GOVERNMENT DOES NOT PAY TAXES
True, in essence but if you delve deeper into government spending you will notice that the government DOES pay taxes, through every purchase or wage.
Example 1: Wages
Government employees (military, Congress, IRS, etc.)
When the federal government writes a check there are federal, state, and Social Security taxes taken out. Military, Congress, and IRS agents come from every state in the Union and unless their home state does not tax income, they have to pay state taxes. These states collect taxes from people that may not be stationed in their home states, or spend the majority of their time out of their home states. IRS employees are another example. MD and VA are good examples of how states “benefit” from people that are employed by the federal government; these states withhold income taxes and collect local sales taxes.
If you think about it, it appears that states are getting subsidies from the federal government through payroll taxes. Another thing that you may or may not have noticed is that these employees are not contributing to federal revenues that the IRS collects. If you are employed by the federal government, take a second to look at your pay stub. For those that are not, we’re going to take a look at Private Peanut’s paystub:
Private Peanut makes $2,000 a month or $1,000 every 1st and 15th. Since Pvt. Peanut is single, total tax deductions will average around 35% of his check, and Pvt. Peanut is left with $650 in deposit in the bank. Congressman Kickback, IRS Agent Gonna Audit, ALL GOVERNMENT EMPLOYEES, government contractors, recipients of Welfare, Social Security, and government funded pensions have these same taxes withheld from their checks. You’re probably thinking to yourself, “But Will, Pvt. Peanut has taxes taken out of his check, therefore Pvt. Peanut is contributing to federal tax revenues!”
No. He’s not. Not one copper cent. Since Pvt. Peanut is employed by the federal government his entire check is paid by the taxpayer. Federal, State, Social Security and Medicare taxes that were taken out of his check came from the government in the first place and seeing as the major source of the governments’ revenue comes from businesses and private citizens, logic dictates that those entities actually pay FOR Pvt. Peanut’s tax liability.
It appears that the federal government is getting discounted labor and interest free loans, and to some degree it is. Based on Pvt. Peanuts rank/pay grade he falls into a low tax bracket which entitles him to tax refunds from his home state and the federal government. If his bracket is low enough, then his tax check from these governments will be a 100% return of the withheld income taxes.
A loan is, “an arrangement in which a lender gives money or property to a borrower, and the borrower agrees to return the property or repay the money, usually along with interest, at some future point(s) in time” ("Loan definition," 2011). Pvt. Peanut was essentially forced to loan this money to the government and was paid 0% interest for his inconvenience.
Using the same logical process from a previous paragraph, the discount is the Social Security and Medicare taxes withheld from Pvt. Peanuts check. The higher up the rank/pay grade you go the bigger the discount rate is. Why? More money is withheld and less money is returned due to the individuals’ tax bracket.
Now that you’ve seen that the government employs discounted labor, receives interest free loans from said labor force and taxpayers foot 100% of government wages, you should be getting a sense that the government is more crooked than Bernie Madoff.
No. He’s not. Not one copper cent. Since Pvt. Peanut is employed by the federal government his entire check is paid by the taxpayer. Federal, State, Social Security and Medicare taxes that were taken out of his check came from the government in the first place and seeing as the major source of the governments’ revenue comes from businesses and private citizens, logic dictates that those entities actually pay FOR Pvt. Peanut’s tax liability.
It appears that the federal government is getting discounted labor and interest free loans, and to some degree it is. Based on Pvt. Peanuts rank/pay grade he falls into a low tax bracket which entitles him to tax refunds from his home state and the federal government. If his bracket is low enough, then his tax check from these governments will be a 100% return of the withheld income taxes.
A loan is, “an arrangement in which a lender gives money or property to a borrower, and the borrower agrees to return the property or repay the money, usually along with interest, at some future point(s) in time” ("Loan definition," 2011). Pvt. Peanut was essentially forced to loan this money to the government and was paid 0% interest for his inconvenience.
Using the same logical process from a previous paragraph, the discount is the Social Security and Medicare taxes withheld from Pvt. Peanuts check. The higher up the rank/pay grade you go the bigger the discount rate is. Why? More money is withheld and less money is returned due to the individuals’ tax bracket.
Now that you’ve seen that the government employs discounted labor, receives interest free loans from said labor force and taxpayers foot 100% of government wages, you should be getting a sense that the government is more crooked than Bernie Madoff.
Now back to Pvt. Peanut:
Some of you might jump to say, “But Pvt. Peanut does pay taxes every time he uses a service, buys off base, or has property taxes.” You’ve missed the point of discounted labor, all together. Government pays Pvt. Peanut, Pvt. Peanut pays the government. Another thing, Pvt. Peanut does pay taxes on base through the purchase price of products. The makers of these products pay taxes and push the cost to the consumers. The more Pvt. Peanut buys, the more taxes he’s charged, and the more his labor is discounted.
Under the FairTax, several things will occur:
Under the FairTax, several things will occur:
- Pvt. Peanut will receive his entire check and his money is no longer loaned to the government until April 15th.
- Pvt. Peanut controls the discount of his labor through his purchasing choices. (New or used.)
- Pvt. Peanut will receive a pre-bate based on the size of his family, further reducing the discount of his labor.
What will stay the same?
Taxpayers still foot 100% of Pvt. Peanut’s tax liability.
Now one thing most of you will forget or ignore from an earlier statement is that this is not just a military example, but also for those Congressmen, IRS Agents, government employees, government contractors, recipients of Welfare, Social Security, and government funded pensions. Using the military pay as an example is only a simple illustration of how people that depend solely on government as their source of income actually pay no taxes in our “wonderful” current tax system.
You can agree with me or you can think I’m wrong. If you don’t think I’m correct in this assessment, prove it in the comments section and we’ll BOTH learn something.
BE ON THE LOOK OUT FOR:
Example 2: Social Security, Government Funded Pensions, and Welfare
References
Loan definition. (2011). Retrieved from http://www.investorwords.com/2858/loan.html
1 Comment
Yes, I've often found it odd that my husband, who is a Marine, pays taxes on his income which is paid by....taxes.
Posted on Thursday, July 28, 2011 at 10:06:00 PM EDT