A Massive 'Tax Grab' Must Now Be Expected
The Financial Repression Authority sees the massive government tax grab
already quietly underway accelerating in 2016 in most of the developed
economies.
This 'grab' will be a desperate political act driven by underfunded, and
in a significant number of cases, unfunded public pension which will unfold
at all three levels of government, Federal, State and City /Local government.
It will be disguised by different focal emphasis and appear to evolve in an
uncoordinated manner - but it will occur!
To spot its telltale fingerprints we should expect the following words to
become much more prevalent in the "public narrative" throughout
2016 and to see EACH of these which we explore in this article to
increasingly and significantly extract money from taxpayer wallets:
- Capital Gains Tax,
- Property Tax
- Global Wealth Tax (PFIC, FATCA, GATCA),
- Civil Forfeiture Fines,
- Means Testing,
- Licensing Fees,
- Usage, Tolls & Emergency Services Fees,
- Inspection Fees,
- Processing Fees,
- Fines (Police and Agency)
- Ticketing,
- School Activity, Equipment & Supply Fees,
- Inheritance Tax,
- Social Security Taxation Rate
The Wealth Effect is believed by the government to have pushed up taxpayer
US Household Net Worth by $30 Trillion or 55% from the Financial Crisis low.
The US government is coming after that money! They see it as a "Honey
Pot" that can't be resisted.
The following is how the Financial Repression Authority expects the
government to undertake this 'grab'. However, never under estimate the
government's abilities to come up with new schemes to finance its insatiable
largesse.
Let's start at the bottom of the political machine by examining what City
and Local governments are doing and planning and work ourselves up to the
head of this gluttonous and uncontrollable monster.
City & Local Taxation - Property Tax, Fees & Fines
City and Local government have massive problems with underfunded Pension
obligations. Costs for road and water services which have not received
adequate financing are also coming due. Administrative, police, fire and
teachers' salaries are all relentlessly climbing along with generous benefits
which have long ago been jettisoned by the private sector.
Unlike the Federal government, city and local government cannot
"print money" but must cover their costs by primarily Property
Taxes or by issuing more debt in the form of muni bonds. The problems have
gotten so bad that cities like Chicago have recently been brought to court
for inappropriately using bond issues to pay operating costs associated with
meeting public pension obligations versus badly needed infrastructure repair.
These desperate actions are symptomatic of the pressures forcing the
following actions:
- PROPERTY TAXES will increase dramatically.
Chicago and New Jersey property taxes have reached the point where
people are being forced to relocate. Pensioners on fixed income are
being forced to take out reverse mortgages to pay property taxes and
keep their homes. Residential property taxes in many areas are routinely
$15-22,000 on what would be considered the standard home in the area.
- FINES are on the rise as Police departments for
example are increasingly expected to achieve income to match expenses
where cities such as New York employ "revenue
generating ticketing' or where Virginia issued 6996 traffic tickets
in one weekend in an
effort to raise revenues for the state government.
Now even a minor violation as
reported by our FRA guest Michael Snyder can put a massive hole in your
wallet. For instance, driving as little as 15 miles an hour over the speed
limit in Virginia can get you a reckless driving charge that can carry a fine
of up to $2500. So why the hefty fines? Well, the law increasing the traffic
fines in Virginia clearly admitted why they are so high. "The purpose of
the civil remedial fees imposed in this section is to generate revenue."
(Virginia Code 46.2-206.1)"
The Investigative Reporting Program at UC Berkeley with California Watch
discovered that impounds at "sobriety" checkpoints in 2009 alone
generated approximately 40 million dollars in towing fees and police fines.
"Red-Light cameras" have become huge revenue raising tools in many
areas of the country. In Los Angeles, revenue from red-light cameras has
doubled from $200,000 a month in 2007 to $400,000 a month at the end of 2009.
Expenses are accelerating due to Federal expectations of preparedness for
the War on Terror and the epidemic levels of horrific Public Shootings. The
police and first responders have an increasing fiduciary responsibility,
however the funding is not coming with it.
The Daily Bell (Local
Government Larceny) & NY Times ('Black
Lives Matter') recently both explored the link between the need for local
municipalities to generate revenue in the face of rising pension fund needs
& budgetary pressures, with the increase in numbers of interactions
creating frictions & "Ferguson Missouri" type outcomes.
"The intense spotlight placed on Ferguson, Missouri in the last
year exposed a small-town government engaged in petty larceny on a grand
scale. Duly elected officials supervised a police force that regularly shook
down visitors and residents to generate municipal revenue. The area's
demographics ensured the victims were mostly poor and black, but similar
official theft occurs in white-majority towns all over the nation .. Local
governments all over the U.S. are not nearly as accountable to voters as they
want us all to believe. They serve as the training ground for politicians who
rise to higher office. That's why higher levels of government are certainly
no better and often much worse. People who run for local offices often start
with noble ideals. Their ideals rarely survive once elected. A little power
creates a little corruption - and usually leads to more."
