Sirwin
Sirwin

Fiat Money and Taxes


“The power to tax involves the power to destroy . . . “ -Former Chief Justice John Marshall, in McCulloch v. Maryland, 17 U.S. 4 Wheat. 316 316 (1819) 

Taxes are what we pay for civilized society, . . . “ -Oliver Wendell Holmes, former Justice of the United States Supreme Court, in Compañía General de Tabacos de Filipinas v. Collector of Internal Revenue, 275 U.S. 87 (1927)       

“So Samuel spoke all the words of the LORD to the people who had asked of him a king.” “And he [the king] will take the best of your fields and your vineyards and your olive groves, and give them to his servants. And he will take a tenth of your seed and of your vineyards, and give to his officers and to his servants. He will also take your male servants and your female servants and your best young men and your donkeys, and use them for his work.” -God, warning the Jews what would happen with respect to their demand for a king.  1 Samuel 8: 10, 14-16  NASB 1977                   

Readers of ofthefreemarket.com, S. Rigglesworth here, getting back to you with a new posting on taxes. In my last two postings, I discussed the fact that U.S. currency is fiat money, that is to say, no asset, commonly considered to represent real wealth, backs any of it, including any of the precious metals. 

So what about the taxation of fiat money? This is an intriguing question, is it not?

Look at the above three quotes, two are from U.S. Supreme Court case decisions, and one is God himself speaking to and through the great Old Testament prophet Samuel. These three quotes all come from times when the U.S. did not operate on fiat money or when gold and silver was what represented real wealth among human cultures from antiquity—not bits of paper and ink. 

One might cheekily argue that taxing fiat money is not taxing at all, because fiat money doesn’t constitute real wealth to begin with. And I will concede that this claim has a certain logical force to it. However, the falsity of this is easy to see due to the simple fact that unless a society has completely abandoned a fiat money system, such as the current U.S. fiat money system, and reverted to barter or some other form of exchange, we all remain slaves to the existing fiat money system. 

And how do the citizens of a country free themselves from this type of slavery? 

Well, the key, “is some other form of exchange”: barter, gold, silver, maybe crypto currency, even chicken feathers would work if the market determined that chicken feathers represented wealth, and then there is always labor. Moreover, if a society, such as our own, totally abandoned the current fiat money system, that would also mean that our current system of government in this country would be gone too. 

The U.S. government (like all governments) is only able to continue exist because most citizens in their actions comply to some degree or another with laws imposed by government. One of the so-called battle cries of the American Revolution was “No taxation without representation.” In fact, some would argue, the genius of the American system is that allegedly citizens participate in governing themselves through a Republican form of government. Isn’t this the argument used by U.S. administrations try to convince citizens to sign up for the endless series of wars our government involves itself in, that is, sign up and die lowly citizen, protect your sacred right to govern yourself? And, of course, save your loved ones from whatever evil ideology is supposedly threatening our way of life. If this happens to strike you as debatable tripe or maybe as so much hogwash, I submit you are not alone in that view. That, however, would be another blog posting, this one is about the relationship between taxes and a/the fiat system of currency.   

Fiat and Taxes Wrecked by Taxes

Power to Destroy

Take a second look at the very first quotation in this blog article, i.e., “the power to tax involves the power to destroy.” Now, before you dive into the deep end of the pool, thinking never were more wise words uttered by a jurist, the background here was Chief Marshal talking about states (Maryland, specifically) having the power to destroy the federal government. What? Wasn’t the wise jurist talking about the power of the government to destroy its own citizenry by the imposition of criminally onerous rates of taxation? I also assumed that this was the Chief Justice’s meaning when I first encountered this quote. But, the proverbial fact of the matter is that the State of Maryland was trying to tax federally issued (inside Maryland) paper money notes of a U.S. chartered bank. Let’s put this in perspective. Am I suggesting that a government couldn’t destroy itself by imposing criminally onerous rates of taxation on its citizens? Of course it could. Humans are stupid and evil and therefore governments are stupid and evil. The esteemed judge missed his own point: if the State of Maryland (and other states) could destroy the federal government, what is the destructive havoc that both states and federal government have in their power to wreak on U.S. citizens? This power to destroy is rather incomprehensible, until you find yourself one of the ones being destroyed, no?

The Price We Pay

And since we are back on the three quotes heading up this post, then let us examine “taxes are what we pay for civilized society . . .?” Oh? If this is the case, then we are being stolen from every day; we are not getting what we are supposedly are paying for, i.e., a civilized society. If you go to the grocery store and buy a dozen eggs and half of them are rotten, you take them back and get a refund or a replacement carton on eggs. But I ask you, how do you return a rotten uncivil society and get a replacement or refund? You don’t.  

Back to The Old Testament

Which, in an oblique way, brings me to third quote above from the Old Testament book of Samuel. How so, you ask? That’s very interesting. The Jews, under the covenant imposed on them by God, were meant, among other things, to be an example to the world of human beings living in a proper relationship with God and with their fellow human beings. They constantly, of course, failed to do this. They are still failing now, as are their fellow gentiles now, in fact every ethnicity is still failing in this regard. The Jews after arriving in the promised land decided they didn’t like living under a theocracy. Maybe, if we get a king, like all the nations around us that God drove out for us, lots of our self-caused problems will go away. Interesting theory, no? 

Moreover, God told them, through Samuel, if you get a king, he will be taking all kinds of things from you in the form of taxes. None of this mattered one wit to the Jews and the Jews were given their kings, all them flawed, sinful and incompetent. Were any of their previous self-imposed problems solved under kings? They were ameliorated at times, always only temporarily, and more generally, they were expanded and exacerbated. So, the answer to my rhetorical question is a sound no. 

Blinded Ben

To Conclude

So now, readers, I find myself floating. Governments have the power to destroy the societies they supposedly govern (and by derivation themselves); the government tells us that our taxes buy us a civilized society—so where is the product? And human beings think if they just get the right leaders, all of their problems will be laid to rest. What are we to do about these dangers and fantasies? Are they in the end just all intractable? 

As you can tell, I don’t mind bringing these ugly realities up for examination and you probably didn’t just read this blog posting not expecting to somehow benefit by the expending your time. The prophet Samuel was troubled when Israel started clamoring for a king. God’s response? 

“And the LORD said to Samuel, “Listen to the voice of the people in regard to all that they say to you, for they have not rejected you, but they have rejected Me from being king over them.” 1 Samuel 8:7 NASB 1977 

Let us be very careful here; because if we are not, we will, in fact, get quite precisely what we are paying for. And we may discover just how uncivilized it truly is. And I say this, with little or no deference afforded to Justice Holmes. He rather missed the point as well.

 

Written by S. Rigglesworth from ofthefreemarket.com on June 23, 2021

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