Economic Fascism and Tax Slavery

Nelson Hultberg

May 27, 2003

For a number of decades, our universities and colleges have been teaching a serious fallacy in political philosophy (or “poly sci” as it is now called) that has distorted our thinking about governments and corporations in the modern world.

This fallacy is that our present system of political organization is a free enterprise system, i.e., capitalism.

This is not true. What we are calling capitalism in our schools and in our media is not capitalism. We abandoned free enterprise long ago in the aftermath of WW I in favor of Mussolini’s “corporatism,” i.e., economic fascism, where Big Business, Big Government, and Big Finance form combines to exploit the people with monopolized prices and corrupted dollars.

This is one of the crucial issues of our time, and it needs to be clarified if we, who believe in the propriety of capitalism, wish to lead America back toward a free-market system of sound money and fair taxation. It becomes especially crucial, seeing that the next 5-10 years threaten us with a collapse of the Western economies that could bring severe chaos and misery, out of which would arise great pressure to further centralize our government in Washington and further suppress our fundamental freedoms.

Defining Our Terms

To get at the roots of this fallacy, we first need to define the terms of fascism and capitalism. Webster’s Ninth New Collegiate Dictionary says the following (to which I have added clarifying remarks in parentheses):

Fascism — a political philosophy, movement or regime that exalts nation and often race above the individual, and that stands for a centralized autocratic government headed by a dictatorial leader, severe economic and social regimentation, and forcible suppression of opposition. (The state has power over every aspect of the economy to plan and regulate its workings. The factors of production are owned privately, but controlled by the governing authorities as to what and how they are to produce, and what level of profits they are to retain.)

Capitalism — an economic system characterized by private or corporate ownership of capital goods, by investments that are determined by private decision rather than by state control, and by prices, production, and the distribution of goods that are determined mainly by competition in a free market. (The state is neither to own nor operate the factors of production, nor to interfere in the peaceful decisions of their operation, leaving them to be controlled by the natural laws such as supply and demand that operate within the marketplace.)

Obviously the two systems are different in the fact that fascism advocates STATE control over the factors of production and their profits, while capitalism advocates PRIVATE control over those factors.

The primary distinction between the two systems is that capitalism is a system of economic organization without government involvement, thus its descriptive adjective of “laissez-faire,” which means to leave alone. The government’s job is basically to preserve the peace and perform those few limited functions granted by the Constitution.

Under fascism, the government’s job is to intervene into the marketplace to control all the various economic interactions of its participants. Its role is to manipulate the economic interactions through regulations and the conveyance of special privileges. Government assumes this power because it is felt that this is the only way stability and order can be maintained in society.

Under capitalism, the term “private” means free of government control or involvement. Thus, PRIVATE enterprise is FREE enterprise. Private businesses are entities in which the individual owners (rather than public officials) make the decisions of hiring, pricing, wage determination, production levels, policy planning, profit disposal, etc. Government is divorced from these economic decisions.

Under fascism, ownership of businesses are left in “private” hands, but the government rigidly regulates all businesses confiscating much of their profits and using them as the government sees fit. Thus business entities are private in name only. The term “private” is still used, but it no longer means free of government involvement. It is used within the context of government-business “cooperation.” However, such terminology is a fraud because there is never any cooperation when government is involved. Government simply tells businesses what it wants done and legally mandates that it be done. There is no choice in the matter. Those who don’t do as the government says are imprisoned or fined egregiously.

Fascism is thus a command economy where massive centralized government is developed to regulate its citizens’ lives. The major power centers of society — government, corporations, and banks — form a triad to monopolize and manipulate the economy according to their liking, their aggrandizement, and their profit at the expense of the individual and his rights.

“The essence of fascism,” writes Thomas J. DiLorenzo of Loyola College, “is that government should be the master, not the servant, of the people. Think about this. Does anyone in America really believe that this is not what we have now? Are Internal Revenue Service agents really our “servants”? Is compulsory “national service” for young people…not a classic example of coercing individuals to serve the state? Isn’t the whole idea behind the massive regulation and regimentation of American industry and society the notion that individuals should be forced to behave in ways defined by a small governmental elite?” [Ideas on Liberty, June 1994, p. 289.]

“Virtually all of the specific economic policies advocated by the Italian and German fascists of the 1930’s,” says DiLorenzo, “have also been adopted in the United States in some form, and continue to be adopted to this day. Sixty years ago, those who adopted these interventionist policies in Italy and Germany did so because they wanted to destroy economic liberty, free enterprise, and individualism. Only if these institutions were abolished could they hope to achieve the kind of totalitarian state they had in mind.” [Ibid., p. 292]

Who Benefits from Fascism?