Martin Armstrong reports the extent to which this is now reaching as
police are going after
teenagers who just want to make some pocket money shoveling snow and it
isn't just an isolated incident. "The police even in Philadelphia are
targeting kids as they are in New Jersey. Many towns demand a license with
paperwork and fees of $50+ to be paid to shovel snow!"
- EMERGENCY SERVICES are on the rise in a major
way. An ambulance call to a private residence can easily be $4-5K. These
costs are often not covered by medical insurance as they are seen as
public services or matters of policy deductibles. The tax payer is
caught between the two and the squabble results in crippling costs to
the unprepared tax payer.
- USAGES FEES in schools are nothing new to already
financially strapped parents, but worse is to come. Fees for
extracurricular activities and equipment has been in place for awhile
now but are rising significantly. Parents are forced to take out loans
when their young student makes the regional, state or national levels of
competition because of the costs the parent are expected to saddle.
There is nothing any longer in the school system that is not being
billed to the parent for and this will only increase. Parents have no
choice.
- INSPECTION FEES are yet another example of how
public services are being billed. From Building inspectors to almost any
form of government compliance officer is now billing some or all of
their activity to the public. These fees seem like "token amounts'
but are becoming areas of new found revenue. Police, and EMS'
"detail' availability for construction activity and special events
are all now routinely billed to the organizations involved and are
becoming major construction expenses. These costs must obviously be
passed on and are nothing more than a "stealth taxes" to the
unsuspecting public.
The list is much more extensive than we are showing here and would take up
too much space to show the forms that "new taxation" techniques are
taking. In New England for example many towns are now offering nominal tax
rebates for seniors and unemployed who volunteer to do community service work
that was previously provided by town workers. Some would suggest this is a
tax savings but in reality it is taxpayers doing work for the town for free
when previously it was part of their local tax (which has only increased even
with the rebate). Is this not in really just another form of taxation?
State Taxation - Usage Fees, Licenses & Ticketing
The taxation problem only gets worse as government budget shortfalls get
worse. Many of the methods used at the City and Local government carry over
to the State level (i.e. Ticketing, Inspection and Fines). The States have
additional methods:
- SALES TAX is the purview of state government and
it has been increasing in most states. Illinois recently moved the Sales
Tax to 6.25% but the real total can be an extraordinary 9.75%. Illinois
is not unique and more states can be expected to soon follow their lead.
- LICENSING is on the rise for almost anything that
involves a government approval. With 88,000 pages of Federal bills in
2015 alone, many of these pages require new license fees to be paid. As
an example of the degree it has reached, a dog being transported across
state lines now requires quarantine and inspection. All of course
billable for those even aware of such a law. Mandatory veterinary
services (i.e vaccinations) government reporting can result in a new
unsuspecting dog owner receiving a fine notification from the state for
not having quarantined or had the dog inspected.
- TOLLS are on the rise to fund badly needed
Infrastructure. At first glance this does not seem unreasonable or
unexpected. Uproar in Rhode Island recently brought to light the
taxation game going on. Monies from the American Recovery and
Reinvestment Act of 2009 were given to the state to build a major
state bridge. The state then placed a toll on the new bridge. The people
fought it in court as "double dipping" and the state was
finally forced to back off. As increasingly US public infrastructure is
moved to private corporations this is nothing more than taxation in a
different fashion as state taxes are not reduced for the gains on the
private sales but rather the tax payers only see tolls or fees arise
from what was formally covered by their state tax.
Federal Taxation - Global Wealth Taxation
- GLOBAL WEALTH TAX is presently having the
mechanics for its implementation being put in place. In their October
2013 Fiscal Monitor Report to kick this off, the IMF painted a dire
picture for advanced economies with high debt that fail to balance their
budgets. The report builds a case for draconian measures including the
direct confiscation of assets. On
page 49 of the IMF's report they state: "The sharp
deterioration of the public finances in many countries has revived
interest in a 'capital levy' -- a one-off tax on private wealth - as an
exceptional measure to restore debt sustainability. The appeal is that
such a tax, if it is implemented before avoidance is possible and there
is a belief that it will never be repeated, does not distort behavior
(and may be seen by some as fair) .. The conditions for success are
strong, but also need to be weighed against the risks of the
alternatives, which include repudiating public debt or inflating it away
(these, in turn, are a particular form of wealth tax -- on bondholders
-- that also falls on nonresidents) .. reducing debt ratios to end-2007
levels would require (for a sample of 15 euro area countries) a tax rate
of about 10 percent on households with positive net wealth."
