Guest Post: More Lies About Your Taxes...

Tyler Durden's picture

Via Simon Black of Sovereign Man blog,

In 1936, the US government began circulating a series of pamphlets to explain its brand new Social Security program, plus the associated taxes. Initially, the Social Security tax was set at 2%. The government promised it would rise to 3% in 1949, with no additional increases EVER:

“[F]inally, beginning in 1949. . . you and your employer will each pay 3 cents on each dollar you earn, up to $3,000 a year. That is the most you will ever pay.”

In 1949, the tax rose to 3% as scheduled. But it only took five years for the government to break its promise. The tax rose to 4% in 1954, 4.5% in 1957, 5% in 1959… and continued to rise for decades. On January 1st it will be 12.4%.

Politicians routinely make bold promises about tax policy... and they almost always end up being lies. Raising taxes, i.e. plundering the wealth of citizens, is one of the oldest tactics in the playbook for insolvent governments, and you can be 100% certain that your taxes will increase despite any promises to the contrary.

Perhaps most dangerously, politicians fail to understand that raising tax rates does NOT actually increase government tax revenue.

In the US, for example, government tax revenue has consistently been 17.7% of GDP since the end of World War II, plus/minus a very tight band. Similarly, the British government has consistently collected 35% of GDP in tax revenue.

Yet over the decades, tax rates have been all over the board... from 0% to over 90%! Plus variations in corporate profits tax, payroll tax, estate tax, capital gains tax, dividend tax, and (for the Brits) VAT.

Rates go up, rates go down... it doesn’t affect overall government tax revenue one bit. Despite the obvious facts, though, politicians keep raising tax rates.

On January 1, 2013, the US government will impose what my tax attorney calls the biggest tax increase in the history of the world. And some of the rate increases are simply extraordinary.

The estate tax exemption, for instance, is being slashed by EIGHTY PERCENT! And the amount that the Obama administration will tax the rest of your estate will increase to a whopping 55%!

Moreover, dividend tax rates are set to rise from 15% to as high as 43.4%. This affects not only US taxpayers, but everyone on the planet who invests in the US stock market.

Remember Finance 101– the price of a stock is theoretically the present value of discounted future cash flows. In English, this means that share prices should rise and fall based on the market’s expectations about future earnings… and over the long run, future dividends.

As a result of this tax policy, many investors who own shares in US companies will now see their after-tax dividends slashed by 33%. And since their investment returns are falling so dramatically, it stands to reason that the investments themselves become less valuable.

This is putting a lot of downward pressure on stock prices, affecting almost everyone who currently owns US shares– pension funds and retirement accounts, rich and middle class, US and non-US citizens alike. It’s as if the US government is hanging a sign over the country saying “PLEASE DO NOT INVEST HERE.” It’s genius.

This is the tip of the iceberg. Taxes will keep rising. Investment returns will be destroyed. Any incentive to start a business will be destroyed. Any benefit to your heirs for what you have worked your entire life to pass on will be destroyed.

All of this because a handful of morally bankrupt individuals who run financially bankrupt governments fail to understand simple truths about tax policy.

Bear this in mind over the next few weeks, because many new taxes will take effect on January 1st, and it’s imperative to take defensive action first. I strongly recommend consulting with your tax advisor as soon as possible.

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nmewn's picture

Fair share bitchez!

Michaelwiseguy's picture

The "Fiscal Cliff" jargon was a well orchestrated psychological ploy to subvert the "Government Spending Cut" movement and shut them up. It worked like a charm on the sheeple.

kaiserhoff's picture

Exactly, and for once Simon is on target.  Increasing taxes = increase in time I spend avoiding taxes, not writing a bigger check.

Beam Me Up Scotty's picture

Increasing taxes is nothing more than an excuse to raise spending. They will jawbone spending cuts, but those will never materialize, and the alleged cuts are nothing more than cuts in the rate of increase in spending.

And all the idiots talking about compromise make me laugh too. Like "compromise" will fix things. Compromise has gotten us into a 16 trillion dollar hole.

cranky-old-geezer's picture



When the colonists decided to emancipate from England taxes were 4% - 5%. 

Today Americans pay 50% of what they earn in taxes, and still no revolution. 

Instead they debate useless arguments like whether raising taxes nets more tax revenue or not, ignoring the glaring fact that they're paying half their earnings in taxes, 10 times more than the colonists when they declared independence from Engalnd and fought the revolutionary war.

