I’ll feature a section from the upcoming edition of NWTRCC’s “Practical War Tax Resistance” series pamphlet #5 on low-income / simple-living as tax resistance. I suspect that most of this section will end up being cut, for space reasons and because its subject matter is only tangentially related to the core topic of the pamphlet. But it’s too good not to share:
How Does the Federal Government Get Your Money?
If one of your goals in resisting taxes is to stop funding the government’s war budget, it is worth investigating in what other ways the government gets its funds besides the federal income tax, and whether you can reduce your contribution to these funding sources in the course of adopting a low income lifestyle.
According to U.S. Budget documents, in 2005 the federal government brought in its revenue in the following ways:
43.0% Income tax on individuals & families 36.9% Social insurance taxes (FICA, self-employment tax, the “payroll tax”, Social Security/Medicare) 12.9% Income tax on corporations 3.4% Excise taxes 3.8% Other (estate/gift taxes, customs duties / tariffs, Federal Reserve deposits, etc.)
Social Insurance Taxes
Although social insurance taxes are ostensibly collected to pay for programs like Social Security and Medicare, any surplus that the government collects but does not use to pay for these programs, it “borrows” to pay for other items in its budget, including the military. For this reason, some tax resisters who do not disapprove of programs like Social Security and Medicare still try to resist these taxes.
In recent decades, the percentage of government revenue that comes from social insurance taxes has risen. Today, most families pay more to the federal government in social insurance taxes than in income tax.
Corporate Income Tax
As an individual you can reduce your contribution to corporate income taxes by reducing your contribution to the profits of corporations, and the best way to do that is by reducing your consumption of corporate-provided goods and services.
The federal government taxes the sale of certain specific things like alcoholic beverages, gasoline, airline tickets, ammunition, vaccines, local telephone service, tobacco, cars & car parts, fishing equipment, and coal.
The receipts from some excise taxes fund particular programs, while others just go into the general fund. For instance, the federal excise tax on gasoline funds highways and mass transit projects, while the federal excise tax on local telephone service may be spent on anything in the budget.
You can avoid excise taxes in a variety of ways. For instance, you can avoid the excise tax on alcohol either by not using alcoholic beverages or by producing your own (it is legal to produce your own beer or wine). You can avoid the excise tax on local phone service by using an internet-based voice-over-IP phone instead of a regular phone line — assuming you do not get your internet over your phone line — or, as many tax resisters do, you can simply refuse to pay it and subtract it from your phone bill.
Tariffs are taxes on goods imported into the country that are applied when the goods arrive. The Washington Post reported in that “the average tariff on non-agricultural goods imported into the United States is less than 3 percent” but that “tariffs on a number of everyday consumer products — including clothing, luggage, dinnerware and handbags — range well into double digits. The same goes for some food, such as butter and cheese.”
You can avoid contributing to these tariffs by purchasing fewer foreign-made products. However, when you purchase from domestic producers, you contribute to their profits and therefore to the income taxes they owe and pay. This is an example of where lowering consumption in general is the best policy.
If you have less income, you will also reduce your state and local tax liability. Many resisters are opposed to state taxes because of concerns such as unnecessary highway-building (which creates community displacement and habitat destruction), prison construction, and the death penalty.
Other Revenue Sources
The official revenue numbers do not tell the whole story. Much of the money the government spends is money that it borrows. In some years, this can rival the amount it gets from any particular tax. For instance, in the federal government brought in $1,880 billion through various taxes, but borrowed an additional $568 billion. One way the federal government borrows money is by selling U.S. Treasury Bonds; the original purchasers of such bonds are loaning money to the federal government.
The government can also manipulate the money supply for its own benefit. By doing so, it can use inflation to quietly tax people and to reduce the value of its debt. John Maynard Keynes wrote: “A government can live for a long time… by printing paper money. That is to say, it can by this means secure the command over real resources, resources just as real as those obtained by taxation. The method is condemned, but its efficacy, up to a point, must be admitted. A government can live by this means when it can live by no other. It is the form of taxation which the public find hardest to evade and even the weakest government can enforce, when it can enforce nothing else.”
The Amish and Other Exceptions to Social Insurance Tax
In general, social insurance tax (also known as “FICA”, the “payroll tax”, or the “social security/medicare tax”) is hard to avoid if you earn your income in the above-ground economy. Your employer is required to withhold money from your paycheck starting with the very first dollar you earn, and you cannot qualify for a refund no matter how little you make.
If you are self-employed, be aware that social insurance tax is assessed on incomes much lower than the minimum threshold for the income tax. For most people, the threshold is $400 per year. For an employee of a church or church-controlled organization, the threshold is $108.28 per year. In addition, if you are self-employed, you are required to pay the tax by certain deadlines, four times a year.
The federal penalties, both civil and criminal, for refusing to pay social insurance tax are the same as those for refusing to pay income taxes. The IRS does not distinguish between these two kinds of taxes in terms of applying penalties.
There are a few exceptions from the general rule that everyone must pay social insurance tax. An exemption applies to the Amish and a handful of other religious groups that have been around at least since and that have religious scruples against participating in social insurance plans (see the sidebar).
If you do not earn any income — that is, if all of your income comes from interest, capital gains, pre-existing savings and the like — you do not have to pay social insurance tax on that money. In addition, there are a few job categories that can provide income exempt from social insurance tax:
- State and local government workers who participate in alternative employer retirement systems
- Election workers (people who are employed by the government to staff polling places during elections) who earn $1,200 or less a year
- College students who work at their academic institutions
- Household workers (housekeepers, maids, baby-sitters, gardeners, etc.) who earn less than $1,500 from an employer
- Self-employed workers with annual net earnings below $400
- Paid ministers, members of religious orders, and Christian Science practitioners who elect to be exempt