Jim Wagner
Federal income tax utopia
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By Jim Wagner
October 26, 2021

Democrats inflate the Federal labor force almost as reliably as they inflate our money supply. In effect, they print new job positions the same way they print new dollars, with total disregard for their declining value. Whether more government workers are actually needed or not has no bearing on this process, because each new Federal employee is a new dependent and consequently a new Democrat voter. Since government jobs dole out something like double what comparable private sector jobs pay, try to imagine an Affirmative Action hire voting against the policies that make her astonishing Affirmative Action bonanza possible! “It may cost me my job,” she might say, “but the work I do is not important and I’m not really needed. So I’m going to vote for austerity in government.”

But she doesn’t say that. And who can blame her! At some level most of us realize that this is fundamentally corrupt, and we either envy or resent it depending on our attachment to principle. One thing that no one has ever pointed out, however, is that government employees pay no income taxes at all. This is not hyperbole. I mean these words exactly as I have written them. Federal employees pay literally zero income tax. Or as Rush might have put it, they pay “zip, zilch, nada.”

Forget what the Federal pay stubs say! That is merely a shell game. For example, say we have a Federal welfare manager receiving $200,000 per year. And let's say this person "pays" 50% of that amount in federal and state taxes. That’s revenue to the government, right? But wait a minute! Her entire paycheck was tax money in the first place, extracted from the private sector. Every cent of it came out of taxes paid from the earnings of workers in business and industry. It would be cheaper and more efficient to set her pay rate at $100,000 and allow her to file no tax "payments" at all. This would make no difference to government revenue or to the national economy, except that it would eliminate the wasteful pretense of taxation, a process which requires yet more Federal employees.

When a private industry worker pays taxes, the money comes from the profit on a product. For example, if he works at a pencil factory and makes 100,000 pencils a year at one dollar each, then it can be seen that at a 50% tax rate the government takes half those pencils. (Of course as a practical matter the government actually requires the man’s employer to sell the pencils, and then takes half the money. The pencil factory pays the employee from the other half.) If this individual were allowed to file zero tax payments, the government would be out $50,000.

Look at it another way. If taxes from Federal payroll were real tax revenue to the government, then a country could always offset its deficit by paying government employees more and taxing them more at the same time. Imagine if all government employees were paid $100 million per year, and taxed at 99.9%. They would each retain the same $100,000 – a very nice net income. And at the same time the government would take in some $20 trillion per year in added revenue. (2.1 million current Federal civilian employees X $99,900,000 in annual “income taxes” paid by each of those “workers.”) The deficit, as a percentage of the budget, would be negligible! We would literally tax ourselves out of debt. But this doesn't seem to work! Why not?

In the private sector, goods and services of real value are produced. The market determines the value, and private enterprises that fail to produce value cease to exist. When a private sector employee works, he produces a car, or a house, or a bushel of corn. What does a government worker produce? When a private sector employee receives a paycheck and delivers a portion of that money to the government in taxes, real value is removed from the economy and delivered to the government. In the case above, the government is richer by 50,000 pencils. But when a government employee "pays" her taxes, it is nothing more than a fictitious book-keeping entry. The government is no richer for the 50,000 paper shuffles she has performed over the year. Still, the rest of us are all that much poorer!

Beyond that, the Federal employee in question is now allowed a false sense of her own worth. Sincerely convinced that she is actually adding to the national revenue, she sees herself as contributing to the welfare of society both as the provider of a valuable service—whether or not her work actually serves any public interest – and as a “taxpayer.” From that perspective, she is a part of an elite cadre that does “more than its fair share.” So her say in the body politic is more valuable, and must command more sway. She comes to feel, if not to articulate, that she is a part of the Deep State. And why not! Who will dare to shatter such a grandiose illusion?

Am I saying that there should be no Federal employees? Of course not! We need a certain amount of government in order to function as a country. But that is not in dispute. Only the notion that continually expanding the size of the Federal labor force is harmless is in dispute. Only the fiction that government employees somehow contribute to our national tax revenues is being challenged.

Small business has always been the largest source of employment in America, and consequently the major source of genuine tax revenue. And yet the Democrats, while stifling small businesses over the largely imaginary threat of Covid, seem at the same time determined to continue increasing the number of Federal jobs as if they were the life blood of our economy. That is like asking a starving man to drink his own blood. An increasingly smaller number of real producers will have to support an increasing larger number of pretend producers. The pyramid is upside down.

Why don't we just make everyone a government employee? We can all push papers back and forth, eliminate the Federal debt, generate national prosperity and become rich beyond our wildest dreams! Rich like Marxist Cuba! Or rich like socialist Venezuela, where everyone is a trillionaire. Rich in bolivars, that is. But bear in mind that it takes nearly half a million bolivars to equal one US dollar. Why? Because Venezuela is a socialist country, and socialist countries always inflate their government labor force along with their currencies.

Too good to be true, right? Let’s just hope the Democrats don’t think of it!

© Jim Wagner

 

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Jim Wagner

Jim Wagner is a retired businessman and freelance writer. His degree is in Psychology with a minor in English from Simon Fraser University in British Columbia, where he lived, worked, farmed and studied for nine years after his repudiation of the Vietnam War... (more)

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