How you can resist funding the government → other ways the government is funded

I’m hunting for ideas for people who want to make up for the money I’m not paying into the government treasury. Use the email link off to the left to send me your ideas.

Ways you can support the federal government

  • Have a smoke!: For every pack of cigarettes you buy, the manufacturer will donate 39 cents to the federal government — this is above and beyond the tax you paid on the income to buy the ciggies, the payroll taxes paid by the tobacco industry, state taxes, and payoffs to various lawsuit-happy attorneys general!
  • Pay at the pump!: For every gallon you put in your car, the feds get another 18-and-a-half cents to spend. (Again, above and beyond…)
  • Earn Income!: For every six or seven dollars you earn (on average), you’ll give one of those dollars to be spent by the U.S. Congress.
  • Raise that mug!: At the bottom of every pint of beer is a federal excise tax nickel. The feds get 21 to 67 cents for your bottle of wine. Finish off that bottle of hard liquor and your Senator has another $2.14 to argue over.
  • Enjoy Burning Man!: Half the price of your ticket goes straight to the federal Bureau of Land Management — what they don’t use to buy night-vision goggles and bong-seeking-missiles for use on the playa they get to keep as profit.
  • Go shooting!: A sweet 10–11% of the cost of your firearm, and your shells and cartridges go to help Congress figure out new ways to interfere with your right to bear arms. (As always, above and beyond…)

Other federal excise taxes apply to cars and car parts, tires, coal, fishing equipment, vaccines, phone service, air travel, water travel, heavy vehicles and probably a bunch of other things. Can you help me with my list?

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
2%miscellaneous

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?

A few more things that I found in the inbox when I got back to my desk:

Some bits and pieces from here and there:

  • Prisoners in at least six Georgia state prisons have gone on strike, refusing to leave their cells to work in government-run prison slave labor industries. The unusual strike is being organized by the prisoners via contraband cell phones.
  • I’ve been working on a series of pages for NWTRCC under the tentative title of “Where Else Does the Government Get money to Make War, and What Can We Do About It?” These pages are meant to supplement the current NWTRCC site focus on the federal personal income tax and telephone excise tax, and to talk about other government funding sources and the resistance strategies appropriate to them. It is slow going, and surprisingly controversial (there is debate about to what extent taxes like the payroll tax are really dedicated to non-military trust fund spending and to what extent this is an illusion).

    Prison labor is one way governments extract value from people at gunpoint (and, seeing as how the Department of Defense is a big user of prison labor-produced products, I suppose it counts as a “war tax” also). Another tactic governments have often turned to is seigniorage — simply printing up money and spending it and implicitly taxing people by making their money-denominated savings less valuable. But according to a recent article in Forbes, seigniorage doesn’t work as well as it used to, as investors now have more tools to evade or counteract its effects.

    The Initial Public Offering of stock from the formerly-public, then government-owned General Motors is another odd source of government revenue. According to a Treasury Department press release, the government brought in $13.5 billion in by selling GM stock. (Actually, according to the press release, “Taxpayers” received the money, but that’s only true in government fantasy-land.) Did you buy any? Did the mutual funds in your 401k or IRA? If so, you helped the federal government get a return on its investment.
  • The PandaLabs blog has been keeping track of a “cyberwar” of sorts in which angry WikiLeaks supporters have tried to take reprisals against the politicians and corporations who have been conducting a distributed denial of service attack against Wikileaks. It’s interesting stuff, to be sure, and not least interesting is the indication that the rebels have decided to take a turn to the moral high road and abandon their own denial of service attacks for Operation: Leakspin in which they vow to more closely investigate and expose the leaks whose sheer quantity is bewildering the world of journalism.
  • The Treasury Inspector General for Tax Administration publishes a list of management priorities for the IRS every year. This year they’ve got a new top priority: keeping their employees safe from “a surge of hostility towards the federal government” from irate taxpayers.

As I mentioned , I have been working on a series of pages, originally intended to supplement NWTRCC’s website or literature, on the subject of “Where Else Does the Government Get Money to Make War, and What Can We Do About It?” (Where else other than the personal income tax, that is.)

Unfortunately, it seems that the defenders of the NWTRCC faith are not happy with the direction this project has taken so far, fearing that it would distract from the orthodox war tax resistance message the group has already established, or something like that.

