Every State With An Income Tax Is A Slave State
Every State With An Income Tax Is A Slave State
Paul Craig Roberts
The headline might seem extravagant, but it is true. Readers might not realize its truth, because people tend to associate slavery with confinement, but that is incorrect. The slave was confined to his place of work, because that is where his labor was used and mobility in those times was extremely limited, not because confinement was a feature of slavery.
A slave is a person who does not own his own labor. His labor is owned by another. On 19th century plantations about half of a slave’ output was used to feed, clothe, and house him. In other words, the slave was taxed at 50%. The other half was return on the capital the owner had invested in the slave. According to economic historians, earnings on the investment varied over time but seldom was extravagant. Slavery was brought to the British colonies not because it was profitable, but because there was no other labor force to work the fertile land. Some historians concluded that the return was declining and that slavery was on its way out.
In medieval times, serfs were less productive than slaves in the 19th century. Historians I read decades ago concluded that the productivity of labor was so low in medieval times that if more than 30% of a serf’s labor was claimed by lords, the serfs could not reproduce and would revolt.
In modern times, the slave’s labor is owned by the state and collected through an income tax. If the tax is progressive, the higher your income, the less you own of it. The highest paid have the least ownership of their labor or creatively or however you care to put it. Prior to the Reagan tax rate reduction during 1981-83, the highest US earners only owned at the margin 30% of their labor income. A head of household faced a 54% marginal tax rate at $44,700 of annual income and a 70% marginal tax rate at $161,300 of annual income. They met every definition of a 19th century slave but one. They could refuse to work and not be whipped for refusing.
Today in the US the highest tax bracket is 37%. That is a marginal tax rate, not an average tax rate. On your first chunk of income the tax rate is 10%, but as your income crosses thresholds the tax rate rises to 12%, 22%, 32%, 35%, and then 37% of every dollar a head of household earns above $523,600.
In 1952 and 1953 the highest marginal tax rate in the US was 92%, and was 91% for all other years between 1944 and 1963. This pretty much made the rich more exploited than medieval serfs and 19 century slaves. But we never hear about reparations for the rich.
With the large incomes of billionaires, 37% comes close to being their average tax rate. To avoid handing over 37% of their labor to a government (plus state income taxes), the really rich try to structure their income so that most of it is in the form of capital gains. Currently, long-term capital gains are taxed at 15% or 20%. (Some types of gains can be taxed at 25% or 28%.) Some readers might recall that some years ago, Warren Buffet, one of the world’s richest persons, said that his secretary’s income was taxed at a higher rate than his. That was true, because his secretary’s income was wages, and his income was capital gains.
There is much dissatisfaction with the low capital gains tax rate, especially as capital gains are associated with the rich. But consider a couple of points. Suppose you buy stock for $50,000 and the stock price drops so that your holdings are reduced to $45,000. As you haven’t sold, you only have a paper loss. But suppose the stock pays a $4,000 dividend, keeping you almost whole at $49,000. That is pre-tax. You have to pay income tax on the dividend. You end up taxed on holdings that have declined, not risen, in value. You were taxed on a decrease in your net wealth.
Next, consider this point. Generally speaking, there is no such thing as a capital gain. Look at it this way. Your $50,000 investment rises to $60,000. You sell and have, according to US tax law, a $10,000 gain on which you must pay income tax. After you pay the tax, your holding is less than $60,000, the replacement cost of what you sold. In other words, you had no gain. You had a decline in net worth by the amount of the tax.
In an equity market in which the Fed is not making the super-rich richer by pumping liquidity into stock and bond prices, share prices rise because the company is becoming more profitable, perhaps from better management, perhaps from better technology, perhaps from new products, perhaps from offshoring its production. The rising income is being taxed by the corporate income tax, by income tax on executive bonuses, by income taxes on dividends. In other words, the rise in stock price has already been taxed in these ways. To tax it again as a capital gain is deceptive.
