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Looking Round the Corner The Pope's Challenge to Conservatives

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A Century of Tax

by Christopher Chantrill
April 18, 2008 at 11:09 am


I WAS TALKING with a liberal friend recently over some convivial post-theater refreshment and the question of privacy came up.

What do you mean, I asked? What privacy? I just sent in my Federal Income Tax return for 2007 and I reckon that the government already knows everything about me. For 2007 Uncle Fed knows how much I earned in wages, in interest and dividends, and in the proceeds of any stock and mutual fund transactions.

Unless I was interested in “paying for a woman to go away” or indulging in a little innocent revolutionary activity in the suicide-bombing line, what else would the government want to know about me that it doesn’t already know?

I’ll tell you what, I told him. If we want to get serious about privacy, let’s start with abolishing income taxes. Personal income taxes require, by their nature, that the government knows everything about its citizens’ financial affairs. When liberals are ready to abolish the income tax then we will know that they are getting serious about privacy.

Everybody complains about taxes but nobody does anything about them. For instance, take a look at taxes over the last century. Yes, you can go to usgovernmentrevenue.com and click up a chart that tells the whole dismal story.

The chart shows the innocence of the United States a century ago when good old J. Pierpont Morgan was solving the 1907 banking meltdown. In those days bankers were as foolish as they are now. F. Augustus Heinze and his brother thought they would use the money from their bank to finance a nice little corner in copper shares. They nearly brought down the whole financial system when their brilliant little plan went south.

Look at the government revenue in terms of GDP.

Federal revenue at 2.4 percent of GDP? Talk about living in Arcadia!

Unfortunately in the aftermath of the Panic of 1907 (now a book by Robert F. Bruner and Sean D. Carr) so brilliantly solved by J.P. Morgan, wise heads decided that this sort of thing must never happen again. The United States needed the security of a formal central bank. The idea of the “Money Trust” solving a financial crisis in J.P. Morgan’s high-ceilinged library with the help of Morgan’s exotic African American librarian Belle da Costa Greene was clearly repugnant to all rationally-minded people.

So the United States got an income tax and a Federal Reserve System just in time to finance World War I. Federal government revenue went to 8.4 percent of GDP, mostly on the strength of the new personal and corporate income taxes.

When the next financial crisis appeared in 1929 the United States had a fully functional central bank in place, ready to fall asleep at the switch. Maybe if the first Governor of the New York Fed, Benjamin Strong, Jr., had not died in 1928 all would have been fine. Strong was one of the rising young men who assisted J.P. Morgan in the 1907 crisis.

Look at what happened on the revenue front when the nation collapsed into depression in 1929-1933. Government revenues went up! Federal revenues went up from 4.14 percent of GDP in 1929 to 5.78 in 1933. But state and local revenues went through the roof from 8.83 percent of GDP in 1929 to 13.36 percent in 1933. The chart tells the story:

That is what you call raw talent: Raising taxes in a depression. No wonder the folks on the Great Plains revolted when they had to sell their farms to pay their property taxes. See for yourself. Create the chart at usgovernmentrevenue.com and look at the numbers.

Let’s return to the first chart. Do you notice something rather surprising? Federal revenue has been pretty constant ever since the 1950s at about 17 to 18 percent of GDP, except for the last year of the Clinton administration when it reached nearly 21 percent.

The real growth in taxation in the last half-century has been at the state and local level. State and local receipts have doubled from about 8 percent of GDP in the mid 1950s to a peak of 17 percent in 2000 and 2005.

Here we are all getting riled about about our federal income taxes when it turns out that federal taxes aren’t the problem. It’s the state and local taxes that are killing us.

Just what are we getting in return for all these government taxes and revenue? It’s a good question to ask your liberal friend some time. For answers you can’t do better than usgovernmentspending.com. If we could reduce the size of government, maybe we could help our liberal friends get the privacy they want.

Christopher Chantrill blogs at www.roadtothemiddleclass.com.

Buy his Road to the Middle Class.

