38. What Is Taxation?

We’ve all probably heard the term taxation before from our adults, but what does it really mean and why does everyone seem to hate this word so much?

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Terms:

• Consent: to give permission for something to happen.

Books:

• Civil Disobedience 
• Lessons from a Lemonade Stand

Here is the transcript of our conversation:

Connor: Hey Brittany.

Brittany: Hey Connor

Connor: So hashtag taxation is theft. And what does that mean? Why is it a running joke? I wanna talk about taxes and especially as kids get older, I remember when I got my first job and I remember getting my first paycheck and I had done the mental math. I had been like, Okay, work this many hours, this much wage, I’m gonna get this much. I can buy all these things. And then I got my paycheck. I was like, Wait, what? That’s way less than I thought, right? Cause it’s like, oh, we’ve deducted it for all these different things. We’ve taken your money. And I just had this sinking feeling of like, are you kidding me? I never said that was okay. And how can I get that change? Have you had a similar experience when you first experienced taxation?

Brittany: I haven’t experienced, Every time I get paid Connor, every time there’s this feeling, well, and especially since I’m a contractor as well, once a year I usually have to write a check. I actually have to pay taxes. So that’s always a moment where I’m just sitting here thinking, where did I sign up for this? I don’t want half the things that this money is going to so.

Connor: Let’s maybe explain that a little more For people who have jobs most adults work for someone else. When you have a job then you get what’s called withholdings where the government lets you kind of calculate how much you think taxes you’re gonna owe. And then every paycheck you’re usually getting paid every couple of weeks, the government will you’re, you’re employer actually the company will automatically take from your paycheck the amount of money that you’re likely gonna owe for taxes and they’ll send it to the government. And so it’s kind of this automatic process for people where most people don’t experience the pain that you do, Brittany, where you’re having to actually write the check for the full amount and do it yourself. A lot of people, it’s kind of automatic. They don’t often think about it. They don’t look at their pay stubs, they don’t realize how much money is being taken. And so that’s kind of an interesting thing right? that if more people had to do what you do, if everyone had to write checks out or look and hit and pay attention to the amount of money they’re sending, maybe fewer people would be okay paying as much taxes as we do.

Brittany: Exactly. But unfortunately, they made it so easy that people don’t complain as much. And a lot of people also get stuff back. But before we even get into the details of that, what is taxation Connor? What does that mean?

Connor: So taxation is a method by which the state or the government takes money from people to use for purposes that it says it needs it for. So here’s the government saying, Well we wanna do these things and so we need money from them so we’re gonna force you to pay for it. Now in every other organization that exists, you don’t have taxes, you have membership fees for example, or something. What’s that?

Brittany: Like dues, They used to call it

Connor: Yeah, that’s right. Your dues for the organization or your membership fee. Think of your cell phone bill or your insurance bill or your local gym that you go to for the adults. Maybe they have a gym membership or what are some other examples? Even tithing to, if you go to a church, wow, you’re paying tithing All these things are voluntary agreeing to like, Yes, I wanna be part of this organization and so I’m willing to pay a hundred dollars a year. Or I’ll get, I want this cell phone company rather than that other one over there. And so they’re telling me they’ll give me all these benefits if I pay them this amount of money, I’m consenting to it. I’m agreeing to. I’m agreeing to pay that money in exchange for some benefits that are provided. So in all of these things that we go through throughout life consent is critical because we are voluntarily giving some of our money or time sometimes.

But we’re giving something in exchange for something else. The government does not operate with consent. Now here’s really interesting, Brittany. We’ve talked in the past episode about the Declaration of Independence and talked about the legitimate government derives its powers from the consent of the governed. And so there’s actually a real question. I wrote a book that for the older kids, preteens and teens, you’d be able to read called Lessons from a Lemonade Stand, a great book, which is exactly about this idea about taxes, but also really about does our government have consent. Cuz if it doesn’t have consent, right, then that’s a problem. And the taxes are, it’s why taxation is theft becomes kind of this little nickname is because it’s actually more stealing from us rather than us saying, Oh I agree to this. Okay, here please take my money in exchange for taking my garbage and protecting me with the military and police and so forth.

Brittany: Well, and you bring up an interesting thing with the military too. So not only is this money being stolen from us, but sometimes it’s going to pay for things that we are morally opposed to, that we are against. So if I’m against a war that’s going on, if I don’t want our country going and invading somebody else or killing people in another country, I still have to pay for it. Which is so ridiculous to me. Same with the school. Let’s say that I’m against the public school and that I choose to homeschool my kids, I still have to pay for public school and it’s all because of taxation. So it’s almost like they’re forcing people to pay for things because they know that maybe they couldn’t fund them on their own. So they have to use force.

