                                  T H E

                               Z E P H Y R

                      __     M A G A Z I N E
                     {__]++++++++++++++++++++++++++[]
                     Issue #53                2-05-88

                A weekly electronic magazine for users of
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                        Editor - Gene B. Williams

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                                (c) 1988

    THIS ISSUE:

    Once the religious, the hunted and weary
    Chasing the promise of freedom and hope
    Came to this country to build a new vision
    Far from the reaches of Kingdom and pope

    Like good Christians some would burn the witches
    Later some bought slaves to gather riches

    And still from near and far to seek America
    They came by thousands, to court the wild
    But she patiently smiled, and then bore them a child
    To be their spirit and guiding light

    And when the ties with the crown had been broken
    Westward in saddle and wagon it went
    And till the railroad linked ocean to ocean
    Many the lives which had come to an end

    While we bullied, stole and bought our homeland
    We began the slaughter of the red man

    But still from near and far to seek America
    They came by thousands, to court the wild
    But she patiently smiled, and then bore them a child
    To be their spirit and guiding light

    The Blue and Grey they stomped it
    They kicked it just like a dog
    And when the war was over
    They stuffed it just like a hog

    But though the past has its share of injustice
    Kind was the spirit in many a way
    But its protectors and friends have been sleeping
    Now it's a monster and will not obey

    The spirit was freedom and justice
    Its keepers seemed generous and kind
    Its leaders were supposed to serve the country
    Now they don't pay it no mind
    Cause the people got fat and grew lazy
    Now their vote is a meaningless joke
    They babble about law and 'bout order
    But it's all just echo of what they've been told

    Yes a monster's on the loose
    It's put our heads into the noose
    And just sits there watching

    The cities have turned into jungles
    And corruption is strangling the land
    The police force is watching the people
    And the people just can't understand
    We don't know how to mind our own business
    Cause the whole world's got to be just like us
    Now we are fighting a war over there
    No matter who's the winner we can't pay the cost

    Yes a monster's on the loose
    It's put our heads into the noose
    And it just sits there - watching

    America, where are you now
    Don't you care about your sons and daughters
    Don't you know we need you now
    We can't fight alone against the monster

    "Monster" - Steppenwolf (John Kay, Jerry Edmonton)

