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Balance the Power
Winning the ‘Middle Class’ Struggle against Tax Oppression
Introduction
BALANCE the POWER is a comprehensive summary with graphic illustrations that provide a reasoned roadmap through a maze of articles published on this website, debtism.com and the Tyler Morning Telegraph.
It is divided in four parts: Part I “Introduction and overview of current conditions”, Part II “Pathology of Injustice”, Part III “How to Fix the Social Security retirement program”, and Part IV “Take Back your Country!”.
Armed with the truth, it is my stubborn belief that no challenge is equal to the collective strength, will, and character of the American worker. The USA emerged from the last “Great Depression” and will survive the turbulent times ahead. “Balance the Power” documents the results of failed policies, identifies specific defects in current law that created the problems, and offers specific proposals on political and legal actions that are necessary for the middle class to win the war against tax oppression.
Working Americans are being insulted and assaulted by their government. Unsustainable levels of debt generated by unjust tax and welfare laws is the greatest threat to US national security and to the middle class struggle for financial independence and freedom of choice. The middle class must unite to take back the power necessary to restore control of their own destiny. To do otherwise is to surrender to tax and welfare oppression, and the rights of free choice. The choice is simple. Continue to be a tax slave or take back the power from unresponsive politicians who write the laws.
Etched in granite on the Supreme Court of the United States are the words “Equal Justice under Law”. That principle coupled with these words of human civility “Treat others as you want to be treated” are standards to live by. They are elemental to fairness in all dealings.
The middle class struggle to be treated fairly exists because federal tax laws discriminate against wage income and welfare eligibility rules often exclude the middle-class. Blatant middle-class tax discrimination by exacting two direct income taxes on wages is the most abhorrent defect in American Law. The FICA income tax and the Social Security Old-Age and Survivors Insurance (OASI) program should be challenged in Federal Court on grounds that Congress exceeded its Constitutional authority.
Aside from the question of legality, two direct taxes on wage income are morally reprehensible. Middle class workers are deprived of the discretionary income that could be saved and invested for future needs because it has been confiscated by the government to provide for the perceived needs of a third party. The net result is millions of today’s worker will be heavily dependent on political promises for retirement instead of assets they could own and control.
Tell those seeking elective office their primary duty is to serve the public not to create middle class servants. Tell them the size and costs of government must be reduced. Tell them balancing the federal budget should be given a higher priority than balancing their own family budgets.
This is a War! To win it, you must join the fight for justice or continue to be victimized by a century of compounding legal defects that have created a malignancy of national indebtedness and government dependency. Unless defective tax and welfare laws are changed without delay; underpinnings for a healthy economy and a prosperous middle class will continue a relentlessly decline.
The US government is wasting valuable resources fighting endless wars on poverty and terrorism, which arguably, our own defective policies helped, create. Hundreds of thousands of US Patriots are supporting less noble causes in service to their country, often facing deadly threats, and sacrificing life and limb. Their sacrifices should be honored by building new foundations for US economic prosperity consisting of tangible assets instead of unsustainable debt.
Absence of Justice
“Injustice, cleverly concealed within complex law,
Crafted by brilliant legal minds is not justice”
An objective review of US tax and welfare laws would likely reveal that equal justice is denied to millions of US middle class retirees and workers. If challenged in federal court, many of these laws would be found unconstitutional. Middle class oppression has evolved because of the complexity of law and the confusion that creates. The intrusion of government power into the ability of middle class Americans to control their own destiny has been insidiously compromised or destroyed by mass misinformation, disinformation and their own indifference.
The mass-media ‘free press’ should be held accountable for dereliction of their constitutional responsibility to monitor the government and inform the public. Instead, mass marketing is the mantra and trivia is sensationalized. Truth is the casualty and the public is denied succinct information needed to form solutions instead of compounding the problems.
The collective wisdom reflected in the Constitution was prepared by uncommon men of uncommon valor, with differing views, to produce a rare document that would achieve common objectives. The primary objective was to provide for the common defense of a new nation and to inculcate into one document the guiding principles of morality, ethics, fairness and justice by the rule of law.
