Are Taxes Necessary?

$2.59 trillion. That’s how much the Obama Administration anticipates it will collect in taxes in 2012.  Another $1.345 trillion will be collected by state and local governments, based on 2011 data by the U.S. Census Bureau.

All together, that’s a whopping $3.935 trillion Americans pay in taxes on an annual basis — or about 24.9 percent of the nation’s Gross Domestic Product (GDP).

In fact the only thing governments do more than tax is spend and borrow. This year alone, the federal government will spend about $3.717 trillion. State and local governments, according to Census, spend about another $3 trillion top of that. $555 billion of that comes from the federal government.

All together, that adds up to about $6.1 trillion of total government expenditures (38 percent of GDP), but only $3.9 trillion of taxes.  That means we’re running deficits close to $2.2 trillion — every single year. We’re borrowing even more than that, because of several off-balance sheet liabilities, including certain portions of interest payments.

Therefore, governments are borrowing 36 cents and rising for every dollar they spend.

Much of that money is provided by U.S. financial institutions that purchase U.S. treasuries ($15.6 trillion) and municipal bonds ($3.7 trillion) — a market of government debt that totals $19.3 trillion (122 percent of GDP). Banks in turn get much of their money from the Federal Reserve itself, borrowing at near-zero interest rates, and then purchasing higher yielding government bonds.

So, the government has two sources of revenue: taxes, which are derived from citizens’ painstaking hours of labor, and borrowing an ever increasing sum of money, which is generated in large part by a printing press.

That’s our nation’s finances in a nutshell.

The national debt has increased every single year since 1957 according to the U.S. Treasury. It is never paid back, only refinanced. A debt crisis, such as is being experienced in Europe, is said to be impossible in the U.S. because of our willingness to continue monetizing the debt.

So, with such a seemingly limitless capacity to borrow and print money, this raises a profound question: Do taxes matter?

Namely, if the government can just borrow all of this money, why does the government even bother itself with collecting taxes?

Indeed, why should taxpayer pay? Why not just borrow and print it all?

The answer, of course, is that banks do not in fact have an unlimited capacity to lend as is presupposed by politicians. Even with the loose standards for engaging in “lending” — what the bank cartel ironically calls the money it loans into existence — financial institutions are still required to hold certain amounts of capital.

And they can only lend so many multiples beyond that.

That is largely why the Federal Reserve has been dramatically increasing its share of the national debt. It is filling the gap that banks cannot fund. And it now holds more than $1.6 trillion of U.S. treasuries — more than 10 percent of federal debt.

It’s the never-ending bailout. Because, quite frankly, there is never enough money for the government to spend through taxes. So, every year, the government and the cartel dutifully ensure that whatever cannot be taxed and borrowed privately is done with the printing press.

The scary reality is, in spite of our government acting as if taxes don’t matter, they do. Ultimately, someone will have to pay this enormous debt we are running up. It will fall on our children and grandchildren.

And as the people in Greece recently discovered, once the funding crisis hits, the bank cartel will literally move mountains to get paid. So, if you think the IRS has an attitude now, you ain’t seen nothing yet.

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