Tag Archives: taxes

Noise

I am indoors steaming because of machine noise.  My formerly peaceful, rural environment has become a cesspool of cacophony in my lifetime.  Even as I write, my neighbor brother-in-law is mowing the lawn between our houses.  He couldn’t do it over the weekend, when all the neighbors were outside with their power tools, and the Gun Club was a’popping down the street.  No, he had to wait until today, so he could rev his lawnmower for an hour, complete with backfires and my slim and waning hope that it would stop for good, or that he would give up.  The grass doesn’t even need mowing.

It may be said that I am adding to the noise by my complaints.  It seems the world is overpopulated with people and machines screaming for attention.  There are so many demands on attention, from so many sources, that it’s tempting to shut them all out, if that were possible.  I understand now why people go deaf.

Last night it occurred to me that I look forward to the evenings and the relief from the constant demands on attention—and my rooster is crowing—from phone ringing for sales or survey calls, or the daily hang-up calls.  I get enough noise from the nags inside my head, who are constantly badgering me to do something or other.

Am I the only person on the planet who likes peace and quiet, with emphasis on quiet?  There are people who say they like “white noise.”  They can’t sleep without it.  It is said nature abhors a vacuum.  Even formerly empty space—phone rings, and I hang up without even looking to see who’s calling—is now said to be full of “dark matter” and “dark energy,” suggesting there are no vacuums anywhere.  I wonder if the theorized black holes are actually vacuums, with the common characteristic of sucking everything into them.  Is gravity, then, a vacuum begging to be filled?  Does silence attract sound, like magnets attract iron filings?

Ahhhh . . . The lawn mower has stopped.  My rooster Squire, who I moved to the filing cabinet next to me, is quiet for the moment, looking quizzically at me.  Now, the lawn mower is back.

I used to frequent coffee shops, but no more.  I’m tired of asking the personnel to turn the music down.  How many grocery store or big-box store cashiers have I asked if they get paid extra to listen to the “I Died and Went to Hell” music at top volume?  I tell them to tell their bosses the music is driving customers away.  Has it made a difference, in the years I’ve complained?  “I just tune it out,” a cashier once told me, “but that’s harder to do when it’s skipping.”

In my lifetime, “progress” and “development” has occurred all around my neighborhood.  Not only that, but the perpetual US wars have contributed to an increase in size and activity of Georgia military bases.  One of them, the Hunter Army Airfield, is within a couple of miles—as the jet flies—from my house, with its flight path directly overhead.  I always know when troops are being deployed, because planes fly low overhead every five minutes, headed for Iraq or Afghanistan, or wherever they are sending the testosterone-poisoned to make war this week.

Savannah has grown up around Hunter over the past 60-odd years, but Yankees have invaded on the ground, too, with the conversion of International Paper’s island and former tree farm to a gated community real estate development, complete with three taxpayer-funded bridges over the intra-coastal waterway.  My formerly peaceful residence happens to lie between town and this gilded prison, which  has led to an increase in traffic and more development along the route.  Because of construction and clearing of trees for same, vegetation no longer blocks or absorbs the noise, and the traffic becomes a roar at rush hour, especially when the tide is high.

In order to serve these Yankees and their ilk, the county has courted “progress” in the form of a Walmart and Sam’s Club within hearing distance and adjacent to a new parkway so that the Yankees can get home from town faster.  This brought three stoplights and attendant congestion, along with a street sweeper in the wee hours in the Walmart parking lot.

I put the fear of the lord in the street sweeper at 2 a.m. one night, when he woke me up, because this “progress” along with the “progress” of the grass seeder at International Paper’s real estate development golf courses, has caused my property taxes to double in the last ten years.

Now all governments claim to want “progress” and “economic development,” but the flaw in this reasoning is that current residents are expected to pay for the governments’ desire to attract future residents.  The Yankees gloat about how living expenses are lower here than in the urban cesspools from which they escaped, but they have raised my living expenses, taxes, and have created mayhem on my stomping grounds.

My brother-in-law is not a Yankee, but he loves his power tools, just as the coffee shops love their “Feel My Pain” music, the military loves its helicopters and jets, the Gun Club loves its guns, the whole world loves its SUVs, trucks and other gas guzzlers, the neighbors love their barking dogs, and my roosters love to crow.

What’s the difference between a Northerner and a Yankee?  A Northerner visits and goes home.  A Yankee buys real estate for inflated prices, gets a parkway and bridges built for him, owns a couple of SUVs, and stays to criticize those they have elbowed aside, like the deer on the former tree farm, which now grows houses and golf courses.

I contend the noise is driving everyone crazy, but can people hear themselves think anymore?  Do they want to?

 

 

 

 

 

 

How Did It Happen?

Does anyone ever wonder how we got the income tax?  This tax has become so universal, on international, federal, state and even local levels, that it is taken for granted, but few people seem to question its legitimacy, history, or even its purpose.

An internet search suggests a form of “wealth tax” or income tax existed in the Roman Republic, ancient Egypt, and China, but the form we know, usually imposed to finance wars, began in England in 1188, by Henry II, for the “Saladin tithe” to fund the Third Crusade.

In his landmark book, Wealth of Nations, in 1776, Adam Smith, a Scott, suggested even the King of Britain could not get away with an income tax.  Tax on interest or money is difficult to calculate without extraordinary “inquisition” into every man’s private circumstances and “would be a source of such continual and endless vexation as no people could support.”  However, a mere nine years after Smith died in 1790, British Prime Minister William Pitt the Younger formally implemented the income tax, designed to pay for the French Revolutionary War, to purchase weapons and equipment.  It was a progressive income tax and in place between 1799 and 1816, but for a short reprieve following the Peace of Amiens in 1803.  It was reintroduced in Great Britain in 1842 by Prime Minister Sir Robert Peel, who was seeking revenues for the government’s increasing budget deficits.

“A heavy progressive or graduated income tax” is the second major tenet of the The Communist Manifesto, as delineated by Karl Marx and Friedrich Engels in 1848.  The fifth tenet advocates “Centralization of credit in the hands of the State by means of a national bank with State capital and an exclusive monopoly.”