The permanence of honest weights and measures provide a model of excellence to be achieved in “Equal Justice under Law”. Unlike substances that may be weighed by a scale or measured by a yardstick, equal rights among members of society must be settled by a third element. Law is that element. If the law is just, freedom is served. If defective, freedom is denied. If lawmakers are lacking in sound judgment or scruples, the same results may be expected.
To achieve excellence, justice and law must maintain balance. The power of government must be kept in check. It must be continuously monitored and challenged to reflect evolving consequences, so law does not become unjust. Policies must be constantly measured against the results produced by their application. When found imperfect, defects must be corrected immediately. Justice delayed is justice denied. To do otherwise is immoral. Unbalanced weights or uneven measures are the equivalent of unjust law. Defective law is the essence of legalized public theft.
To maintain civil obedience and the blessings of liberty; the law must be the embodiment of justice based on principles of truth, honesty, equal opportunity, equity, compassion, morals and ethics. The law, to be obeyed, must be clear in its intent, efficient in identifying violators, fair in its judgment, and apply penalties commensurate with the noncompliance.
The United States of America proclaims itself to be “A Nation founded on the Rule of Law”. The country would be better served if the proclamation was changed to “A Nation founded on the Principles of Justice”. The role of lawmaker should be reserved only to those dedicated to achieving that objective.
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Part II
Pathology of Injustice
The graph below was constructed from Government Accounting Office (GAO) information. Road to Perpetual Debt is chronology of the development of government monetary, tax and welfare policies that have developed since 1913 when the 16th Amendment to the US constitution authorized the “Income Tax” and Congress created the Federal Reserve banking system.
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The above graph may represent what President Jefferson meant by “Perpetual Debt”! Just 5% interest on the $53.5 Trillion in total government obligations is $2.68 Trillion. That amount exceeds total IRS revenues reported in 2006.
Federal tax and welfare laws have created significant obstacles to achieving the American Dream by millions of hard-working Americans. The law has become so hopelessly complex and complicated that legislators cannot comprehend what they, themselves have enacted into legal mandates. The majority of your congressmen and senators have to pay professionals to prepare their individual tax returns. Tarnish Spreads on the ‘American Dream’
Failure of US domestic and foreign policies have compromised the future of this great nation and created resentment and anxiety at home and abroad. The supreme power of the US military and its unwelcome intrusion and/or invasion of other nations has created global resentment. The supreme power of the US government is producing middle class debt slaves, welfare dependency, and untenable national liabilities.
Specifically, laws that tilt the scales of justice toward profits over wages or between owners and employees are examined. Workers must earn incomes that provide as a minimum, a living wage with a cushion for savings, to meet future needs such as retirement. Companies must earn profits with a cushion for investments to enhance their own development. Both must be held accountable to themselves for success or failure and when the latter occurs or appears inevitable, work harder or try again. Government interference should be reduced to an absolute minimum.
A healthy competition between profits and wages operates best when treated with equal balance and respect. Contented employees are a company’s best assets. A worker’s best security is a good paying job. Society functions best when Freedom of Choice is held in high esteem. A Nation prospers when resources are managed prudently. It is doomed to failure when defective law supplants justice and natural talent and resources are wasted. Tax policy bias of profits and capital gains over wages and interest income should be corrected.
Government interference between owners and employees has created most of the problems, herein being addressed. The government should be confined to doing its primary job of protecting the homeland. Troops should be brought home from abroad and maybe our own borders could be defended. Homeland Security is a joke. What is the Department of Defense, chopped liver? Or, is it the Department of “Offense”?
US Consumption fed by Debt
The US population represents less than 5% of the earth’s inhabitants; but consumes 20% of its resources. The economic engine of the US is propelled by consumption. Mass marketing induces consumers to buy things they don’t need with money they don’t have. Consumption is fueled by the creation of new money and debt, which substitute for the shortages of cash and savings.
The Federal Reserve banking system creates the new money and government tax policy rewards the debt. Widgets are manufactured in factories owned by foreign governments and international corporations that have no national allegiance. The factories are often manned by cheap labor that barely survives on slave wages.
Demise of Dollar Hegemony
The public is generally unaware that much of the luxury enjoyed by Americans has been significantly increased by the role the $US dollar played in international commerce since WWII. As the dominant currency used to denominate global trade, the dollar allowed the US to export an infinite supply of $100 dollar bills that cost 6 cents to produce. Even today, the US imports, in return for a $100 bill, more than a barrel of crude and Americans mistakenly believe they are being ripped off by OPEC.
