The belief trap: How our children are taught “The Big Lie,” tax version

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It takes only two things to keep people in chains: The ignorance of the oppressed and the treachery of their leaders..
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A belief trap is a belief so powerful it is not even questioned, much less denied. The notion that gravity attracts was a belief trap until Einstein proved gravity, rather than attracting, changes space-time.”

The Big Lie” denies the facts of  Monetary Sovereignty. Unlike state and local governments, our Monetarily Sovereign U. S. federal government never can run short of its own sovereign currency, the U.S. dollar. Even if all federal tax collections fell to $0, the government could continue spending, forever.

Thus, federal taxes do not fund federal spending

This is a fact that not taught in the vast majority of our schools — high school or college — nor is it revealed in our media.

Here is a classic example of the Big Lie from today’s Chicago Tribune:

The high cost of being tax-ignorant
By Professor Marjorie E. Kornhauser, Tulane University Law School

Immediately, we see that Professor Kornhauser has law expertise. She sees federal taxes as a law problem and does not present federal taxes as an economics problem and a social problem.

For the past few years, I’ve sat in New Orleans high school classrooms watching students debate the fairest way for government to raise revenue.

No differentiation is made between federal government vs. state and local governments. They all are treated as “government,” though their problems are diametrically different.

While state and local governments must balance spending needs with funding ability, the federal government has no such problem.  It can focus solely on spending.

But Profesor Kornhausers students are stuck in the “it-goes-without-saying” belief trap that “of course governments need to raise revenue,” though this is not true of the federal government.

They role-play — first as management consultants advising legislators, then as lawmakers, weighing what to tax — property vs. sales vs. income. Are there limits on what or who can be taxed? Is a flat tax or a progressive rate structure fairer? Sometimes their discussions are heated.

As we discussed at “Which Taxes Are Fairest? Which Taxes are Least Fair?”  no taxes, local or federal can be called “fair.” But federal taxes are especially unfair in that they have no funding purpose.

These teenagers, however, have an edge that many adults don’t: basic tax literacy. Guided by Tulane law students, the high schoolers explore different philosophies and methods of taxation through TaxJazz, a program I began in 2013.

Students who take the weeklong course study issues of fairness and technical matters such as bases and rate structures. They examine key concepts such as the difference between marginal rates (the percentage of tax paid on the last dollar of income) and effective rates (the average percentage of tax paid).

They learn that narrower tax bases, such as sales tax, need higher rates than broader bases, such as income taxes, to raise equivalent amounts of revenue. They discover that changing the method of taxation increases how much some taxpayers owe and decreases that amount for others.

If more people knew what these students know, we’d have a far more reasonable tax debate and better tax laws.

Actually, the professor’s students are at a disadvantage, because rather than having no knowledge, they have the wrong knowledge.

Without an understanding of Monetary Sovereignty, and without understanding the differences between a federal tax and a local tax, discussions of “fairness” and “equivalent amounts of revenue” are futile.

We fight about taxes because we disagree about what is fair and what government should do. If we knew more, we’d still have disagreements, but at least our discussions would be more rational and produce more coherent policies.

Amen to that, Professor.

Real-world discussions often occur in a tax-ignorant universe. Many people say that some taxation is needed to pay for the government but that it should be lower and “fairer.”

We suspect that Professor Kornhauser is among those who believe “some taxation is needed to pay for the government,” though this is not true of the federal govenment.

At the local, state and national levels, lack of tax knowledge hampers the promulgation of rational laws that could help spur the economy and lead to prudent budgets.

A tax-literate electorate could demand that politicians provide coherent tax policy options.

We could not have said it better. Unfortunately, this professor, and with a few exceptions, all other professors, do not provide that knowledge, which is why we do not have coherent federal tax policy options.

How can more Americans become tax-knowledgeable? The first step, of course, is to include more discussion of taxes in schools — not just in high school and college, but even elementary school. This is no less important than the financial literacy programs many schools now incorporate into their curricula.

Without tax knowledge, voters enable politicians who spout inflammatory, empty rhetoric and perpetuate counterproductive, unfair tax policies. Democracies need informed voters to function properly. The cost of tax ignorance is too high.

The irony is palpable.

And the beat goes on. In the same issue of the Chicago Tribune, we found the following article:

Those who skirt ‘fair share’ annoy tax filers most
74 percent vexed by complexity of system, poll finds
By Gail Marks Jarvis, Chicago Tribune

Americans finishing off their tax returns are annoyed by the complexity of the task, but that’s not their top gripe.

Corporations and wealthy people who don’t pay their fair share in taxes are the largest source of frustration among filers, according to a recent survey.

Again, no differentiation was made between Monetarily Sovereign vs. monetarily non-sovereign taxation. In the research, all taxes are the same.

About 80 percent said in a Pew Research Center poll this month that they are bothered when corporations don’t pay “their fair share.” About 60 percent of those polled were very upset when wealthy people skirted their “fair share.”

The populace has not been taught that all taxes paid by the private sector reduce the amount of money in the private sector, and therefore reduce Gross Domestic Product. Asking corporations to pay more, or even to pay a mythical “fair share,” merely reinforces The Big Lie that the federal government needs tax dollars.

There is no “fair share” and the federal government has no need for taxes.

Roughly 54 percent of the filers surveyed this year said they thought they were paying “about the right amount of taxes.”

The “right amount” compared to what? This opinion probably is related not to how much in taxes are needed, but rather to what other people pay.

The popular belief trap ignores the likely fact that everyone pays too much in federal taxes, the fact that reducing federal taxes would grow *Gross Domestic Product (thereby helping everyone), and the fact that state & local taxes are in a completely different category from federal taxes.

*(GDP = Federal Spending + Non-Federal Spending + Net Exports)

The Big Lie has become a religion unto itself. To deny it is considered a heresy that must be denounced angrily. The public has been conditioned to assume federal taxes are necessary, and that’s that. No debate wanted.

Like religion, The Big Lie is taught to us from childhood. It cannot be doubted or even examined.

We are caught in the belief trap from which seemingly there is no escape. 

Rodger Malcolm Mitchell
Monetary Sovereignty

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THE RULES

•Those, who do not understand the differences between Monetary Sovereignty and monetary non-sovereignty, do not understand economics.

•Any monetarily NON-sovereign government — be it city, county, state or nation — that runs an ongoing trade deficit, eventually will run out of money no matter how much it taxes its citizens.

•The more federal budgets are cut and taxes increased, the weaker an economy becomes..

•No nation can tax itself into prosperity, nor grow without money growth.

•Cutting federal deficits to grow the economy is like applying leeches to cure anemia.

•A growing economy requires a growing supply of money (GDP = Federal Spending + Non-federal Spending + Net Exports)

•Deficit spending grows the supply of money

•The limit to federal deficit spending is an inflation that cannot be cured with interest rate control. The limit to non-federal deficit spending is the ability to borrow.

•Until the 99% understand the need for federal deficits, the upper 1% will rule.

•Progressives think the purpose of government is to protect the poor and powerless from the rich and powerful. Conservatives think the purpose of government is to protect the rich and powerful from the poor and powerless.

•The single most important problem in economics is the Gap between the rich and the rest.

•Austerity is the government’s method for widening the Gap between the rich and the rest.

•Until the 99% understand the need for federal deficits, the upper 1% will rule.

•Everything in economics devolves to motive, and the motive is the Gap between the rich and the rest..

MONETARY SOVEREIGNTY