Monday, January 2, 2012

Is Modern Tax Slavery as Bad as Whips-and-Chains Slavery?

So instead of facing forward, we merely look around us. And find more than a few reasons to weep.
The National Defense Authorization Act has been signed. We expected as much. But we tried not to think of the legalization of the totalitarian police state and, instead, relish the changes in our life that coincided with the new year.
We began the new year full of new hope. After all, we'd just settled on a city to call home. Regular readers might have noticed that we've been sending our daily missives from Minneapolis this past week. We mean to give living in this city a dedicated try. Sure, it's cold for much of the year, but the city offers a good quality of life at much lower cost than the burgs on either coasts. The people are friendly, the values are Midwestern and the women good-looking.
We thought we might be able to enjoy the relative affordability at our current level of income. But a recent closer look at the numbers tossed very cold water on that notion.
You see, for the first time in our life, we begin a new year as an independent contractor. This means that people pay us cash for our ruminations, and then it's up to us to send the federal government a check for not putting us in a cage or killing us. We changed status from employee to contractor in the middle of the year, and now -- at the start of this year -- we have to reckon with the protection money we have yet to pay the government.
Now, we all know that we pay nearly half of our incomes to the federal government. But most of us are employees who get our checks after the federal government has taken its cut. So most of us are conditioned not to miss the money. After all, most of us simply never see it. The picture is entirely different for the self-employed...
The self-employed get to see all the money they've earned in their hot little hands...before the government holds out one of its own hands in expectation and with a gun firmly held in the other.
We've seen various writers on the Web mocking the small-government, libertarian-type thinking that compares tax slavery to the kind of slavery that involves whips, chains and regular beatings.
But regular beatings do not a slave make. A slave is someone who parts with the fruits of his labor under threat of force. That is to say, someone who endures chronic, low-grade muggings.
Slaves of the whips-and-chains variety tend to have to part with 100% of the fruits of their labor. Our own modern slavery is more benign, more subtle -- and this is by design -- but no less real. It's only more benign and subtle because slaves with the illusion of freedom are far more productive than those without. So we're allowed to keep enough of our incomes to afford a modicum of comforts.
Withholding taxes from pay is a fantastic tool in maintaining that illusion. Self-employment does wonders for reminding one of the reality.
The self-employed get to see all the money come in. And then mail it away to the feds.
The self-employed get to imagine more vividly the ways in which that money could make their lives better. They get to see it sitting in their bank accounts and imagine how it could quickly grow into a nest egg, one big enough to provide a real sense of security in case of loss of income.
The more-imprudent self-employed may even decide not to put some or all that money away for the requisite quarterly payoff to the feds...They may actually inject much of that money into the economy! Their demand may actually boost employment.
Or they may simply choose to help out loved ones. Or most likely, some combination of all three: saving for the rainy day, enjoying a higher quality of life and personally directed charity.
For our own part, we were hoping to start fresh this year right. A nice little house in a pleasant Minneapolis neighborhood rents for less than an entire shoebox apartment in a so-so neighborhood in New York. We hoped to do this while still helping out our relatives and stashing away something in case our own fortunes dimmed.
We calculated what we would have to pay in taxes and thought, "Hey, that's not too terribly bad."
Then a friend looked over our shoulder, glanced at our calculations and said, "What about Social Security?"
After we stopped screaming and banging our head against the desk, we did some checking. A quick Internet search took us to a government website that warned that the self-employed have to foot the entire Social Security tax themselves. That's 13.3% up to $106,800. (And then there's the 2.9% or so for Medicare.) Employees see only half that tax because employers quietly pay the other half. The self-employed, however, see yet a bit more of their potential quality of life and future security stolen away.
Personally, we would love to take that 13.3% of our income and just put it away ourselves. That money isn't being put away for us by the feds after all. It's being used to pay current recipients of Social Security and Medicare, among other things. Last we checked, Social Security and Medicare represented nearly 75% of the total taxes actually collected by the U.S. government.
The rest of the government's expenses -- including protecting us from the enemies it creates -- was funded by deficit spending. That is to say the money was borrowed, adding to the already impressive $33 trillion in government liability.
There are people we'd like to help directly with the money we earn. Relatives who've fallen on hard times and who need a couple of bills paid. Friends who are dear to us and who are having a hard time finding work and who could use a little help now and again.
We also would love the security that comes with growing savings. We'd really rather stop having our savings taken from us and given to complete strangers and military contractors.
We can live a comfortable enough life with the money left over after the government mugs us. But we can't save nearly as much as we'd like. We can't live as well. We can't help those close to us as much or at all. We suspect that this is a situation a lot of you are in.
And that's the point. We're all left with just enough to give us hope, to keep us productive, to keep us from falling into utter despair.
A good chunk of the money the government takes from us is supposed to help ease our later years...paying for our medication and giving us money to pay for our food and energy bills.
But we know how that really works. That money is being used to pay for others and for other things right now, mostly things that just make the economy worse and our the world less stable. The expectation is that the government will lie to the next couple of generations, take their money and pay for us when the time comes.
Again, while most know in their bones that they're being robbed...that they are not getting what they are forced to pay for...they manage to ignore it. For the self-employed, it's a bit different. The ugly truth is obvious every few months when they write out a check and mail it to the IRS.
They get to bundle up their higher quality of life, their financial security, their assistance for loved ones, into a check every quarter and send it away, never to be seen again.

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