Law & Justice

This essay was provoked by a friend "Dan" trying to convince me that the income tax collected by the IRS is stealing. His illogic was serpentine, tied only to the uninformed rants of tax protesters who are mostly flat wrong, but buried in all this froth is a valid concern very badly presented. It is a question of justice in the Biblical sense.

The purpose of this essay is to explore the difference between law and justice, and to suggest appropriate remediation for the violation of each kind of wrong.

God's purpose in supporting human legal institutions [Romans 13] is to promote justice. God cares a lot about justice, and much of the Old Testament "minor prophets" is about justice. Not only there, but Jesus taught the same principles. He didn't call it justice, however, so it's less obvious. I wrote a separate essay on justice, showing why it's important and why we care about it, and why it requires a Hell. Today I'm looking at the linkage between law and justice.

Briefly put, Dan's argument against the income tax is that the IRS is not a government agency, but only a collection agent for the Federal Reserve, which is a private (not government) corporation, and the Fed's "fractional" money system constitutes unequal weights and measures (forbidden by God), so therefore the IRS is stealing. Each of these points is faulty in its own right, so the whole argument is completely false in every step of the way. But it does have the worthy appearance of justice and law. However it confuses the two, thus falling down into a hopeless muddle.

The one worthy concern for justice concerns equal weights and measures, which God strongly endorses [Deut.25:13-16 and many other places]. Whether the fractional reserve money system actually constitutes unequal weights and measures is a matter beyond the scope of this essay, but I touch on it briefly below. I suspect Dan's extremism is misplaced, another sky-is-falling alarm borrowed from the tinfoil hat crowd. But if and to the extent it is true, it is a matter of justice, and the good people of this country -- like the Old Testament prophets -- should cry out against it. And those in a position to do something about it (Congress) should fix it.

Every other step in Dan's argument against income taxes is completely without merit, nothing more than the pitiful writhings of selfish people who obviously love money and prefer not to pay taxes. It's sometimes hard to tell if Dan suffers from the same sin, or if he is merely deluded by the slick words and videos of the deceitful, but I want to examine his conclusion on its own merits.

Is it possible for the collection of taxes to be in any sense "stealing", that is, the unlawful taking of property by force? There are several ways to look at this question.

Thou Shalt Not

As a Christian, I always start with God's Law, in this case, one of the Ten: "Thou shalt not steal." There is no definition here, we all know what stealing is. But other texts help us recognize that the Commandment here refers to what we moderns also call stealing. Jesus invited his audience to "lay up treasure in Heaven, where thieves do not break through and steal." Stealing is what thieves do. Two thieves were crucified next to Jesus, one on the right, the other on the left.

Tax collectors, on the other hand, were not crucified. Many of them were also thieves, but only insofar as they took more than the law prescribed. The collection of tax was defined by law, and Jesus endorsed it. The Apostle Paul even went so far as to describe government agents (including tax collectors) as "God's servants."

The atheists and scoundrels want to find contradictions in the Bible; I do not. There is no contradiction between "Thou shalt not steal" and "pay your taxes." In God's perspective, collecting taxes as specified by law is not stealing. Saying otherwise violates a different one of the Ten Commandments: "Thou shalt not bear false witness."

Internal Revenue Code

Now we come to whether the collection of income taxes is indeed specified by law. There is no question, Title 26 of the U.S.Code, voted into law by Congress, signed by the President, and affirmed numerous times by the Supreme Court, is devoted to the specifics of income tax collection. It is the law of the land. A few years ago, in the same tussle with this same friend over a somewhat difference aspect of the issue -- usually proof that it's not about the stated arguments at all, which are only random roadblocks thrown up to divert attention from the real agenda -- I dealt with the legality of the income tax. The law has not changed in three years, it's still the law of the land. When I first wrote this essay, it seemed my friend's resistance to God's command also has not changed. sigh

Therefore we conclude that the collection of income tax from USA citizens is indeed lawful, and therefore also commanded by God. It is not stealing.

Continuing to throw up irrelevant roadblocks, the protesters then try to tell us that the Internal Revenue Service has no authority to collect income taxes. This is clever enough, but unfounded. The Internal Revenue Code, U.S.Code Title 26 Section 7803 clearly defines the Commissioner of Internal Revenue as a person appointed by the President "with the advice and consent of the Senate," who is authorized to "administer, manage, conduct, direct, and supervise the execution and application of the internal revenue laws" specified elsewhere in Title 26, obviously including the administration of any agency he may choose to hire for that task -- in this case the IRS.

Whether the IRS is defined in law, or merely by means of regulations authorized in law, is beside the point. They are empowered to collect the taxes prescribed by law. Like the Jewish tax collectors in Jesus time (and among his own disciples), they do not need to be specific government (in the 1st Century, Roman) agents to do the lawful job. It is not stealing.