Forbes in their report "The
International Monetary Fund Lays The Groundwork For Global Wealth
Confiscation" point out some of the IMF taxation guidance:
""IMF economists know there are not enough rich people to fund
today's governments even if 100% of the assets of the 1% were expropriated.
That means that all households with positive net wealth -- everyone with
retirement savings or home equity -- would have their assets plundered under
the IMF's formulation." This is where the bankruptcy of the debt-mired
western world is taking us - "capital controls and exit restrictions so
the proverbial four wolves and a lamb can vote on what's for dinner."
The IMF report says "There is a surprisingly large amount of
experience to draw on, as such levies were widely adopted in Europe after
World War I." The Forbes essay: "And we all know how well that
worked out."
For those who want to know more they need to study PFIC, FATCA and GATCA,
all explained in Financial
Repression Authority videos by those in the know.
- INHERITANCE TAX can be expected to return with a
vengeance. With inequality in America so blatant that both Democrat and
Republican parties are presently talking about it in their primary
campaign rhetoric. The public will likely accept this tax of the
"rich". However the rich will find clever ways around it while
the public will simply surrender its greatly reduced life savings which
they were hoping their children could use to get themselves out of debt.
- MEANS TESTING is already gaining significant
public "narrative" and so we should fully be prepared for
means testing for Medicare and Social Security as the Baby Boomer bulge
fully arrives over the next two years.
- CIVIL FORFEITURE is a major new tax device which
allows the government to take people's property, even if a person has
not been charged with a crime. What does it take for law enforcement to
take property? Nothing more than a "preponderance of evidence"
that the property was connected with criminal activity.
Jared Meyer of Economics21 explains: while most people think about
forfeiture as taking the property of drug dealers or other criminals,
the government has used civil forfeiture to take vast amounts of
property from entirely innocent individuals.
The use of the civil forfeiture power has exploded in recent years:
- In 2001, $407 million was seized under civil forfeiture
laws; in 2012, a whopping $4.3 billion was seized.
- From 2001 to 2012, law enforcement has taken $2.5
billion in cash from 62,000 Americans, all without warrants or
indictments.
Meyer offers examples of forfeiture victims:
- When Roderick Daniels was pulled over for going two
miles over the speed limit in 2007, police seized $8,500 in cash that he
was carrying. Daniels had planned to purchase a car with the money.
- George Reby was pulled over in Tennessee for speeding
and had $22,000 taken from him by a police officer. Again, Reby intended
to purchase a car with the money.
- When small business owner Carole Hinders made multiple
cash deposits of less than $10,000 into her bank account, the government
suspected money laundering and took $33,000 from her.
What happens to the seized property, be it cash, cars, jewelry or
something else entirely? When the federal government does the seizing, Meyer
writes that the funds go to the Department of Justice (DOJ). The DOJ has an
Asset Forfeiture Fund, which then distributes the proceeds for various law
enforcement needs.
In the past few years, Washington DC police officers have made more than
12000 civil asset seizures under city & federal laws. In a "Stop and
Seize" investigative series by the Washington Post in November 2014 they
cover the fact in their sixth installment that "D.C.
police plan for future seizure proceeds years in advance in city budget
documents ... D.C. police have made plans for millions of dollars in
anticipated proceeds from future civil seizures of cash and property, even
though federal guidelines say 'agencies may not commit' to such spending in
advance".
Martin Armstrong cites: "Worse yet, cities need money desperately.
They are now including civil asset forfeitures as part of their budget. In
other words, police are under orders to confiscate your money for any excuse
possible. This was the end phase of the Roman Empire. The army began sacking
Roman cities on the pretense they stood against whoever the proclaimed to be
emperor. Rome weakened itself and cannibalized its own civilization. This is
what government is doing now in the USA." He
strongly warns: "never pick up a hick-hiker in trouble for if they
have any drugs, even marijuana, there goes YOUR assets!"
The law lets the I.R.S.seize accounts on suspicion, no crime required! A
NY Times article frighteningly highlights the growing phenomenon in the
U.S. of civil asset forfeitures .. "Using a law designed to catch drug
traffickers, racketeers and terrorists by tracking their cash, the government
has gone after run-of-the-mill business owners and wage earners without so much
as an allegation that they have committed serious crimes. The government can
take the money without ever filing a criminal complaint, and the owners are
left to prove they are innocent. Many give up."
This is happening across America but especially in Texas, Tennessee,
Michigan where it
was reported that "a town of 150 people called Estelline Texas earns
more than 89% of its gross revenues from traffic fines and forfeitures.