Connor: Yeah. We talked a few weeks ago about civil disobedience and there’s a great essay that I think every teenager would love to read. I actually did a class for our homeschool co-op a few years ago, and this was one of the things that we read and discussed. So Henry David Thoreau wrote this essay called Civil Disobedience and it was written after this experience he had, which relates Britney exactly to what you said at the time, I believe it was the Mexican-American war was happening and he objected, the tax collector came around, was collecting taxes that everyone owed. And he said I’m not paying that. And he was able to say that because the tax was specifically for that purpose. He could kind of clearly understand that this tax funds this, it gets a little bit harder in our day when taxes go into this general pot, right?

And it’s like, okay, well yeah, I oppose the wars and I oppose public education, but I kind of like that, or I, I’d be okay with that. And you can’t really pick and choose, man, If we could pick and choose the things that would be okay to be taxed for, that’d be amazing. But he was able to object to that tax because it was specific to the war that he objected to. They threw him in jail. He spent a night in jail until someone, I believe a family member bailed him out and got him out of there, and paid the amount that he was owed. And he wrote that essay sharing his observations about when is it okay to stand up for things that you oppose. Do you remember the story Brit, about Irwin’s Schiff? Do you remember who he is?

Brittany: Yes. Because he has a famous son as well, I believe. Yes. So he was in jail for not paying his taxes, I believe,

Connor: Right? That’s right. That’s right. He was a tax, he was someone who had studied this issue and felt like what the government was doing was wrong, that he didn’t actually owe the taxes. He had some legal arguments that he put together for why he felt like the tax that the government said he owed was actually something he didn’t owe his son. Peter Schiff is a famous economist. He’s a big fan of gold. He speaks a lot. So a lot of people know who Peter Schiff is. Well his dad, Irwin Schiff, Brittney, as you point out, was thrown in jail. He died in jail, shackled handcuffed to his prison bed. I believe he died of cancer. But it shows that he was just this frail old guy who was handcuffed there and they kind of kept him under lock in the key just because he wouldn’t pay the government what they said he owed. It almost seems like something out of a mafia movie, the degree to which the government is willing to punish people who say, No, I’m not gonna pay that tax.

Brittany: It’s terrifying. And we didn’t always have these, We had taxes, but we didn’t always have income tax with the income is the one that we think about the most. In fact, I believe it’s the same year as the Federal Reserve. Am I wrong about that? Was it 19?

Connor: That’s right. 19, 13, I believe the men, It was fully implemented a couple of years later, but yeah, it all got started in 1913.

Brittany: That’s right because in the beginning, they didn’t take it out directly. I think it was one of those, you everybody paid for it. We didn’t have withholding. So it’s crazy that it used to be something that wasn’t so common. In fact, I think it was to fund the war. Maybe I’m wrong about that. Cause that would’ve been before I guess World War I. Either way, this is not something that has been with our country forever. This is relatively new. If you look at the whole history,

Connor: It’s new. And also if you think about the analogy of the frog and the pot of boiling water or the camel’s nose and the tent is another one. The camel’s just like, Oh, just let my nose in so I can breathe. And then he interests forward and inches forward until he is in the whole tent, kicks the guy outta of the tent. And when these taxes are introduced, when the income tax was introduced, social security is another one that, that’s a welfare program to take care of old people. Basically, these taxes are always introduced or proposed as being very small. They start very, very, very, very small. And even then there are people who strongly objected to them, No, that’s wrong, we shouldn’t do that. But they always win people over. Oh, this is just so tiny. But it’s gonna help a lot of people. And then once they have their foot in the door, once that camel’s nose in the tent

Brittany: Up and Up

Connor: Absolutely. And so when these taxes are introduced, they’re so tiny to the point now where they’re massive. And then, there’s a tax foundation is an organization that looks into a lot of tax stuff. And they have a day every year that they kind of celebrate or popularize called I believe it’s called Tax freedom day. And what they do, Brittany, is they add up all the taxes that people owe. So the income tax, which you pointed out, right? Social security, property taxes, sales taxes, gas taxes, everything else, so many taxes, all the adults, we roll our eyes cause we’re fed up with it all. And so this group, they add up all the taxes that people owe, they add it all together and they come up with an average. How much of the year? How long do you have to work in the year before?

Finally, you’ve earned enough money to pay for all the taxes. Does that make sense? Right. So hey, every year I pay to earn. Let’s say I earn $50,000 the whole year and then I had to pay $20,000 in taxes. And so that’s two-fifths of the year that you would spend having to just work half taxes, And then the rest of the year you’re working to actually earn your own money. And it’s really interesting to see over time that dates right in the year when we’re finally as a, they average it out. Obviously, it’s different for different people, but they average out. It’s so interesting to see where, I believe it’s like sometime in April if I remember Right? So basically January, or February, you’re working the whole first several months of the year. Just for the government Yeah, it’s crazy.

