.

Among people who believe we need a system of just laws to survive as a society, the most concerning aspect of this is the evasion is often obvious, like a plumber charging a lower price for a cash payment.  As tax evasion becomes more and more prevalent, fewer and fewer of our citizens believe an evader is actually doing anything wrong.

The quickest way to break down any society is to weaken people’s willingness to obey the laws.  If people decide it’s OK to violate one law they don’t like, where does it stop?  Does simply disliking or disagreeing with a law become sufficient justification for ignoring it?
Mr. Cost’s second point about obeying a law providing them benefits they cannot otherwise enjoy is only true for the small minority of the people who are making income from exploiting the law or obtaining tax savings for which they paid generously.  The Ruling Class and their minions in D.C. are constantly trying to convince us we do indeed profit from the income/payroll tax system.  However, we know we only get the scraps which are left over after they have fattened themselves by selling favors and protecting their friends.

The third point is people obey a law out of fear of punishment.  The skyrocketing evasion rate would indicate this is becoming less and less of a deterrent to those who would cheat the system.  Audit rates are very low, and with more and more people becoming self-employed, there are more and more ways to evade federal taxes.  There is also peer pressure.  Your friends brag to you about how they’re getting away with exaggerating deductions or hiding income and insist you must be really dumb not to be doing the same.

The fourth point is a major one, “the conviction a law is just, or at least the regime who promulgated it is just” is a significant part of people’s willingness to obey it.

Given the low opinion of Congress and the growing awareness the media is controlled by the Ruling Class, no one believes the regime is just.  Fewer and fewer people believe the income/payroll tax is just.  That’s one of the reasons we see the rampant tax evasion and the growing tolerance for tax evasion.

However, my fifth point is perhaps the most important one.  “The law is clear and specific so all people know if they are obeying or breaking the law”.

A speeding law is clear.  If you drive faster than the posted limit, you’re breaking the law, period.  It doesn’t matter how much we may disagree with the appropriateness of a 65 MPH limit on a deserted highway, it’s still the law.

A sales tax of 23% on all new retail goods and services is clear.
A federal income tax code which makes deductions more a matter of opinion than fact and is composed of tens of thousands of pages of statutes, rules and regulations no one will read isn’t clear.

The federal income tax code is so Complicated, Convoluted, and Polluted, it can easily be interpreted differently by sincere people who are honestly trying to comply with it.  This is why over the years, each time a number of different tax accounting firms were given the same facts and figures about a hypothetical family’s income and deductions, they came up with widely different numbers on how much federal income tax the family owed.

Federal income tax laws often create a situation where an examining IRS agent has one view of a taxpayer’s return, and the taxpayer has another.  All too often the taxpayer has to give in and pay what the IRS is demanding.  Not because they are wrong, but because they can’t afford to spend the time and money to fight the most powerful agency in the Federal government.

This would be like driving through a town with no speed limit signs and being stopped for speeding.  In years past before interstates, these speed traps were a lucrative way to fund the budgets of small communities.  Most people just paid the fine.  Many were just passing through, and few could afford to come back three days later to appear in court and probably lose anyway.

If a law isn’t clear, then it’s going to be widely misinterpreted and many will stop obeying it.  This, in large part, explains the growing income tax evasion rates.

Mr. Coats concludes his article by saying, “Absent a draconian police state or a massive system of bribery and patronage, respect for the law is ultimately premised on the belief the law is good.  If enough people conclude these laws are ruining them, look out”.

We know there is a MASSIVE system of “bribery and patronage” keeping the income/payroll tax system in place.  We also see from some of the excesses of government during the COVID-19 events, many in government want to exert “draconian police powers”.

During this COVID-19 period, a great number of people have been upset by the arrogant and callous attitude displayed by many government officials who seem to delight in the plight of the working men and women who can’t go to work or open their businesses.  We get the clear feeling the government workers’ attitude is they still have jobs and continue to get paid so they don’t care what kind of pain and hardship they inflict on others.  Some clearly enjoy wielding their new found power.

There are obvious questions:
1. How many of these same government people were furloughed?
2. How many of them were unable to make house and car payments?
3. How many of them had to try to work while they were watching children who were becoming increasingly agitated because they had to stay home and couldn’t even go out and play?

It’s illogical to argue preventive actions aren’t needed in a health crisis.  However, logic dictates any preventive actions should specifically address the specific health issues in play while causing as little disruption to people’s lives as possible.  Measures that are ineffective should be quickly changed.  Measures that are no longer needed should be dropped as quickly as possible.

That is what we expect from government, smart leadership.  The recent government actions regarding COVID-19 have led many of us to question their motives.  Are they really trying to help us or help themselves and the people who direct them?

The same smart leadership would recognize The FAIRtax is the better way to fund the government.  The reason the Ruling Class wants to keep the current system is clear, the income/payroll tax system makes it easy for them to reward their friends, punish their enemies, maintain control over our lives, and profit handsomely at everyone else’s expense.

Sweden has taken the less punitive steps at the top of the chart, but has refused to lock down their country.  Their playgrounds and schools are still open, as are restaurants and bars.  Sweden’s actions are about encouraging and recommending, not compulsion.  Two days after Spain imposed a nationwide lockdown on March 14, Swedish authorities were encouraging people to wash hands and stay at home if sick.  On March 24, new rules were introduced to avoid crowding at restaurants.  But they very much stayed open.

So did many primary and secondary schools.  Gatherings of up to 50 people are still permitted.  CNN, April 10, 2020
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Yours In Liberty!   Yours In Freedom!

Steve Hayes
Chairman, Americans For Fair Taxation

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