There is a real form of capital gain. Suppose a government puts a new road through property. The value of property with road frontage goes up. That is a capital gain to the owners created for them by taxpayers. Classical economists believed that it was this kind of gain that should be taxed, not labor and investment income. To classical economists it was nonsensical to reduce GNP by taxing labor and capital.
To provide another example, suppose a new subway line is constructed in a city. The property adjacent to the stations will rise in value. If this rise in value were taxed, it would pay for the construction instead of taxpayers having to pay.
These are real capital gains. The owners of the property made no investment that caused their property to rise in value. Taxpayers drove up their property values by locating means of transportation on the property.
Governments are always deceptive about taxation. In the US legal forms of slavery were abolished in the 19th century. But the Revenue Act of 1913 resurrected slavery with the income tax which assigns ownership of part of a person’s labor to the government. Years ago I told the tale of the income tax, and wish I could find it.
The income tax was used to lower tariffs and to cover the lost revenue with a tax on income. The states had to approve an income tax. To secure approval, the schemers brought the tax in with such low rates on such high incomes that only 3 percent of the US population was subject to the income tax. A one percent tax was imposed on incomes above $3,000, a high income in 1913, and a top tax rate of six percent on incomes above $500,000, an unimaginable income in those days.
Once the tax was on the books, World Wars I and II provided ample excuse for widening the tax net and raising the rates. It seems that the people are always outsmarted by governments.
It has always puzzled me that with all the talk about slavery and reparations for American black people no one ever focuses on the income tax as the reimposition of slavery. Today not all black Americans live on welfare. Many of them work. The fact that they earn means they are subject to the income tax, which means that they, like 19th century slaves, do not own their own labor. Reparations would just be corrupting like welfare. Blacks and the rest of us would do much better to focus on reclaiming the ownership of our own labor and tax the real forms of capital gains instead.
But this requires intelligence, one of the scarcest resources in the United States.
Someone Needs to Tell the Kremlin that the “Ukraine Crisis” Is Over
Someone Needs to Tell the Kremlin that the “Ukraine Crisis” Is Over
Paul Craig Roberts
As I have warned for some time, sooner or later the Kremlin will lose its patience with Washington and its European puppet states. Signs of this are now appearing. The normally very diplomatic Russian Foreign Minister, Lavrov, just compared his discussion with his British counterpart, Liz Truss, with talking to a deaf person. He added: “Russia has been cheated and wronged for many years, many times, when it comes to agreements and obligations from other states.”
At a February 10 press conference, Lavrov said his Ukrainian counterpart was “lying with a straight face” and is a member of the “school of Goebbels, and maybe even surpasses the art of the chief propagandist of the Third Reich.”
The Russian Foreign Ministry said that Russia will not attend this year’s Munich Security Conference because the conference “has been increasingly transformed into a transatlantic forum” and has lost “its inclusiveness and objectivity.” This is a sign that Russia is learning to give up on endless talk.
Russia’s UN ambassador, Gennady Gatilov, said Russia’s “serious concern is that the US and its allies are exacerbating the situation to the point where the game of raising the stakes could turn into a real tragedy.”
Even Putin is losing patience: “Not an inch to the East they told us in the 1990s, and look what happened – they cheated us, vehemently and blatantly.”
Russia’s anger is long overdue. I wouldn’t have been able to keep my patience so long. Nevertheless, I don’t understand why Russia goes on about it. Russia made it clear at the security talks that it means war if Ukraine is made a member of NATO. The West understood the message. When Blinken and Stoltenberg say it is up to them and Ukraine whether Ukraine becomes a NATO member, they are merely saving face by asserting a right they dare not use. No NATO country would invite its own destruction by knowingly provoking Russia to war. The US and NATO lack the capability of confronting Russia in conventional war, as the few droplets of troops and equipment sent to Europe “to deter Russian aggression” testify. Even as insane as Washington is, Washington will not destroy itself and its European empire over Ukraine or Poland or Romania.
