L. Neil Smith's
THE LIBERTARIAN ENTERPRISE
Number 227, June 8, 2003


The Bush Tax Cut Scam
By Todd Andrew Barnett
libertarianman@comcast.net

Special to The Libertarian Enterprise

Conservatives who, in both Houses of the Congress, passed President Bush's $350 billion tax cut package might as well rest on their laurels. The water-downed tax cut package, which Bush has just signed into law, is purported to give $330 billion in tax relief to families, businesses, and investors, with an additional $20 billion going to debt-ridden states. One key provision of the new law also includes $10 billion "in refunds" being handed over to low-income earners with children.

As soon as Congress passed the legislation, the president praised it, saying, "By leaving American families with more to spend, more to save and more to invest, these reforms will help boost the nation's economy and create jobs." Then he says, "When people have extra take-home pay, there's greater demand for goods and services. And employers will need more workers to meet that demand."

The truth of the matter is—the "big" tax cut that Bush and his ilk have touted is nothing more than a scam aimed directly at the American people. How is this so? Here's a simple explanation.

The newly-passed tax cut is actually a clever vehicle used by the Bush administration to use demagoguery in order to purchase votes from the voters and to bolster Bush's prospects for re-election to the presidency while he shrouds the true purpose of the so-called "tax cut": to pillage the American people of their earnings via the devaluation of their currency.

It's no secret that the Republicans, like their Democratic counterparts, are inebriated with their perverse, morally-bankrupt urge to proceed with their out-of-control federal spending. After all, if a Democratic president were in office, would anything have been truly different? No, of course not! However, in this case, Bush's out-of-control federal spending makes the typical "tax-and-spend" liberal Democrat look like a conservative in drag.

It's also no secret that Bush, with the aid of Congress, boosted the national debt ceiling from $6.4 trillion to almost $7.4 trillion by a record $984 billion. The ceiling, by the way, is supposed to be a "limit" on how much debt Congress can legally incur. However, as recently evidenced by the actions of the members of Congress and President Bush, the debt limit is subject to change and can be raised at any time. As of now, the "limit" runs over $6 trillion. Considering that is the case, what is the point of the "limit" if Congress can continue to hike the "limit" every time the debt exceeds its "limit?"

The debt, in case one hasn't noticed, has already surpassed $300 billion, although some observers and pundits are already predicting that it will reach the $500 billion mark by year's end. Adding insult to injury, the fact that the U.S. dollar continues to plummet against the Euro by almost 30 percent within the last 12 months does not concern a majority of Americans.

Bush, of course, is now claiming that the currency is "devalued by the market," which is an outright lie. It's even a contradiction to his policy. The real culprit behind the devaluation is the pillaging and looting of the American people by taxing them indirectly.

Let me explain how this works: let's assume that Congress has a budget of $200 million. Let's also assume that the government was spending $100 million and the IRS was collecting $100 million in taxes. One would notice that a debt has not been incurred. But let's change that. Suppose that Congress doubles the spending to $200 million, but cuts income taxes to $50 million.

"Holy cow!" says John Q, the average citizen. "That's outstanding! That sounds like a great tax cut! I hope our wonderful president comes through for us! We ought to thank our politicians by re-electing them, because they gave us a great tax cut. Because of this, we'll have more jobs and more money to spend. Thanks to them, we've got more prosperity than we have ever dared to dream!"

What happens is that the government, thanks to the printing presses of the U.S. Treasury, must spend $150 million to print more money than it needs, thereby artificially increasing the money supply. In order to accomplish this, Congress must either raise taxes (directly or indirectly), print more bills to make direct payments, or to borrow funds. Either way, the government has to come up with the money to make up the difference. Nevertheless, given the "tax, borrow, and spend" track record of both Houses of the Congress, the leviathan would be happy to do all three. Thus, the costs are passed onto the taxpayers— whether or not they asked for them.

Because of the $150 million spending deficit and the inflated supply of printed money, the value of the dollar deteriorates. Unfortunately, the media refuses to acknowledge this, and nearly all Americans remain na´ve and ignorant about this scheme.

Another brilliant aspect of the tax cut scam is the recent scheme by Congress to hit Americans who live abroad (that is, outside of the United States) with over 30 tax hikes. According to the May 9th edition of the Washington Post, Senate Finance Committee Chairman Charles E. Grassley of Iowa and fellow Senate Republicans on the committee "broke from their no-new-taxes orthodoxy to propose tax increases on Americans living abroad, companies sheltering income overseas and others." The Post reported that they "approved more than 30 tax increases or other revenue raisers to help fund their tax cuts in other areas, including dividends." This was done to help offset the loss of federal revenues from Bush's tax cut, just so that Americans would have no reason to accuse the president of breaking his "So help me God" promise not to hike taxes.

The real problem here is not the taxes as much as it is federal spending. In order to provide real tax relief, you need to cut— preferably repeal—all taxes on income and all other taxes not on income and to cut all federal spending significantly.

A real tax cut plan, if authored and passed, would have been of the following:

  • A constitutional amendment calling for the repeal of the 16th Amendment to the Constitution
  • A repeal of the federal income tax
  • A repeal of the Social Security and Medicare taxes
  • A repeal of the tax on dividends and earnings
  • A repeal of the corporate income tax
  • A repeal of the marriage penalty tax
  • A repeal of the gift tax
  • A repeal of the estate tax (also known as the death tax)
  • A repeal of all and any taxes on cigarettes, alcohol, and gasoline
  • An end to unconstitutional federal spending across the board
  • A significant cut on constitutional federal spending across the board
  • A constitutional amendment requiring a balanced budget
  • A constitutional amendment requiring a 2/3 supermajority to increase spending
  • A constitutional amendment requiring a 2/3 supermajority to increase all and any taxes on income
  • A constitutional amendment calling for the repeal of the 17th Amendment
  • An elimination of all unconstitutional federal departments and agencies, except for the U.S. Department of Defense and the U.S. Department of Justice

How would the federal government be funded? It would be done so through user fees and other voluntary methods of financing—not via tariffs, excise taxes, a sales tax, or even a flat tax.

Overall, the Bush tax cut is a sham. It's only a cosmetic change of the tax system, which maintains the statist system of winners for the favored and losers for those who don't benefit directly from it. This new tax cut not only flies in the face of taxpayers, but also perverts and corrupts the American Dream, as we know it.


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