In the United States, President Abraham Lincoln instituted the first US income tax in 1861 to pay debts from his war.  It was repealed by Congress in 1872.

The Socialist Labor Party pushed for an income tax in 1887.  The Populist Party demanded it in its 1892 platform, and the Democrats, led by William Jennings Bryan, advocated for the progressive income tax law passed in 1894.   Called the William-Gorman Tariff Act (Revenue Act), it reduced tariffs and imposed a two percent income tax but only on the top ten percent of earners.  In 1895, in Pollock v. Farmers Loan and Trust Co., the Supreme Court declared the tax unconstitutional, based on the constitutional requirements that taxation be apportioned by a state’s population.

Republican Rhode Island Senator Nelson W. Aldrich, who served between 1881 and 1911, was probably the single most influential individual in creating the financial structure we know today.  As chairman of the Senate Finance Committee–which oversaw bank regulation and monetary policy–he was possibly the most powerful man in the nation from 1898 to 1911. The financial Panic of 1907, (which some believe was engineered by banker and Aldrich friend/business associate, J. Pierpont Morgan) led to the Aldrich-Vreeland Act in 1908, which was designed to make the monetary supply more elastic.  It also established the National Monetary Commission with Aldrich becoming chairman.  As chairman, he led a team of “experts” to European capitals to study their banking practices, and returned as a proponent of a national banking system.  He worked in secret with powerful bankers to develop the “Aldrich Plan,” which eventually formed the basis of the Federal Reserve Act of 1913.  The secret dealings that began in 1910 and led to the creation of the Federal Reserve system is well documented in The Creature from Jekyll Island:  A Second Look at the Federal Reserve, by G. Edward Griffin.

Aldrich, who apparently had a habit of publicly opposing things he wanted, then voted in Congress for the corporate income tax in 1909, claiming this was to insure the personal income tax would not be passed.  Ten years before, he had called the income tax “communistic.”  However, later he and President William J. Taft then agreed that a constitutional amendment would be more effective in overriding the Supreme Court’s objections the 1894 law.  Aldrich claimed he believed the 16th amendment would never be approved.

The relationship between the Federal Reserve System and the new income stream generated by the income tax is not well documented, but it resembles that of the Whiskey Tax and the nation’s first central bank in 1791.  At that time, Treasury Secretary Alexander Hamilton introduced legislation for the whiskey tax on December 13, 1790 and for the central bank the next day, on December 14, 1790.

A common thread in the two bank/taxing schemes was that they gave the federal government the authority, if not the right, to investigate every taxpayer’s personal property and bank accounts searching for infractions, and to seize property it decides has been obtained illegally.  This has set the precedent for the federal invasion into private lives that has become so prevalent today.

In the “Gilded Age,” Nelson Aldrich was well known for his close and unsavory ties to business, by which he had become personally wealthy.  He believed his power base would successfully defeat the income tax amendment.  Indeed, while they were opposed, their solidarity had broken down, so individuals like Andrew Carnegie and John D. Rockefeller (whose son John Jr., married Aldrich’s daughter Abby) formed tax-exempt foundations to shelter their wealth before the tax went into effect.

At that time the income tax was promoted as a “class tax,” with only the upper income earners affected, so the idea of wealth re-distribution appealed to lower income earners.  Only later did President Franklin D. Roosevelt expand the “class tax” to a “mass tax,” according to former IRS historian Shelley L. Davis in her book, Unbridled Power: Inside the Secret Culture of the IRS.

Proponents of the income tax used other arguments, too.  It was proposed as a more reliable method than tariffs for raising federal revenues, and gave President Woodrow Wilson justification for reducing tariffs.  Also at that time the idea of Prohibition was in the air, and advocates of Prohibition recognized the government would lose income from excise taxes on alcohol.

The 16th Amendment reads, “The Congress shall have the power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several States, and without regard to any census or enumeration.”  It was passed by Congress on July 2, 1909 and sent to the states for ratification.

It was supposedly ratified by the requisite number of states by February 13, 1913.  However, there is some question about whether it was ever properly ratified.  In 1985, William J. Benson published The Law that Never Was about the income tax.  Here, Benson claimed that in 1984 he had visited national archives and all 48 state capitals looking for records of ratification.  Not only had he found variations in wording and punctuation from the congressionally approved amendment, but he claimed some states which were certified as ratifying never did or voted against the amendment.  He said only two to four states had ratified as written.

Constitutional amendments require ratification by three-fourths of states.  In 1913, there were 48 states, so 36 would have had to ratify.  Benson found that seven states had not ratified at all.  1913 Secretary of State Philander Knox had claimed Kentucky and Tennessee ratified, but Benson said they did not.  Eight states were reported as having ratified, but Benson found no evidence of it.  Six more states did approve, but the governors or other officials required to sign did not sign.  Twenty-five states violated provisions of their own constitutions in ratification, and 29 violated state procedures.  Twenty-two states changed the wording to ratify, one state changed spelling, and 26 states changed punctuation.   Oklahoma changed the wording to say the opposite of what the amendment said.  Tennessee law required a delay until the next session but ignored it.

The American Law Division of Congress’ Congressional Research Service responded in May, 1985 to Benson’s claims.  “While it didn’t rebut Benson’s factual claims,” it said the amendment had been ratified “because Knox said it had been ratified,” says one internet source.

In 1990 Benson went to prison for tax evasion.  He served 15 months before a federal appeals panel overturned the conviction, saying a government witness had given improper testimony in the 1987 trial.  This occurred less than one month before Benson was scheduled for parole.

Benson’s book caused quite a stir, and he was selling packages based on his book to help individuals fight the Internal Revenue Service.  However, those who have used his arguments have not fared well in court.  Also, Benson himself was the loser in court rulings in 2007 and 2009 that determined his “Reliance Defense Package,” which he sold for $3500 to tax protesters, was fraudulent.

Courts have denied requests for evidentiary hearings and have refused to hear the arguments against the 16th amendment itself, claiming “Secretary Knox’ decision is now beyond review.”