       One the reasons behind the founding of our country was to
    escape the crushing taxes placed on our ancestors. They had
    little or no say in the matter. As far as England was concerned,
    the people in the new land were still British subjects. Those
    subjects had benefits from all services offered. There was
    military protection. There was the use of new inventions. There
    were so many fine services available to the citizens, and those
    services had to be paid for.
       The so-called Boston Tea party was just one violent act to
    protest "taxation without representation." There were represent-
    atives, of a sort, but they tended to be self-serving and rarely
    listened to the people. (Sound familiar?)
       After other similar riots, in 1776 we told the government to
    take a hike. The Revolution began for real. This is what is
    usually considered to be the birth of our nation.
       It wasn't until 1791 that we finally had the Constitution and
    the government as it is today (more-or-less). With that came a
    means to support the government. Taxes were placed on distilled
    spirits, refined sugar, tobacco, property sold at auction,
    corporate bonds, carriages and sale of slaves. (Yes, Virginia.
    Our country was founded on the principle and practice of
    slavery.)
       Then came the War of 1812. It was an expensive conflict. To
    meet the costs, the government levied sales taxes on gold, silver,
    jewelry and watches. With the war over, in 1817 ALL internal
    taxing was cancelled. From then until the Civil War, the
    government operated on money brought in by tariffs on imported
    goods.
       In 1862 the first income tax was created. The Act of 1862
    created the office of Commissioner of Internal Revenue and
    gave this commissioner the power to access, levy and collect
    taxes - and to seize property or income to make sure that the
    taxes were paid.
       During the Civil War taxation was fairly simple. Anyone with
    an income of between $600 and $10,000 paid a flat rate of 3%
    of all income. Those earning more paid a slightly higher rate.
    Also put into effect were more sales taxes, some excise taxes,
    and an inheritance tax.
       The Civil War ended. In 1872 income taxes were dropped along
    with many other taxes. Concentration went back to the luxuries -
    liquor, jewelry, tobacco, etc.
       In 1894 Congress once again tried to bring in an income tax.
    It was struck down in 1895 by the Supreme Court after they
    declared it to be unconstitutional.
       Congress wasn't about to be put off by such legal shenanigans.
    They had certain things in mind they wanted to do, but didn't have
    the funds to do these things. More money was needed. In 1913 they
    put through the 16th Amendment. At that point income taxing
    became a part of the Constitution.
       Net income for the government jumped from $675 million in
    1910 to $683 million in 1915 (with $80 million of that amount
    being in income taxes) to nearly $4 billion in 1920 (with more
    than $2 billion being in the form of income taxes).
       With the exception of years around the Depression, this
    remained fairly stable for more than 20 years. Then came World
    War II. By 1943 the net receipts came to $22 billion, with a
    little over $16 billion coming in from income taxes. (In other
    words, in a period of a couple of years, the amount collected in
    income taxes quadrupled after more than 20 years of stability.)
       In 1944 the amount of income taxes more than doubled again -
    to $34.7 billion, and increased again the next year to $35.2
    billion. (Net receipts during these years was $43.6 billion
    and $44.4 billion, respectively.)
       It seems logical that a major world war is an expensive
    proposition. And it seems logical that expenditures during such
    a time would be considerably higher than during a time of
    peace. Following that logic, those expenditures SHOULD go down
    after the war, as should the need for high taxes.
       It worked that way in 1862. There was a war. Money was needed.
    So a modest income tax (3%) was brought into play. As soon as the
    war was over, the income tax was dropped and everything went
    along just fine as before.
       With World War I in the offing, an income tax was brought
    back, this time permanently. But at the end of the war, the
    taxing continued at the same high rates. At least they did
    until 1929 and the Depression. After decades of the rich getting
    richer and the poor getting poorer, millions were put out of
    work. By 1933 the federal net receipts had dropped to $2 billion,
    or about half; and the amount of income taxes collected dropped
    from $2.3 billion to $746 million - about a third.
       Some have suggested that if money had been siphoned out by
    income taxes, more would have been kept in the marketplace and
    would have prevented or softened the Depression. (Others say
    the opposite.)
       Taxes increased again, so that by 1939 the net receipts and the
    income taxes collected were back to the pre-Depression level. World
    War II caused the need for more money. (The figures are above.) The
    war ended in 1945.
       By 1950 the money collected from income taxes decreased to
    $28.3 billion, mostly because of problems in employment due to
    the return of so many soldiers.
       But the trend had been set. Despite relative peace, taxes
    continued to increase, as did government spending. If Congress
    needed more money, all they had to do was allocate it, increase
    taxes again.
       By 1956 IRS generated income had doubled again - to nearly
    $57 billion (with total net receipts being $74 billion). By
    1960 they'd gone to $67.1 billion (net receipts - $92.5 billion).
    Over the next ten years those figures more than doubled again,
    to $138.7 billion in IRS collections, and $193.7 in total net.
       Another decade - from 1970 to 1980 - it all doubled again
    (to $359.9 billion and $520 billion, respectively).
       It continues to rise. Despite some sweeping tax reforms, the
    trend continues. Many experts say that the reforms are nothing
    more than a smoke screen and just a shifting around of items
    so that on the surface it seems that the tax payers are paying
    less, while in fact most are paying more.

