The point is not that they get anything out of it. They create it out of nothing. The real point is that you lose: your loss is their gain. It is not a zero-sum game, but one of spiraling negatives.
Continuing from Tax Theft 11; series starts here.
The Direct Cost of Taxes
Taxes cost a gigantic amount of money. Like currency and property, the idea that everything should be accounted and tabulated through a centralized administration is an expensive one to implement. For example, if we have a village with ten people, and each of the people has $100, and we need a new Well for $500, the cost of the Well is $500--unless we also have to implement a village-wide system of monitoring, accounting, comptrolling, and pensioning, in order to ensure that everyone pays the fair amount. If the town hires Citizen A as an accountant and Citizen B as a sheriff, the Well no longer costs merely $500--it costs $500 plus the cost of paying Citizen A and Citizen B their salaries.
Although supply-side economics is ridiculous, the Laffer Center provides, here, a good analysis of the specifics of the cost of taxes. The IRS costs around a dozen billion a year, and the ultimate figure that the Laffer Center comes to, in its probable agenda for a "flat tax," is over $400 billion--e.g., more than Bill Gates is worth, getting flushed down the tubes each year.
The standard defense for taxes says, "Taxes make money for the government, and without them there would be no government, ergo taxes actually make money." Or, some form of, "taxes are the price we pay for a civil society." This is easily, somewhat humorously countered, though, by the fact that taxes for police, fire departments, and most social services come at the state level--and aren't even a part of the ~$431 billion flushed to the Potomac Swamp each year. Education and public safety are paid for locally, and the Post Office would run at a net profit if it didn't sell ad space at a loss to well-connected businesses.
Other than the soon-to-be-cut Social Security and Medicaid payments, federal tax dollars are spent on various forms of corporate welfare. The ~$1.5 trillion in yearly tax revenue goes more than 50% to "the military" to pay for corporations to engineer broken new weapons, maintaining the worldwide network of ~800 officially acknowledged bases, and giving giganormous subsidies to friendly businesses for this or that bullshit. A (comparatively) small part goes to politician salaries and associated benefits, and an even smaller one to federal employee salaries. Federal taxes, in a practical level, fund only waste or Big Brother--military & agribusiness subsidies; NSA spying; drone development; DHS goons who get to override local cops and local prosecutors; Federal and Supreme Courts that extract commercial revenue from interstate commerce, or that interfere in state marriage or marijuana laws.
The goodness of the federal government is another subject, though; this is about the means. Even were taxes a good thing, the means of getting them is clumsy and inefficient, to say the least. Take the "building a Well" example above. If ten people have $100, and we need $500, we'll need even more to pay for the sheriff and the accountant, right? Well, their salaries aren't the only part of the game. As soon as Citizen A becomes accountant, not only does she draw a salary that everyone else has to pay for--she also stops doing whatever productive work she was doing before (say, teaching or building or farming or whatever). As a result, the actual value to the society goes down even more than her salary. The accountant has become a parasite, serving a function that is not inherently useful, but one which merely moderates and oversees the functions performed by others.
This is no particular secret; most of us, now, perform jobs that are worthless. Not "essentially" worthless, or "sort of" worthless, or even "kinda" worthless, but literally, completely, wholly, and in every way worthless--and so far beyond the zero point of "worth" that they are a negative drain on the rest of the species. Such a small portion of people, now, actually build and create things, while most people are working in vague "occupations" that involve recording, justifying, or glorifying what has been produced. That's a separate issue, though, and we'll look at it more later on. For this essay, the point to remember is that the job, "Makes sure, in some way, that taxes are fairly paid," produces nothing good for the society. Even were the taxes being spent well, the requirement of any one individual (or, shudder, millions of them) wasting her or his time monitoring how much to extract from the actually-productive is a regrettable task.
Regrettable, this loss, this cost: what the accountant could have been doing if she had not been tabulating is a price we'll never know. We can guess at what a travesty it is, and recoil from the vulgarity of the waste, but we'll never know just how bad the damage is, just like we'll never know what inventions and greatness humanity has lost every time Obama hits a new "thousandth" mark in children massacred.