The increasing US dependency on foreign countries to finance domestic consumption is putting strains on global trade, finance, and the USD. Foreign governments and centrals banks are sending strong signals that international trade and finance arrangements are unsatisfactory. The central banks of many countries are increasingly moving away from the dollar toward the Euro, commodities and precious metals.
The US dollar is now at its lowest value - measured with a trade-weighted index that blends the currencies of the top US trading partners - since the era of fixed exchange rates ended in the early 1970s. Public finance in the United States is in crisis and it appears that political leaders and the Federal Reserve banking system are virtually powerless to do anything about it.
There are sensible policy changes that could be pursued that might postpone and reduce the pain of an inevitable catastrophic economic downturn; but, they will not be pursued. Just the threat of a US recession scares hell out of everybody. Even a modest US recession - dampening the US perpetual consumption and debt machine – will impact global trade.
The primary responsibilities of the US government are to promote the general Welfare, insure domestic tranquility, establish Justice and provide for the common Defense. The US Constitution provides the bedrock on which laws are erected. Laws found to be in violation of the basic document must be modified or repealed by the legislature or struck down by the courts.
Flawed tax and welfare laws erected on a depreciating fiat currency are not only morally and ethically repugnant; they threaten national security. Surprisingly, it was during the last Great Depression, many of these seeds of destruction were planted, virtually assuring a repeat of that tragic era. The looming catastrophe may be closer and more severe than anyone can imagine.
The size of Government, (federal, state, and local) and the welfare state have grown beyond the capacity of the tax base to support them. This fact has led to the creation of Trillions of Dollars in fiat paper and electronic money, unsustainable debt, and bogus government promises. Once understood, solutions to the problem become painfully obvious. Reduce the size of government and the welfare state, or go bust. It has taken decades to slide into this pile of manure and it will undoubtedly take several years to clean up the mess.
The United States is facing the most challenging economic predicament in the nation’s history. How these daunting problems are dealt with now will have enormous impact on this nation’s future prosperity.
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Part III
Social Security torpedoed by Politics and Incompetent Politicians
The Social Security Old-Age Insurance (OAI) retirement program was destined for failure before the ink dried on the Social Security Act of 1935. Its doom was sealed in 1939 when “Survivors” were added as beneficiaries, but no additional premium “income tax” was provided to fund the additional costs.
Chronic funding problems have plagued Social Security since its inception. The Social Security Administration (SSA) continues to claim the Old-Age and Survivors Trust Fund owns asset of $1.8 trillion. What the SSA identifies as “assets” is nothing more than a ledger of debt.
Fundamental defects in the Social Security Act, as amended, and defects in US income tax policy embedded in law cumulatively created a funding system erected on perpetual debt. Myths, misinformation, and disinformation have been misleading the public for decades. A comprehensive review of the program reveals the “truth” has been concealed by design, not by accident of so-called unintended consequences.
Social Security is funded by a regressive second income tax on wages. Benefits are calculated to enrich the wealthy not the working class it is purported to support. I’m not sure if the Social Security program is based on flawed policy or conspiracy; but the evidence strongly supports the latter.
Social Security Trust Fund
When the Social Security Administration talks about Trust Fund assets,
They are referring to a Ledger of US Debt
An accounting of increasing Debt, not, Asset Value
The Federal Old-Age and Survivors Insurance Trust Fund is basically an accounting system used to keep track of Social Security taxes and benefits. Many people mistakenly believe that the trust fund collects taxes and pays benefits. In reality, the trust fund performs no real economic function. Every payroll tax check sent to Washington is written to the U.S. Treasury. Every Social Security benefit check is written on the U.S. Treasury. By contrast, the trust fund neither cashes checks nor dispenses them.
Technically, the trust fund holds ‘special interest-bearing U.S. non-marketable US government securities (IOUs)’, representing the accounting surplus of payroll taxes collected minus benefits paid. The interest on these special securities is paid by the US Treasury with more IOUs to the Trust Funds. The Social Security trustees cannot sell them on Wall Street or to foreign investors. Nor can they use them to pay benefits. They can only hand them back to the Treasury for redemption and the US Treasury must find the cash from tax revenues or by selling new debt interest to the public or foreigners on which they have to pay real, market interest.