Why then do our political elites, our corporations, and our bankers attempt to maintain the fiction that we are a capitalist economy when we are so obviously becoming every decade more and more of a government manipulated FASCIST economy?

Whenever the facts of reality are being distorted by the authorities of a society, one needs to ask, “Cui bono?” Who benefits? In this case, the beneficiaries are those who seek the regimentation of Americans under a massive centralized government in Washington. Our political elites, our corporations, and our bankers wish to smuggle us into a centralized despotism because they envision more power and wealth for themselves, but they clearly realize the strong positive connotation of the words “private” and “free.” Thus they continue to use these words to describe their policies, even though they know that what they are implementing is neither private nor free.

The semantic corruption that is happening here permeates our entire society. Our courts and our government operated schools maintain the fiction that all businesses in today’s economy are FREE, PRIVATE entities, when in actuality the government is subtly making them into CONTROLLED, PUBLIC entities by usurping their rights and instituting a myriad of regulations over their business policies.

To understand this requires only simple logic and common sense. Business owners do not have true control of their businesses without the right to freely set prices and wages, retain their profits, formulate policy as they see fit, etc. Ownership without control is a fiction, a contradiction in terms. But this is what we have in America today — ownership without real control. Government sets price ceilings and floors, dictates wages through laws and labor courts, and confiscates profits. This is Mussolini’s corporate-statism, i.e., fascism — not full blown fascism yet, but well on its way. Under such a regime, government becomes a “partner” to all corporations, and they, in essence, operate jointly. But as Ayn Rand pointed out decades ago, what kind of “partnership” can there be when one of the partners makes use of arbitrary dictates backed up by guns and the law?

Indeed, what kind of “partnership” is it when Washington’s black limousine crowd skims off whatever profits it can bamboozle 51% of the people to vote for? What kind of partnership is it that allows businesses to continue to operate only if they remain obedient to Washington’s dictates? This is not free enterprise! This is the evolution of economic fascism! Our corporations in America become more and more fascist every decade because the Federal Government assumes more and more control over them through regulations or tax policy, or both. Ironically many corporations welcome the omnipresent regulatory arm of government, because it can often be used to monopolize their markets and protect them from competition.

A perfect example of corporations welcoming government involvement to establish a monopoly of their industry is our mega-banks and the Federal Reserve System. Through special privilege legislation granted by the Federal Government, our banks have succeeded in forming a giant fascist cartel that now wields enormous and dangerous power over our economy and our lives. Because the Federal Government has granted to the banking cartel the power to indiscriminately print paper money via the legal tender laws, they can now siphon off our wealth at will through monetary inflation.

What we have here is the two-fold tyrannization process that Marx advocated: Corrupt the language and the money, and capitalism will fall. Take all the important words that support a free society and turn them inside out. If it is done in a sophisticated enough manner, the intelligentsia will buy into it, and the people will follow. Combine the debasement of words with a debasement of money through a centralized government-run bank, and a free society can be enslaved. Is this not what has been happening to us over the past century in America? Vital words such as “freedom,” “private,” “rights,” and “enterprise” are being twisted in the schools and the media to mean what the collectivists want them to mean. In addition, the value of our money is being steadily depreciated to line the pockets of mega-bankers and government bureaucrats. And the people are ignorantly buying into it to sanction more and more government.

Marx’s prediction is coming true, but ironically not in the form of his espoused socialism, which died in 1989 with the collapse of the Berlin Wall. It is coming true in the form of Mussolini’s “corporate statism.” The collectivists of the world have merely shifted to the ideology of fascism; their tyrannical goals are alive and well in both Moscow and Washington.

Fighting the Tyrants in Washington

Hopefully the reader can see that fascism is growing in America through government intervention into the economy and the myriad controls that Washington forces upon our businesses and banks. But it is not inevitable; we do not have to meekly tolerate its growth. Fascism (like any other form of collectivism) cannot be sustained without confiscatory taxation. Thus if we wish to stop today’s tyrannical drift in Washington, we must become concerned with RADICAL TAX REFORM.

Any perusal of history shows that every dictatorship that has ever solidified its tentacles around its citizens’ lives has used the ability to tax their income as its lever to power. For this reason, the Founders were firmly committed to a country WITHOUT AN INCOME TAX. Therefore this must be our ultimate goal — total repeal of the income tax. But in fighting this fight, we must remember two things: 1) We’re up against fascist mentalities. They are ruthless, totally amoral, and in love with power over all other pursuits in life. They have formed a tacit alliance with masses of unthinking voters by subsidizing them at the expense of those productive members of the middle and upper classes. To overthrow this corrupt game will require courage and commitment of the highest order. 2) Secondly, we must understand that while radical LEGAL change can sometimes be won quickly in the courts, radical POLITICAL change comes about only through incremental victories.