- CAPITAL GAINS TAX has become a strong political
talking point after 6 years of unprecedented financial market
performance. Political strategists know this must occur before we have
the next market draw down. Taxes are 100% payable on Capital gains when
they are earned but there is only a $3000 per year cap on write-offs on
losses. Effectively the governments only wins and you can only lose on
market investments.
- SOCIAL SECURITY TAXATION is something the Baby
Boomer generation will soon learn about. They are under the impression
they will pay minimal tax on their Social Security. What they don't know
is that over $33,000 in taxable income makes your Social Security
payments eligible for a 50% tax. Over $44,000 and your Social Security
tax payments become 85%. This has been quietly slipped into the tax code
and no doubt will increase going forward. With Social Security indexed
by a fictitious CPI, more and more Baby Boomers are required to work.
This "extra money will only push them into this increasingly
predatory tax position. To have a livable income baby boomers who are be
pressured to stay working in greater numbers, may be forced to pay
nearly all their Social Security to tax to survive.
To put all the above in perspective regarding the degree of taxation we
should fully expect, my friend and Macro Analytics Co-Host Charles Hugh Smith
wrote this "template
letter". It somewhat cynically outlines what we should soon expect
from the government to help fulfill its escalating pension & healthcare
promises to current & to retired government employees:
Dear Resident:
As you may have read, the costs of fulfilling our pension and
healthcare promises to our retired and current employees have soared. As a
result, pensions, healthcare and the annual interest due on city bonds (money
we borrowed in the past) now consume all tax revenues.
Without additional funding, we will have to lay off all current
employees and close City Hall, the libraries, the fire and police
departments, parks and recreation, and the rest of the city departments.
To avoid this, we are asking you to approve increases in fees for use
and the sale of new bonds to raise desperately needed funding.
The proposed fees for use:
- A 50% annual increase in city garbage collection fees
for the next decade, after which we anticipate an annual increase of 45%
until 2096.
2. Building permits for any project under $5,000 will cost a minimum of
$5,000. Fees for larger projects will start at $10,000 and rise on a
sliding scale based on the value of the project.
3. Homeowners and contractors caught attempting to evade the building
permit process will be fined a minimum of $5,000 or 200% of the
estimated cost of their project, whichever is higher.
4. All street parking in the city will require an annual parking permit
of $1,200 per vehicle per year.
5. Day use of all city parks will now cost $10 per family per day.
Reserving BBQ grills and tables will cost $100.
6. Internet and wifi service in the city will be taxed $1,000 annually
per household.
7. Residents will be taxed $100 each annually, payable on the first of
January, for consuming the city's air.
8. Parking violations will be increased from $35 per violation to $500
per violation.
9. Asking city staff for information about city regulations will cost
$10, payable before the question is asked.
10. All residents will pay a sidewalk usage fee of $100 annually.
11. A hotel tax of 100% of the cost the room will be imposed from
January 1, 2016, including private AirBnB rentals of rooms and
apartments.
12. Every home-based business must obtain a city business license
annually for a sliding-scale fee that starts at $1,000. Anyone caught
evading this tax will be jailed as a financial terrorist bent on
depriving city employees of their livelihoods.
Residents who cannot afford the new fees can deed their homes to the
city, and pay rent to live in the home they once owned.
Unfortunately, the new fees for use will only pay a fraction of the
salaries of our employees and managers, and so we also need your approval of
new bonds:
BOND A: $30 million to keep the libraries open for two years.
BOND B: $30 million to keep City Hall open for two years.
BOND C: $30 million to fill the gargantuan potholes in city streets for two
years.
BOND D: $30 million to keep the city parks open for two years.
BOND E: $30 million to keep the city Public Affairs department funded for two
years, so they can continue explaining why the city is broke and why it's
such a great place to live.
BOND F: $30 million to hire retired employees pulling down $8,000 a month in
pensions and benefits for $100,000 per year salaries as
"consultants."
BOND G: $30 million to fund a public-relations campaign for two years
extolling the city's "green initiatives" and selling the city's
potential to global corporations.
BOND H: $30 million to fund tax breaks for global corporations that open an
office in the city.
BOND I: $30 million to fund studies on how to raise more revenues from fees
for use.
BOND J: $30 million to fund more appeals like this for increased fees for use
and the issuance of more bonds to fund everyday city functions.
BOND K: $30 million to purchase a surplus M1 Abrams tank for crowd control
and to root out financial terrorists depriving the city of the revenue it
deserves.
With your support, the city managers expect revenues to cover expenses by
2096, assuming the city's functions have been fully automated and there are
only 12 employees left managing the servers. Until then, please support our
efforts to grow the city out of its budgetary hole.
Don't say you weren't warned!
