Continuing to Ponder Income Tax and Social Security

Home » June 2018 » Continuing to Ponder Income Tax and Social Security

Originally Published in June 2018 by R. Nelson Nash

Let’s begin this pondering session with a definition of the term statism.

Statism is the principle or policy of concentrating extensive economic, political, and related controls in the state at the cost of individual liberty. A statist is one whose fundamental belief system is fully grounded in the concept of statism.

A statist can’t conceive of life without the U.S. Postal Service (which is older than the U.S.) — how could we ever do without the USPS — who would build roads without the state — who would protect our lives and property without the state — who would educate (they wouldn’t dare admit that the correct term is really indoctrinate) our children — how could we possibly survive without the idea of Social Security, etc., ad infinitum.

Lest there be any doubt in your mind, I am not a statist. Sixty-one years ago, I was introduced to the Austrian school of economic thought through the Foundation for Economic Education. Leonard E. Read taught me that governments don’t do all those things mentioned above — people perform these functions.

People acting freely with one another under contract with one another can — and do — perform all the necessary functions in life. It is only this form of action that keeps us alive. Unfortunately, our broadcast media and government education (excuse me, I meant indoctrination) centers don’t spend much time making us aware of this fact. That’s because they are statists.

Statist believe that there must be a monopoly coercive force that performs these necessary functions in order for us to exist. In essence they are saying, “People can’t do these things without being forced to do so through government action.”

How did people survive before all these government actions came into being? The U.S. Postal service began in 1775, one year before the thirteen independent English Colonies seceded from the mother country.

Income Tax, as we know it today, began only 104 years ago. (Good grief! I’m 87 years old — so that’s just 17 years before I was born). Social Security law was passed in 1935 and became effective in 1937. (I was 6 years old then). These are just a few examples within a plethora of statist intrusions in our lives that have occurred since the beginning of the 20th century.

So, is all this government intrusion into our lives a recent phenomenon? No, to the contrary, it has been there for at least six thousand years according to Paul Rosenberg in his two-page essay entitled Fish Are the Last To Notice The Water (Google it). It may surprise you to face the fact that most everyone you know — including you (probably)— is a statist. Human beings are born with that proclivity. We can only make progress through overcoming this tendency. It should be at the highest level in our priorities.

Remember, the Infinite Banking Concept is all about how you think! Thinking like a statist is the primary obstacle that you must overcome in order to become your own banker.

Where is the origin of recent belief in statism? On our website, there is a RESOURCES tab. Click it on and find RECOMMENDED READING. Click that on and go to the HISTORY section. There are 138 books listed there. Read them all and you can easily conclude that this current statist mindset in the USA stems from the influence of Alexander Hamilton in 1789 and the creation of The Constitution. Our children are taught that there was a natural progression from our Declaration of Independence to our Constitution. Nothing could be further from the truth! The difference between those two documents is “wider than the Grand Canyon in Arizona!”

The primary reason for our separation from the mother country was something, probably best classified, as mercantilism — a sort of collusion between government and big business. We started out fairly well grounded in the beliefs of Thomas Jefferson and Thomas Payne — authors of the Declaration of Independence — the antithesis of statism. But we became “Hamiltonians” just 13 years later. The net result is that we now have “mercantilism on steroids.”

In an attempt to put a measuring stick to what happened, suppose that British mercantilism punished Colonial citizens by a “factor of one.” Under the influence of Hamilton’s ideas, we are now punished by a “factor of four.” People of my father’s generation would say, “We jumped out of the frying pan into the fire.”

Statism in recent history seems to get going in a big way around 1890 with Bismarck in Germany and his idea of social security. The object was “to get those old folks out of the work force to make room for jobs for the young folks because there are only so many jobs for everyone!” He set retirement age for German males at age 70. Life expectancy for them was a little over age 50!

In 1916 — half way through WWI — Bismarck is dead, and the retirement age was reduced to age 65. That’s where Franklin D. Roosevelt got USA Social Security retirement age set at 65 in 1937. Life expectancy for USA males at that time was around 61. Now it is 78+ — yet we are using age 67 as normal full retirement age. There is no way this statist idea can be sustainable. Painful change will take place in some way or another. Reality will replace fantasy.

I cite all the above just to notice the fact that we live in a hostile financial/economic environment. How can you survive in it? Very well, thank you — but you must first purge yourself of statist thinking. This has to be done on an individual level. You may be one who does very little statist thinking — but that is the same thing as a woman being “a little bit pregnant.”

Through the years I have emphasized how necessary it is to properly classify things we encounter throughout our lives. Governments have an endless number of bureaucratic entities that control our lives. That is their statist mission in life — but they are all examples of statists beliefs that are manifested by government (force) action.

So, here’s an example of how one can cope in this hostile financial environment. April 17 was the due date of U.S. Individual Income Tax Return (Form 1040). During last year my wife and I had to pay $30,000.00 in Income Tax (to a government bureau). That was “real money “— a token of goods and services that we had performed for others by freely contracting with them.

On the same Form 1040 it is listed that we had income from Social Security (a government bureau) of $40,283.00. That was “fiat money.”

I asked my CPA recently. “Has anyone ever made a check payable to Social Security?’ No, all such payments are made to The U.S. TreasuryThe money is spent on whatever the government wants to spend it on. After paying current recipients of Social Security (like my wife and I) — anything left over is put into worthless IOUs — essentially saying “we will collect this money from future generations — and filed in a cave in West Virginia. Welcome to the USA young folks — this is your inheritance of statist thinking.

We paid $30.000.00 (“real money”) a government bureau and we received $40,283.00 (fiat money) from another government bureau. So I have question to you — did we really pay any income tax? It looks to me like we paid income taxes with fiat money from Social Security.

How did we manage to get this amount of fiat money from Social Security? Simple — we just didn’t file for Social Security until I was age 71. It was like capitalizing a business. Ruminate on that action for a while.

There is more pondering and ruminating to come so we must pace ourselves — this one can keep you busy until the next example.