The ‘special securities’ are nothing more than IOUs the government has written to the Social Security Trust Funds. The only thing the Trust Funds can do with these "assets" is hand them back to the US Treasury for redemption. Every asset of the trust fund is a liability of the Treasury. Summing over the accounts of both agencies of government, the assets and liabilities cancel each other out, adding up to zero.
Ultimately, for the government to write a check to the Trust Funds, it must first tax, borrow or print more money. For this reason, knowing how many IOUs are in the trust fund does not convey any useful financial information about the government's ability to pay Social Security benefits. If the trust fund was dissolved, real economic activity would not bee affected. No private security owners would suffer. The government would not be relieved of any of its existing Social Insurance commitments to current or future beneficiaries, since the obligations are not bound by contract.
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| OASI Trust fund of Assets claimed by SSA |
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| This is the same chart with a minus sign to illustrate corresponding US liabilities |
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Social Security Benefits not a Contract
In a 1960 case, the U.S. Supreme Court ruled that the mere fact that you have paid taxes does not by itself create a legally enforceable claim to benefits. The Court also ruled that a future Congress has no obligation to keep promises made by a past Congress. So the only right to benefits you have is whatever the government decides to give you during your retirement. Note that this is very different from a private pension. If your employer fails to keep pension promises you can take your claim to court. Unlike private employers, however, the government can unilaterally break promises to pay. [For more about the 1960 case, click here.]
Americans have no legal right to collect Social Security benefits, even if they have paid Social Security payroll taxes throughout their working lives, according to the Cato Institute.Social Security benefits are not "property," in the legal sense. Examples of property include insurance annuities, where the individual receives a contractual guarantee to periodic benefits in exchange for premiums, and interest-bearing bank accounts, where an individual receives a contractual promise to pay the principal plus interest. Both are property, with legally enforceable rights. Moreover, the right to an annuity or bank account can be passed on to one's heirs, whereas Social Security benefits cannot.
In Helvering v. Davis (1937), the Supreme Court ruled that Social Security is not an insurance program—thus payroll taxe are not contributions that guarantee a benefit, but are taxes like any others. And, in Flemming v Nestor (1960), the Court ruled that workers and their families have no legal claim to their payroll tax payments.
Thus many Americans' retirement security is solely dependent on political decisions by Congress and the President, and can be reduced or eliminated at any time. Benefits have been cut for many workers over the life of the program. For instance, workers born after 1955 face a higher retirement age; benefits of retired federal workers are reduced, even if they retired early and paid Social Security taxes; and the benefits of individuals who work after retirement are reduced.
Personal retirement accounts would provide workers with a legal, contractual property right to retirement benefits. Additionally, personal accounts have a higher rate of return and can be passed down to an individual or his heirs.
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Taxable Social Security Benefits
Taxes on social security benefits are based on “provisional” income (adjusted gross income plus any tax-exempt interest plus half of your social security benefits).
Your benefits will be tax-free if you're single and your combined income is less than $25,000 ($32,000 if married filing jointly). No more than half of your benefits can be taxed if your combined income is between $25,000 and $34,000 if single (or $32,000 and $44,000 if married filing jointly). And up to 85% of your benefits can be taxed if you're single and your combined income is more than $34,000 (or $44,000 if married filing jointly). The worksheet in IRS Publication 915 can help you figure out how much of your benefits are taxable.
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Taxes on Social Security Benefits
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Filing status
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Income level
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% of benefits taxed
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Single and head of household
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Below $25,000
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0%
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Married filing jointly
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Below $32,000
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0%
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Single and head of household
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$25,000 - $34,000
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50%
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Married filing jointly
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$32,000 - $44,000
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50%
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Single and head of household
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More than $34,000
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85%
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Married filing jointly
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More than $44,000
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85%
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Social Security retirement plagued by funding problems
Financing of social security benefits has been plagued with funding problems from the day of its creation. Ambiguities in the Social Security Act of 1935 created a retirement program that required an expanding tax base to pay benefits.
Social Security began with equity in a social program to finance the retirement of low wage workers. It has in political terminology evolved into “a compact between generations” and to “Pay as you go”.
