How you can resist funding the government →
the payroll / social security tax (FICA) →
Congress dips into this money to supplement the general fund.
An analysis in ’s New York Times summarizes the way that payroll taxes, ostensibly used for trust funds and distinct from the rest of the federal budget, end up being dipped into by Congress for everything else — including, of course, the war budget:
I brought up the payroll tax, I noted that it’s much more difficult to evade than the income tax and I quoted an article that said “more than 79 percent of U.S. families now pay more in payroll taxes than in federal income taxes” and “, the percentage of government revenue derived from payroll taxes went up from 12 to 33.”
All this presents a problem for a tax resister like myself.
My goal is to stop paying for things like neocon military adventurism and my technique is through successfully resisting the federal income tax.
This is not a symbolic protest but an attempt to reduce my complicity in acts I abhor.
But if payroll taxes also end up funding these things, then I need to figure out a way to avoid paying these as well, and the same techniques I’ve been using to stop paying income tax won’t work for this.
When I discussed this , I said:
There are ways to get out of the payroll tax.
You can stop earning wages, for one — if you can figure out a way to make a living off of some other source of income.
You can work in the underground economy, or work as an independent contractor and simply (illegally) refuse to pay those taxes.
Or you can be a member of a religious group that is conscientiously opposed to insurance (for instance because “god will provide”), that supports its dependent members, and that has existed continuously .
The Amish are an example of such a religious group; I’m not sure which other ones qualify.
Can you think of any other techniques?
Daniel Gross, in Slate magazine, gives a run-down of how the payroll tax, and social security in general, has been raided to provide cover for increased government spending and cuts of more progressive taxes.
This again brings up this sticky, inconvenient question of how to evade the payroll tax that this tax resister hasn’t found a good answer for yet.
Those of us who have eliminated our income tax burden but who still pay FICA may be relieved to know that finally our payments are not subsidizing the general fund — this year, and for the foreseeable future, it’s the other way around:
I’ve been dreading the moment when I would have to start addressing the hoopla about the Dubya Squad’s plans to muck around with Social Security.
For a long time there were no plans to address — just a lot of hand-waving about an impending crisis, the importance of something called “ownership,” and so forth.
Now that actual plans are starting to become fleshed out with details, it’s becoming clear that I won’t be able to avoid the issue here at The Picket Line as I’d hoped.
Most of what you’ll be hearing about “private accounts” (or whatever the media is convinced to call them) is just a smokescreen designed to take your attention away from what is really going on — the next phase in the great FICA robbery.
I’ll try to describe what’s been taking place:
The U.S. government gets the bulk of the money it spends from borrowing and taxing.
Most of the taxes come from two sources: the federal income tax and FICA (a.k.a. the “payroll” or “Social Security” tax).
In some abstract universe that resembles our own, the federal income tax receipts go into the “general fund” that Congress taps to spend for all the things it likes to spend money on, and the FICA contributions go into a “trust fund” that is used to pay out Social Security and Medicare/Medicaid benefits.
To oversimplify a bit more: the federal income tax is paid mostly by the richer half of Americans.
A large number of people (like me) don’t pay it at all.
FICA, on the other hand, is paid by anyone who works for a living, and the richer you are the smaller a percentage of your income you have to pay.
Most Americans pay more in FICA than they do in federal income tax.
For a long time, people also paid more into FICA than the government paid out in Social Security and Medicare/Medicaid benefits.
This resulted in a surplus that Congress coveted.
Congress has been borrowing this money by selling bonds to the Social Security “trust fund.”
A while back, someone foresaw the time when the trust fund would start paying out more money than it was bringing in, and its surplus would start to dry up.
We must do something!
Crisis!
Crisis!
What they decided to do at the time was to increase the FICA tax to raise more money.
That kept the surplus coming, but Congress just kept borrowing from it, so the IOU kept getting bigger.
The Social Security “crisis” that you’re hearing about is not a crisis of the Social Security program itself (which could keep on doing what it’s doing for the foreseeable future without much change), but it’s a crisis about this debt that Congress owes and doesn’t want to have to start paying back.
The government is acting like a guy who’s been on a bender all week and who, when the bartender tries to collect his tab, says “Don’t bother me with that right now — you’ve got to do something about our drinking problem!”
Congress has been pretending to believe in a marvelous myth: They don’t have to practice any fiscal discipline now because some day in the future a Congress of wise and brave politicians will appear who will look all this debt in the face and either a) cut spending to the bone and raise more money in the general fund so there’s enough to pay back the debt, b) default on the debt somehow and let Social Security wither, c) raise more money via FICA again so as to put off the day of reckoning even further, or d) cut Social Security and/or Medicare/Medicaid benefits so the IOUs don’t have to get cashed in any time soon.
So that’s cut spending, default on the debt, raise taxes, or cut benefits.
All very unpopular choices for politicians to make.
Each one is something that a politician will be attacked at election time for doing.
But never fear, one day the wise and brave politicians will come and they’ll know what to do!
All of this talk of private accounts and who gets to put money in them and how much control you’ll have over them and whether it’s too risky and so forth is just a smokescreen.
That’s the debate the politicians are hoping people have so it distracts ’em from what’s really going on.
After all the smoke clears and the legislation gets to the president’s desk, it’s going to raise your taxes or cut your benefits or both (vaporizing the IOUs doesn’t seem like an option, and cutting spending enough to address the problem is laughably unlikely).
But what about the libertarian argument about how the government shouldn’t even be in the social security and health insurance business in the first place?
Isn’t there some benefit to replacing at least some of this with private accounts that belong to the person making the contribution?
The answer is yes and that answer is also completely irrelevant to the debate, since the “personal accounts” under discussion do not belong to the person making the contribution but remain under the control of the government, which makes the rules about how much you can put in, where you can invest it, when you can take money out, how much you can take out, and so forth, and can change them at its whim.
Furthermore, the money that goes into these “private accounts” isn’t really your money at all — nope, the government will continue to take as much of your money as before (or more, if it boosts the FICA tax again), and then — get this — it will loan some of your money back to you to invest in these “private accounts” and expect you to pay that loan back with interest out of your Social Security benefits!
(Yep, the more you look at it the dumber it looks.
And, like Dubya’s crazy Medicare reform, it’ll probably start costing a lot more than advertised once the bills start coming due.)
So, in short, this becomes an issue here at The Picket Line because the proposed Social Security changes represent a new attempt by the government to take more money from us to spend on its wicked ways.
It also makes my distress at paying FICA more acute.
The U.S. government is spending more on its military today, to support its wars in Iraq and Afghanistan, its global military presence, and its arsenal, than it spent (in inflation-adjusted dollars) in the most expensive year of the Vietnam War.
And much of this spending is coming from “off-budget” borrowing.
For instance, Congress has “borrowed” $177 billion from the Social Security trust fund this year to spend on war and pork, but you won’t see that $177 billion show up in the officially-reported budget deficit.
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 Indian independence movement boycotted goods that the British colonial occupation monopolized and taxed, such as alcohol.
Gandhi’s independence campaign encouraged Indians to produce their own salt and cloth, both to withdraw financial support from the British monopolies and to encourage the development of domestic industry.
Rebellious British colonists used a similar tactic during the American Revolution — making homespun cloth in patriotic “spinning bees” and boycotting British monopoly tea.
What would be a good equivalent of the patriotic spinning bee for today’s anti-imperialists?
What commercial transactions does the government tax that it would have a harder time taxing if they were the fruits of household industry rather than the marketplace?
One good candidate is home-brewed beer.
The federal excise tax on beer comes to about a nickle per bottle.
By home-brewing, you can resist this tax, learn a craft, and drink good beer — all legally!
It is a winning proposition any way you look at it.
Imagine “brewing bees” or “drinking bees” at which tax resisters belt out songs of liberty with gusto!
Wrote one home-brewer: “I like the symbolism of home brewing tax-free beer.
Gandhi’s campaign had a value that went beyond its bottom-line pounds-and-pence figure.
Spending time spinning cloth was a way of consciously participating on a daily basis in the resistance, and wearing the homespun cloth was a way of broadcasting your commitment to those around you.
Besides, brewing beer is fun and when you’re done you’ve got beer!”
Excise Taxes
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
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.
Other Taxes
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 resistance and conscientious objection of Amish people to social insurance tax forced the government to change its tax laws.
Some Amish people felt that government-sponsored social insurance programs were both mistrustful of God and destructive to the mutual support that forms an important part of Amish community life.
When the Social Security program and its social insurance tax became mandatory, many refused to pay the tax and refused to apply for benefits.
14,000 signed a petition to Congress asking for permission to opt out of the program.
The IRS began to try to enforce the law by seizing money directly from resisters’ bank accounts.
Amish resisters responded by closing their accounts entirely.
The IRS then began to seize money from the cooperatives that purchased the resisters’ products, and then finally to seize the resisters’ property.
The local IRS Chief of Collections said: “People have no right to use their religion as an excuse not to pay taxes.”
After a number of sympathetic resisters had been subjected to IRS seizures — in one case they seized a man’s horses as he was using them to plow his field — public outrage and Amish petitions finally convinced Congress to give the Amish the legal right to opt out of Social Security and cancel the outstanding tax bills of 15,000 resisters.
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
