Thought Experiment: Why Do We Bother Paying Personal Taxes?

Tyler Durden's picture

Submitted by Lucas Jackson

Thought Experiment: Why Do We Bother Paying Personal Taxes?


"Stupidity combined with arrogance and a huge ego will get you a long way.”

      - Chris Lowe

I will admit right up front, I am not a fan of the views of Paul Krugman.  If Paul Krugman was to be given his way - and by and large he is being given his way - my children and grandchildren will be burdened in the future with paying back untold amounts of public debt just so his life and the lives of countless other Boomers can remain comfortable and embarrassment free today.
This is the essence of his grand plan for a US recovery – MOAR and MOAR debt.
Wow.  Genius.  Why I didn’t I think of that?  Just keep borrowing and printing, borrowing and printing.  Got it.  Now that I understand it, do I get a PhD?
Who’s going to pay the money back?  How will it effect future generations?  How will it effect the markets?  What will this do to civil society?
Who cares.  Or as another defender of the status quo, Hillary Clinton, might say, “What difference, at this point, does it make?”
Krugman has a reputation as a high priest of Keynesian economics and his adherence to these views, regardless of how broken they are, is way more important than the future of this country.  But don’t challenge his credentials.  He teaches at one of the Ivy League universities which automatically puts him in a rare air caste.  Plus he writes for the NYTimes so he must be wicked clever.  Oh yea, he also has a Nobel Prize which surely means he is more intelligent, wise and deserving than the rest of us, right?
Ok, perhaps the Nobel Prize bit is unfair praise after the dubious award was given to Barack Obama despite the hundreds or even thousands of innocent civilians he has killed globally and the EU for… well I’m not actually sure why the EU got it, but that’s the point.  Since the Nobel Prize has become a joke, I suppose it’s fitting then that Krugman has one.  But I digress…
MOAR debt, that’s the answer.  Got it.
Turn That Frown Upside Down
But in the spirit of healthy academic debate, I like to consider the other side of the argument.  So I got to thinking about things this weekend and said, “Self, what if ol’ Krugman is right?”  To which my self replied, “What!  Heresy!  Unpossible!”
But seriously, what if he is right?  What if there is no long term harm to running up ridiculously high public debts and monetizing them via the central bank?  Of course, history at almost every point in time contradicts this ludicrous position, but what if this time IS different?
So I got to thinking, maybe this increase in debt and no cost monetization via the central bank thing will work.  But if it does, let’s use this moment to really rid ourselves of the most pesky of income adjustments – personal income taxes.
The US government will take in about $2.5 trillion in taxes this year.  Seems like a lot of money but when you look at what the Fed and US govt can do when they really wants to, $2.5 trillion is child’s play.  The Fed alone has doled out trillions in USD to TBTF banks alone.  Add in TARP and other bailout programs, the backstops on FNMA/FHLMC (still not counted on the govt’s balance sheet), the interest savings associated with ZIRP (to the borrowers, not savers), the FDIC insurance subsidy which accrues to the banks, the mortgage interest subsidy and financing provided to the real estate industry, the growing mountain of federally insured student loans fueling the bubble in education, etc.  The list goes on and on but the point remains the same, when the govt wants to spend big, it certainly can.
Since Mr. Krugman tells us all this spending and debt issuance/guarantees are not only good and necessary but in the long run, painless, why are we bothering with personal income taxes?
The US government will collect approximately $2.0bn this year in Personal Income and Payroll taxes.  But why?  Why are we even bothering with this when today’s leading economists and politicians are telling us that debts/deficits don’t matter and running up astronomical debts is a long-term painless process?  It’s practically patriotic.  So why shouldn’t we just add our tax burden to the list of items the Fed should be monetizing?
Seriously.  Why not relieve the burden on every tax paying citizen in the United States (about 53% of us according to Mitt Romney)?  You want an economic recovery?  Reduce my taxes to zero and see how fast I go out and start spending some of that extra income.
Since I reside in the wonderfully unbalanced city of Manhattan, my all-in tax rate including federal, state and city taxes combined with sales taxes, fees, the implicit property tax I pay in my rent, etc, is way north of 60%.  If the Princeton duo of Bernanke/Krugman would only work with Congress and the President to eliminate taxes and allow them to unleash their Keynesian magic, I will become a consumer again.  Big time.  My animal spirits will return.  Big time.  My holdings of physical gold will increase.  Big time.  Oh wait, that’s another topic – ignore that last one…
Cui Bono
If Krugman is right, the debate right now shouldn’t be on the huge level of US debt or deficits, it should be on which group in society benefits the most from the issuance  and monetization of this debt.
Currently, the undisputed champions in this fight for government/Fed largess are the TBTF banks.  Hands down.
Coming in a distant second place are the large, global corporations able to game our deliciously labyrinthine tax system (looking at you GE) and fund at generationally low levels, credit risk be damned (looking at you HY market).
Coming in dead last are the savers, workers and regular taxpayers of this once great nation.
This is what has to change.  Since the debate isn’t really about whether or not Krugman is right - we’re running up the debts and monetizing them apace anyway - we have to shift the thinking to whose benefit are we directing the pillage.
If we want to continue to allow the TBTF banks and large, global corporations to run roughshod over the American consumer, then by all means, continue the status quo.
But if there is serious discussion to be held about how we improve the plight of the average American, cut our personal taxes to zero and let the magic of Paul Krugman’s Keynesianism cum never-ending-debt growth cum Fed monetization without consequences save the day.

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
DeadFred's picture

Don't go all reductio ad absurdum on us

Stackers's picture

I'd be fine with going back to the tax rate at which the law was sold to the public and passed under ........... 1%

knukles's picture

Let's quit making fun of Paul.
he'll get more insecure than he already is.
maybe even face the abyss of zero self-esteem, one of the majestic preconditions to suicide.

Juast thinkin' out loud....

SafelyGraze's picture

when you pay all that money in taxes, *we* decide how to spend it


MillionDollarBonus_'s picture

The point is that our government needs to finance its operations. That's why we need to pay taxes, idiots. Just accept it!

Everybodys All American's picture

Here all along I thought Bernanke just printed it.

CH1's picture

There is only one reason people pay taxes: FEAR.

If you don't pay, first you get letters. Then they go after your bank account.

And if that doesn't work to their satisfaction, you get more papers, followed by armed men seizing you and locking you in a cage.

Then, you have the privilege of begging to be let out if you promise to obey in the future and pay a heavy fine.

If not, you stay in the cage longer than murderers and rapists.

Chuck Norris's picture

"All your money are belong to us"


eclectic syncretist's picture

We have to pay taxes so the people in power can continue to believe that we believe we are living in a world different than the world we are living in.

kaiserhoff's picture

Nice piece.  Sadly there is an answer.  But first, much as I hate banksters, the biggest beneficiaries of the scam are governments at all levels, who finance their budgetary crimes at near zero rates, and at the expense of savers.

As most of us know, we have to pay taxes to preserve the illusion that the debt might be repaid some day, which it won't, because it can't.  It all comes apart the day Ben prints a little less, or something big breaks.  Tic Toc.

Sofa King Confused's picture

Ronald Reagan had what was called the Grace Commision do a study of the IRS and where the Federal tax money went in the eighties.  To summarize, a very small part went to the govt, most of the federal tax dollars went to pay the interest owed on the debt.

Pinto Currency's picture


According to Sullivan v. USA, there is a problem with paying taxes (see pg 23):

Raymond K Hessel's picture

Two thing....

Yeah for MDB

Second, This guy is a genius.  I want my bailout too!!!




FEDbuster's picture

No income tax??  What a funny concept to bring up on the 100 year anniversary of the 16th amendment which made the income tax legal (and of course the 100 year anniversary of the Federal Reserve).

yrbmegr's picture

Not significant problems, though.  Not legal problems.

max2205's picture

Then they couldn't call you a slave...

Cap Matifou's picture

Taxation is about reshaping society.
As an early predecessor of the Bernank said nearly 70 years ago:
Taxes for Revenue are Obsolete

Slightly Insane's picture

Examine what you wrote .... CH1.  You just identified how to kill the beast.

King Nothing's picture

Why do we "need" to have so many "operations"?


And you're very forceful today, Do you make money collecting taxes or something?

LawsofPhysics's picture

Hhmm.  Perhaps it's the details of those "operations" that are the problem.

IridiumRebel's picture

I'd like to make a personal donation to you and yours, sir. To whom do I write the check?

bluskyes's picture

It is mathematically impossible to sustainably finance government using taxes, when using fiat money that is created out of thin air, and lent out with interest due. You will end up with no dollars in circulation, and principal still due.

Taxes are tribute that is paid to banksters, for their generosity in allowing our continued existence. /sarcasm

orez65's picture

"... our government needs to finance its operations. That's why we need to pay taxes, idiots."

You mean operations like the Iraq, Afghanistan, Libya and Syrian wars?

Or subsidies to large corporations that bribe our Government officials, like General Electric?

Or lavish pension and benefits for Government "employees".

Or so that they can take away our liberties, like with the Military Defense Authorization Act?

Looks like you are the IDIOT, just accept it!

Saq's picture

Even if those 'operations' are not for OUR benefit?

reTARD's picture

MDB is right. And now that "our" government is growing and that "our" GDP and "our" economy is dependent upon "our collective" growth of the "public" sector, "we need to" pay taxes and contribute "our fair share." It's just the "social contract" which "we are" obligated to as a "modern society." ;-)

[Note the use of the ambiguous "we" and "our" instead of the more direct "you" or heaven-forbid "I" which has been perfected in political language and etymology.]

logicalman's picture

Always thought you are a jerk.

Now I KNOW you are an uninformed idiot, incapable of rational thought.

Read 'The Constitution of No Authority - Rothbard - and get back to me, asshole.

Herd Redirection Committee's picture

But it is true that despite the western government's desire to 'boost the economy' not one has cut taxes.

Hmmm....  Its almost like they want the recovery on their terms.  No reduction in taxes, no reduction in the size of government.  In fact, increases in the size of both!  And that is supposed to help the recovery process!

I told a friend of mine this, and he said "Thats only if you don't believe in Keynesianism."

I didn't think that even merited a response!

BigJim's picture

It's almost as if ZIRP and QE are actually there to benefit the banks and THIER stakeholders, rather than the rest of us.

But that can't be - our leaders would have surely told us if that were the case.

logicalman's picture

If I walk up to you in the street with a knife and say 'give me your money, or else...' it's called robbery.

If the Gubmint comes to you and says give me your money or I'll destroy your life, it's called taxation.

Can anyone point out why the two are different??




Thought income tax was VOLUNTARY anyway..Most tools can't believe that.

Cursive's picture


I think the 16th Amendment should be repealed; however, while payment is voluntary, compliance with the law is not.  So, if you don't pay what they say you owe, your assets will be seized and you can be imprisoned.  Just ask Wesley Snipes.

Pure Evil's picture

There's a big argument going on in the comments section to a post on another website about whether wages in exchange for labor are really considered income/profit by law.

Seems one man is fighting the IRS over this very topic and has continually requested that the IRS provide the exact law that states that wages are income.

Cursive's picture

@Pure Evil

Interesting.  Good luck to him with that legal argument.  And what is the constitional basis for the FICA taxes?  Still, pay or face the full fury of USG.

OneTinSoldier66's picture

"So, if you don't pay what they say you owe, your assets will be seized and you can be imprisoned."


That's what's called "voluntary payment"? As in like.... I can get a new Chevy Camaro in any color I want, as long as it's Black? Payment is voluntary, but if I don't "voluntarily" pay, then...


To me, voluntary means that I only pay for products or services that I actually want. And no one else makes any decision as to where my money goes in any way, shape or form... otherwise it's not voluntary.


We can pretend that the a piece of paper called the Constitution limits the size, scope and power of Government, but that's all it would be, pretending.


"Stop throwing the Constitution in my face," Bush screamed back. "It's just a goddamned piece of paper!"


4 Non Blondes - "I realized quickly when I knew I should that the world was never this brotherhood of man, for whatever that means."


To me, freedom and liberty bring people together. But I feel that when it's not voluntary, it's hard to find brotherhood.

IrritableBowels's picture

Not sure what your angle is here.  If more and more people stopped paying, they would be unable to prosecute.

kralizec's picture

Indeed.  I keep asking the question "Why do we pay taxes?" not to get the usual BS about what your government wants to do with it, but to seriously ask people why they as a nominally free person decides to pay taxes!  If even a quarter of the taxpayers told government at all levels to go stuff it, they'd have a nightmare on their hands...and I for one would like them to see them transition into full Nazi for all to see or backdown and see everybody join the party...either way real change would be in the offing!  Unfortunately all too many latter day Americans are weak, stupid, fearful and in the end utterly we are back to waiting for it to implode on itself.

Buckaroo Banzai's picture

Wages in exchange for labor are definitely NOT income. The only way they can be construed as such is if the laborer's time has a value of $0.

What kind of person's time has no economic value to the person himself? A slave. Whoops.

There is a reason that the IRS is domiciled in Puerto Rico.