       Some of the doubling and doubling again can be explained as
    wage increases. That hardly takes care of all of it. Wages do
    not double in a decade (nor have they). They haven't quadrupled
    in two decades. The only sector of the population where this
    has happened is among the highest government officials. (For
    example, Congress voted themselves 27% pay increases in 1987
    alone.)
       The explanation lies more with the other side of the coin -
    that of expenditures:
       In 1800 the government income and expenditures balanced out
    at $11 million in and $11 million out. Despite the expense of
    the war of 1812, the subsequent addition of taxing, then the
    dropping of them again in 1817, by 1820 the budget was still
    balanced, with $18 million coming in and $18 million going out.
    And there was still no income tax.
       The Civil War was very expensive. In 1860 there was a
    deficit of $7 million. By 1865 the deficit had jumped to $964
    million. But, by 1870 our country was showing $101 million to
    the plus side of the ledger. Income taxing became a temporary
    part of American life, to help foot the bills of the war. This
    modest tax lasted for 10 years. The deficit was paid off, and
    a surplus was shown. And then the tax was dropped.
       By 1880 there was still a surplus ($66 million). By 1890
    the plus had grown to $85 million.
       Then came the move by Congress to reinstitute income taxing
    (in 1894), which was knocked out by the Supreme Court. By 1900
    there was still a surplus of $46 million. Ten years later, in
    1910, we were facing a deficit, this time of $19 million.
       Along comes 1913 and the official enactment by Congress of
    the IRS (by the 16th Amendment). Despite this - or possibly
    because of it? - by 1915 the federal deficit had reached
    $63 million.
       World War I came along at about that time. When it was all
    over, by 1918 the federal deficit had hit a whopping $9 billion,
    most of which was due to an increase in military expenditures
    of 2400% (from $202 million to almost $5 billion).
       It took a while to recover from the expenses. But with Congress
    now able to access new taxes at will, there was no incentive to
    balance the budget. It wasn't until 1929 that the government
    showed a surplus again - just in time for the stock market crash
    and the Depression. Many people were thrown into poverty.
       By 1939 and the beginning of World War II, the deficit was
    reaching the $4 billion mark. The deficit peaked in 1943 at
    about $58 billion, dropped back to $51 billion at the end of
    the war, and dropped even farther to just $3 billion in 1950.
       Another surplus, of $4 billion, showed up in 1956; and
    another, of $269 million, in 1960.
       From there things get depressing.
       More and more taxes began to be applied. Tax rates increased
    at a phenomenal rate, with the net taken in by the IRS doubling
    every decade (as above).
       Military expenditures went from $51 billion at the end of
    World War II, down to $6 million in 1950, back up to $44 billion
    in 1960, almost doubling to $78 billion by 1970, doubling again
    to $136 billion by 1980 and almost triple that today.
       Meanwhile, the national debt is approaching the trillion
    dollar mark, and threatens to at least double during the 1990
    decade. (Some experts are expecting it to triple in just that
    decade, unless something is done immediately.)
       In 1800 the per capita debt came to $15.87. Just before
    the Civil War the national debt could have been paid off if
    each person had chipped in $2.06. The expense of the Civil
    War brought that to $75.01 per person, which decreased to
    $16.60 per person by 1900. (All without any income taxing.)
       In the next decade, the national debt increased to a per
    capita level of $131.51 - an 8-fold increase (792%). By 1940
    and the beginning of World War II it had jumped to $325.23 per
    person, then to $1848.60 per person at the end of the war in
    1945.
       In the next 15 years it remained fairly stable, decreasing
    to $1572.31 by 1960, despite the Korean War, the beginnings
    of the space race, and the ever growing "Cold War."
       In the decade between 1960 and 1970 and the VietNam War
    (excuse me, the VietNam Police Action) the national debt
    increased so that to pay it off each person would have had to
    chip in $1807.09. In the next decade - to 1980, and a
    period of peace - it had more than doubled. The per capita
    debt reached to just shy of $4,000 ($3969.55).
       In the next 5 years it doubled again (to $7598.51 per
    capita). That debt is now getting very close to $10,000 per
    person.

