The Scripps Voice

By Laurel Schwartz ’15
Politics Columnist

Just weeks after delivering an inaugural address focusing on civil rights in America, President Obama shifts gears in his State Of The Union address, making a thriving middle class one of his top priorities.

Obama acknowledges recent progress, saying, “The state of our union is stronger.” However, he admits that there is still a lot of work to be done, as wages and incomes have barely moved in over a decade.

The president calls a thriving middle class “America’s unfinished task.” Here is how he hopes to complete the task:

1. Bi-Partisanship: The president calls for an effort to resort the middle class that involves bi-partisan efforts, saying: “They [the American people] expect us to put the nation’s interest before party.” Obama acknowledges that this will involve compromise and that the nation can only move forward if we do so together.

2. Stop Budget Cuts: The popular opinion in Washington is that the currently proposed budget cuts to education, defense, Medicaid and much more would be detrimental to the growth of the nation. The president argues that in order to continue such programs, “those who care deeply about them must be willing to face modest reforms.” Modest reforms to programs across the board will reduce the need for such drastic cuts

-Medicaid: Obama proposes reforms to the program that he argues will enact the same amount of healthcare savings as the reforms proposed by the bipartisan Simpson-Bowles commission. Reforms, which include the continued implementation of the Affordable Healthcare Act, would slow the growth of healthcare costs. The President promises that the underlying goal of Medicaid will always be based on the quality of care that seniors receive, rather than the number of tests ordered or days spent in the hospital.

-Taxes: Getting rid of special interest tax breaks for the wealthy will provide more funds for federal services like education. The president asserts that loopholes in the tax system need to be closed in order for federally funded programs to grow. Obama calls “for bi-partisan comprehensive tax reform that encourages job creation and helps bring down the deficit.”

3. Share the burden: Too many cuts to programs that help the middle class will prevent economic growth; instead, Americans must be willing to share the burden. Obama explains, “We can’t ask senior citizens and working families to shoulder the entire burden of deficit reduction, while asking nothing more from the wealthiest and the most powerful.”

Obama’s propositions should come as no surprise to many Americans. His proposals regarding the economy have been heard for months leading up to his re-election. However, this address includes an added emphasis on the fact that the effort to restore the economy must be a bi-partisan initiative. With many Republicans speaking out against the president’s proposed reforms, bipartisanship in terms of restoring the economy may be easier said than done.

By Kara Odum ’15
Economics Columnist

On Jan. 1, Congress narrowly avoided the fiscal cliff by preventing the Budget Control Act of 2011 from going into action.

If Congress had taken no action, multiple tax increases would have gone into effect, including an end to temporary payroll tax cuts, the start of Obamacare taxes, and the repeal of certain tax breaks for business. Also scheduled were spending cuts for over 1000 government programs including defense and Medicare budgets. By increasing taxes and decreasing spending, these changes would have created a sharp decline in the budget deficit, so much so that the deficit was projected to be reduced by roughly half in 2013. The government deficit, the amount by which the government spending exceeds its revenue, is often confused with the government debt, the aggregate sum of what the U.S. government owes to debt holders.

Photo courtesy of Peanuts

While the U.S. has been working to reduce the budget deficit, the changes would have had an adverse effect on the recovering economy. Many economists predicted that the U.S. would have experienced a mild recession along with a higher unemployment rate if nothing had been done.

Congress averted the fiscal cliff by passing the American Taxpayer Relief Act, which Obama signed on Jan. 2. The act eliminated most of the tax increases and spending cuts. However, some tax exemptions were allowed to expire, which resulted in a projected $157 billion decline in the 2013 deficit.

Spending cuts were temporarily averted, but budget sequestration has been delayed for two months. Budget sequestration occurs when Congress’ spending exceeds the annual Budget Resolution, which triggers automatic reductions across the board so that the budget will balance. An equal percentage is supposed to be held back by the Treasury from all departments and programs but Congress has exempted Social Security, Medicaid, federal pay, and veterans’ benefits from these cuts. In order to do this, Congress must cut more from non-exempt programs.