The Donbass republics, the flashpoint for military confrontation, have already begged the Kremlin to reabsorb them into Russia, their home country. The Kremlin could erase the flashpoint by reabsorbing the Donbass Russians and reminding the West to “get off our doorstep before you are driven off.” But the Kremlin doesn’t want Donbass any more than it wants Ukraine. The Kremlin came up with the Minsk Agreement, because the Kremlin wants to keep the Donbass Russians in Ukraine for the same reason that the Soviet government put them there–to water down the Ukrainian neo-Nazis and prevent a train wreck. The Kremlin does not want the responsibility for Ukraine, and the Kremlin doesn’t want to give Western propagandists support for their claim that Putin wants to restore the Soviet empire. The only reason Russia would invade Ukraine would be to forestall US missile bases being located there.
I don’t believe there is a crisis. It is an illusion of crisis produced by endless talks that the Russians find frustrating. They should stop talking. Ukraine will never be put in NATO unless Russia collapses militarily. If Donbass is again part of Russia, no one will attack Donbass. The flashpoint for the past seven years will be gone.
The alleged “Ukraine Crisis” has proved that NATO has no capability of defending Ukraine or any Eastern European member, nor in my opinion any Western European member. The Polish and Romanian governments know this as well as anyone. The US missile bases endanger them, not defend them. They will have the bases removed. The bases serve no Polish or Romanian purpose.
It is obvious that Washington, its British puppet, and Stoltenberg are doing their best to provoke Russia into invading Ukraine. The question is why? One reason could be that a show of Russian teeth will frighten the NATO countries back into Washington’s arms, but why does Europe, or some of it, support this? Do European countries prefer to be puppets instead of sovereign states?
Those years in the past when the US had a media instead of a collection of whores, reporters would be asking Biden and Blinken why they are trying to provoke a Russian invasion of Ukraine. But of course, whores don’t ask such questions. They just take the money and perform the necessary act.
I wonder if the Kremlin has an explanation why Russia is being provoked in this way. If Russia decides to attack, I doubt that Shogu would waste Russian military resources on such a non-threat as Ukraine, which is being used by Washington as a pawn. Russia, one assumes, would focus its attention on the real threat. The best way to do that is to ignore Washington and go about Russia’s business.
It is time for Russia to get on with its partnership with China, setting up a new payments system and a new reserve currency and developing the Asian trade relations to which both countries have committed. It is inexplicable why Russia and China got themselves entangled in Washington’s financial tentacles. It is difficult to believe that Putin and XI are as gullible as the average American. It is long past time for both countries to jettison the neoliberal economics that holds both countries back. As Michael Hudson and I have made clear, there is no validity to neoliberal economics. Russia should use its exports of energy to Europe to strengthen the ruble by billing in rubles. Why should Russia strengthen the Euro and dollar by billing in those currencies?
Russia and China should simply exit the Western world. They don’t even need diplomatic contact. The West is dying. Its economies are shot. As Covid mandates and forced vaccinations proved, the Western leadership class is committed to tyranny. Australia even has citizens in concentration camps. The Canadian and American governments have declared peaceful protest to be “domestic terrorism” and are trying to blame the truckers’ protest on Russia. The Western media does nothing but lie for the governments. The culture is rotten and sordid, civil liberty eroded.
Russia and China have emerged from the tyranny associated with Stalin and Mao, while the West has fallen into tyranny. If there is any hope for mankind, it is not in the West, which is demonizing its own founding fathers, demolishing its own historical monuments, black-listing its own classic literature, demonizing its own ethnic populations and permitting immigrant-invaders to dilute national ethnicities by overrunning national borders. Western countries are becoming Towers of Babel, devoid of a nationalist consciousness that patriotism requires. Countries with populations that have nothing in common can only be held together by force. Such countries are weak and are incapable of standing up to unified countries.
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