Social Security Administrations (SSA): “Social Security is a compact between generations. For more than 60 years, America has kept the promise of security for its workers and their families. But now, the Social Security system is facing serious future financial problems, and action is needed soon to make sure that the system is sound when today's younger workers are ready for retirement.”
Social Security Retirement, Pay as you go – “Pay Go”
Pay as you Go will take on new meaning. Social Security benefits will be linked to the cash revenues required to support it. A revision of Social Security benefit formulation rules can simplify and redistribute FICA/OASI tax revenues to those who paid the taxes to a narrow range that sends the bulk of the money to those near the bottom of the food chain, where it is most needed.
Politicians cannot fix a Social Security program that do not Understand!
There is not one politician in office or seeking election that has a full understanding of Social Security funding problems, nor a clue as to how to save the retirement system. It is a practical impossibility to fix a program without the knowledge to correctly diagnose the problem.
Defective government accounting and tax policies are so complex and counter-productive it is understandable why politicians may not identify the fundamental defects in Social Security funding and distribution of benefits. Or, if they do understand and are unable to offer solutions, it is clear why they don’t wish to talk about it.
Among those presently seeking political party nomination to run for President, none offer viable strategies to balancing the Budget of the United States, fixing Social Security, or solving the problem of an “Illegal Alien Invasion”. The first one to expose the ugly truth and offer practical solutions to solving these problems will earn the privilege to be President of the United States.
There are practical policy changes that could be pursued that could reduce the pain of the inevitable downturn. The political will to take action needs to be nudged by the pressure of an outraged public. The primary objective of Balance the Power is to inform and stimulate public thinking so solutions can be found.
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HOW TO FIX SOCIAL SECURITY
Tax Burden shifted onto Middle Class Workers
Tax burden shifting from corporations and the wealthy onto middle class workers coupled with negative net (after taxes and inflation adjustments) savings rates along with accelerated increases in food, energy and health care costs, while wages remain relatively stagnant, are insidiously reducing the standard of living of American workers. This condition will worsen because of failed public policies. Bush tax cuts accelerated the pace of the growing gap between the rich and the working middle class.
The significant increases in the national debt and the exponential, explosive increase in explicit and implicit government social obligations – Off-balance sheet DEBT – is a subtle, but devious means of hiding or postponing the real costs of funding benefit and entitlement commitments embedded in current law.
The following graph represents the Social Security Administrations “CLAIM” that the OASI Trust Fund is growing:
Chart 1
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| 2006 OASI Trust Fund Gross Revenue reported by SSA |
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The following chart represents the actual 2006 cash-flow changes to the so-called trust fund after adjusting for the following expenses and losses of revenue to the SSA reported OASI trust fund expense (billions):
$642.2 – Gross SSA reported OASI trust fund revenues
-$460.9 – SSA reported OASI trust fund expense
$181.3 - SSA reported Surplus
And, like Paul Harvey is prone to say: “Here’s the rest of the story!”
-$176.9 – Trust fund revenue losses due to Business Wage Expense deduction of FICA
- 41.0 - FICA/OASI tax refunds to low wage contributors due to the Earned Income Tax Credit
- 91.8 - US Treasury IOUs deposited in trust fund, but offset by government debt
-$309.7 – Total adjustment to OASI trust fund.
-$128.4 – Actual 2006 cash flow deficit of OASI trust fund.
Chart 2
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| 2006 FICA OASI trust Fund Cashflow Deficits of $128.4 billion |
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The FICA/OASI trust fund cash flow shortages reflected in chart 2 could easily be removed with 3 simple changes in law, none of which will happen unless lawmakers are threatened by an irate middle class and/or compelled to do so by order of the US Supreme Court.
- Discontinue the Business Expense Wage and tax deduction of FICA and FIT income taxes that are included in employee wages. This single change will restore a cash flow deficit to a cash flow positive. The $176.9 billion corporate tax deduction exceed is the cash flow deficit of $128.9 billion by $48 billion.
- Change the law that demands all surpluses be invested in non-marketable Special government debt instruments to prohibit that practice. This will disconnect the current political gravy train of collecting a tax for the OASI trust fund, spending it on a politician’s wish list and putting government IOUs into Trust Funds. The fund will begin to grow compounding assets instead of compounding debt. The approximate $95 billion of 2007 interest due the Trust Fund will begin to provide real assets to the trust fund.