The Future Cost of Taxes
Go even further, though. Say we pay Citizen A to be an accountant, and Citizen B to be a sheriff. We lose their real productivity, call it X, and we lose the salaries we have to pay them, call them Y. The Well now costs X + Y. Let's add in "Z." Z will be all of the things that we lose by having to think, yearly (or daily), about taxes. Taxes affect us in more ways than having to buy Turbotax, waste ten hours in April, or pay some jerk CPA; they also affect us by forcing us to conceptualize all of our fiscal choices in life around the yearly extraction. We have to be aware of the IRS goon who will be poring over our returns, and of the armed sheriff who will back up an audit team that gets sent out. What peace of mind, creativity, and freed effort is lost to these factors is not something we can accurately tabulate, but only speculate on.
X + Y + Z +...A? A can stand for "AARP," or any of the other "volunteer" clinics, where the IRS takes taxpayer money--public funds--and gives millions of dollars to a private marketing organization in order to train financially-comfortable retirees how to prepare taxes, using expensively subcontracted software also purchased with public funds. In the manner of most charities, the I.R.S. uses the veneer of "public good" to transfer resources from those who work to those who consolidate venture capital in the software field.
X + Y + Z + A, + B, + C... The ripple effects of each year of financial punishment are even less possible to calculate. Human production grows exponentially--if Citizen C invents a wheel during one year of work, the wheel benefits her primarily during Year 2, not Year 1, and even more during Year 3, when she's improved the design, and still more during Year 4, when someone else has been inspired by the wheel to invent something that transcends it as a transportation method.
To some extent, we can track the cost of destroying Citizen C's Year 1--and her Year 2. We can tabulate exactly how much we wasted by removing her from the labor force and turning her into a State monitor of those who do useful work. To a lesser extent, we can imagine--but not tabulate--how much it cost society to lose her work in Year 3 and 4. We cannot, though, ever hope to approximate what other people have lost by being bereft of the fruits of her labors. Take Citizen D, whose life is also greatly improved by Citizen C's wheel--or ten thousand or a million citizens, depending on the invention. Take Citizen H, who is inspired to invent an engine to drive a wheeled machine more powerfully than humans or horses can, and then another ten thousand or ten million citizens who benefit from said invention. Their benefits are all part of Citizen C's invention, and all those benefits are lost by the simple act of wasting just one citizen's--Citizen C's--time.
On a data sheet, we can prove that we lost Citizen C's former production, and then lost again the cost of paying her as a monitor, and we can even multiply it by three to account for un-trackable externalities (call that a "standard loss," to use the I.R.S.' preferred terminology against it). Using the atomized methods of tracking by which our property system measures gains and losses, even an analysis that seems scathing--like the supply-side one linked above--dramatically underscores the gross waste built into the system.
The ripple effects individuals have on the economy are profound. One person's salary reducing isn't just the on-paper reduction of her salary, but the undercutting of her children's food, education, and careers, and so on to her grandchildren and deeper. Another person's slightly reduced salary is one less vacation, which reduces waitress hours somewhere. One person's failure to start a business isn't just a loss to that person, but to the twenty people they would employ. And so on.
All the business crap that Republicans spout has a basis in reality, because the tax code includes so much waste that it's easy for a Republican Senator to occasionally talk about "busting pork," and highlight a few bad examples--just like a Democratic Senator can easily find a poor family to spotlight when it's time to appear conscientious. They're both jerks, and neither intends to change the system, but the examples remain apt.
Enough money to feed Africa for a year--no, enough money to feed Africa, China, North America, South America, and rural India for a year, is used in order to get the U.S. Treasury a little over a trillion in yearly revenue. Which is to say, administrative costs eat up about 40% of the "profits" to taxes. It's a morbidly obese murder monster that annually craps bloody diarrhea, wipes its ass with billion-dollar bills, and picks its teeth with the mangled femurs of little Arab kids. Even if you love every single dollar spent on the military and corporate welfare, the way that the U.S. Government collects taxes is an abysmal, catastrophic waste. No hyperbole here--c. $400 billion dollars is catastrophic even to a government that isn't administering a crumbling international military empire filled with starving, frightened people.
It's About Losing
Why? If the government really wants money to give to the military, or to Monsanto, or even just to help people and do good--whatever story you want to believe--why do they waste so much in the process of collecting? Even an intelligent set of Machiavellian rulers would see that their nation would be made stronger by not wasting 400 billion dollars every single year just to gather tax revenues! Even frigging Subway has a better long term net profit projection than that. A hundred thousand citizens reviewing 1040s, rather than polishing cars, means a longer wait to get your Mercedes waxed.
