September 28th, 2006

Laden with Taxes


And all this he did, for the sole purpose of bringing this people into subjection or into bondage. And behold, we at this time do pay tribute to the king of the Lamanites, to the amount of one half of our corn, and our barley, and even all our grain of every kind, and one half of the increase of our flocks and our herds; and even one half of all we have or possess the king of the Lamanites doth exact of us, or our lives. (Mosiah 7:22)

While reading the Book of Mormon this morning, this verse really stood out to me. King Limhi’s people were being heavily taxed by their rulers, and it was quite burdensome for them to bear. And then it struck me. We are in the exact same situation today.

We are heavily taxed ourselves. Take a look at the ever-growing list of taxes we are required to pay. A bit absurd, I think.

I grabbed one of my latest pay stubs and did some quick calculations to figure out how much I’m being taxed on before I even get my “increase”.

11.82% federal income tax
4.92% state income tax
6.20% social security tax
1.45% medicare tax

24.4% total tax

So before I even see my money, I’ve lost 25% of it. Then I’m paying 15.89% tax on gasoline (42.9 cents/gallon in Utah). Add on top of that a 6.25% sales tax for anything I wish to purchase. Then there’s the taxes on my phone bills, electric bills, heating bills, property, and the list goes on.

When it all adds up, that’s scarily close to “one half of all [I] have or possess”.

The verses that follow in this chapter of Mosiah are also quite interesting, allowing one to easily draw comparisons and parallels to our own day.

27 Responses to “Laden with Taxes”

  1. fontor
    September 28, 2006 at 8:29 pm #

    Typical Americans!

    You have a very low rate of taxation compared to other industrialised countries (near bottom in terms of GDP, and yet you still complain.

    You’ll be complaining about gas prices next.

  2. the narrator
    September 28, 2006 at 10:45 pm #

    You’ll be complaining about gas prices next.

    I’ve already been complaining… and walking. gas prices in utah are aburdly high compared to much of the nation. whats the deal?


    taxes seem high (though as fontor pointed out, relatively low compared to interational standards). what do you propose?

  3. Connor
    September 28, 2006 at 10:51 pm #

    and yet you still complain.

    Do I not have reason to? And if I have reason to, all that means is that the guy in a worse off country has more reason to. That does not mean I have absolutely no right to “complain” and point out this absurdity.

    I’ve already been complaining… and walking.

    …and I’ve been taking the bus. Love it, love it, love it.

    what do you propose?

    The Fair Tax. My copy of this book (pictured on this link) arrived today. Can’t wait to start reading it.

  4. fontor
    September 29, 2006 at 1:35 am #

    …and I’ve been taking the bus. Love it, love it, love it.

    Aah, the ol’ chauffered Mercedes. It’s not too bad, eh?

    My city has buses and trains. That, I am sure, you would go ape over. Can you imagine? A train? Whizzing past traffic on I-15?

    Oh, but getting one would probably necessitate… a tax! Blast and heck!

  5. Mike A.
    September 29, 2006 at 7:50 am #

    “We are in the exact same situation today.”
    Except that the taxes are spent on things that relate to us, rather than just being shipped off somewhere else entirely. That half an income didn’t pay for roads, schools, busses, trains etc.

    It seems this “fair tax” is still regressive in nature even with refunds for people under the poverty line.

    The fair tax doesn’t replace social security, medicare, or state taxes. So, from the list of taxes you pay now, the only thing the fairtax would remove is your federal income tax. You would still pay the state income tax and also pay the social security and medicare taxes.

    So, since you are above the poverty line, lets look at what you pay in taxes and see if it is more. Is that 23% sales tax more or less money than 11.82% of your income. Well, I suppose it depends on what portion of your income you spend. With the “fair tax” if you spend (on taxable goods and services of course) almost exactly half of what you make you would pay about the same in taxes as you do now. If you spend less than half then you would pay less taxes, and if you spend more than half of your income you would pay more in taxes than you do now. I just don’t see how this “fair tax” adds up to actually paying less in taxes for most people.