In an interview in 2013, Benson remained an income-tax evader and bragged he has never gone back to prison, despite his continued outspoken crusade against the 16th amendment.

 

 

 

Wealth of Nations Synopsis

bkssmithwealth1776

Adam Smith’s landmark book, Wealth of Nations, published in 1776, is a 500-plus page treatise on economics, oft cited bur rarely read, except by economists and masochists like me.  If you can overlook Smith’s sing-song style, his tediousness, repetition, generalizations, vague and archaic terminology, and inconsistent reasoning, the book is worth reading, especially as a social history.  It is important to recognize that Smith writes as a spokesman for the monarchy and the wealthy stock holders, landowners, and mercantilists who made the book an immediate hit and won him a position as Commissioner of Customs in Edinburgh, Scotland.  His “commercial society” has enshrined him as the “first modern economist,” or “father of modern capitalism.”

A confluence of factors contributed to the conditions of Smith’s time.  The “industrial revolution” began in Britain with the invention of the steam engine in 1712, first used for pumping water out of coal mines.  Other inventions quickly followed, eventually leading to the growth and dominance of the British Empire, through manufacture, trade, and colonization. Another feature of 1700’s Britain involved war and military conquest.  As an island nation, with England, Scotland, and Wales united as the United Kingdom, or “Great Britain,” in 1707, it developed its sea power and had established dominance in the seas and in trading routes by the time Smith wrote Wealth of Nations.  Competition with other powers brought war and its heavy costs.

Wealth of Nations refers repeatedly to the “late war,” which presumably was the Seven Years’ War, fought between 1756 and 1763.  One of the book’s primary aims appears to be exploring the various modes of taxation the king could use to pay debts from that war.

Meanwhile, the industrial revolution was bringing a rapid shift in social and cultural dynamics, as Great Britain went from predominantly agrarian, rural society to one of urban and industrial predominance.  The textile industry was probably the first to be affected in a major way, with the invention of the spinning jenny–“jenny” is a nickname for “engine”–by Englishman James Hargreaves in 1764.

The iron industry also underwent fast transformation, and with it, the transportation industry.  Communication and banking adapted accordingly.

Because industrialization necessitated large capital investments, business ownership shifted from individuals to groups, including partnerships and corporations.  The banking industry grew by leaps and bounds after the Bank of England was first chartered in 1694.  The London Stock Exchange boomed after the Seven Years’ War.  The government became increasingly dependent on it to finance wars.

Like many of his contemporaries, including Benjamin Franklin, Thomas Jefferson, Alexander Hamilton, and George Washington, he was fascinated by machinery and its commercial potential.

In the first pages of Wealth, Smith presents the plan for the book, summarizing that the real wealth of a nation comes down to the “annual produce of the land and labor of the society.”

He then distinguishes between towns and agriculture and glorifies machines for facilitating division of labor, thus efficiency and productivity.  He uses pin-making as an example, with speed of production due to division of labor the only criterion.

Smith claims farmers are lazy, because as one-man operations, they waste time changing tasks, whereas a group of men in a “workhouse,” each doing one small task repeatedly, are able to produce much more in the same time period.

He says “Cochin-china” is one of several Asian countries that have sea access as well as extensive canals inland, but most of their trade is internal.  He wonders why they have not sought to trade outside their own countries.

Wealth emphasizes the enduring value of labor, despite the fluctuations in metal money.  The discovery of gold and silver in the Americas caused a glut in Europe that reduced the value to a third of what it was before.  A man can only do so much labor, but that labor holds its value through all the ups and downs of markets.

Wealth gives a multiplicity of examples of how labor costs rise and fall in relation to cities versus rural, or demand—such as North America, where labor was in great demand and food relatively inexpensive—and how much a laborer must be paid to sustain himself and children to replace him.  Since 50% of children die before reaching adulthood, says Smith, we need to calculate the cost of feeding four children in every family.  Smith acknowledges that all the laws favor the employers, should the laborers strike for higher wages.

While he presses the point that nothing happens without labor, Smith is happy to squeeze the laborer into a bare subsistence wage, better to keep him working hard to make ends meet.

He cites numerous examples of relationships between labor and stocks. New land, like the colonies, attracted lots of stock capital because it was cheap, full of natural resources, and soil was rich.

Early on “corporations” restricted competition, with the king’s (or queen’s) support.  Smith says 5th of Elizabeth formalized the “Statute of Apprenticeship” that restricted practice of craft or trade to those who had apprenticed seven years.  Church wardens, mandated by the king to provide for the poor in their parishes, did everything possible to keep the poor from moving in.

Corn was the major food crop in Europe.  Smith says tobacco grows well enough in parts of Europe, but it is illegal because it’s too hard to tax individual farmers, so tobacco is imported from (primarily) Virginia and Maryland, warehoused, and resold at profit.  Sugar is in great demand, and is very expensive, imported from Caribbean colonies.  In “Cochin-china” sugar is no more expensive than ordinary food crops and is cultivated alongside them and apparently not exported much.

Labor and landlords benefit from policies that also serve the public.  Stockholders, however, are loud, moneyed, and invested in reducing competition, so they generally work against the public good.

Smith explains how money is not the same as circulating capital.  It is the “wheel” of the economic engine but has no intrinsic value.  A coin is not used up when it is exchanged for goods or services, so the same coin, each time it changes hands, buys its face value for the purchaser, who gets his coin’s “worth” in product.

He also writes about the banks, primarily of Scotland, that used paper money promissory notes in excess of gold deposits for lending.  80% paper to 20% backup.  Merchants could also get lines of credit, so were encouraged to accept that bank’s paper in trade, to promote it to friends and associates, and to spend it.  However, paper was no good in foreign countries, so gold was exported to import foreign products.

“No equal capital puts into motion a greater quantity of productive labor than that of the farmer,” says Smith.  Also, farms stay put, like retail shops, and can’t be outsourced.

He discusses how the American trade is financed by merchants in Great Britain.  He uses the example of hogsheads of tobacco from Virginia and Maryland as commodity money that is bought in excess by England and resold in other places.