But is it just?

Although his full argument points in that direction, Dan did not ask that question of the income tax. That's because the injustice issue is different from the legality issue. Even if the tax laws are unjust, they are still the law. In order to maintain his anger at paying his miniscule taxes, Dan must find actual criminal fault in the tax collectors. He does not. It is not stealing.

But is it just?

On the face of it, the progressive tax system we enjoy here in the USA is the most just of all taxation systems in the world. It puts the burden of the tax on those most able to pay it.

A sales tax -- widely used in Europe and most often recommended by the tax protesters -- is regressive, putting the greatest tax burden on the poor. It is patently unjust. Many states with a state sales tax try to mitigate some of the injustice by refraining from taxing the necessities of life like food. My home state of California and Dan's state of Texas are both among these somewhat enlightened places; Missouri (where I am writing this) is not. European countries seek to mitigate the patent injustice of a regressive sales (they call it "value added") tax by a byzantine system of credits and exemptions.

An excise tax is like a sales tax, except it is typically levied on "luxury" items. It is thus rather more progressive and just than a sales tax on all goods and services. Unlike sales tax, which is a percentage of the selling price, excise taxes are typically a fixed amount per unit of product. Sales taxes encourage vendors to take pity on the poor by lowering their prices, which also lowers the tax paid. Excise taxes offer no benefit to the poor on any taxable items.

A real property tax is more progressive than sales tax, because the people with property are more likely to be rich and thus able to pay it. But it is not as enlightened as a progressive income tax, because it diminishes people with property (a house, for example) but little or no income. The income tax takes only from active income; it never taxes people who own their home but have fallen on hard times in terms of employment. Thus the income tax never diminishes any person's wealth, but only reduces somewhat the accumulation of wealth.

So with respect to the kinds of justice that God cares about, a progressive income tax is the best. The rich people who love money hate income tax most, because they pay the most. This gives them incentive to post their bogus articles condemning the income tax for whatever frivolous arguments they are able to muster. And they do. And gullible people like Dan (himself no pauper) are easily swayed.

Federal Reserve

One of those bogus arguments is the supposed link to the Federal Reserve. Maybe there is such a link, but I was unable to find any evidence of it in law, only in the rantings of the tax protesters. Let us suppose for the sake of argument that such a link exists. Let us further suppose for the moment that the Fed is evil. Can this confer culpability on the income tax?

Not at all. Collecting tax is a good and proper function of government, and is affirmed by God, without respect to how it is collected nor the purpose to which the taxes are put. God is perfectly able to use evil men and their evil governments to accomplish His good purposes, as explained by the prophet Habakkuk. The Chaldeans are God's servant, just like the tax collector. If they are evil, then they too will be punished. But we citizens must "live by faith" and accept the government God brings down on us without complaining. Even if the Fed is evil, and even if there is a connection to the IRS, the tax collector still has God's approval. It is not stealing.

Unequal Weights

Let me look briefly at the charge brought against the Federal Reserve bank. I am not an economist, so my opinion is probably not much more valid than the foolish rants of the protesters -- except it is my own, not copied from another protester, not motivated by greed and the love of money.

God's command against "unequal weights" is specifically against merchants who increase their profits by using different measures for buying and selling. I don't think God opposes a reasonable profit earned by buying at wholesale and selling at (higher) retail, the fault is for lying about the nature of the transaction. The customer who sees one merchant buying for $5 and selling for $10, and another merchant buying for $6 and selling for $8 might be inclined to patronize the less greedy vendor -- unless he knew that the latter fellow is using extra heavy weights to buy his product (which really costs him the same per pound as the other guy), and extra light weights to sell it (so the customer actually gets far less per pound for their $8 from him than they would get for $10 from the other store). This is what God hates.

Is the Fed doing this? Not at all.

The Federal Reserve bank sets interest rates at which the USA government borrows (and lends, but I think it is mostly borrowing in our evil deficit economy) money. Being the 800-pound gorilla on the block, their rates affect everybody's rates. Activist bankers at the Fed try to adjust the rates to make the economy work well and make the whole country prosperous. This is a good and virtuous objective. In my opinion, this supposition of connection is unfounded, but if enough people believe it, it happens anyway. Except when it doesn't, like now when the media are trying to make the economy look bad so their favorite candidate will get elected, the way they did it in 1992 "It's the economy, stupid."

The only product the Fed is buying and selling is money. They are not using unequal weights (interest rates) to do that, everybody gets the same rates, with the same spread between borrowing and lending. The rates go up and down from time to time, just as a grocer adjusts his prices by the immutable law of supply and demand. When bad weather freezes the orange crop in California, the price of oranges goes up. A bumper crop of corn sends prices down, but not this year, too much corn is being siphoned off into fuel production. Supply and demand.