  6. fontor
    September 29, 2006 at 8:07 am #

    Great point, Mike, especially since people with less money end up spending a greater percentage of their income than those with more.

    I try not to judge books by covers and all (okay, no I don’t), but does anyone else smell an anti-government crank? Maybe it was how they’ve named their plan ‘Fair’, and perhaps that part about abolishing the IRS.

  7. Connor
    September 29, 2006 at 9:03 am #

    “We are in the exact same situation today.”
    Except that the taxes are spent on things that relate to us, rather than just being shipped off somewhere else entirely. That half an income didn’t pay for roads, schools, busses, trains etc.

    This is not entirely true. 100% of your income tax goes to pay off the national debt to the “Federal” Reserve, since Uncle Sam keeps coming up with the need to have money created out of thin air, plummeting our economy further into debt, increasing inflation at the same time due to an increase in circulated currency. Not one red cent of your income tax goes to, as you say, “roads, schools, busses, trains etc.”

    The fair tax doesn’t replace social security, medicare, or state taxes.

    It sure does reform them. The Social Security system would still operate in the same way it does today, except that its funds would come from the progressive sales tax, as opposed to the regressive payroll tax. All it would accomplish is facilitating the reformed Social Security system, in that Social Security/Medicare funds would no longer be taxed three times: the time at which payroll taxes are first withheld, the time that those withheld taxes are counted as taxable income tax purposes, and finally when one gets the desired benefits.

    Additionally, by placing the tax solely on the sales of goods (new, not used), prices would drop an estimated 20-25%, so after the 23% tax you’d essentially be paying the same price you are now, not noticing any difference. The only difference is that you would have 25% more money to spend because of the elimination of the payroll taxes.

  8. fontor
    September 29, 2006 at 12:11 pm #

    100% of your income tax goes to pay off the national debt to the “Federal” Reserve

    Connor, where are you getting these numbers? Even the nut-jobbiest websites I’ve seen are claiming no more than 25%, and the more even-handed are saying something like 19%. Not that that’s not a lot — it is — but no one’s saying 100%.

    Are you making up stuff, or are you getting it from someone really off the charts?

  9. Connor
    September 29, 2006 at 12:18 pm #

    “100% of what is collected [through federal income taxes] is absorbed solely by interest on the Federal Debt … all individual income tax revenues are gone before one nickel is spent on the services taxpayers expect from government.”
    Grace Commission, a result of Pres. Reagan’s Private Sector Survey, a “directive to identify and suggest remedies for waste and abuse in the Federal Government”

  10. Mike A.
    September 29, 2006 at 4:31 pm #

    OK, the 100% going to pay off the debt isn’t entirely acurate, but for the sake of argument we’ll go ahead and assume it is. So the government has a big huge credit card with no spending limmit and every penny in taxes goes to making the payments. Thing is the credit card is still being used every month to buy things like roads, schools, and buses. The original money that we are paying off was for those things as well- so we are paying for those (plus interest)

    It may very well be fiscally irresponsible and not sustainable. But to claim that we are in ” the exact same situation today” is abusrd. 1. we are paying less in taxes and 2. those taxes are paying for services which we received and or will receive (sure, plus interest that doesn’t need to be there)
    These taxes are not simply being taken by oppressive rulers who give nothing in return. The lamanites did not offer protection, social services, etc. or even payment on the debt for those things.

    Most of the fair tax proponents don’t advocate removing social security or medicare taxes. The wikipedia article you linked to says as much, and that the taxes replaced are all federal: personal income taxes, payroll taxes, corporate taxes, capital gains taxes, self-employment taxes, gift taxes and inheritance taxes.
    That means that social security and medicare are still being taxed.

