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The federal government does not spend money


When you buy a coke, you pull a dollar from your limited supply, put it in the machine and as far as you are concerned, it is gone forever. If you want more dollars you have to go get some more. In reality, your ownership of the dollar and trading it away is only a small part of that dollar’s travels. The entity that sold you the coke now has the dollar and will spend it again. If it were not for taxes that dollar would circulate forever.

A government dollar is different. If the US government buys a coke, it immediately gets a portion of the money back through taxes. The fellow that sells you the coke pays income tax, social security tax, sales tax, employment tax, property tax, business tax, etc. out of that dollar. After the taxes are taken out there is only 30 to 60 cents left for the coke seller. When he buys something with what is left, the next fellow gets to pay another round of taxes. By the time the dollar passes through 2 or 4 hands, over 90% of the government dollar has been sent back to its source, the government.

So what the federal government is doing is NOT spending, it is circulating; giving out with one hand and taking it back with the other. The effect is that the people that handled the dollar generated and shared some wealth, stimulating the economy.

Circulated money is not taxpayer money it is government money

Government spending and taxing do not have a hard connection. Did your taxes go down when there was a budget surplus under Clinton? Do your taxes go up when the deficit goes up? Does the government lose its ability to spend when there isn’t enough taxpayer money coming in? The answer to all three questions is “No.”

“The government pays its bills through taxes, debt, and inflation of the currency.” ( ) As long as there is a demand for money (that is not everyone is “rich”) and inflation is low, the government can incur more debt and pay the debt by creating more money.

Increased economic activity also increases tax income because when money changes hands faster (the ‘velocity of money’ increases), taxes are collected faster . This is why, to a point, lowering tax rates increases tax income because if people have more money they usually spend more money.

As long as the economy continues to grow, this is sustainable. When the world finally reaches a point of stable or declining population growth, or reduced expectations for standards of living, things will change dramatically.


The government placed itself squarely in the economic system (taxing and spending) for the purpose of controlling people. Our government taxes partially to pay for debt but primarily it taxes to control the society. It does this for two reasons. One is that some of our leaders want to be sure that no one gets too rich for too long. Rather than let market forces control the economy, they use taxes to level incomes and spending to redistribute the money. You can thank Karl Marx for expressing this as graduated income tax and it may not be completely bad.

Another reason for taxing and spending is Social Engineering: “Government influence of behavior through incentives and disincentives built into economic policy and tax policy.” The government taxes what it wants to discourage and gives money to what it wants to encourage. So if you look at what is taxed, business, employment, property, sales, alcohol, tobacco, etc. and look at what is subsidized, unemployment, government make-work, social programs that create life-long dependence, disability, out of wedlock children, etc., you have to wonder why would our representatives want to discourage and encourage these things.

Since the government doesn’t spend money but circulates it, the tax rate determines how fast the money gets back to the government. Tax rates control how many times a dollar must be exchanged before it is returned to the source. There is the eternal push and pull over this between the Socialists (Democrats) and Individualists (used to be Republicans). The Socialists want to increase taxes thereby giving government more power to spend and control the people. The Individualists want to reduce taxes thereby leaving the money in the hands of the people longer and giving less control to government people.

The federal government holds the state governments hostage by taxing their citizens and businesses, then giving it back to the states only if the state governments comply with the federal’s wishes. A recent example is Louisiana, which was forced tighten its drinking laws (back door prohibition) or lose sorely needed highway money.

For those who say that the government does not have the legal authority to collect income tax, you may be right (sort of). It seems to be true that the government cannot show the chapter and verse that gives its authority to tax BUT if you fail to pay and try to challenge it in court, you will be tried in an Article I Tribunal (Tax Court) NOT an Article III Tribunal (Constitutional Court). So any attempt to defend yourself by using The Constitution or Law will fail, you will lose your property and go to jail.

Article III tribunals are the Supreme Court of the United States and the 13 United States courts of appeals and 94 United States district courts that make up the judicial branch of the government defined by Article III of the Constitution. These courts have the power to hear cases involving the Constitution or federal law and certain cases involving disputes between citizens of different states or countries. Only Article III courts may judge cases involving life, liberty, and private property rights, with limited exceptions.

The United States Tax Court is an Article I tribunal.

Article I tribunals are certain federal courts having differing levels of independence from the executive and legislative branches. They can be Legislative Courts that review agency decisions, Ancillary Courts with judges appointed by Article III appeals court judges, or administrative agencies. Article I judges are not subject to the Article III protections. The United States Supreme Court has determined that Article I tribunals may exist, but that their power must be circumscribed and when deprivation of life, liberty, property is involved, their decisions are subject to ultimate review in an Article III court.

Constitutional protections don’t apply when it comes to taxes. You are assumed to be guilty until proved innocent. You are required to testify against yourself. People who contest the imposition of a tax may also bring an action in United States District Court or the Court of Federal Claims but ONLY after the tax has been paid first.

The Tax Court is the only place where taxpayers may bring a challenge without having first paid the disputed tax in full. So, if you haven’t paid your taxes, you can’t get your trial moved out of the Tax Court to the Article III court. Guess whom the Tax Court is going to side with.

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Copyright 2010 by NotesOnMoney
Updated 01/26/10
This information may be distributed for free with out changes.

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Added: Jan-27-2010 
By: boomersooner
Tags: Money, Wealth, Federal Reserve, Goverment, boomersooner
Views: 8043 | Comments: 11 | Votes: 1 | Favorites: 1 | Shared: 1 | Updates: 0 | Times used in channels: 1
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