Lies the government told you (23 page)

Lie #9
“It’s Only a Temporary
Government Program”

Milton Friedman, the esteemed Nobel prize–winning free market economist, famously noted, “Nothing is so permanent as a temporary government program,”
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and, “The government solution to a problem is usually as bad as the problem.”
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Examples of temporary government programs that have become permanent fixtures include income tax withholding, rent control, and social security.

Another example is the National Defense Act, which was created in 1916 during World War I and was also used in World War II. It is known to be the most comprehensive piece of military legislation ever passed by Congress. The Act permitted the President to make obligatory orders in times of war that take precedence over any market forces or lawful private contracts. The government is then allowed to seize operations of private companies for the purpose of wartime efforts at whatever price it has deemed appropriate, and any resistance would result in a felony. By setting prices below market value, the federal government was able to conceal the true costs of both World Wars. The Act was a violation of private property rights, and the Supreme Court has since eliminated executive wartime power to seize private property unless that power is expressly given by Congress. So, therefore, in the realm of “temporarily” seizing private property, it requires two branches of the federal government to make an unconstitutional act constitutional!

Although the National Defense Act has been phased out, several similar programs that were passed in times of crisis as a “temporary fix” still linger today. It seems the American government has never refrained from using the “opportunity” presented in a crisis as an excuse to expand the government and indulge in the money of taxpaying Americans.

America was founded on basic principles of limited government. Then, throughout American history when situations such as war or economic downturn became apparent, these principles were often abandoned and the federal government expanded. These expansions, which run counter to fundamental American values, were often permitted because they happened in times of emergency. Yet, instead of going away once the emergency situations subside, these programs have lingered and eroded the way our government functions. Over and over, these “temporary” government programs have proved to be nothing but permanent.

“Temporary” Government Program #1: Taxation

At the root of government expansion lie taxes. The government funds its wars, its welfare system, and its programs through the taxes it places on citizens. Sadly, Benjamin Franklin’s old adage, “In this world nothing can be certain, except death and taxes,” has proven to be an immutable truth.

Big government and high taxes were far from what the Founding Fathers had in mind. Paradoxically, taxes acted as a catalyst to America’s revolt from Britain. In his book about America’s tax system, Timothy J. Gillis explained:

The rebel colonists remembered why they and their forefathers had come to the New World. The colonists were people, or offspring of people, who fled environments where royal favor and grants were common and success could depend much less on what a person did than on whom he knew. They remembered that government taxation and fiscal policy were primary means of subjugating liberty and imposing tyranny, both petty and great. This influenced the colonists to construct limited and frugal government.
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In America’s youth, the possibility of freedom from taxes was alive and well for its citizens. So, what has happened over the years to make no taxes seem like an impossible dream?

As the United States grew, so did the federal government. The idea of limited government was pushed aside in favor of collecting funds for various crises. The first big expansion of the federal government’s budget, and in turn the people’s taxes, came in 1861 with the start of the Civil War. The federal income tax laws that were passed in the 1860s by the Union and Confederacy were unpopular, unconstitutional, and immoral, and they were repealed by Congress in 1871. After the federal income tax was repealed, the government paid off the rest of the Civil War debt in twenty-four years with money from excise taxes and customs duties. There were excise taxes on items such as playing cards, gunpowder, feathers, telegrams, iron, leather, pianos, yachts, billiard tables, drugs, patent medicines, and whiskey. Many legal documents were also taxed, and federal license fees were collected for almost all professions and trades.
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In 1893, the income tax returned. This time, however, the country was not at war, and many citizens viewed the tax as unjustifiable. In 1895, a lawsuit claiming that the federal income tax was unconstitutional was brought and eventually reached the Supreme Court. The Court held that since the income tax was based on income from real estate, it was unconstitutional because the Constitution requires that direct taxes imposed by the federal government on the states be proportional based on population.
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A little over a decade after this ruling, President William Howard Taft proposed a law which circumvented many of the Constitution’s impediments to the 1893 income tax. Get this: A president who swore an oath to uphold, preserve, protect, and defend the Constitution proposed a way to avoid and evade it, a way that would purport to allow the federal government to steal cash from groups of individuals with impunity. This law would allow the federal government to tax corporations (as opposed to individuals), and was passed by Congress with near unanimity. Later, in 1913, the United States ratified the Sixteenth Amendment, which permits the federal government to tax the income of individuals.

The government did not waste any time before taking advantage of its new power. Just eight months after the Sixteenth Amendment was ratified, President Woodrow Wilson signed a law that levied a 1 percent tax on net personal incomes over $3,000.
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The law also provided for a 6 percent surtax on incomes exceeding $500,000.
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These taxes were aimed at the wealthiest Americans, however, and did not reach the vast majority of the people.
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In 1918, only 5 percent of Americans paid income tax, and the income tax remained a “class tax” until World War II.
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During World War II, however, the federal government expanded its assaults on personal income. The government passed the Revenue Act of 1942, declaring that it was just a war measure. It significantly increased the marginal tax rates, and added a 5 percent “Victory Tax” on annual income exceeding $624.
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Under this Act, the income tax rolls increased
from 13 million persons
to
50 million persons
in just one year.
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The government also implemented a system requiring that employers withhold federal income taxes from employee wages and salaries.
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Finding it unrealistic to arrest all tax evaders, the government saw income tax withholding as a device to extract income automatically from the taxpayers.
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It also helped folks “save” money for the government, as it guaranteed the government a steady revenue stream during the costly war.