    Additionally there is dispute about what tax rate would be needed to keep the same income level we currently have. But even if 23% were the number, it is impossible for it to actually lower the price of goods and services by the 20-25% you are claiming. If all the corporate taxes add up to 25% of the price of an item AND they pass on all the savings to consumers that come from lower taxes then you still have to make up for all of the personal income tax that isn’t being collected. The only way you can remove all the inclusive taxes on items AND all the personal income tax and replace it with a clearly defined sales tax all while keeping the same income is to make the new tax add up to all the old taxes.

    Even if magically this happens, it is still entirely an extremely regresive tax.

  11. Mike A.
    September 29, 2006 at 4:33 pm #

    Oh, on a somewhat unrelated note: fontor, how long have you been in Perth? I served my mission in Melbourne and really liked it. I hear Perth is a very clean, beautiful city and I’d really like to visit someday.

  12. Connor
    September 29, 2006 at 4:40 pm #

    Thing is the credit card is still being used every month to buy things like roads, schools, and buses.

    No it’s not, that’s what gas taxes and property taxes go towards.

    That means that social security and medicare are still being taxed.

    Sure, but through progressive rather than regressive tax. The restructuring of funding sources thus allows the consumer to make a conscious decision as to where their hard-earned money goes. But I’m of the opinion that social security and medicare should be eliminated as well. We have become a lazy welfare state. But that’s another discussion for another time.

    Even if magically this happens, it is still entirely an extremely regresive tax.

    I disagree. You get to choose how (or if) you spend your money, thus determining when you will end up paying such a tax. However, the point of this post was not to argue for the FairTax—I merely offered it as a possible solution upon Narrator’s request—but instead to illustrate the similar circumstances in which we live today.

    I am tempted to concede the point to you that the Lamanites didn’t offer any services or protection and thus the situation differs, however, we are not explicitly told that. For all we know, there was some sort of exchange of services or protection. Verse 21 says it was a treaty that they signed, perhaps indicating that in addition to the allocation of land there were other services promised. Who knows?

  13. fontor
    September 29, 2006 at 6:47 pm #

    Hi, Mike.

    I served my mission in Perth (Pres’s. Campbell/Innes), came back to USA and got my BA and MA from BYU, and then went back. I’ve been living here for about 10 years.

    Australia is a pretty cool place, and Perth is beautiful. The beaches are gorgeous. When I went to the beach at Barcelona a few years ago, I was actually disappointed! What’s all this brown sand? Wouldn’t mind staying.

    I understand complaints about taxes — I really do. We get a higher percentage taken off than the USA, (it’s more progressive BTW). But you should see the stuff we get back! Health care is much more affordable than in the USA, and we don’t break the bank by covering our people. There’s a good welfare program in place, and the state-run media is fantastic. You wouldn’t think they do a better job of self-monitoring than privately-owned corporate media in the USA, but they do. And… the uni education for my PhD has been largely free (I do pay some trivial fees).

    What’s different about Australia that makes it work? Beats me. This could be just my perception, but I get the feeling that there’s a sense of the ‘public good’ as an active concept. It comes out in terms like ‘mateship’ and such. Even though many Americans are quite charitable, I haven’t seen this concept of ‘the public good’ as part of the national discourse since Reagan. It’s more ‘devotion to self’ and ‘what’s in it for me’.

    Australia ain’t utopia, but if I were living in America, and I wanted to complain about taxes, I wouldn’t complain about the amount I paid. I’d be complaining about how little I was getting back.

  14. Mike A.
    September 30, 2006 at 4:17 am #

    What’s different about Australia? Don’t you mean what’s different about Perth? A whole bunch of the problems with delivery of services that exist here and may not exist in Perth were certainly there in Melbourne. The welfare system in Victoria and Tasmania certainly kept most people in houses and with food- but it certainly had problems and seemed to really be creating a sort of permanent underclass.
    Although, I think when asking what things Australia has going that the US does not a few key differences include:
    Australia spends less than three percent of its GDP on military expenditures, I think the US spends a little over four percent. If we decreased our spending to about two percent or two and a half percent of gdp it would free up another hundred or couple hundred billion dollars. That makes a difference.
    The tax rate really is quite a bit higher. In addition to the income tax there is a federal goods and service tax (sales tax) though I don’t remember the percentage.