- Deduct the $41 billion costs of Earned Income Tax Credits (EITC) from Trust Fund revenues or add the expenditure to Trust Fund expenses. This accounting change will help provide the Government Accounting Office (GAO) with transparent accounting records, so they can fulfill their audit responsibility, which under current practices is not possible.
SUMMARY
The above changes will put new life into a defunct fund. If successful, reform of the Social Security retirement system may provide an effective model for all the other trust funds. If these actions are taken immediately, trillions in US debt and social insurance obligations will magically begin to disappear. Politicians will be held accountable to maintain government spending levels below government revenues instead of concealing their actions by passing on to future generations $10s of trillions of government obligations.
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Part IV
Taking your Country Back
Winning the Middle Class Struggle against Tax Oppression
Justice versus Greed
In the eternal battles between greed and justice, greed is winning the war hands down. It doesn’t always have to be this way. The middle class can win back their economic freedom; but only if they understand how they have been betrayed and if they will courageously stand up and do something about it. Balance the Power has attempted to identify the problems and made recommendations of political and legal actions that may be pursued by working Americans to find solutions.
Replace Corporate Income Tax with National Business Receipts Tax
Corporations prefer debt to equity financing because the IRS tax code allows business to be rewarded by government rather than have profits reduced by fair tax laws. While dividends must be paid or shares repurchased with after-tax profits, interest payments on every dollar borrowed is tax deductible. Wage, tax, and interest business expense deductions from gross profits unfairly shift the burden of taxes from corporations onto the shoulders of employees and the federal government. The practice encourages debt as a substantial means of business finance instead of capital formation. Results are unsustainable levels of government debt and the creation of debt slaves among employees.
Middle Class Losing the War for Justice
Middle class justice is denied, because they do not unite. They do not unite because they are uninformed. They are uninformed because they do not listen! Parasites are sucking the life blood out of this Great Country! The only way to stop is to STOP IT! Join the grass roots effort for Equal Jusitice. The rewards will be worth the struggle. Spread the word. Do your part. United We Stand! Divided - you know the rest!
Summary
For that minute’ number of middle class citizens who may have read this far, I’ll summarize the whole maze with a simple analogy.
Scenario: Assume that you have refused to obligate yourself to pay interest on a loan to buy something you don’t need; but would dearly love to own.
Three and one-half years ago John Doe decided he wanted a boat that cost $18000. Joe tells his wife Jane that he plans on buying a boat and intends to pay for it by putting a $100 bill in a coffee container every weekly payday until the amount saved equals the price of the boat.
A couple of months ago, Joe realizes he has saved almost enough to buy the boat and began looking for the best ‘cash deal’. Yesterday, Joe he found just the right vessel equal to his ‘dream’ boat and knows he has the cash to pay for it.
This glorious Saturday morning (beautiful weather, birds chirping, fresh aroma of coffee), Joe tells Jane that he has found a good deal on his dream boat and asks her to bring out the coffee container with his $100 bills. Jane, with a look of chagrin, sets the can on the table.
Joe opens the can. He is so amazed by the content; he tells Jane she must have made a mistake because there is no green in the can. All he sees are little white notes with “IOU” written on them. He asks, “Where the hell is my money?” to which she replies “I borrowed it; but I intend to pay it back!” And, “How the hell to you intend to do that?” Joe asks. To which Jane responds “I don’t know!”
Joe carefully counts 100 backwards and walks out the door. He heads for the liquor store to buy a case of his favorite Kentucky bourbon . Joe also picks up a carton of cigarettes , a vice he had given up to save for the boat.
Immediately upon getting home, Joe begins to pack his clothes and personal effects in his car. Jane asks where he is going. Joe tells her he is starting over. Jane asks what she should do with the IOUs. Joe’s reply (expletive deleted) suggests she light (expletive deleted) a match and burn (expletive deleted) them.
What the middle class should do about politicians who have embezzled, misappropriated and stolen their money is an individual choice. I know what Joe would do!
Good luck to all,
John T Koraska, MSgt, USAF-Retired
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| Goddess of Justice |
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