But the “great commerce of every civilized society” is between country and town.  In fact, the home trade, by far the most important, was considered subsidiary to foreign trade, based on Man’s book, England’s Treasure in Foreign Trade.  Smith says the mercantile system works in many ways against the enrichment of the country.  It selectively encourages exportation and discourages importation.

He says it is a mistake to politically favor exports over imports.  Restraints on imports consist of high duties and absolute prohibitions.  Exports were encouraged by “drawbacks” (tax relief), “bounties (subsidies), advantageous treaties, and the establishment of colonies.  Smith is down on bounties.  He specifically mentions corn, because it, to him, is the commodity by which the price of everything else is measured.

He claims restraints on importation and prohibitions may be good for the home manufacturers but not for the population or the economy as a whole.  The famous “invisible hand” comes up on page 300, in which Smith mentions the folly of “statesmen” who try to control private enterprise.  He says the market will determine what is needed without government help.

Merchants and manufacturers derive the most benefit from monopolies, says he, whereas farmers and populace derive little and undoubtedly lose by them.  Corn merchants benefit more from subsidies than corn farmers.

The notion of “balance of trade” is “absurd,” and he enumerates reasons.  Smith also states that it is silly for nations to try to improve their wealth at the expense of other nations.  This leads to hostilities rather than friendly exchanges.

Smith asserts again that all wealth comes from the land, with farmers the most productive workers and everyone else subsidiary.  Those who bring raw materials to more useable form, like wool manufacturers, do not add as much value as the farmer does by cultivating the land.

Smith cites the duties of the sovereign.  He claims the sovereign does not have the duty or right to regulate commerce.  At the same time, he says the king’s first duty is to protect the country from other governments.

He makes the case for a standing army and says this is the only way the sovereign can maintain peace and order.  Now “civilized” societies can conquer “barbarous” societies, which don’t have the advantage of gun power.  He believes, therefore, that gun power equals civilization.

Smith mentions highways, bridges, navigable canals, coinage, and the post office as public institutions that facilitate commerce.  Post offices everywhere, he says, are valuable revenue sources for the government, with steady and immediate cash flow and low maintenance costs.

Obviously, a glaring inconsistency in Smith’s premise is between his views on free trade and his belief in the importance of a standing army.  Here we have our pseudo proponent of free trade justifying forts and garrisons in foreign countries to protect merchants’ stores.  Where these countries do not allow forts, it has been necessary to send ambassadors.  Smith believes most ambassadorships were created to protect trade.

He goes into “regulated companies,” which are open to anyone with the money, willing to submit to the rules, and trading his own stock at his own risk.  These are opposed to “joint stock” companies, which sound like publically traded companies today.  Pooled resources and pooled profits.  He says only four types of joint stock companies seem valid.  He cites:  1. The banking industry; 2. Fire and sea-risk insurance companies; 3. Canal or navigable channel companies; and 4. Those bringing water by pipe or otherwise to a great city.  He notes the Bank of England doesn’t have exclusive privilege, except that no other bank in England can employ more than six people, and the Bank of England lends to the sovereign.

The last hundred pages of the book are devoted to taxes and other potential sources of revenue for the commonwealth or sovereign.

He floats the concept of a central bank, calling it a “public bank to support public credit, and upon particular emergencies to advance to government the whole produce of a tax, to the amount, perhaps, of several millions, a year or two before it comes in.”

Smith asserts the king should be wealthier than anyone, with grand style and pomp to support his “dignity.”

He distinguishes between direct and indirect taxes, saying the former, as on land, are easily assessed.  Tax on interest or money is difficult to calculate without extraordinary “inquisition” into every man’s private circumstances and “would be a source of such continual and endless vexation as no people could support.”

“There is no art which one government sooner learns of another, than that of draining money from the pockets of the people.”

Wages on the “inferior classes of workmen” are regulated by demand for labor and the price of provisions.  As taxes on labor go up, wages must go up more, to cover the additional tax.  Manufacturers can pass these costs on to the consumer, but farmers’ landlords must absorb them.  This leads to a decrease in the demand for labor.  “Absurd and destructive as such taxes are, however, they take place in many countries.”

Smith goes into government jobs, which are much sought after, because they are highly paid and carry perquisites (perks).  Taxes on luxuries do not raise the price of other commodities, but those on necessities do, so should not be taxed. He mentions alcohol taxes as by far the most productive.

Excise taxes are generally on home goods destined for home markets and imposed on only certain items of the most general use. Excise laws discourage smuggling more effectively than customs laws.

He acknowledges that poor people, because there are more of them, consume the most, not only in quantity, but in value.

He mentions that war has required even the most frugal republics to contract great debts to maintain independence.  He says it is incorrect to assume money lent to government increases capital, because it is generally wasted, and that money would otherwise be spent on productive labor.  Also, foreigners often buy in.

“When national debts have once been accumulated to a certain degree, there is scarce, I believe, a single instance of their having been fairly and completely paid.”

Wealth ends rather abruptly on the subject of public debt, saying that when it exceeds taxpayers’ ability to pay with reasonable measures, government uses unreasonable measures, such as issuing interest-free bonds for immediate expenses, or interest-only bonds that are never intended to be repaid.  He says this has “enfeebled” multiple governments.

When governments reach the point where they can’t pay the debt, they either inflate the currency or declare bankruptcy.  He says the latter is more honest, but says the entire system of debt-backed government is “pernicious.”

My take is the tradition of monarchs and overlords has led to societies in which unearned wealth is glorified and held in high esteem.  The most highly respected and emulated are those who have done the least to acquire what they have, in general terms. The very idea, The Wealth of Nations, presumes the nations own the individuals who live within their borders.

 

 

 

Taxing the Sun

The new 30% tariff on imported solar panels looks like a direct economic hit on the alternative energy industry, imposed by the dinosaur in the White House.  That the man is owned by the oil industry is becoming increasingly obvious.  First there was the okay to the final segments of the Keystone XL pipeline.  More recently, just about the entire coastline of the US has been offered for off-shore oil and gas drilling.  Our Secretary of State is former CEO of Exxon, and the head of the Environmental Protection Agency has spent much of his career fighting the EPA.