So I’ve dropped the project, and will just go ahead and publish the pages I’ve assembled so far here instead. Here’s the first, along with some introductory material:

in a typical year, the personal income tax and social insurance taxes constitute about 80% of federal government revenue

Sources of Federal Revenue in a Typical Year

The United States government gets the majority of its revenue for conducting wars from two sources: the personal income tax and social insurance taxes (the “payroll” tax that ostensibly funds such programs as Social Security and Medicare). In addition, the government usually borrows a great deal of money to cover expenses that exceed its revenues. Another large source of revenue is the corporate income tax. A number of other taxes and fees and other sources of income make up the rest.

The receipts from some taxes and fees go into the federal government’s “general fund” from which it pays for most of its budget items, including most military spending. Receipts from other taxes and fees go into specific trust funds. For example, there is a tax on fuel that goes into the “Leaking Underground Storage Tank Trust Fund” that is used to fund the agency that oversees the cleanup of sites where fuel has seeped into the ground from leaking underground fuel storage tanks.

Some war tax resisters only want to resist taxes that go into the general fund but do not mind paying taxes that are at least nominally destined for such non-military-related trust funds.

However, Congress has a history of “borrowing” from trust funds to pay for general fund spending (including military spending). For example, it borrowed heavily from money paid into Social Security when more money was being collected by the payroll tax than was being paid out in Social Security benefits. Now that benefits paid are starting to exceed payroll tax receipts, Congress is balking at paying back this borrowed money and is instead talking of a Social Security “crisis” that will necessitate raising taxes or cutting benefits. What this amounts to is that all along, Congress treated the payroll tax as if it were money in the general fund that it could spend on war.

For this, and other reasons, some war tax resisters want to resist even those taxes that are ostensibly levied for non-military purposes.

The Excise Tax on Tobacco

Description

Every time someone buys a pack of cigarettes, they pay $1.01 in federal excise tax, and an average of $1.20 in state taxes (different states have different tobacco excise tax rates). Other tobacco products are also taxed.

Amount of the Tax

The federal excise tax on tobacco products rose sharply in , and has risen 321% since . As of , the federal tax rates on tobacco products are:

ProductTax rate
small cigarettes$59.33 per thousand
large cigarettes$105.69 per thousand
small cigars$59.33 per thousand
large cigars52.75% of sale price (or $0.4026 per cigar, whichever is less)
chewing tobacco$0.5033 per pound
snuff$1.51 per pound
pipe tobacco$2.8311 per pound
roll-your-own tobacco, blunt wrappers$24.78 per pound
rolling papers$0.0315 per fifty
cigarette tubes$0.0630 per fifty

In addition, every premises at which tobacco product manufacturing takes place is required to pay $1,000 per year in federal tax (some smaller manufacturers may pay a $500 tax instead).

How Much the Government Collects

In , the federal government reported collecting over $950 million in tobacco-related excise taxes.

How This Tax Is Collected

The manufacturer or importer of the tobacco product is liable for the federal tax. Tobacco products may be transferred from one licensed manufacturer or importer to another without tax being paid, but the final such entity who sells the product on its way to the end-consumer must pay the tax.

Are the Tax Receipts Earmarked?

These taxes go into the federal government’s general fund.

How Can You Resist This Tax?

Obviously, you can avoid contributing to tobacco taxes by not purchasing, manufacturing, selling, or using tobacco products.

In cases where the tax on tobacco products is considerably different in neighboring jurisdictions, some people evade the higher of the taxes by smuggling tobacco products from the low-tax jurisdiction to the higher-tax one and then selling (or using) the products there.

One can support the tax resistance of others by participating in the production and distribution of counterfeit tax stamps (such as are attached to cigarette packaging to indicate that the tax has been paid).

Another option is to “grow your own.” The process of growing and curing tobacco is complex but not completely out of reach of the small-scale producer. Don Carey of Freedom Township, Ohio, responded to a 2,153% increase in the excise taxes on roll-your-own tobacco by doing just that (see: “Smoker decides to grow his own tobacco” Ohio Beacon ).

See Also

  • Lovenheim, Michael F. “How Far to the Border?: The Extent and Impact of Cross-Border Casual Cigarette Smuggling” 61 National Tax Journal 7–33 ()

Some bits and pieces from here and there: