Greenmail
Income Tax, Flat Tax, or, No Tax?

Gary Hunt
Outpost of Freedom
June 22, 2015

For those who believe that the federal government should tax us, either by income tax or a fair tax, or any other direct means of taxation, must understand that doing so only creates socialism among the states (taking from one to give to another), as the following table shows (A more complete table can also be found at Tax Foundation Special Report No. 158, “Federal Tax Burdens and Spending by State).

The table is from 2005 (I haven’t found a newer one, yet), so I would suppose that the only changes, absent minor redistributions of moneys, would be that the numbers have gone up, proportionately, in the last 6 years.

Note that $2,084,247,000,000 was taken in through taxes and that $2,210,184,000,000 was sent back to the states. This results in nearly $126 billion that was added back to the states’ side (to the benefit of the state). This additional money is likely a debt passed on to our posterity. And, this does not account for the many trillions spent by the federal government, each year, to support wars, foreign aid, and the expense of operating the government and its administrative agencies.

So, if the money never went to the federal government (income taxes), then the states would have had less revenue, even if they retained that which would have gone to the federal government for redistribution back to the states.

Now, there is also a loss in the administration of the distribution of the money. First, it is collected (IRS); then it has to go to the various agencies (accounting) for distribution back to the states (with all of the strings attached); then the state has to distribute the funds according to those strings, which, surely, requires a significant staff to assure that no money goes where the federal government does not want it to go, and vice-versa.

How much less would it cost if the states collected that money (and, being closer to home, might be more cautious in their raising taxes and spending recklessly, or to comply with federally mandated programs), and determined where it was to go, without federal intervention?

Now, if this does not convince you that a federal direct tax is unnecessary, and that it is used to manipulate social change and to bring the states into subjugation, then I would appreciate your explanation as to why it does not.

You should also note that Washington, D.C. gets back nearly six times, per capita, what it contributes, which amounts to over $65,000 per resident of that “model” city.

You can understand that rather than calling this blackmail, it is more appropriately defined as “Greenmail”.

* During fiscal years in which the federal government runs deficits some spending is financed through borrowing. This creates implicit tax liabilities for states that must be repaid eventually. To incorporate these implicit tax liabilities into the analysis, the following adjustment was made to state tax burdens: First, the total federal tax burden is increased by the size of the federal deficit. Next, this total burden is allocated among states based on each state’s proportion of the actual federal tax burden. Finally, adjusted spending-per-dollar-of-tax ratios are calculated by dividing actual expenditures by the adjusted tax figure, effectively making figures deficit neutral.

Source: Tax Foundation Special Report No. 158, “Federal Tax Burdens and Spending by State,” and U.S. Census Bureau’s Consolidated Federal Funds Report for 2005.