Now we have a 30% tariff on solar panels?  According to an Associated Press report, the tariff was sought by Suniva, Inc., which sought bankruptcy protection in April, and by the American subsidiary of Germany’s SolarWorld.  They claimed the 500 percent increase in imported solar panels over the past five years has led to a ruinous price collapse.  Nearly 30 American solar-manufacturing companies closed in that time.  They claimed big, bad China plotted to flood the global market with cheap products to weaken US manufacturing.  Apparently foreign companies manufacturing in the US are exempt from the tariff, but they now have more wiggle room to raise prices.

So the US President jumps in to stop China in its tracks, apparently, and to raise the price of solar panels for everyone.  But, as Senator Ben Sasse, R-Neb, claimed, tariffs are a tax on consumers.  Moreover, a tax on imported solar panels will reduce choice and supply for everyone, forestall or delay installation, and constrict employment in the alternative energy field.

A tariff is defined as a tax or duty on a particular class of imports or exports.  It is claimed “protective tariffs” are intended to make domestic products more competitive.  Tariffs are not new in the US, with the first imposed in 1789. Since then, well over thirty acts affecting tariffs have been implemented.

The 1789 tariff, also called the Hamilton Tariff Act, was the second piece of legislation passed by the fledgling US Congress.  Two years later, excise taxes on whiskey, run, snuff, and refined sugar were initiated.  The purpose of both types of taxes, according to the first Treasury Secretary, Alexander Hamilton, was to pay Revolutionary war debt, allow the government to function, redeem at full value federal debts, and pay the debts of states.

President George Washington made protective tariffs a national security issue.  In his 1790 State of the Union address, he claimed protective tariffs, especially for military supplies, was crucial for US independence.

Between that time and 1860, tariffs and excise taxes comprised 80-95%. of federal income.  The amounts of each varied.  Thomas Jefferson abolished the whiskey tax, but it was re-instituted in 1812.  When national debt was paid off in 1834, Andrew Jackson abolished most excise taxes and halved tariffs.  By this time tariffs had become a major political issue, especially following the tariff of 1828, the so called “Tariff of Abominations,” which imposed a 38% tax on 92% of imported goods.  Most tariffs were instituted to protect domestic industry, favored by Whigs (which later became Republicans), who were mostly Northeastern industrialists and industrial wage earners.  Southern Democrats strongly opposed tariffs.  In the South, tariffs raised prices for every household and also made it harder for the British textile manufacturers to buy their cotton. Some historians believe the cause of secession was not slavery but tariffs.

The Republican platform of 1860 favored higher tariffs. Abraham Lincoln made tariff increases one of his priorities. The Morrill Tariff passed in 1861, after seven Southern states had seceded and their Congressmen had resigned.  The Morrill Act raised tariffs from 17% overall and 28% on dutiable items to 26% overall and 36% on dutiable items, but it wasn’t enough to feed the government and the approaching war, so a second tariff bill later that summer raised tariffs another 10%.  Lincoln also instituted the first income tax in the US, under the “Revenue Act of 1861,” but it was repealed ten years later.

After the Civil War, tariffs fluctuated mildly but remained, with excise taxes, the main source of federal funding until 1913.  This was the year the income tax went into effect.

Since 1913, most of federal income comes from individual income taxes, payroll taxes (later), and corporate income taxes, with 41% coming from individual income taxes.  Excise taxes apply to “luxury” items, like tobacco, alcohol, and gambling, but also to telephone and utilities, among other things.  Excise taxes comprise about 3.8 percent of federal income.  Tariffs now constitute only about 1.7% of government revenues, $30 billion in 2012.

Far from being a supporter of free trade, the US has 12,000 specific tariffs on imports.  Tariffs on imported tobacco products are the highest and can run up to 350%.  Peanut tariffs that date back to 1933 run from 131.8% for shelled peanuts to 163.8% for unshelled peanuts.  New Balance shoes enjoys a 48% tariff on foreign sneakers like Nike and Adidas.  There’s a 40% tariff on Japanese leather.  We pay a 100% tariff on European meats, truffles, and Roquefort cheese, just to name a few.

It is arguable whether tariffs protect domestic industry, or benefit a country’s economy, especially if they start trade wars with other governments.  In the case of the solar industry, the added cost to imported solar panels may be prohibitive for large-scale projects that could employ large numbers of people.  It looks like a protective tariff, not for domestic solar panel manufacturers, but for the oil industry.  But the good news is that the solar industry is thriving, considering the 500 percent increase in imports over the past five years.  No wonder the oil companies are threatened.

Chemistry Quiz

  1. What is the difference between organic and inorganic chemistry?
  2. What is this molecule?

                           CH4

3.  What is this molecule?

                           CH3-CH2-OH

Answers:

1.  The difference between organic and inorganic chemistry is carbon. Carbon (C) is the basic building block of life, thus “organic chemistry”. Everything that lives or has ever lived contains it.  Carbon dioxide (CO2), considered a “greenhouse gas” in today’s parlance, is part of the natural life cycle, exhaled by human beings and animals, used by plants for growth.  The earth’s atmosphere is composed of 78 percent nitrogen and 21 percent oxygen.  The remaining one percent consists chiefly of argon, with extremely small amounts of other gases.  Carbon dioxide, then, constitutes significantly less than one percent of the earth’s atmosphere.

Green plants take in carbon dioxide and give off oxygen in “photosynthesis,” a process involving chemical reactions, using the sun as an energy source.

Life is an organizing force which defies “entropy.” “Entropy” has several definitions, but it is generally perceived as the ultimate degradation of matter and energy in the universe toward patternless conformity, degradation, disorder, and death.  However, the organizing force of life concentrates the energy in the living or dead organism.  Wood, coal, oil, and natural gas are examples of stored energy sources derived from living or formerly living organisms.

2.  If you answered that CH4 is methane, you would be right. Methane is another so-called “greenhouse gas.” It is produced by all living and decaying organisms.  It is the simplest molecule in organic chemistry, consisting of one carbon and four hydrogen atoms.  Everything from marshlands to landfill, from animal waste to human farts, add methane to the atmosphere.

If you answered that CH4 is natural gas, you would also be right.  This is why natural gas is considered the cleanest fuel of all, because it produces no toxic by-products.  The chemical reaction for natural gas when used for energy production is:

CH4 + 2O2 + flame = CO2 + 2H2O

Translated, this means that one methane molecule plus two oxygen molecules plus heat of combustion generates one carbon dioxide molecule and two water molecules. Thus, burning natural gas generates twice as much water as carbon dioxide.

If you are considering “greenhouse gases,” you must recognize that water (steam) is a potent one. The cloud cover of the earth has the effect of trapping heat inside the atmosphere.

You will note that “climate change scientists” want to reduce CH4 levels, but oil and gas companies want to capture and sell CH4 in the “global economy.” They are using “fracking” and other techniques to extract CH4 from trapped deposits in the earth.

3.  If you answer that CH3-CH2-OH is whiskey, you would be right. Whiskey is a distilled alcohol, usually from grain, such as rye and maize or corn. It is also distilled from barley.  Corn liquor was an early American product and used in bartering by cash-strapped farmers to pay bills.  George Washington was a large-scale whiskey distiller.  In his later years, he made most of his money from the distilling business.  Distilleries are examples of “economic narrows” that operate as toll gates between producer and retail purchaser.  Washington and Alexander Hamilton conspired to enact the “Whiskey Tax” in 1791 to undermine the bartering system and replace it with a cash-based system that could be more easily taxed. (Alexander Hamilton, Ron Chernow, 2007) This led to the infamous Whiskey Rebellion, in which Washington betrayed the farmers who had fought in the Revolution (thereby neglecting their farms) and were going bankrupt because of debt, taxes, and the devaluation of the Continental dollar, after the new United States currency was introduced.

If you answer that CH3-CH2-OH is ethanol (or ethyl alcohol), you would also be right.  The 2007 Congressional mandate to blend gasoline with at least 10% ethanol proved a boon for Archer Daniels Midland and other corporate giants, which benefitted mightily from the mandate, through tax breaks, other ethanol subsidies, and price supports.

It must be remembered that “farmers” and the “farming industry” are not the same. In fact, “farmers,” as we perceive them, are being displaced in large numbers by corporate mega-farms.  The corporate “farming industry” has significant political clout through donations to both major parties.  They also have armies of lobbyists, lawyers, and friends in federal and state regulatory agencies like the USDA and EPA.  They are the major beneficiaries of federal and state mandates, subsidies, and price supports.  They have their fingers in every point of the farm to table (or vehicle) distribution chain, including storage, distilleries, commodities futures markets, transportation (ADM Trucking is a subsidiary of Archer Daniels Midland), and global sales.

In this election year, while the media and public are focusing on the presidential candidates, let us not forget that the entire House of Representatives and one third of the Senate are up for grabs. Whatever anyone thinks of Donald Trump, we must admit he is a game-changer.  His grass roots appeal is showing the power of the people to make a significant difference in how the game is played.  We may be moving closer to a true democracy, by default, as the “ruling elite” of the two-party system desperately tries to recapture its “market share” of public trust and acceptance.

Yes, the individual can make a difference, whether at the national or local level. If that individual is informed well enough ask the right questions of all candidates, from local to national levels, and to demand informed answers, we might wrest a revolution in consciousness from this circus of political psychodrama.

So far, Ted Cruz is the only presidential candidate who has come out against the ethanol mandate, but he has begun to waffle under political pressure from the “farm lobby” and others. Hillary Clinton does not seem to know the difference between natural gas and methane.  She is not alone.  It is frightening to think that so many people with zero knowledge of science are in positions to write and pass legislation mandating, regulating, and subsidizing industries that affect us all and to such a great extent.

It probably doesn’t matter much who becomes president. The real power is in Congress, which has the power to repeal stupid legislation, like the ethanol mandate.  Especially now that there’s a worldwide oil glut—one of the premiere reasons for passing the mandate—it’s especially good timing to revisit that law and its consequences.

 

 

Spotlight Therapy “You ask questions.”

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I dreamed awhile back that I was in a public meeting about the latest GoverCorp outrage (take your pick). I took my characteristic Spotlight Therapy stance, which involves turning the lights on to reveal triangulation tactics.

Afterwards, a 20s-something minority female, eyes shining, came up to thank me. “What for,” I replied. “I don’t accomplish anything.”

“Yes, you do.” she said. “You ask questions.”

“Triangulation” is a term applied to the strategy of playing both ends against the middle. You don’t confront the enemy directly, but go for things that are important to him.  When you turn the lights on, the previously hidden manipulators are exposed.

When the dot.com bubble burst on March 10, 2000, my stock value suddenly shrank below my mortgage debt. At that time I was naïve and inexperienced.  Had I known then what I know now, I would have sold the stock before the bubble burst and paid off the mortgage.  Instead, I trusted a banker and stockbroker who I thought worked for me.  They wiped me out instead.

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I believe it was intentional. This sounds paranoid, but the financial setback started me on a reading tangent that validated my suspicions.  Books like Confessions of an Economic Hit Man, The Robber Barons, The Creature from Jekyll Island: A Second Look at the Federal Reserve, Supercapitalism, Wealth of Nations, Alexander Hamilton, The Whiskey Rebellion, and None Dare Call it Conspiracy,* to name a few—as well as the US Constitution–opened my eyes, and I was horrified.  These writings revealed how boom and bust cycles are created on purpose to consolidate wealth and political power in the hands of relatively invisible insiders.

Desperate people are capable of desperate acts, to save themselves. Perhaps my banker and stockbroker were feeling the squeeze before the bubble actually burst, and trying to save their own skins.

But the practice of trapping individuals and nations in debt has a long history. It gives the lender—the presumed lender, anyway—a strategic advantage in terms of control.  Often the presumed lender, like a bank, is lending other people’s money, called “leverage.” Newspapers like the Wall Street Journal regularly inform their readers how many billions this or that hedge fund or individual controls.

