Why Are We Paying Taxes?


Op-Ed Contributor


Published on 02 February 2013


by Greg Smith

(WireNews+Co)

New York, NY

Federal Spending - USA Federal Revenue - USA
Federal Spending - USA

I read something the other day that got me thinking... You know in the movie Inception when Leonardo DiCaprio's character Dominic "Dom" Cobb is talking the Japanese businessman Saito about planting an idea in someone's mind; about how the idea can literally define the person's character and how utterly impossible it is to remove the genesis or seed of an idea once firmly planted...?

Well, I started thinking about that this morning as I was reading an article about a Bill approved by the Senate that is now winging its way to the White House for President Soetoro/Obama's signature.

The legislation will suspend the U.S. debt limit and allow the $16.4-trillion debt limit to be raised to make it possible for the U.S. to continue paying the nation's bills through May. The U.S. government is currently spending over $2 trillion more each year than it receives in tax revenue from all sources.

According to some estimates, another $450 billion in debt is expected to be amassed in that time as the nation’s existing bills are paid, pushing the debt load to nearly $17 trillion.

So where's all this money coming from?

Some of it comes from treasury bonds and bills borrowed from the Federal Reserve. Treasury notes and bonds are sold to citizens at maturities of 2 to 10 years. Interest is usually paid out every 6 months to the bond holder and the interest comes from the taxes we pay so in effect, we're paying ourselves interest on the bonds we sell to ourselves.

A large portion of the money comes from implicit debts which are debts in the form of promises. This is the exchange of funds in return for promised social payments on health, education, security, and pensions. These are the most difficult to keep track of as there are no debt papers or bonds to track. And again, it's our money to begin with and so we're borrowing our own money and paying it back with interest that we pay from our own money.

The rest of the money comes from external debts or money that's borrowed from foreign governments.

Anyway, so I was thinking, why don't we just pay off the national debt owed to external governments while the debt limit has been suspended? It's about $16.4 trillion.

I know, I know, your first thought is that's crazy! But is it?

Then, I was thinking, why are we paying taxes? What's the point?

The government collects just $2.3 trillion in total revenue (2011) and so in order to pay off the current national debt it would take more than 8 years if the government stopped spending right now. But it can't stop spending because the debt costs us more than $500 billion each year in interest.

That means that the U.S. government is spending more than $2 trillion more than it earns each year and the cost of carrying the debt costs another $500 billion that is added to the debt and is projected to reach another $5 trillion in the next decade. So, I repeat, what's the point?

As I thought about this I started to think about how many people have been born, lived and died while the U.S. government has been in debt and spending more than it receives in revenue. Did that debt load have any impact on their lives, except that they paid taxes that didn't contribute in any meaningful way to resolve the problem? I think the answer to the question is "No".

So why are we paying taxes?

Why don't we as a nation just pay off the external debt (we don't want to be accused of being deadbeats!) and then suspend federal income tax altogether and while we're at it we can shut down the Internal Revenue Service (that will save another $13 billion per year). The federal government can continue to run the military and do whatever else it does and simply caulk up internal debt that really doesn't matter at all (according to many in Washington, D.C.).

It won't have any meaningful impact on any of us, except that we will no longer be slaves to a system that is completely dysfunctional and headed for disaster.


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Posted 2013-02-02 20:04:00