The 118-Year-Old Trick Used by the Government to Bamboozle Taxpayers
By Bob Bauman
I have long been a student of history. In fact, I've lived through a lot of it.
And from my experience, I can tell you that there are secrets lurking in yellowed, cracking pages that you simply can’t find in today’s press… or Google. Today, I’d like to share one of these secrets with you. A 118-year old “trick” that’s been deployed by the Federal Government to wring billions… perhaps trillions of extra dollars out of our wallets.Psychologists call it the theory of “minimum variation.”What is it… and why is it so powerful?
I uncovered this principle in an old psychology textbook from 1897, which was put out by E. W. Scripture, PhD, Director of Yale University’s Psychological Laboratory.The legend goes like this; if you toss a frog into boiling water, he will instinctively jump out. But if you place that same frog in a pot of luke-warm water, then gradually raise the temperature, he will boil to death without moving a muscle.That’s the theory of “minimum variation” in a nutshell. Animals (or taxpayers for that matter) are terrible at detecting subtle changes in their environment.And it’s clear to me that the politicians in Washington and elsewhere have ruthlessly exploited this weakness for decades, slowly boiling Americans alive, with new taxes, fees and boondoggles.
The Secret of “Minimum Variation” Has Enslaved 4Generations of American Taxpayers… including YOU
This fable of the frog may sound silly. But it has direct ties to the expansion of Big Brother's government.Let’s take a look at how this theory has been put to work since the early 20th century…Most people don’t know this – but prior to the stock market crash of 1929, most states didn’t have an income tax or even a sales tax. It wasn’t until the crash of the stock market – and the ensuing Great Depression – that their most significant source of revenue, property taxes, was crushed…and they needed to seek revenue elsewhere.So to supplement their revenue, states branched out and started taxing things like incomes, tobacco, alcohol, etc.Many of these taxes were billed as “crisis measures” but as we know, there’s no such thing as a temporary government program. To this day, these taxes continue to steamroll Americans, 70 years after the so-called “crisis” has passed.Some states like California and Illinois have recently raised their sales tax beyond 8.75% to 10.55%!
But that’s nothing compared to the Federal Income Tax
Let’s rewind to the 1920s… The Federal Income tax was a blip on the radar. Most families paid 1-2% of their income, while the well-off contributed 7%.Then came the crash of 1929 and the Great Depression.Believe it or not, within ten years, the top bracket soared from 7% to 79%. In other words, the Feds confiscated $79 out of every $100 a successful businessman earned.Today, we are not faced with such punitive rates. But the Federal Income tax is still very high, historically, at a top rate of 35%. Any of these tax hikes – if they occurred overnight – would cause a massive outcry from the general public… if not a revolution.But as you can see, the government skillfully employed the theory of “minimum variation.” Like the frog that got boiled alive, most Americans took these rate-hikes in stride. This has allowed the government to take unimaginable liberties with our property… our savings… and our rights.As you can see in the chart below, Federal outlays (red) continue to outstrip receipts, or taxes (green). And still, our elected leaders insist on spending trillions of dollars more. There can only be one conclusion: taxes are about to head much higher.
But They Won’t Call it a Tax Increase This Time Around…
So far, 30 states have passed outright tax hikes… But don’t expect many more to “go public” with new wealth confiscation themes in 2010.The reason?Democracy, of course. 37 governors… 46 state legislatures… 435 House members and 34 U.S. Senators are up for re-election.And you can bet they will twist, turn, duck and dodge to avoid using the “t-word.”That’s why the greatest near-term threat will come from hidden taxes – what I call Government Wealth Siphoning. For example…
The most recent “stimulus bill” to cross President Obama’s desk will add about $10 billion in back-door taxes.
This month alone, over $90 million in fees are being ram-rodded through the Georgia state house. Residents will face higher taxes and fee increases on everything from drivers’ licenses and passports… to daycare centers and court filings. This pattern is repeating across dozens of states as they scramble to make up for budget shortfalls…
The Federal Government’s “Build America Bonds” program is effectively plowing billions (possibly trillions) of dollars into the municipal bond market by subsidizing a large portion of the interest rates – yet another back-door “bailout” foisted off on the middle class.
States from New York to Hawaii are planning to freeze tax refunds… for as long as five months…
Property tax assessments continue to rise… despite a tumbling housing market…And the expiring Bush tax cuts will likely see the government’s share of dividend income and long term capital gains soar from 15% to 22.9%.