       What it comes down to is this.
       In the first 100 years there was internal taxing only in a
    limited sense and never on a permanent basis. We fought a
    number of battles, including the one that won us our freedom
    from England. We took 13 small colonies on one seashore and
    extended clear across to the ocean on the opposite side of the
    continent.
       And the public debt came to $2 per person.
       Then comes income taxing during the Civil War, which is
    dropped, brought back into effect, dropped again and
    made a part of the Constitution. All this happened in the
    50 years between 1863 and 1913 when income taxing became a
    permanent part of our lives. By 1920 public debt skyrocketed
    by a factor of more than 100 (that's 10,000%). The actual
    factor is 110.79 - or 11,079%.
       In essence, public debt went to about $2 in our first 100
    years, with no income taxes. Once Congress gave themselves the
    power to access taxes, the debt in the last 75 years went to
    nearly $10,000 per person. That's an 5000-fold increase, or
    500,000%.

       It can be argued that things today are more complicated. That's
    a true and valid argument. In the first 100 years we were basically
    isolated. Travel was difficult, especially overseas travel. The
    transport of troups from one country, across the ocean, to fight
    on the soil of a second country. But think about it.
       All through that first 100 years America had its own continuous
    battles of expansion. We pushed the Spanish, French, English,
    Mexicans, Dutch and Indians off their land so we could have it.
    In a few cases we bought land from the various groups. If anyone
    got in the way of our Manifest Destiny, they had to go, one way
    or the other.
       Then all those lands had to be tamed. Trains and roads had
    to be built. Services had to be provided for the people. With
    the loss of slavery in the 1860s, economics took a tumble. Not
    only was there less free labor, there were also a whole lot of
    people "out of a job." (It could have been worse, but along
    came the Industrial Revolution. All that free labor was replaced
    with machinery. Unfortunately machines also replaced quite a few
    workers. Machines didn't join unions, didn't go on strike and
    didn't make expensive demands of management.
       Unemployment went up.
       In short, America had its share of problems all along. Life
    may have been less complicated in those first 100 years in
    some respects. It was extremely complicated in others. And
    yet the country was conquered and built without income taxes,
    and without going into massive debt.
       With the beginning of income taxation, and ever increasing
    sales taxation - internal taxes of a wide variety, actually -
    the national debt began to climb.
       Give a person an allowance and the knowledge that this is
    it. No more will be coming. He's going to at least TRY to live
    within the boundaries of that allowance.
       Tell that same person that if he needs more all he has to do
    is take some more from the pot and what happens? Give this
    person the ability to determine the size of the pot, and how
    much everyone is to chip in, and the reason for living within
    a set budget is diminished, or done away with altogether.
       It becomes the proverbial snowball. Let it grow a little and
    it's bound to grow a little more. The more it grows, the more
    likely it is to grow ever faster.
       This is just what has happened.

       For over 100 years there was very little internal taxing
    (with the exception of the decade surrounding the Civil War,
    and once that was over the taxing was dropped again). And we
    built the most powerful country in the world.
       Then Congress gave itself the right to set then collect
    taxes. They also gave themselves the ability to raise those
    taxes, or to extend them, at will whenever more money was
    needed. On the surface it sounded pretty good. Even logical.
       The 3% flat rate to recover the expenses of the Civil
    War is now bound up in rules, regulations and loopholes that
    require a tax specialist to even sort of understand. Then
    states jumped on the bandwagon, both for income tax and for
    other internal taxes.
       Income taxes on all levels take directly fairly close to
    25%. (In other words, you work until some time in March for
    free to pay your direct taxes.) Indirectly they take much
    more. Total it all up and close to 50% (and some experts put
    it even higher) of your income goes for various taxes.
       When a business pays a tax, they have to raise their
    prices accordingly. Do business with that company and you
    end up paying their tax as well.
       For example, assume that the raw materials for a product
    cost $5. To get those materials into the country there is a
    25c tarriff. Straight labor costs $3, but there is also the
    various employment taxing (say 50c). All other costs come to
    $1 for the item. Now the $5 of materials has become $8.75. The
    manufacturer has to charge at least that much just to break
    even. The end buyer pays that, and more.
       Say that the manufacturer pays another 25c in corporate
    taxes because of profits earned. The end cost of the item
    goes up by that much more.
       The manufacturer needs a profit. He can't do that unless
    the item can sell for more than it costs to make. With all the
    taxes and other charges, that item is costing the manufacturer
    $9 to make. To that he tacks on $2 for profit.
       Now it goes to the middleman. He also has taxes to pay,
    which he in turn passes along to the end buyer. And his
    own profit.
       Then comes the dealer. He also has to make a profit, and
    he also has to pay taxes (which are passed to the end buyer).
    That $5 of raw material ends up costing, say, $25 to the
    end buyer. About $5 of that is eaten up in paying the taxes
    of those up the line.
       On top of that there is the direct sales tax (6.5%), which
    is based on the final retail price. That's another $1.63.