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This is triangulation in action. Between the stock market and the mortgage market, individual wealth has been gutted by seemingly random events.  Don’t believe it.  Spotlight the Federal Reserve, the “lender of last resort,” which has no wealth of its own.  It creates money out of thin air to “lend” to the federal government, which then disburses it to pay bills and fight wars.  This from The Creature from Jekyll Island, which explains the history of money and banking.  It also reveals the secret beginnings of the Federal Reserve Act, which essentially put Congress in the debt-creation business, to trap taxpayers in un-repayable debt until the sun burns out.  In other words, the dollar is backed only by government promises to pay.

Now anyone who trusts government promises deserves to suffer, and those who believe the government has the right to promise unborn taxpayers’ future earnings, in order to repay the Fed for its fiat money “loans,” is living in LaLa Land.

taxarrow0406 What Creature does not say is that the income tax was also initiated in 1913, two months before the Federal Reserve Act, in order to guarantee perpetual interest income to the Fed.  The precedent for this double whammy was set by first Treasury Secretary Alexander Hamilton.  Hamilton introduced legislation for the Whiskey Tax and the first US central bank December 13 and 14th in 1790, for the same purpose—ostensibly to pay off Revolutionary War debts, but also to provide a vehicle for trapping the fledgling nation in a bottomless barrel of new debt.

In my case, debt would force me to work in a career I had come to detest, to feed the absentee bosses and other middlemen, who work behind the scenes to call the shots, yet take no personal risks.

These days, you can’t get away from news reports, politicians, and “economists,” who are bemoaning the state of “the economy,” the need to “create jobs,” and concerns about unstable stock markets and central banks around the world. The hidden truth behind all this hand-wringing is, as Ron Paul has tried to say, “The US is bankrupt.”  (His book End the Fed, is also well worth reading.)

It appears the balance has begun to shift, because everyone–individuals, corporations, and government—is maxed out on credit. Bills are coming due, without resources to pay.  As the Boomer generation (that’s me), approaches retirement, and Social Security payments can’t keep up with expenses, Boomers are withdrawing money from the stock market to make ends meet.  At the other end of the earning spectrum, the millennials are dealing with student debt, credit card debt, automobile debt, and maybe mortgages, too. Not only are there fewer of them than of seniors, but they don’t have money to invest in the stock market.

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But what’s good for “the economy” is bad for individuals. The “strong dollar,” is hurting exports, meaning Josie Taxpayer’s dollar has more buying power at home. Percentage-wise, she pays less in taxes, too.  This “deflation” that terrifies the money churners could have the effect of grounding the dollar at home, where it belongs.  Also, as people get out of debt–whether paying it off, writing it off, declaring bankruptcy, or walking away–the inflated money supply shrinks even more.  Interest on debt, as well as inflation (a “hidden tax,” according to Creature), reduce the buying power of the money. This is great for people who have no debt, and bad for “the economy,” which now is $19 trillion in debt, equal to the gross domestic product.

For example, on Thursday, February 18, 2016, The New York Times ran an article entitled “Oil Price Soars and Shares Rise.”  The assumption by the NYT and Wall Street Journal is that what’s good for stocks and raises prices is good for America.

This false assumption becomes easier to understand when you realize a goodly portion of America is heavily invested in stocks through “retirement benefits” like pension plans, including public pension plans. Hedge fund and pension fund managers can make significant waves in the stock market by moving those large pots of money around.  “Investors,” then, are not primarily the wealthy “one percent” that the public has been taught to hate.

“Investors” are the groups and individuals who make their money through managing other people’s money, people they assume want the greatest value for their money. Only trouble is, the most profitable stocks are issued by some of the most unscrupulous companies, often those with incestuous ties to the government, and are beneficiaries of large, cushy government contracts.

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As is my habit—and one of my favorite pastimes–I underlined and scribbled in the margins of the above-mentioned article. Here, we are informed that stocks climbed the previous day as “investors clung to hope for an international deal” to cut production.  “The price of oil rose sharply, as did the stocks of major energy companies like Chevron.”

“Who benefits by raising oil prices?” I wrote.  I know the State of Georgia benefitted mightily by low oil prices last summer, as Governor Deal signed a six-cent gas tax increase as soon as oil prices fell.  Now, the State of Georgia can expect even more tax revenues.  Already the accumulated excise and sales taxes on gasoline amount to over 50% of the customer cost.

Who is the greatest consumer of oil and gas? I don’t know for sure, but I believe it’s the military, which probably doesn’t pay the taxes and competes for the oil.  I applaud anyone who wants to research that.

When the NYT repeated that “investors’” hope for an “international deal that will cap or cut production,” I commented it doesn’t matter, as demand remains low.  I also asked if this “deal” to cut production also applies to US offshore well drilling, new oil pipelines, fracking, and other domestic eco-rape.

 

We are told that Chevron and Hess profited. We are also told that Kinder Morgan gained, too, on the news that Warren Buffet has acquired a 1.2 percent stake.

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Now Texas-based Kinder Morgan is a loaded kettle of fish. Founded by Richard Kinder, of Enron fame, it is in the process of appealing the state of Georgia’s denial of eminent domain for its Palmetto Pipeline.  Governor Deal did something right, for a change, when he denied Kinder Morgan’s request.  This would have set a dangerous precedent for publicly traded corporations to use state government to seize private property for a pittance.  Not only are oil prices low, and sales slow, but the pipeline is planned to run through 210 miles of coastal Georgia and to affect 396 landowners across 12 counties, only to transport gasoline, diesel, ethanol, and natural gas to the Savannah, Brunswick, and Jacksonville ports for export.  Kinder Morgan also expects to drastically enlarge its liquid natural gas storage facility on the Savannah River.  Meanwhile on the opposite side of the continent, Kinder Morgan is trying to trample Native American Tl’azt’en Nation’s native hunting and fishing lands in British Columbia.