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Responsible Self

[The Axial Age] highlights the conception of a responsible self... [that] promise[s] man for the first time that he can understand the fundamental structure of reality and through salvation participate actively in it.
Robert N Bellah, "Religious Evolution", American Sociological Review, Vol. 29, No. 3.

Taking Responsibility

[To make] of each individual member of the army a soldier who, in character, capability, and knowledge, is self-reliant, self-confident, dedicated, and joyful in taking responsibility [verantwortungsfreudig] as a man and a soldier. — Gen. Hans von Seeckt
MacGregor Knox, Williamson Murray, ed., The dynamics of military revolution, 1300-2050

Civil Society

“Civil Society”—a complex welter of intermediate institutions, including businesses, voluntary associations, educational institutions, clubs, unions, media, charities, and churches—builds, in turn, on the family, the primary instrument by which people are socialized into their culture and given the skills that allow them to live in broader society and through which the values and knowledge of that society are transmitted across the generations.
Francis Fukuyama, Trust

What Liberals Think About Conservatives

[W]hen I asked a liberal longtime editor I know with a mainstream [publishing] house for a candid, shorthand version of the assumptions she and her colleagues make about conservatives, she didn't hesitate. “Racist, sexist, homophobic, anti-choice fascists,” she offered, smiling but meaning it.
Harry Stein, I Can't Believe I'm Sitting Next to a Republican

Liberal Coercion

[T]he Liberal, and still more the subspecies Radical... more than any other in these latter days seems under the impression that so long as he has a good end in view he is warranted in exercising over men all the coercion he is able[.]
Herbert Spencer, The Man Versus the State

Moral Imperatives of Modern Culture

These emerge out of long-standing moral notions of freedom, benevolence, and the affirmation of ordinary life... I have been sketching a schematic map... [of] the moral sources [of these notions]... the original theistic grounding for these standards... a naturalism of disengaged reason, which in our day takes scientistic forms, and a third family of views which finds its sources in Romantic expressivism, or in one of the modernist successor visions.
Charles Taylor, Sources of the Self

US Life in 1842

Families helped each other putting up homes and barns. Together, they built churches, schools, and common civic buildings. They collaborated to build roads and bridges. They took pride in being free persons, independent, and self-reliant; but the texture of their lives was cooperative and fraternal.
Michael Novak, The Spirit of Democratic Capitalism

Society and State

For [the left] there is only the state and the individual, nothing in between. No family to rely on, no friend to depend on, no community to call on. No neighbourhood to grow in, no faith to share in, no charities to work in. No-one but the Minister, nowhere but Whitehall, no such thing as society - just them, and their laws, and their rules, and their arrogance.
David Cameron, Conference Speech 2008

Faith and Politics

As far as the Catholic Church is concerned, the principal focus of her interventions in the public arena is the protection and promotion of the dignity of the person, and she is thereby consciously drawing particular attention to principles which are not negotiable... [1.] protection of life in all its stages, from the first moment of conception until natural death; [2.] recognition and promotion of the natural structure of the family... [3.] the protection of the right of parents to educate their children.
Pope Benedict XVI, Speech to European Peoples Party, 2006

Never Trust Experts

No lesson seems to be so deeply inculcated by the experience of life as that you should never trust experts. If you believe doctors, nothing is wholesome: if you believe the theologians, nothing is innocent: if you believe the soldiers, nothing is safe. They all require their strong wine diluted by a very large admixture of insipid common sense.
Lord Salisbury, “Letter to Lord Lytton”

Conservatism's Holy Grail

What distinguishes true Conservatism from the rest, and from the Blair project, is the belief in more personal freedom and more market freedom, along with less state intervention... The true Third Way is the Holy Grail of Tory politics today - compassion and community without compulsion.
Minette Marrin, The Daily Telegraph

Class War

In England there were always two sharply opposed middle classes, the academic middle class and the commercial middle class. In the nineteenth century, the academic middle class won the battle for power and status... Then came the triumph of Margaret Thatcher... The academics lost their power and prestige and... have been gloomy ever since.
Freeman Dyson, “The Scientist as Rebel”

presented by Christopher Chantrill

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