The "why," here, is that the purpose of taxes is not to generate government revenue. The people that control "government" also control "Federal Reserve," and they set the value of the currency, as well as what all the big corporations will do in any given year. Money has no inherent value; duh, we know that, right? Its value is only what we say it is, and they are the ones who say what that "is" is. They create money on ledgers, quantitatively ease it when they feel like it, and can and do use their police and military to crush competing currencies and ensure that things run the way they want. They could order the production of anything they wanted, and put as much into the U.S. Treasury account as they wanted to.
The point is not that they get anything out of it. They create it out of nothing. The real point is that you lose: your loss is their gain. It is not a zero-sum game, but one of spiraling negatives. By mandating that economic transactions occur in the medium of dollars, then requiring the payment of taxes in dollars, the government gives dollars an artificial value--its like an evil kid forcing you to play Dungeons and Dragons at the point of a gun, and shooting you if you try to make-believe with any money other than its preferred "Elfish Gold." Since Elfish Gold is made out of thin air, the real value of money to the government is to prevent people from having too much of it.
Taxes are levied to cut down on the amount of money that real people have in their control. By preventing real savings and tangible investment by all but a few, the illusion of money being responsible for power is maintained, because those who are in power are defined by their ability to retain money in the face of the yearly tax deluge. That's why it's irrelevant to the government how wasteful the income tax regime actually is: because waste is the purpose. Any dollar taken away from a peon produces a less secure peon; a peon who will be more concerned with self- and family-preservation, instead of starting businesses or enacting social change. "College students" and "young people" are able to be the traditionally radical protesters in the U.S. because their needs are often being provided for in some way, even if on a temporary basis. Once the grind of adult "responsibility" settles in, protest is stifled, and survival becomes the name of the game.
The military machine could be paid for by fiat. In fact, it is--dollars are, explicitly, a fiat currency (for the non-savvy, this means they have value only because they are assigned value, and not because they can be redeemed for something that has inherent value, e.g., a precious metal). Taxes are carefully levied to keep people running, fearful, and to prevent them from amassing capital collectives that could challenge existing power structures. We know that initially, the income tax was used expressly to create the warfare state, being needed to pay for the Civil War and the occupation of the Deep South. For over a century thereafter, the Code became relentlessly more convoluted, spawning billion-dollar industries and entire segments of the economy that exist only to facilitate the transfer of money. Dozens of millions of people spend their entire adult lives doing nothing productive, instead running on hamster wheels and filling out forms.
That situation is okay for elites, because any wasted labor ultimately helps them. Television commercials, plastic landfills, stoplights, road construction, single-car transportation, 1040s, waiting rooms, invading the country run by the guy who was our friend a couple years ago, please hold for the next representative--all of the audacious, blatant wastes of time, space, and money built into the system are a tiny, insignificant problem for people whose family holdings have provided them with a lifetime of free time, and a massive, decades-destroying ruination for those who are short on time, space, and money. A complicated tax system wastes, maybe, a couple weeks worth of evenings, and a few thousand dollars, for millions upon millions of lower-income taxpayers, and billions more in small business accounting costs--for a wealthy family, it wastes nothing, because the tens of thousands of dollars they pay their accountant(s) are coming out of investment income. The actual time and effort stolen from the poorer family translates into real hours that they don't spend at work, play, or education; for the wealthy, it's a minor calendar highlight in a life of tennis.
Similarly, time spent waiting for the city manager's friend's construction company to finish up their 11-month-long repaving project, which is half a year and half a million over estimate, means a lot more to Juan, who has to sit in traffic another 45 minutes during rush hour, than it does to Paul, who wakes up at 10 and heads to the club at 1 in a different area of town. Tiny thefts aggregate to massive proportions, creating the imbalances of which we see the results yearly. Tired, stressed, hurried people don't have as much time for bikes, cooking their own food, pursuing deeper forms of entertainment, or, um, "questioning authority." Guaranteeing an extra ten grand and 100 hours yearly in real worth to each one of the masses would, eventually and indirectly, produce many of the revolutions we're (probably) hoping for.
Your Soiled Mattress? ~ On Believability
Understanding the basic nature of this argument is easy: "Elites use the government to create a complicated tax scheme in order to cause poor people to waste time and money, so as to reduce the chances of elite power being challenged."
