Mitchell’s laws: To survive, a monetarily non-sovereign government must have a positive balance of payments. Economic austerity causes civil disorder. Reduced money growth cannot increase economic growth. Those, who do not understand the differences between Monetary Sovereignty and monetary non-sovereignty, do not understand economics.

Background: The politicians, the media and the old-line economists worry about how our Monetarily Sovereign federal government will pay its bills, despite the absolute fact the government can pay any bills of any size, any time.

Perhaps those same politicians, media and economists, rather than thinking of ways to support a government that needs no support, should worry about how the middle- and lower-classes will pay their bills. I don’t know whether to laugh or to cry when I hear our leaders insist that federal taxes must equal federal spending (i.e. a “balanced budget”), while doing nothing to make sure the people of America have balanced budgets.

Caring more for the financial health of our financially omnipotent government than for our financially suffering poor- and middle-classes, demonstrates uncommon ignorance. Even more remarkable is the acquiescence of the lower classes to this outrageous, Tea/Republicanism.

If Bill Gates and Warren Buffet refused to give a dime to charity, because they wished to run their own “balanced budget,” the world would be outraged at such meanness. Yet, even Gates and Buffet are not Monetarily Sovereign. So what should we say about our government, which unnecessarily wishes to balance its budget on the backs of the citizens?

In several posts I have explained that lifting the poor does not involve bringing down the rich. Very simply, lifting the poor requires lifting the poor.

On July 11, 2010 I posted
“A partial solution for the gap between rich and poor: Education.” The post suggested that fully paid-for education, not just K-12, but all the way through college and beyond, would be one step toward lifting the poorer classes. I also suggested that the government actually pay people a wage for attending college.

I also have suggested that eliminating FICA, the single most costly tax on working people, would help lift the lower classes. Now, in typical Obama style, we almost, but not quite, will eliminate FICA. We temporarily will eliminate half of it. That is the symptom of this administration: Always too little and too late

There is another tax, or rather a group of taxes, that powerfully affect the lower classes: Local taxes. Cities charge them. Counties charge them. States charge them. Even the federal government charges them. What if all local taxes were eliminated?

Though the federal government neither needs nor uses tax income, the states, counties and cities, being monetarily non-soveriegn, do. So how will these local governments be supported?

Here’s a “What if?” for you to think about: What if the federal government offered to support every state, county and city on a per-capita basis, if these governments voluntarily would forego collection of all local sales and income taxes?

Consider Chicagoans. They pay taxes to Chicago, to Cook County and to Illinois. Here are the taxes residents pay just to the state of Illinois:

Aircraft Use Tax, Automobile Renting Occupation & Use Taxes, Bingo Tax & License Fees, Business Income Tax, Charitable Games Tax & License Fees, Chicago Home Rule Municipal Soft Drink Retailers’ Occupation Tax, Cigarette & Cigarette Use Taxes, Coin-Operated Amusement Device Tax, County Motor Fuel Tax, Dry Cleaning License Tax & Fee, Electricity Distribution & Invested Capital Taxes, Electricity Excise Tax, Energy Assistance & Renewable Energy Charges, Environmental Impact Fee & Underground Storage, Gas Tax, Gas Use Tax, Hotel Operators’ Occupation Taxes, Individual Income Tax, Liquor Gallonage Tax, Manufacturer’s Purchase Credit (MPC), Metropolitan Pier and Exposition Authority (MPEA) Food & Beverage Tax, Motor Fuel Taxes, Oil & Gas Production Assessment, Personal Property Replacement Tax, Property Tax Information, Pull Tabs & Jar Games Tax & License Fees, Qualified Solid Waste Energy Facility Payments, Real Estate Transfer Tax, Sales & Use Taxes, Sales of Aircraft & Watercraft by Lessors, Tax Increment Financing (TIF), Telecommunications Tax, Telecommunications Infrastructure Maintenance Fees, Tire User Fee, Tobacco Products Tax, Use Tax for Individual Taxpayers, Vehicle Use Tax, Watercraft Use Tax, Withholding (Payroll) Tax

Not only are these taxes costly for residents (The payroll tax alone is 5%.), but they are costly to collect. What if the federal government said to Illinois, if you will forego your $25 billion in total annual taxes, we will give you $2,000 per person. Since Illinois has about 13 million people, that would come to $26 billion. If you consider deducting for collection costs, the state would come out millions ahead. What would the citizens say and what would the politicians say?

Then there is Cook County. It will collect $2 billion in taxes next year. With a population of 5 million, making the same deal with the federal government would require $400 per person.

Finally, Chicago: It collects about $3 billion a year in taxes. With a population of about 2.7 million, federal support would amount to about 1,100 per person.

So, replacing all Chicago, Cook County and Illinois taxes would amount to $3,500 per person. If every city, county and state in America opted to forego taxes, the federal government would supply a total of about $1 trillion dollars.

In 2010, the federal government spent about $3.5 trillion, so would an additional $1 trillion (29%) to eliminate all city, county and local taxes in America be “affordable”? Would it cause the inflation, the “inflationistas” always worry about? For perspective, 2009 federal spending increased 29%, and 2010 spending increased another 20% on top of that. Are they affordable? Do we have inflation? Have any federal checks bounced?

Admittedly, there would be many issues to consider, not the least of which is the probability that local politicians like taxes. They are a source of power. But what would you, as a taxpayer, think about the elimination of all local taxation and the associated budget (collection) savings? Something to think about.

The U.S. government is Monetarily Sovereign. It’s about time we make use of that asset.

Rodger Malcolm Mitchell

No nation can tax itself into prosperity, nor grow without money growth. Monetary Sovereignty: Cutting federal deficits to grow the economy is like applying leeches to cure anemia. The key equation in economics: Federal Deficits – Net Imports = Net Private Savings