Should the government take 50% or 53%?   Some say 53% wouldn't net any more revenue.  Some say it would.

It's like debating whether a mugger should just take your wallet or take your watch and wedding ring also. 

God, what dumbasses.


Random's picture

Spot on! And nobody asks the pivotal question: what is the reason a state has to exist in the first place, many people just take that for granted...some are even proud to be "citizens" of X/Y/Z wearing a badge saying: Proud to be fucked by X/Y/Z...

SemperFord's picture

More like, work harder slaves...I mean bitchez!

kaiserhoff's picture

I think you are confused, Semper.  Allow me to help.  In the world of dogs, a male is a dog and a female is a bitch.  On the other hand, in the world of humans a male works like a dog and a female..., wait a minute.  I need to check my notes.  I'll get back to you....

ShrNfr's picture

Collects alimony and child support?

Buckaroo Banzai's picture

Whether she earns money or not, the female in the relationship ALWAYS holds the office of Chief Spending Officer.

ISEEIT's picture

Slaves are only bad if individuals own them. If it's government then the rightful owners are like...really cool, kinda like obamommy.

Midas's picture

As soon as I get back from my farm in Chile, I will talk to my talk advisor!  Thanks for the tip!

odatruf's picture

Mercy, he is obtuse, isn't he? It's like playing cards with my brother's retaded kids or something.


RockyRacoon's picture

I'm wondering is a nice stiff round of high taxation might finally get the majority of J6Ps off the dorito-stuffed sofa and go out into the streets to shout, "I'm mad as hell and I'm not gonna take it any more!"?

What could appear to be a catastrophic tax agenda could end up being the pivotal event!  I think I might be long of pitchforks.

Beam Me Up Scotty's picture

Wont happen. J6P is happy as long as the other guy is paying moar taxes than he is.

Ass_Hat's picture

Nope!  J6p would have to not be able to afford food or beer.   The he would run out and shout in the streets for the Government to fix this free market calamity.

zorba THE GREEK's picture

Taxes rise and the black market prospers.

otto skorzeny's picture

that's why amazon gets alot of my biz

augustus caesar's picture

Historically the underground economy grows in direct relation to punitive tax policies.

Why do you think there's been such a hard push for digital money with debit and credit cards the last fifteen years?

They want everything and they want to track everything.

That's why they're inflating our dollar whilst simultaneously not printing any new larger denomination bills.

To add to the transaction-convenience cost of doing business in physical currency.

Why do you think they've kept metal change around for so long?

To add to the subtle transaction-convenience cost of doing business in physical currency.

The idea of digital currency is the death of BLACK MARKETS and beginning of COMPLETE TAXATION with nowhere to hide.

They're going to legalize drugs soon too.


The same reason as they did during our inbred Pharoah's ( oops, I misspelled FDR's ) New Deal.

Shift that Black Market money into government coffers to main line some nice new dope into the Power Junkies veins.

MeBizarro's picture

Not really true.  The only way a black market really prospers is if you make something completely illegal that lots of people want and use routinely (e.g., alcohol, sex, drugs, gambling).  Black market does activity bring to pick up as you increase consumption or direct sales tax on it but there really isn't a lot of legit and serious economic study that has been done in the area since it is tough to accurately measure black market activity.  Seen some work regarding tobacco products and alcohol but that is about it.  

BraveSirRobin's picture

"The government is the only thing we all belong to.""

knukles's picture

Yes, the Obama screed.

To better put it in perspective, "the government we all belong to" is grammatically incorrect.

It would properly read: "Government is the only thing to which we all belong."

So by their standard, we all have been forced to belong to something we to which we might not wish to belong, is in error in that we all belong to other conventions such as "Humanity" and, is grammatically incorrect...

Meaning that in every way, it is in error.

The Navigator's picture

I would not join any club that would have me as a member - Groucho Marx

So may I be excused from belonging to this government?

GernB's picture

Yes, in other words government is saying: your sheeple are all belonging to me.

Jendrzejczyk's picture

It's not a lie if they actually believe it.

Everyman's picture

Moreover, dividend tax rates are set to rise from 15% to as high as 43.4%. This affects not only US taxpayers, but everyone on the planet who invests in the US stock market.