Harder than understanding is "believing." As in the case of a false flag attack or a resource war, the sheer scale of the deceit involved makes it difficult for most people to contemplate. Indeed, many people still haven't come to terms with, or even awareness of, Tonkin Gulf. The monstrous waste of the U.S. tax system gets justified as part of the Democrats v. Republicans partnership, where Republicans pretend to be against taxes, but forced into collecting them by tax-and-spend do-gooder Democrats, who spend money on individual welfare, and Democrats pretend to be against taxes, but forced into collecting them by pro-military Republicans. The standard neo-liberal line is that taxes are absolutely necessary to pay for society, as without taxes, we'd have no civil order. That's a blatant lie, given the actual funding sources for public safety, but by oversimplifying tax opposition as, "crazy libertarians who think no one should have to contribute to anyone else's welfare," Democratic voters get to feel altruistic by supporting the military tax complex.
Still, it's a lot of money, and a lot of evil. Would someone really go to all that trouble, not just to gain something for themselves, but purely to impoverish others?
Yes, We Actually Want That Soiled Mattress
Yes, and people do it all the time, in simple, real-world ways that we can observe. "Cross-collateralization" is the term we're looking for.
Cross-collateralization is a method of securing loans where the collateral for one loan is used as collateral for a later loan. For example, if you buy a car, then buy another car a few years later from the same dealer, the dealer might take a security interest in the first car as well as the second car.
(Why in the world would anyone come up with such a stupid idea in the first place? Because of the atrocious, megamillion-dollar corporate welfare insurance system called "bankruptcy court" that operates across the U.S., where mountains of everyone's money pays for a court system designed to lower transaction costs of powerful private banks. But that's another story. Focus, for now, just on the fact that, in bankruptcy courts, having a formal "security" gives a lender a greater interest in a bankrupt person's seized property than those lenders who did not get a formal security, like employers/employees, family members and friends, small businesses, food budgets, et cetera, and so is of great benefit to larger companies in the equal playing field known as America.)
Cross-collateralization is employed in situations where the lender and the borrower have a greater, rather than lesser, power difference between them, such as artists signing publishing rights to a large publisher. Most notably, though, it has been employed in predatory lending schemes against the poor--most hilariously, perhaps, in situations of household goods.
Household goods? Yes, ergo the humor. Here's our situation: Fritz wants a bed from Thug Furniture, Inc., which is one of those nasty little furniture shoppes that operates out of a cramped storefront in the bad section of town. You know the kind, because you've probably never been there, or if you were, you said, "Oops!" and got the hell out before the salesman could get around the section of used wheelchairs and shake your hand. There are cigarette stains on the walls, a payday loan store next door, and the battleship-gray linoleum is peeling, but Fritz literally has no bed, so he buys one there for $50 down, promising to pay Thug Furniture, Inc. the remaining $500 over 12 months for 11.4% interest. Thug Furniture, Inc. takes a security interest in the bed, guaranteeing that, if Fritz defaults, Thugs from Thug Furniture, Inc. can come to his house and repossess the bed, and also that, if Fritz goes into bankruptcy, Thugs from Thug Furniture, Inc. can come repossess the bed "off the top," before any of Fritz's other potential creditors get a chance at it. No problem, though--Fritz makes his payments religiously, and all is well.
Several months later, Fritz's fridge breaks. He's panicked because, as a result of his poor credit, he can't obtain a credit card or a personal loan to get a new fridge. He finds himself back at Thug Furniture, Inc. (which has recently moved its showroom to the warehouse across from the strip club), where he is relieved to learn that he qualifies for another loan to get a gently-used fridge. Thug Furniture, Inc. cross-collateralizes the loan, taking a fresh security interest in the bed that Fritz purchased months ago, in order to secure the new loan on the fridge (they take a security interest in the fridge, too, of course).
13 months later, Fritz has paid off the bed, and the fridge, but he loses his job and is unable to pay off the used nightstand that he bought at Thug Furniture, Inc.'s sale a couple weeks ago. Promptly, Thug Furniture, Inc., repossesses not only the nightstand, but also the bed and the fridge.
Wha-what? The bed and the fridge, too? How can they possibly get away with that? They got the nightstand back! The very same used nightstand that hasn't been out of their possession more than 14 days!
