FDIC Insurance Is Just Another Tax

Like a lot of people, I’ve been keeping a fraction of an eye on the U.S. Treasury Department’s megalomaniacal thrashings about of late. The more I learn about it the more bafflingly absurd it seems, but I also realize I’m in way over my head and don’t really have any expertise to draw on in interpreting what I learn. On the other hand, those who do have the requisite expertise don’t seem to have the humility to understand that even so, they don’t really understand what they’re doing and have so far led things to ruin — they’re just certain that with a tighter grip on the wheel and a whole lot more money (why don’t we ask the taxpayers for a big loan — they’ve never said no before!) the cards are bound to come up better sooner or later and then this will all be like a bad dream.

But of course I looked for a tax resistance angle. And this is what I came up with:

The U.S. Treasury is seeking (or has just assumed) the “authority to issue up to $700 billion of Treasury securities to finance the purchase of troubled assets. The purchases are intended to be residential and commercial mortgage-related assets, which may include mortgage-backed securities and whole loans” (I’m quoting from the Treasury Department’s press release).

If the U.S. Treasury just seized/purchased your mortgage… now there’s a dilemma! What’s a tax resister to do?

And then I stumbled on this interesting factoid:

When FDIC head Shelia Bair says her agency might have to bolster the FDIC’s insurance fund with Treasury borrowings to pay for the new spate of bank failures, a lot of us, this 40-year banking veteran included, assumed there’s an actual FDIC fund in need of bolstering.

We were wrong. As a former FDIC chairman, Bill Isaac, points out here, the FDIC Insurance Fund is an accounting fiction. It takes in premiums from banks, then turns those premiums over to the Treasury, which adds the money to the government’s general coffers for “spending… on missiles, school lunches, water projects, and the like.”

The insurance premiums aren’t really premiums at all, therefore. They’re a tax by another name.

You’ll recognize this as similar to the trick the government plays with the quasi-insurance trust funds for social security and medicare — the government goes out and spends the money, replacing it with IOUs which it has no plans to honor. And so I got to thinking about how many other ways the government reaches into our pockets, and to what extent we can resist these.

As I noted , a large and growing percentage of Americans do not pay any federal income tax. This poses a bit of a challenge to the American war tax resistance movement, since most of their literature involves resisting that tax. (And the rest mostly concerns the excise tax on local telephone service — which is also becoming less relevant as more people are switching to cell phones and internet telephony.)

So I asked war tax resisters what they thought about all this:

…we need to have something to say when we encounter an activist in the non-income-tax-paying 40%. It may be difficult to recruit someone into war tax resistance when most of our literature concerns a tax that a lot of folks aren’t paying anymore…

…[It] might be a good idea for war tax resisters to consider ways of refining their messages so as to take some of the emphasis off of the federal income tax and instead cover the whole spectrum of ways people fund the government and its policies.

Larry Rosenwald took up the challenge, asking me “what do you see as being included in ‘the whole spectrum of ways people fund the government and its policies,’ and which aspects of that funding do you see as subject to choice and resistance, either implicit or [ex]plicit?”

Which is a good question, and one I don’t know the answer to (or if there’s an answer, especially with things changing so rapidly lately).

I took a look at the federal budget to see what kind of numbers they use. I’m sure that it’s misleading, but it does itemize many of the ways money we earn becomes money they spend.

According to the budget for , the government brought in $2,567,672,504,536 in “budget receipts” — mostly what we typically think of as taxes. These can be broken down as follows:

45%individual income tax
34%social insurance / retirement
14%corporate income tax
3%excise taxes
1%estate & gift taxes
1%customs duties

Confusingly, one section of the report threw the FICA acronym in with the “individual income taxes” section instead of the “social insurance and retirement” section where I would have expected to find it. So even at this level of granularity, I’m a little confused as to what the numbers mean.

Each of these categories is further subdivided. Under the individual income taxes section, for instance, you can learn that $49,779,182 was donated by the foolish and insane to the presidential campaign fund to help pay for those marvelous political conventions and advertisements we’ve been seeing lately.