I congratulate anyone who wants to investigate Kinder Morgan’s ethics and stock investors. I’m especially interested in public pension investments in Kinder Morgan, as well as its customers Marathon Oil and Marathon Petroleum, among others.  Remember that everyone in the decision-making “pipeline” from governor to judges to legislators and the United States Congress, state and federal levels of the Department of Transportation, Environmental Protection Division, Department of Natural Resources—and the military—have taxpayer-funded pensions handled by managers for whom there is no bottom line—if they can get taxpayers to subsidize profits.

 

I abandoned Wall Street in early 2008, when it continued to abandon me. I advise anyone who has more sense than money to do the same.  Also, as any stock broker might advise, “Sell high.”

 

 

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*Authors and publication dates are listed in a previous blog, “Sell the TV and Read.”

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Stop the Spread of GoverCorp Cancer

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Stop the Spread of GoverCorp Cancer
Value = (Time + Money) X Attitude
Attitude = Everything

 A potentially fatal carcinoma of intra-cranial fat cells, GoverCorp cancer kills its victims by helping them to death. It sucks up time and money and bills you for it. No one is immune, but you can minimize risk.

 The pathophysiology of GoverCorp cancer:

* Money is a tax liability. The less you have, the less you pay in taxes.

* It can’t tax your time unless you allow it.

* GoverCorp cancer victims’ time and money have been terminally taxed. The situation is grave.

Debt + Overhead + Taxation = Slavery

 Risk avoidance strategies to combat GoverCorp cancer:

* Avoid GoverCorp-infested areas that cost time or money.

* Practice “Demand Side Economics.” Demand what you need instead of what they have. Avoid heavily advertised products entombed in plastic and packaging. You and the environment pay their overhead. If it doesn’t work right, return it. Tell everybody. Reduce demand for petroleum products, like plastics, packaging, and acrylic. Shop with sturdy, reusable bags.

* The most nutritious foods are usually the least expensive: fresh produce, dried beans, rice and other grains, dairy. Your money goes into food value rather than processing, packaging, advertising, Wall Street profits, and distribution. If you buy less, you pay less in taxes. If you earn less, you also pay less in taxes.

* Pay off debt. Interest and late fees do not give value for money. This will reduce overhead, debt and taxes.

* Invest in personal and family assets: your home, the tools of your trade, your or your children’s education. Take care of them, and they will take care of you. Enjoy what you already have.

* Patronize local business over corporations. Buy local products (lower distribution costs) when possible. Local businesses are more responsive to local markets. They must stand behind their products, or they don’t stay in business. They reinvest more earnings locally.

* If you have stock in Walmart, sell it. Walmart and other GoverCorp cancer perpetrators bleed local economies by shipping profits out of town.

* Minimize stock investments. Invest closer to home, where you have more control. This provides long-term gains and unexpected dividends. Pay cash when possible or trade in usefulness. Keep a good set of balanced books.

* Get your priorities straight. Technology isn’t essential to survival, but clean air, water and earth are. Get ahead by slowing down. Sell the TV and go fishing.

Diagnosis: GoverCorp Cancer
Treatment: Radical Liposuction and Shock Therapy
Prognosis: Uncertain

 

Universal Domain Technology and Patents

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A decent bike rack is hard to find in Savannah.

My reusable shopping bag collection

My reusable shopping bag collection

I have a future in product design.  I plan to specialize in universal domain technology, remain small and focused, invent things that I need, use all the potentially useful materials that clutter house, yard, and tool shed, and produce prototypes rather than patents.

Neither Benjamin Franklin nor Thomas Jefferson believed in patents.  I’m on their side.  Patents foster secrecy, such that everybody is so busy working alone and spying on “competition,” that we have a technological revolution of incompatible electronic equipment.

Above left is a bicycle rack, with my lone bicycle parked in it.  Above right is my reusable shopping bag collection, two of them hand-sewn by yours truly.  I used left-over drapery material to make the floral one.

The bike rack is part of a local campaign to embarrass our city and county government into making our streets and sidewalks more wheel friendly.  I’m also on a picture-taking campaign of public safety hazards on public land, planning to e-mail said pictures to those who are wasting taxpayer money on new highway construction and new schools where nobody lives.

Public safety hazards on public land abound in Savannah, where I live, but this appears to be a national problem.  Think of all the wheels that must traverse these areas.  Not only bicycles, but wheelchairs, rolling walkers, shopping carts, delivery carts, skateboards, roller skates, as well as cars and trucks.  In Savannah, tree branches hang in front of traffic lights and street signs.  High curbs, speed bumps, little islands of bushes at eye level prevent drivers from seeing small children and oncoming traffic.

Drainage is another major problem in this backwater burg.  The city and county do not maintain the drainage ditches, such that the mosquito problem is magnified.  When we have heavy rain and high tide together, downtown and midtown Savannah are prone to heavy flooding.

Our city parents (fathers and mothers) solve these problems by purchasing cute but loud little yellow jacket helicopters to dump malathion on the entire coast.  They purchase street signs to tell us the street is closed when flooded.  The helicopters pay special attention to the largest mosquito nest in Georgia and South Carolina that sits on the northern bank of the Savannah River.  This is site of previous Savannah River dredgings.  Our famous Hutchinson Island is an earlier site.  These toxic waste dumps come to us courtesy of the Army Corps of Engineers, but the Corps pays Chatham County to control the mosquitoes with malathion.  They do not want to drain it, because it attracts birds, but the birds and racoons are showing dangerous levels of lead and other toxins.

Yet the Corps and the county and the state of Georgia are hot to deepen the Savannah River even more, from 42 to 47 feet, even though nobody knows where they will put the millions of tons of toxic waste accumulated over 250-plus years of industrialization.

This ambitious project to stimulate imports and exports comes at a time when the “global economy” is dying on the vine.  The dollar is strong right now, great for the domestic economy.  Domestic goods are cheaper, labor is cheaper.  Only the bankers, the governments, and Wall Street are suffering, because they are the profit-skimmers who produce nothing of value on their own.

How do I get from bike racks and reusable bags to the global economy?  It’s simple.  Anyone can make them.  No patents or patent attorneys required.  They give solid, dependable returns on time and money investment for years, and cost nothing in taxes.