       Most people don't stop and think about it in this way. So
    often you hear people griping about how corporations aren't paying
    enough taxes, as though this would mean that the common person
    would be paying less.
       Not true. The system will getcha no matter what. If the
    corporation is paying an additional $1 per item of tax, and
    if this comes back to the average taxpayer in a reduction, that
    reduction will be more like 5c (due to the number of taxpayers
    versus the number of corporations). But, the price of the item
    itself has to go up by that dollar at the manufacturing level
    so that they can still make their profit.
       That means that the middleman has to pay more, and hence
    pays more tax, which means that the cost of the item goes up
    still more, which means that the dealer has to charge more . . .
    and so on.
       For saving 5c the item could easily cost you an additional
    $2.
       Not much of a bargain.

       Keep in mind that any time a tax is applied to a product
    ANYWHERE, it gets passed up the line to the end buyer. And
    that includes services.
       And don't forget to add in the taxes on taxes. There are
    property taxes, for example. You're taxed on the money you earn
    to buy the house, pay all the taxes of everyone who worked to
    build the house, and then spend the rest of your life paying
    taxes (with yearly increases) on the ever increasing "value"
    of the house.
       Then you die and leave the house to your mate - someone who
    has paid those taxes with you all along. Now there comes the
    inheritance tax (of up to 50%, and more in some cases). A tax
    on what you already own, and which you've paid for, and which
    you've paid taxes on all along. Now your spouse dies and you
    have to fork over half of everything - and then you continue
    to pay property tax on what's left.