In March, Congress will be faced again with budget sequestration, which was originally a part of the deal in July 2011 to raise the debt ceiling.

At the end of 2012 the U.S. had once again hit its current authorized borrowing limit at $16.4 trillion. Through a series of “extraordinary measures,” Treasury Secretary Timothy F. Geithner has been able to avoid going above the debt ceiling temporarily. However, in early March, Congress will have to raise the debt ceiling again so the Treasury Department can continue to pay for what Congress has already approved. If the debt ceiling is not raised then Congress will not have enough revenue to cover its obligations.

While the U.S. would probably avoid defaulting, it would still have a negative effect on the economy because faith in the U.S. economy would be shaken, sending interest rates up. This would create a vicious cycle, since the U.S. would have to borrow to cover current obligations but at a higher interest rate, so overall the debt would still rise.

As of now, Congress is not considering the drastic measures necessary to end this cycle of borrowing more money, raising the debt ceiling. Until then, the U.S. will have to deal with “fiscal cliffs” every few months.

By Pat Palmer
Guest Writer

It’s Income Tax season; recalling the annual mass-migration of lemmings into the sea, to drown themselves. (There’s no law preventing us from giving up our rights.) At this time, symbolic protests are being waged against corporations who “don’t pay their fair share.” That’s fine, and I’m sure they are listening. But what about addressing OUR “fair share?”

Let’s consider a positive remedy that is effective and directly benefits us by getting us a raise in pay. No, your business isn’t going to give you more, but you can take more home: stop volunteering to donate up to half of your pay to the Internal Revenue Service (IRS). This action is not “civil disobedience,” but actually following the law. It could be regarded as disobedience to public policy, to the extent that the policy deviates from law.

Why would I refer to “income” tax as a donation? Because, in order for the con to work, we must legally choose to give. Yes, it seems like we MUST pay, but this notion is incorrect for most of us. That’s because it is an excise tax, which is a tax laid on a voluntary activity, like sales tax (you don’t have to choose to buy stuff). You might be saying, “Why wasn’t I taught that in civics class (or law school)?” A famous jurist once said: “There are two kinds of taxpayer: the ignorant one who pays the most, and the informed one who pays the least.” Public schools are naturally vested in the former condition. Why not get informed?

Just what is being taxed? Not earnings; money is not an activity. According to the Internal Revenue Code: “the exercise of Federal privilege” is being taxed. This activity is also called “engaged in a trade or business” (a custom-defined legal term, meaning: working for the Federal government). The extent of this activity is measured by “gross income” or “wages” (custom-defined legal terms, meaning: revenue derived from the exercise of Federal privilege). What Federal privilege are you exercising today? Earning a living? Inhabiting the USA? These are inalienable rights; so it follows, that most of us don’t fall into that privileged category of activity.

Note to “tax protesters:” the “income” tax law is indeed constitutional, as written. What is unconstitutional is the way the IRS collects money. This excise tax is  fraudulently enforced as a mandatory capitation, a direct tax on earnings —and extorted by threat of asset forfeiture and imprisonment. Looks like criminal behavior to me! Racketeering is defined as “organized conspiracy to defraud or extort.” This accurately describes the “income” tax scheme which relieves its victims of up to half of their earnings every payday.

After 60 years of trial-and-error legal challenges to the “new” personal withholding tax (started in WWII, as the voluntary and temporary “Victory Tax”), resulting in losses and jail time for well-meaning but legally ignorant tax-justice advocates, the Internal Revenue Code was finally cracked in 2002. The only safe and lawful way to un-volunteer from this racket was uncovered by legal scholar Peter Eric Hendrickson.

You can prove it to yourself by studying his website at www.losthorizons.com and reading his book: “Cracking the Code: The Fascinating Truth About Taxation in America” (12th edition). His discovery is the result of reading the entire 3.5-million-word, deliberately obfuscated, tax statutes, the applicable Code of Federal Regulations and the many legal precedents applied to the “income” tax, as far back as 1862.

After satisfying yourself with Hendrickson’s book, you might feel more comfortable acting on your own behalf. So here is an abbreviated description of the procedure: to start with, demand that your payer (“employer” is a custom-defined legal term, meaning: Federal government) stop all “voluntary” withholding from your paycheck. Enjoy an instant pay raise of 30 percent or more.

At year’s end you file your 1040 and 540 affidavits of self-assessment (as to the nature of your compensation) as non-privileged (non-taxable), if applicable. Now, the most important step: you MUST rebut your payer’s false allegations of “wages” paid, with his/her testimony recorded on the W-2 and/or 1099 form. You do this by substituting that 1099 with a “corrected 1099 information return” and/or replacing the payer’s W-2 with a substitute W-2: IR form 4852 for U.S. and FTB form 3525 for California.

Lastly, if your payer had unlawfully refused to stop withholding, then you can claim a full refund of ALL of your weekly tax deposits—right on the U.S. and California tax returns. Enjoy the bigger check! You are now helping to stimulate the economy, like thousands of folks before you (if the IRS complains, then you will need Hendrickson’s book to adequately respond to them and put them in their place).

Why WOULDN’T a payer stop withholding? From a balance-sheet perspective, thousands of dollars per year, per worker could be saved from “employer’s contributions.” Only fear of the racketeers’ “offer you can’t refuse” would deter them, unless they could find an honest lawyer who would choose to apply the law.

I can hear the liberals moan about how their social programs (and, for the conservatives, their military adventures) would lose funding if we fail to volunteer for this “system of voluntary compliance” (IRS’s own self-description). Poppycock! Have you ever looked at the reverse of your tax payment check? It was cashed by a private bank called Federal Reserve, not the U.S. Treasury. Your donations never see a government program—those are paid for by loans, fees and excise duties. All income tax receipts pay the interest on the so-called “national debt.”

Now, getting back to “paying their fair share.” The 16th Amendment to the U.S. Constitution, in 1913, closed all “income” tax loopholes then used by business entities world-wide; it has since been corrupted by ersatz regulations to appear to include non-liable workers and exclude liable businesses which is the reverse of its intention. The definition of “federal privilege” needs to be updated, its scope broadened to keep up with the times, in order to make sure that all who use it will pay for it. The lobbying effort to achieve this amounts to the demand that public policy follow the law as written and adhere to the spirit of that law. Neglect of this duty is an impeachable offence for all legislators and actionable against bureaucrats.

Once purified, this excise tax on federally privileged activities will finally be properly paid by all federal employees, contractors and beneficiaries of federally-created monopoly advantage (such as medical doctors, lawyers, drug companies, pro sports team owners, etc.). Also, include corporations that possess federal concessions such as oil, mining, utilities, broadcasting, banks, etc. And do not forget international business: U.S. corporations that rely on federal political pressure, military and intelligence activities to acquire and protect their foreign assets. These infamous non-payers are definitely “federally privileged.”

As Moses said, “Let my people go!” Release the non-liable nontaxpayers and make the legally liable taxpayers pay their fair share. This allusion to slavery is not far-fetched: W-2 workers are essentially government slaves because the IRS considers our labor to have no monetary value. We work for free! We cannot deduct, as an expense, the value of our hours of work. Our gross pay is determined to be 100 percent net profit, as if our expenditure of time and effort is worthless, nonexistent.

Returning to a lawful tax system brings immediate fiscal relief to the private worker while the fat-cats who get government-granted corporate welfare will be properly charged for their advantages. Let us (private earners) seize our rights by grassroots action. Because rights are not going to be given from on-high.  Vote with your wallet and your public servants will cease to be your masters.