Brittany: That makes me so angry.

Connor: So we say taxation is theft, but Brittney, I want to get back to this point that it’s really consent. Let me illustrate the example even more so in my city, I fought a new tax that they were trying to do. It was actually a bond. They were trying to basically go in debt and then we’d have to raise taxes to pay off the debt. But basically, they were trying to just

Brittany: For the city

Connor: Though, not the state. A new tax. This case was for the city because of a park, A lot of people the not have a park, or several parks, and a lot of people in the city want more parks. So the city was like, Okay, well we’re gonna put this on the ballot during the election, we’ll let the voters decide. And everyone in the community is like, Oh yay. We get to decide. And my argument is, wait a minute, you’re putting it up to a decision as to whether you’re gonna forcibly take more money from me. Why is that up for debate or a vote like, Hey, should we steal from Connor today? What do you all think? Right? Show of hands, how many people here are okay with Connor paying for lunch? right? Why is that? Why is this tyranny of the majority when it comes to taxes? And so I put together a whole little campaign on my own and fought it and was able to kill that effort. And a lot of people aren’t very happy cuz they want their parks. But the point is it’s wrong to force someone, to pay for something that someone else wants. If I don’t want parks, if I’m not gonna use them or my kids aren’t gonna go plan them or whatever, why should I have to pay for it? That’s my argument. Brittany, how do you respond?

Brittany: It’s exactly right. And there’s no different than me saying I want a car, but Connor, I don’t wanna pay for it. So I’m gonna take 20% of your income and I’m gonna pay for my car. I mean, we know that. That sounds absurd. We can all see that. That sounds absurd. But when you put it in the terms of parks or roads, we talked about roads on another episode, people suddenly think that it’s okay. But theft is theft. It doesn’t matter who’s doing the stealing. Stealing is stealing.

Connor: So in The Tuttle Twins learn about The Law. Brittney, we talk about this concept called plunder which Frederick Bastiat talked about in his book The Law. Of course, we based ours on his. So what does he mean by plunder and how does it relate to this idea of taxes?

Brittany: I always think of Pirates and Plunder. I’m getting that right. But pirates, plunder, that’s what I always think of. And it’s just stealing and taking your cargo right off your ship. So that is essentially what the government is doing when they’re coming into our paychecks and taking our money.

Connor: That’s what I think. And that’s why Elijah, our wise illustrator drew a pirate into the book talking about that exact issue because it’s so we think of pirates. And so to help the kids understand, look, that’s not to say everyone in government is evil. That’s not the idea. We’re not saying that all laws are horrible and things like that. But when you use taxes to take from some people to benefit other people, when you do this redistribution, you’re distributing it from one person to another. That becomes wrong. And it’s a big problem too, especially Brittany, when for your example, you said when it’s something you’re morally opposed to, yes, it’s wrong. If someone else is in need and they lost their job or their kids, the kids are orphans. Someone needs help, and there’s more sympathy there to have everyone be taxed to pay for these people who are in true need.

But then when you set up that system again, like the camel’s nose and the tent, pretty soon you have people who are finding that they can live off of welfare. Basically these taxes, they can live off of it and be lazy and do nothing and have a bunch of kids. Cuz every kid you get more money. And so let’s just have a bunch of kids. We don’t actually take care of ’em very well or whatever, but hey, then I get more of a paycheck. You create these incentives. We’ve talked many times about incentives that lead people to change their behavior based on what the government is willing to do. Whereas if that support was not available, they would be on their own and have to actually get their life in order and make some smarter decisions. And so there’s at least a case to be made that for the truly, truly needy we gotta figure out a way to kinda help those in need.

But beyond that, when you’re taking from some people and giving others, especially when you’re giving to corporations that have lobbyists and like, Oh here, a billion dollars for you and half a million for you, that becomes clearly wrong when taxes are being given out to people who shouldn’t have them. And it definitely makes it feel a little bit more like taxis stuff. So I don’t wanna end up like Irwin Schiff, right? We all pay it begrudgingly because the people who don’t pay it, run into real problems really quickly. But definitely is a reason to try and fight, to reduce our taxes so that we can keep more of our money and use it in a way we think fit because we’re gonna spend it much more wisely than any bureaucrat ever is going to. So We’ll end on that love.

A lovely note, Brittany, I’m sorry you just had to write your check to the government. And that’s right. We’ll have a more lively topic next time. That doesn’t remind us of the tax slaves that we all are. So we’ll end where we began. Hashtag taxation is theft. Check out tuttletwins.com/podcast. Be sure and share with your friends. We’re loving doing this and being able to teach a bunch of families out there. And guys, we have a ton of subscribers. It’s super fun that you’re all out there listening. So thank you very much, Brittany. Thanks for tagging along and we’ll chat with you next time.

Brittany: Talk to you next time