My friend Dan is more specific. It's the fractional reserve money system he condemns. "Fractional reserve" refers to how much money a bank -- any bank, including but not limited to the Fed -- keeps on hand to pay off depositors who decide to take their money out. It's a risky game all the banks play, because the more money they lend out, the higher their profit margin, but that leaves them with less available for depositers to withdraw. After several hundred years of doing this kind of stuff, the bankers have a pretty good idea how much money they need on hand to keep from turning depositors away. You get a higher rate of interest on a certificate of deposit than you do on a checking account, precisely because you can't go pull the CD money out any time you want. That gives the bank freedom to lend all that money out without worrying about needing it before the CD maturity date.

How does that work for the Fed? It's a little different, because the Fed can print money whenever they need it. If they did that any time they wanted, the money would quickly become worthless -- as is indeed the case in third-world countries who do that. So we maintain this little fiction that the real money is silver (you can't print silver, you must dig it out of the ground), and the paper money pretends to represent actual silver in Fort Knox. Except there isn't that much silver in Fort Knox. That's the "fractional" part. The US government buys and sells real silver at dollar prices to keep the value of the dollar stable -- except it doesn't work, especially when the reserves get low. See "Understanding Monetary Policy" for a longer look at this issue.

How is this a case of "unequal weights"? Pure and simple, it isn't.

It is a confidence game, literally and metaphorically. The Federal government is trying to maintain confidence in the USA economy, so the country will prosper and the real tax base will increase. And they do this by playing mind games on the merchants and investors to persuade them to invest and grow the economy instead of cutting back (which shrivels it). Their true purpose -- nevermind whether it works or not -- is the exact opposite of unequal weights. The media have a different agenda, at cross-purpose to the Fed; they want the economy to go south leading into the election, so their candiates will win, and the media methods are slightly more effective.

None of this is honest and up-front. I agree with Dan that it is evil. But it's not "unequal weights", just propaganda, the same as all those web sites arguing against the IRS are propaganda. Another friend, Phil, once told me that propaganda is 99% truth mixed with 1% lies to produce something that gives an impression 180 degrees away from reality. You get that kind of misinformation from the media, from the pro-Fed bankers and investors, and equally from the anti-Fed web sites and their lap dogs.

Denouncing the Evil

So what does a God-fearing citizen do in the face of evil government activity? You denounce it.

First of all you need to make sure you don't have a vested interest in your objection. If you do, nobody will listen except those in your own camp -- like the tax protesters linking to each other and thus raising their own Google rank, but essentially being ignored by thinking people. When John the Baptist denounced Herod's marriage situation, he had nothing to gain from Herod getting it right. This kind of situation is widely recognized as most likely true.

The tax protesters all seek to preserve their own income from taxation. They would be much more credible if they wanted to denounce the Fed's dishonest manipulation of currency, if at the same time they could show no personal gain in their recommendations. But they all mostly want to tie it to the income tax. That makes their denunciation self-serving and incredible.

If people truly consider the income tax to be evil, they need to offer a different, more just form of taxation. Protecting the rich is not more just, and they mostly know that. So they don't try. But even if the income tax is evil (which it is not), they must pay it while denouncing it, because it is the law. We have procedures in place to change unjust laws. They are applied from time to time to the tax code -- to fix its minor problems, not to remove it, because the people of this country, together with their elected representatives in Congress and the justices of the court system, basically all believe the law is good and right and just. The system is working and it works well.

Not the Fed

More importantly, Dan is not tied to the evil Fed any more than he wants to be. He is salaried in dollars (the Fed's approved currency), but he can immediately convert his salary into any form of money or assets he chooses. Mark Twain once reportedly advised, "Buy land, they've stopped making it." That's good advice so long as the population -- meaning people to live in houses on that land, and to buy food grown on that land -- keeps increasing, but (again evil) government policies have made the population diminish. If Dan had greater confidence in Euros or Yen, he could buy those, or he could buy gold. Much better would be to follow Jesus' advice to abandon earthly assets entirely and invest in the Kingdom of God, "where moth and rust do not corrupt, nor thieves break through and steal."

If Dan were in business for himself, he would need to balance his own reserves against his business expenses and supply line. That's the same trade-off the bankers face, so he might then better appreciate their balancing of risk against profits and growth. He might become a little less eager to criticize the "fractional reserve" part of the Fed policy if he understood it as a prudent way to balance risk and growth.

But Dan is a wage slave. He doesn't understand those things. I have been my own employer most of my life, which gives me a very different perspective on the national economy. I also know that the Fed doesn't control it, it's the attitudes of the people (my customers) that matters most. The Fed can do anything they want, but the people mostly don't even see it. The media put their own spin on it. That's what people see.

Full disclosure: I don't have a TV, so I'm mostly not influenced by the media either. That's why you won't see this perspective on TV nor on a lot of other web sites.

Tom Pittman
2008 June 13+

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