The “excise taxes” category is subdivided to show the various taxes and trust funds involved — though there are negative numbers in the column as well, and I’m not sure why — do some of the trust funds give out refunds? do some relinquish their money into the general fund somewhere else? do some involve so much overhead that they don’t end up in the black? In any case, the biggest item here is deposits into the highway trust fund / leaking underground storage tank trust fund — totaling about $40½ billion of the $65 billion in the “excise taxes” category (if I’m reading the numbers right) and coming from the gas tax. There’s a catch-all subcategory also called “excise taxes” that runs another $15 billion, and then another $11½ billion coming from the airport & airway trust fund — money that eventually comes from inflated airline ticket prices I’d imagine. And there are many also-rans: vaccine injury compensation fund, black lung disability trust fund, tobacco excise tax, etc. Because there’s an obscurely-labeled negative $7½ billion or so in the mix, the numbers I’ve given here don’t add up like they ought.

The customs duties aren’t subdivided according to what the duties applied to — except for arms and ammunition — so that’s less helpful. The estate/gift tax is an unsubdivided line-item.

The miscellaneous section has some interesting bits in it. Most of it comes from federal reserve deposits and doesn’t much concern us. Another $10 billion comes from user fees, licenses, filing fees and the like, including that “universal service fund” fee you see on your phone bill (that’s $7½ billion of the ten) and immigration, passport, and consular fees (another billion). The government hauls in $4½ billion from assessing fines, penalties, and from seizing stuff and selling it at auction. It brings in $241 million from “gifts & contributions” — you heard that right — including (get this) $3,594,405 from something called the “Conscience Fund”:

Money voluntarily paid to restore amounts which the donor considers to have been wrongfully acquired or withheld from the Government. Also includes moneys from those… motivated by personal feeling to ease their conscience from wrongful acts against others.

Go fig.

And that wraps up the “budget receipts.” But there are a whole bunch of other receipts that apparently aren’t budgetish. This includes $12 billion in interest on money the government has lent out, for instance to other countries or the international monetary fund. And there’s $3½ billion in dividends on investments it makes via funds it controls and is allowed to invest (e.g. the national railroad retirement fund). It brings in $4 billion in royalties & rents on public lands, for instance when it leases mining, harvesting, or grazing rights. It gets nearly a billion for actually selling stuff — such as timber, mineral products, or power (for example, the government owns the Tennessee Valley Authority, so if you pay your electric bills to them, you’re contributing to the profits of a government-owned utility, and therefore to the federal budget).

In addition to those sales, there’s another $16 billion in sales of government property — almost entirely sales of military equipment to foreign countries. The government also “sells” insurance, collecting $50 billion in medicare premiums, and another $12 billion or so in other stuff, including the new medicare prescription drug scheme, nuclear waste disposal fees, and veterans life insurance.

There’s a $13 billion item called “negative subsidies & downward reestimates” that I could make no sense out of, $2½ billion in miscellany, and a negative billion worth of “receipt clearing accounts.” You tell me.

When you get to the bottom of that, you’ve got another $126½ billion in “proprietary receipts from the public” in addition to the “budget receipts.”

“But that’s not all!” Stick with me as I put on my straw hat and gesture with my cane at the “Intrabudgetary Receipts Deducted By Agency.” What could these be? I think they’re money that one government agency pays to another, that have to be included as receipts to make the accounting come out right. As such, I think we can safely ignore ’em.

After this comes “undistributed off-setting receipts” — $260 billion that seem to me mostly like more of the same, but it’s hard to tell. There’s “interest received by trust funds” which I’m guessing is grouped near the previous bunch because the interest is being paid by the government and the funds are being invested in Treasury securities, but perhaps not. There’s also $6¾ billion in rents and royalties on the outer continental shelf and about the same from the federal communication commission’s auctioning off of bits of the broadcast spectrum (an item that gets duplicated in the list, so perhaps the money is doubled as well).

From here, we hit the final item: “offsetting governmental receipts” — that is to say “regulatory fees” and “other”. The first is over $6 billion worth of fees for things like “mobile home inspection and monitoring,” “pipeline safety,” “bankruptcy oversight,”, “student and exchange visitors” and “immigration user fees.” The latter only comes to $27 million, so I won’t dwell.

Whew! And that doesn’t even cover the various state governments and other sub-franchise operators that the federal government authorizes to take our money from us (or to run monopolies like the state lotteries). And it also doesn’t count the various ways the government can compel us to labor directly for it (rather than supporting it indirectly through money) — everything from prison labor and stop-loss orders, to the hours we spend filling out paperwork. Nor is the hidden tax of inflation and the devaluation of government debt through its underreporting included here. And the various government powers that have significant economic value — for instance the power of eminent domain, the power to print currency, the power to make the rules — don’t make the balance sheet.

The challenge will be to start with something like this and end with some sort of a practical guide for people who want to boycott and divest from Washington. Any ideas?