NOw why the hell is the market still going UP?????  Don't these "investment professinals" know and are tryig to "make us money" by giving us tax safe investing advice??????  The Dow, S&P, and Russell 2K shold ALL be down that percentage, because that is a loss percentage per dollar.  NOBODY's protfolio could withstand that.



fonzannoon's picture

U see everyman thanks to zirp and soon to be nirp your 5% div taxed at 40% still gets you over 2.5% which is just tremendously higher than the bank. Rejoice.

Matt's picture

Except true inflation will be closer to 15%, so you will actually be losing 12.5% per year. Fantastic!

fonzannoon's picture

It's Still better than the bank!! (yelling with fingers in my ears).

ShrNfr's picture

the banks don't need none of your stinking money. They borrow at bennies and lend it to unka and reap the spread.

Augustus's picture

A great deal of the ownership of the listed companies is through pension plans, IRA plans, and insurance company investments.  the change in rates will have little effect on them.

We were in the midst of the meltdown you somewhat predict when someone announced that they loved their Congressional neighbor and that there should be a deal.  Boehner wisely is letting Obama do the leading on the resolution proposals.  Whatever spending cuts he proposes will likely be meaningless.  Let Obama come with the plan on the table.

When it is revealed that Obummer will deal with this spending problem as they have with illegal immigration (create more of both) the decline will resume and erase this bounce quickly.  JMHO.

Bad Attitude's picture

Dear Leader isn't going to do anything to help fix/resolve the fiscal problem. There is no downside for him refusing to help resolve the problem. Besides, being a real leader would interfere with his international vacations and golf games. If the Republicans capitulate and give Dear Leader the confiscatory taxes he wants, Dear Leader wins and the Republicans loose. If we fall off the Fiscal Cliff, Dear Leader blames the Republicans - again, Dear Leader wins and the Republicans loose.

Dear Leader just won reelection by promising free stuff to his supporters, revenge on his opponents, and by blaming Bush for the ever worsening economy. 

I don't know if anybody has noticed, but it appears that Dear Leader has quietly stolen the title of "Teflon President" from Bill Clinton.

ShrNfr's picture

Actually, he is nothing more than a Chicago slime-bag. It works until it doesn't Ask Blago. Illinois, where our governors make our license plates. He may get caught with his dick in the till yet.

bunnyswanson's picture

Teflon President was Ronald Reagan.


"Because no matter what the scandal that hit his administration, nothing stuck to him personally--regardless of what it was, up to and including the whole Iran-Contra affair. Much of it seems to have been attributable to the whole 'grandpa' image he projected.

The phrase was coined by Rep Pat Schoeder: "As a young congresswoman, I got the idea of calling President Reagan the 'Teflon president' while fixing eggs for my kids. He had a Teflon coat like the pan." Hope this helps! Source(s):

Flakmeister's picture

I'll see your Benghazi and raise you one Iran-Contra....

Is there anyone to compare with Ollie North in any recent Dem. Administration?

BraveSirRobin's picture

Shut up and pay your fair share!

BraveSirRobin's picture

The fiscal cliff is all just a bluff to scare up more bribes for congress.

Matt's picture

So, if the taxes and rates of taxes have no effect on total tax revenues collected as a portion of GDP, how are the British able to collect twice as much tax as Americans?

What policy allows a government to collect more or less tax as a portion of GDP?

BraveSirRobin's picture

They will pay anything in hopes someone will fix their teeth.

kaiserhoff's picture

They're scared to death the gubbermint will take their telly.  Every damn set is registered and fucking taxed.  Sick but true.

Also, the benefits are more evenly spread.  They don't just go to the kleptocrats and the hoochie-mommas.

ShrNfr's picture

Nah, they just go to the whorehopper Pwince UpChuck and his bos that he was banging behind her husband's back. She could give Nancy P. a run for her money as most ugly bos I have ever seen.

adr's picture

VAT, congestion charges, TV tax, $5 a gallon gasoline tax, heavy property taxes, more than your car is worth registration tax, you looked at the Queen wrong tax, you insulted the nose of Prince Charles tax.

NotApplicable's picture

They've been at this empire thing a bit longer than the US.

DaveyJones's picture

and the dirty criminal banking hobby

Winston Churchill's picture

As both a US and UK taxpayer let me help you there.

The old Inland Revenue Serrvice(now Customs and Excise)has powers the US

IRS could only dream of.The tax code is relatibely simple in comparison to the US.

Corporate tax write offs are severely limited,perks are taxed at the highest marginal rate.

and then you have the VAT.Plus NIC(SS) and tax rates are higher.


miker's picture