Well, it's simple: the value of the nightstand has dropped ever since Fritz took it out of the showroom, so merely seizing the nightstand does not return the full paper value of the loan to Thug Furniture, Inc. It's even better than that for the Thugs, though, because the value of the used bed and the used fridge have also dropped, considering that Fritz drove them off the lot. It turns out that even after Thug has repossessed all the furniture Thug sold Fritz, Fritz still owes the Thugs money on the recent nightstand loan!
And yes, that works great, and has worked for decades, although state-level regulators occasionally enact consumer-protection schemes that make Thug need to change its paperwork a little to run the whole scam. Bankrupt Fritzes lose everything they bought.
The Other Mall
Why would Fritz ever buy from Thug Furniture, Inc.? Because it's the only place he can get credit. That's what "credit" is--a private rating system run by banks to ensure that powerless people are forced to take loans and buy products at worse terms than the ones that "middle-class" or rich people get. In theory, market economics says that you would have to work harder to get money from poor people, who have less money and to whom money is more frantically precious, but the opposite is true. Credit scores allow owners to invest in fine businesses, which turn the poor away and cater nicely to the middle class, and thuggish businesses, which completely screw the poor because they know the poor have to shop at them. Even Walmart won't give Fritz a personal loan for a $400 mattress and a $150 frame set, which is why he's forced to go to Thug Furniture, Inc., every time he needs something.
(The reference here is actually, shudder, a Michael Moore, from his "the other mall" segment of Bowling for Columbine. The other mall is the ghetto one that certain people never shop at. How does such a trashy place stay in business in so many different towns? Because it has guaranteed customers--customers who have to shop there. Humorous aside, though--many of the other malls are getting shut down, now, as even Fritz can no longer afford to keep buying stuff. But again, that's another story. Moving right on.)
What's In It For Thug?
So, we understand the scheme: Thug Furniture, Inc. takes advantage of Fritz, and people like him, who can't get good credit and reasonable securities on purchases for basic household goods. In the real world, this stuff will even apply to coffee makers, baby cribs, cell phones, laptops, flatware sets--all sorts of little almost-necessities that people are apt to need to have jobs and live.
And yet, of what value is the "security" that Thug Furniture, Inc. has taken? The security interest in Fritz's soiled mattress is worth a lot to Fritz, because it's his mattress. But it's worth zero to Thug. Thug might've sold the mattress to Fritz as "lightly used" (and it probably was) but after Fritz has slept on it for more than a few weeks, even Thug can't get away with selling the sagging, stained hulk to a new sucker. After the fridge has another several months of use on it by Fritz's family, and after it's been rattled around a few more repo trucks, the water nozzle is twisted, the control panel is making a buzzing noise, and the door doesn't shut right. The baby crib has puke stains on the rungs, the coffee maker is completely broken, and the tines on half the forks are missing.
Even so, each and every time, Thug actually does take back the furniture. Why? It costs more to repossess the stuff, and haul it to the dump, then it does to just let Fritz keep the pile of junk! Why even frickin' bother?
Because of fear: Fritz knows that Thug is serious. Fritz will break his back working to make those payments on the nightstand, because he knows Thug will come for everything if he misses a payment. People in his neighborhood have talked about it. He has seen the Thug Repo truck parked outside the housing block, and he has seen the Thugs roving down the hallways, hauling away used couches with missing cushions, and throwing broken sewing machines into heaps in the back of pickup trucks. People call him and make threats about the armed men who will come to his home if he doesn't pay up.
Fear. It works for Thug, and it can work for you--or the I.R.S. Thug doesn't actually want the furniture that they repossess from everyone who misses payments. It's the threat that counts. By being willing to go into houses and seize property, Thug makes sure that those extortionist monthly payments keep coming in. They don't really care about the property itself; what they care about is that their customers lose that property. It is all about losing. Taking dirty used mattresses and busted couches from poor consumers ensures that those same poor consumers will later have to buy new mattresses and couches from Goon Furniture, Inc., down the line. It doesn't matter if all of the dirty mattresses end up at the landfill. In fact, that's a plus! The more stuff people are losing, the more they are buying.
The same situation applies in the realm of tax theft. Creating wasteful processes helps keep people desperate and needy, preventing the financial independence that would lead to no longer needing to do business with Thug, Inc.