    As for health care, that is such a tough call. It seemed, from the limmited contact I had with health care in Australia and from the experiences of other missionaries, members, or other people we knew that although everyone has access to health care in Australia, it is of a bit lower quality than care in the US. I think the trade off is worth it, but not everyone agrees. A single payer system, even if less effective in producing top quality care, certainly is more efficeint in providing care and using funds for actual health care than the system we have in the US.

  15. fontor
    September 30, 2006 at 9:54 am #

    On Comment 10:

    One data point from 22 years ago?

    I can see that we need to work on recognising valid supporting evidence.

  16. Connor
    September 30, 2006 at 9:56 am #

    Do you have any more recent “data points” from recent years that makes this one obsolete? If not, it still is “valid supporting evidence”.

  17. fontor
    October 1, 2006 at 8:48 am #

    The federal budget estimates that interest on the debt will be about 9.4 percent of total outlay for the current financial year.

    The same source gives 16.2% for 1985; I don’t know where these Grace Commission people got their 100% figure, but I can guess.

  18. samdb
    October 26, 2006 at 11:23 am #

    I was going to write about the issues between consumption tax and income tax, but the literature is out there. I wanted, instead, to address your proposition that we’re in the same situation as the people of Limhi were.

    Two differences, both of which, I believe, are significant. First, the people paying the Lamanites had no say in the tax. We have democratic procedures to give us a voice in the taxation of us. If you say, on a practical level, we have no individual say, that’s a problem with the process, not the tax.

    Second, and more importantly, the BoM tells us very little about the tax. It was half of what they had (as opposed to half of their income, or half of their income minus charitable deductions, etc.) (except, apparently, it was half of the increase of their flocks). And we don’t know on what schedule this half was taken–was it half monthly? yearly? biannually?

    Your taxation, on the other hand, is not close to 1/2 of what you have or possess–it may approach 1/2 of your income, although you’d have to have significant income for your marginal rate to approach 50% (esp. since Medicare, I believe, phases out at a certain point), and live in NYC, CA, or DC for the state tax to add up.

  19. Connor
    October 26, 2006 at 11:35 am #

    First, the people paying the Lamanites had no say in the tax. We have democratic procedures to give us a voice in the taxation of us.

    This is true, we do (sort of) have representation. However, “having a say” in the tax also, in my mind, connotes knowing what such taxes are used for. Transparency in government is crucial, since the government works for “We, the People”. Having $2.3 trillion dollars unaccounted for is appalling in my mind, and just as bad as taxing people without representation.

    It was half of what they had…

    True, but with all the various taxes there are (income, social security, medicare, sales, gas, property, phone, etc.) this pretty much equates to being taxed on everything I have…

  20. samdb
    October 26, 2006 at 11:54 am #

    Um, no. But that’s okay.

    Your essential argument is that you pay too much in taxes. It’s a fair argument (although, at least at the federal level, taxes are the lowest they’ve been in at least 20 years, if not since the imposition of the tax code). I object more to the form–you argue by analogy to the Lamanite taxation of the people of Limhi, an analogy that doesn’t work on any level (except maybe tax rate, although I’d vigorously debate that).

    If what you want is transparency, that’s not an issue of taxation. If you want to pay less, that’s partly an issue of taxation. The tax code is a popular scapegoat, and is admittedly overly complex and has too many carveouts, and doesn’t measure perfect Haig-Simmons income, but it is not the cause of unaccounted-for money. That’s the politicians. And, like I said, you can cause the current politicians to be voted out, and vote in people you like better. Heck, you can even run yourself. The people of Limhi didn’t have these options, and paid half of what they had on some sort of schedule (regular or on-demand by the Lamanites).