       As a tangent, think back a few years and what happened in the
    automotive industry.
       Gasoline prices skyrocketed, supposedly due to a fuel shortage
    (one that evaporated as soon as the cost hit $1 per gallon). In
    an effort to make ends meet, more and more people turned to
    imported vehicles. It was also discovered by more and more people
    that those imports were not just more efficient, they were also
    more reliable. And they were cheaper besides.
       For the past decade, the top rated cars have been the imports,
    especially the Japanese cars. The worst rated were American made
    cars. (The same is true in other fields, such as electronics.)
       So here was a product that was cheaper to buy, cheaper to
    operate, and that lasted longer.
       American manufacturers suffered badly. The obvious went right
    over their heads, and over the heads of so many others. Want to
    sell more? Make your product better than that of the competition.
    Who's going to buy your car for $1000 more when it costs more to
    keep and will be a pile of rusted junk in 10 years when they can
    get this Toyota over there for less, pay less to run it, and
    have it still running like a fine watch 15 years from now?
       Instead of making the effort to improve quality, or to
    decrease prices (by increasing plant efficiency) they did two
    things.
       One was to develop the great "Buy America" project, building it
    to such a state in some areas that some union workers becames
    physically violent towards drivers of imports.
       The second was a push in Congress to raise import taxes so that
    American manufacturers could compete. The idea was to make the
    price of an import higher than that of an American car. People
    were clammering and yowling things like, "YEAH! Let the Japanese
    pay those import tariffs if they want to sell their cars here!"
       What escaped their mentality was that the Japanese didn't pay
    a cent of it. Nor did the dealer. The person who paid that new
    tax was the buyer. The American public.
       In the midst of the "Buy America" frenzy, American manufacturers
    themselves turned to foreigners for parts, for labor, and even for
    entire cars.
       Meanwhile, as soon as the price of the imports went up, so
    did the price of American cars. The reason given was that they
    weren't making enough profit.
       That import went up by $1500. So did the American car. And
    they were right back where they started, with the American
    public footing the bill. So the tariff was increased again, for
    same reason cited earlier. The price of the American car went
    up along with it. This, of course, means that the sales tax you
    pay also goes up. And now there is even a tax on private resale
    of the car.
       What counts here is the taxing. The end cost of imports to the
    American public was driven up artificially by taxation (which the
    buyers paid). This so that an industry (and its employees) didn't
    suffer. Instead of forcing this industry (and its employees) to
    work more efficiently and to come up with a better product (isn't
    that the whole idea of capitalism?), the issue was forced by
    driving the cost up. And up. And up.
       It doesn't end here, though. It's not so simple. Our society
    and our economics is like some bizarre spiderweb spun by a spider
    on LSD. Everything intertwines in all directions.
       The cost of a vehicle goes up. Anyone who uses a car now must
    earn more to pay for it. Any business that has to buy a vehicle
    has to charge more which means again that people have to earn
    more. As all this happens, inflation spirals upwards at an ever
    increasing rate. And with higher wages and higher prices go
    higher taxes.
       The spiral continues.

       Of course, those who set the rules aren't about to be left out.
    They raise the taxes. They know how prices continue to increase
    ever upwards. So they also make sure that they have the ability
    to give themselves pay raises.
       In 1987 Congressional pay raises - voted in by themselves -
    came to 27%. Meanwhile the official stance to the general
    public concerned the federal debt and how we're all going to have
    to tighten the ol' belt and sacrifice to get ourselves out of
    trouble.
       And meanwhile federal spending is still rampant. There are
    still 5c plastic washers selling to the government for $75, and
    $4 hammers going for $600. A few people became concerned and
    began to report such horrible overpricing examples. The official
    response? A new law making it a felony to reveal anything
    "classified or classifiable." Several of the whistle blowers
    are now in prison or in the process of going there. (The cost
    of an item falls under the "classifiable" category.)
       This ruling came down as an executive mandate. It has the
    effect of a law unless Congress acts against it. And Congress
    has yet to do a thing about it.

       In summary:
       For our first 100 years we went from a disjointed and tiny
    group of colonies to being a major world power, conquering a
    continent and being a force that was never defeated in battle
    with anyone. We became the source of most important world
    discoveries. We displaced every other country in the entire
    world as being the best place to live. National debt was almost
    zip, and no one paid taxes. What you earned, you kept. The
    stimulant to build an ever stronger country was there and it
    made us what we are - or were.
       In the second 100 years taxing came into play. With it came
    ever increasing abuses. Many advances are still American, but
    foreign powers are the ones who actually put them to use. The
    situation of 100 years ago is now in reverse. Quality has all
    but disappeared. Taxation has increased to the 50% level and
    continues to climb.
       Our country began with revolts against such things as
    taxation without representation. The government raised taxes
    at will whenever they needed more money, and the populace
    had nothing to say about it.
       Now we have representatives, elected to office by the populace.
    If we don't like what they do, we can elect new representatives
    in 4 more years.
       Things have changed. It used to be that we had a government
    that didn't listen to the wants and needs of the people, who
    spent more than they had then raised taxes when they wanted more,
    who voted themselves pay increases so they could live in the
    style to which they'd become accustomed.
       Now we have . . . .

Zephyr Magazine is © Gene Williams. All rights reserved.