Milton Friedman, who worked at the Treasury Department during World War II, was involved in the development of the withholding tax.
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Recently, Friedman stated that the tax was developed because the government needed to raise massive amounts of money quickly and temper the growth of inflation.
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Friedman explained, “I wasn’t as sophisticated about how to do it then as I would be now, but there’s no doubt that one of the ways to avoid inflation was to finance as large a fraction of current spending with tax money as possible.”
¹⁶

In his memoir,
Two Lucky People
, which he coauthored with his wife, Rose, Friedman conceded that during World War II, he “was helping to develop machinery that would make possible a government that I would come to criticize severely as too large, too intrusive, too destructive of freedom.”
¹⁷
According to Friedman, “I really wish we hadn’t found it necessary and I wish there were some way of abolishing withholding now.”
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The author of the truism about the permanence of temporary government programs was himself the regretful author of the most pernicious and permanent of temporary government programs whereby the federal government steals money from each of our paychecks, every time we receive one.

Through income taxes, the government taxes our personal production, only to redistribute our hard-earned cash to others (often wastefully). This is an oppressive infringement on personal liberty and one that we should not passively accept. The idea of abolishing income taxes is hardly radical. The Founding Fathers did not support them, and they are a relatively new custom in America. Nevertheless, the only politicians who had the backbone to suggest such a policy in the 2008 presidential election were Ron Paul and Bob Barr.

Congressman Ron Paul’s plan to abolish the income tax and, consequently, eliminate wasteful federal programs like the wars in Iraq and Afghanistan, foreign aid, agricultural subsidies, and the United States Department of Education, is absolutely consistent with the intent of the Framers.
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Under Paul’s plan, much more responsibility would be taken on by the States, within which funds would be handled by local politicians who can better gauge the needs of their citizens than the federal government can.

When explaining his stance on taxes, former Congressman Bob Barr stated, “It is not enough to eliminate the income tax. We also must also repeal the 16th amendment, which authorizes Congress to levy an income tax. Without doing so, there would be an ever-present danger that a future Congress would attempt to bring back the income tax on top of the Fair Tax or any other alternative to the income tax.”
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These ideas are in step with the Framers’ intent, but until Americans wake up and realize that they do not
need
to accept an oppressive income tax, these plans will remain far from mainstream.

Frank Chodorov argued, in “Taxation Is Robbery,” that the government immorally pilfers our money from us through any and all forms of taxation. He wrote, “Those who hold to the primacy of the individual, whose very existence is his claim to inalienable rights, lean to the position that in the compulsory collection of dues and charges the State is merely exercising power, without regard to morals.”
²¹

When the government takes from us, it is just as immoral as any other type of burglar. Because humans have an indisputable right to life, it follows that we have the same right to enjoy the products of our life’s labor. Yet, when the government taxes us, the right to our own existence is qualified. Do you know anyone—
anyone
—who comes home with his paycheck and check stub and after examining what he earned and what the government took from him says: “I don’t think I gave the government enough money this week”?

In addition to taxation itself, there is a whole host of government programs funded by our tax dollars that were originally proposed as “temporary,” but then stuck around for the long haul.

“Temporary” Government Program #2:
Rent Control

During World War I, the federal government introduced rent controls, which are ordinances or laws that place a ceiling on the amount a landlord can charge for rent, but stopped them in the late 1920s.
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Rent controls were implemented again during World War II, via the Emergency Price Control Act (EPCA) of 1942. They were brought back strictly as a
temporary
“emergency measure,” mainly in order to help the wives and children of soldiers who were serving in the war, and were to be dismantled after the war.
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The EPCA allowed the federal government to regulate the maximum price of residential rents in an effort to counteract inflationary prices and housing charges. It helped tenants, but it severely harmed the landlords who owned the apartments the tenants leased. Nevertheless, in a few American cities, like New York City, rent control is far from temporary.

Today, proponents of rent control justify it as a device to ensure that people who have lived in their apartments for a long time will not be removed due to rising rents in their area. Yet, the rationale behind rent control today is far from sound: It deprives landlords of the right to control the amount they charge to tenants, it acts as a disincentive to invest in real estate, it arbitrarily favors certain groups of people over others, and it allows government—rather than people’s free-market choices—to dictate what people pay for a good in a given neighborhood. It also constitutes a taking since it consists of the government prohibiting owners of private property from putting the property to its highest and best use.

A proponent of abolishing rent control, pop social scientist Malcolm Gladwell, argued that in New York (where rent control is prevalent), rent control is behind the problem of tax-delinquent landlords. He wrote:

Right now thousands of buildings in the city are in receivership— either abandoned by landlords or under the tenuous control of the city because their owners couldn’t pay their taxes. Tax-delinquent buildings tend, almost exclusively, to be older buildings, because older buildings tend to have much higher upkeep costs and also tend to have many more tenants with artificially low rents . . . they are the buildings now getting burned down, or run down, or boarded up because rent regulation makes it impossible for landlords to take care of them.
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Rent control discourages anyone from even going through the grief of being a landlord since the government precludes it from being profitable.

The government regulation has also had an effect on the interpersonal relationship between landlords and tenants. As a result of these artificially low rents, landlords and tenants will naturally harbor some animosity toward each other. One article describes: “No wonder landlords resent the legalized thieves masquerading as tenants; in turn, the parasites hate their host because he isn’t giving them even more. A couple of landlords have actually killed rent-controlled tenants to end their decades of sponging.”
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