  21. samdb
    October 26, 2006 at 12:01 pm #

    Oh, and FWIW, your objection about transparency is one reason I prefer an income tax to some sort of consumption tax–because increases in the rate equate to a transparent pinch, and potentially backlash. The reason Congress likes to raise the phone tax is because we don’t have to write the Treasury a check. We see our phone bill go up, mutter under our breath about the &*# phone company, and go on with our lives. I’m afraid a consumption tax would present Congress with the ability to raise taxes without political accountability, and thus make them more willing to do so. Right now, if they want to raise taxes, they need to explain their reason for doing so if they want to be reelected.

  22. Connor
    October 26, 2006 at 12:36 pm #

    If what you want is transparency, that’s not an issue of taxation. If you want to pay less, that’s partly an issue of taxation.

    I’m not talking in absolutes here; I’m simply mentioning contributing factors.

    I understand your explanation of transparency regarding a consumption tax, and I agree. It’s very similar to when congressmen attach “riders” onto bills to secure funds for completely different programs and initiatives that sometimes have little, if anything, to do with the bill they’re riding the coattails of. Accountability and transparency are important. I want to know what Uncle Sam is doing with my money.

    I’m not concerned with the statistic of our taxes being the lowest in 20 years. It’s still an issue, regardless of where we were at 5, 10, or 20 years ago. DUIs might be lower than they were ten years ago, but hey, they’re still bad! Granted, such a statistic indicates some progress, but sometimes slow progress isn’t the best thing. Sometimes revolutionary change is necessary.

  23. samdb
    October 26, 2006 at 1:17 pm #

    Then what is your proposal for revolutionary change? Presumptively, any change needs to be revenue-neutral. This means that if, e.g., we were to move to the FAIRTax, it would have to generate at least the same amount of income that today’s income tax generates. You personally may pay less, or you may pay more. If taxes are cut across the board, the government will have to fund its domestic and foreign programs through more borrowing, which merely pushes back the horizon for raising revenue ten or twenty years, basically enslaving our children for our expenditures (the way baby boomers have done to us).

    Bush argues that tax cuts result in raised governmental revenues, but nobody believes it. I doubt he believes it. The Atlantic Monthly did a revue of current thoughts on that theory a couple months ago, but I don’t have it handy.

    If you’re going to make spending cuts, what do you cut? The war in Iraq? Social Security? Education? Welfare? And how do you make that transition?

    I’m not suggesting that there aren’t answers, and maybe you’ve answered them to your liking, but if you want to plan for a revolution, you need to keep your eyes on the fallout after the revolution.

  24. Sam Hennis
    December 30, 2006 at 8:44 pm #

    I recommend a book for all to read called, “The Law,” by Friedric Bastiat. It’s a short read, and quite informative on what government should be limited to. Our taxes would be much less if we cut out all the socialized government programs. The purpose of government should be limited to protecting our freedom, not providing endless welfare state programs. We should not look to government as “the hand that feeds us.” A government that can give you everything you want must take it from someone else. I don’t believe in forced charity. America became the most prosperous nation in the world, not because of high taxes and entitlement programs, but from the absence of these things. We are now a nation in decline because we are embracing these socialist programs. I say less government, more responsibility and with God’s help, a better world. We should, instead of looking to government as the answer to all our problems, look to liberty instead. Until we return the government to it’s limited constitutional authority of protecting our freedom only, we can’t expect to see any significant reduction in taxes.

  25. Connor
    January 9, 2007 at 4:40 pm #

    This article by Devvy Kidd does a great job at explaining why no income tax is needed and what steps must be taken to lift this absurd burden.

  26. Sam Hennis
    January 9, 2007 at 11:00 pm #

    That’s a great explanation. I really like Devvy.
    Why don’t you check out
    This guy, Peymon Mottahedeh, is another voice of truth in the great “sea of falsehood.”

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