But, nobody at the IRS gives a shit about the law, and you won't be able to find a judge with even the slightest interest in investigating the law, as it is written.


whoopsing's picture

Who you callin' a slave Buckaroo?

pods's picture

Well Bill Benson would argue that you cannot repeal that which was never passed in the first place.

Or look at Joe Banister as well.  He was the guy who came to take your property for the IRS until one day he started researching it.  He put together a report that asked the questions we want answered and he was asked to resign for it.

As to the original argument about income taxes and raising money, the income tax was never about that. It was merely another safety valve on the fractional reserve money lending system.  On the issuance side you have interest rates, on the remittance side you have taxes.  Both are merely used to keep the fraud going.


kayl's picture

Wesley Snipes was on the right trail, but he didn't fully understand the Uniform Commercial Code.

First, his negotiable instruments had United States Notes or similar across the top. If he had written private notes or Wesley Snipes Notes, he would have been OK.

Second, did he file a UCC 1 Financing Statement and cancel the indenture at the international level? You can't write your own notes if you don't have the authority to manage your own commercial affairs as a secured party.

Third, did he create controversy with the IRS? The IRS has set up many traps to throw people into controversy. Trap 1: Amount due. Totally irrelevant when you are discharging your debt. Trap 2: Charge you the same amount for one or more years. Again irrelevant. Trap 3: Date and times of communication. You must stay on schedule for your responses. Trap 4: They send you incorrect information to make you look like you are in dishonor, generally while passing the case along to different IRS offices. For example, you didn't pay. You didn't respond in time... and so on. Of course, I don't pay. I discharge all the debt. Always rebut presumptions and respond with attributes of logic like completion, detail, general to specific, etc. Keep impeccable paperwork and send them back your tracking receipts. All paperwork sent with overnight tracking.

Fourth, did he discharge with the Secretary of the Treasury? The IRS doesn't have the authority to discharge debt, but the Secretary does. Give notice. Notice to the Principal is notice to the Agent. Notice to the Agent is notice to the Principal. Timmay was most obliging.

Fifth, did he discharge and close the account according to the trinity? you have to discharge through the trinity and close the account through the trinity. Discharge is the presentment, negotiable instrument, and IRS voucher or promise to pay. Closing includes the presentment, statement of account over the entire series, and letter of confirmation that the account is closed. You are a corporate sole and must manage in a professional manner.

Sixth, did he endorse his negotiable instruments and all the paper sheets of the IRS contracts front and back with his signature? We have a two signature system of assigning liability in the US. It is illegal to refuse to pay and creates controversy. People say they don't want to pay because they don't have the money. But in a bankrupt society, where there is only fiat, you can discharge your debt for any amount with no need for controversy. It is both the beauty and insanity of this vile Keynesian system.

Saq's picture

It's only voluntary until you don't pay......

Waterfallsparkles's picture

"Thought income tax was VOLUNTARY anyway"

I think it is Voluntary because the 5 Amendment says that you have the right not to "Testify" against yourself.  The 4th Amendment says that you have the right to be secure in your papers.  Without a Search Warrant people should not be required by the Government to require information about you and your privacy in your "papers".

If you voluntary give information to the IRS you are waving your rights under the 4th and 5th Amendment of the Constitution.

The penalties of the IRS coherse's people to give up their Constitutional rights.

kengland's picture

"The US government will collect approximately $2.0bn this year in Personal Income and Payroll taxes."

I'd like to see the source for this information. I don't buy it

Slightly Insane's picture

If we didn't pay personal income taxes, what would all the accountants and IRS agents do?  (besides that ... what would Illinois do for the 5% income tax it takes from me?)

Winston Smith 2009's picture

"Don't go all reductio ad absurdum on us"

Sometimes, extrapolation proves how ridiculous a theory is.  This was one of those times.

Lets extrapolate the current unemployment formula that claims if you are no longer looking for work, you are no longer unemployed.  What is the unemployment rate when everyone is unemployed, but not looking for work?  0%.  Sure, that could never happen unless Ben was dumping money out of helicopters to the general public and devaluing the currency, but that's what happens when you extrapolate.

bnbdnb's picture

Already done...

Mine Is Bigger's picture

Because we need some entity to hire all those sadists.

Sudden Debt's picture

and the government loves us and love costs money.... just ask any streethooker.

And like my Grandpa used to say: never go down on a hooker....

I have no clue what he meanth by that but I think it's related...