Those who have formed the anti-income tax movement in America today obviously possess the courage to fight — people like Irwin Schiff, Larken Rose, Bob Schulz and their followers. These are the modern day Samuel Adamses and John Hancocks of America. I have the utmost respect for them. They have put their money where their mouth is. They’ve risked, and often, sacrificed their personal freedoms in the process. They have challenged Goliath armed with their Constitutional slingshots, and they have struck some mighty blows. Goliath is still standing, yes, but no tyranny can forever prevail in the face of such committed patriots. A day of liberation is coming.

But in the meantime, in order to speed up the process and increase our chances of winning, I believe what we need is a two-pronged attack on the federal income tax: 1) attack the actual existence of the tax and its application legally through the courts as Schiff, Rose, Schulz, et al are doing, but also 2) attack the progressivity of the tax through political channels as I have suggested in the AFR Mission Statement. This way we have a back-up option for reform if the Schiff-Rose-Schulz constitutional challenges continue to get stonewalled by corrupt judges.

Our problem lies in the fact that the courts are basically corrupt. Most federal judges simply look the other way as the U.S. Attorneys engage in contemptible fabrications when the issue of the income tax is brought before them. Why? Because the judges know that if the income tax is declared UNconstitutional in either its writing or its application, then what is to replace it to shore up all the government programs and bureaucracies that have been amassed over the years (about $1 trillion worth of expenditures)? They fear the system will implode without the income tax; and no judges are going to opt for that. They are going to PRESERVE the system at all costs. They will justify their corruption of the Constitution in regard to the income tax with the convenient excuse that “it’s in the national interest.”

Thus I have grave doubts whether any court in this land will soon declare the income tax to be UNconstitutional, even in application, as long as massive government bureaucracy needs to be paid for. The courts will always preserve the system by sophistry and semantic corruption.

This means that, though Irwin Schiff, Larken Rose, Bob Schulz, et al are fighting the good fight, it may not be enough, or at least not enough to repeal the income tax in our lifetimes! In my opinion, we will have to dramatically reduce government first before we can get the courts to act responsibly and declare the income tax to be UNconstitutionally applied, and then eliminated. This is because we will then have a government that can be supported by tariffs and excise taxes as the Constitution authorizes. As a result, the judges will not fear that the system will collapse, and they will begin to interpret the law correctly.

The position of the anti-income tax movement has always been that we don’t have to worry about the government being supported in the absence of income tax revenues because we can fund all legitimate federal functions with tariffs and excise taxes. This is true; we can fund the legitimate functions in this way. The problem consists in getting from where we are today to legitimacy. This is a goal that cannot be achieved overnight. While phasing down to a smaller more Constitutional structure, the government will still need revenues.

For example, the Federal Government took in about $1.2 trillion in revenue from the income tax in fiscal year 2000. These revenues went toward supporting a lot of waste and boondoggles. But let’s say that we chopped $400 billion of waste in three years as The People’s Budget showed could be done [Regnery, 1995]. We still have $800 billion to account for.

Let’s then say that we somehow convince the American people to abolish the Fed and pay off the national debt by swapping non-interest paper (money) for interest-bearing paper (bonds) as Vincent LoCascio recommends. By phasing out the privilege of fractional reserve banking over 10 years, his plan would be non-inflationary, and it would chop another $300 billion in annual interest.

We now need only $500 billion in revenue to fund the military and other assorted functions. Would tariffs and excise taxes suffice at this juncture? Perhaps, especially if a small national sales tax of say 3% is enacted (a sales tax is defined in the dictionary as an “excise” tax, and would, according to some legal minds in the tax reform movement, be Constitutional).

How to Better Insure Victory

But the question is how do we get from where we are to legitimacy? I submit that this can best be done by eliminating the progressivity of rates in our present tax system. It is progressivity of rates that leads to “infinite demand” for government services, which causes relentless government growth. But if everyone were required to pay out of his own pocket (i.e., with a flat tax), then the American people would not want all this government expansion. In fact they would suddenly want just the opposite. They would start voting for those politicians that campaigned on REDUCING government instead of EXPANDING it. We would have a monumental shift in political opinion in this country simply by eliminating progressivity. If combined with a restoration of gold backing to the dollar, it would stop government growth cold, and in fact start shrinking it.

Of course, I could be wrong in my estimation of the establishment’s ability to continue to stonewall in the courts. The Constitutional challenges that Schiff, Rose and Schulz are raising could conceivably bear fruit sooner than anticipated. Justice has a strange way of working itself out sometimes. Right when things look bleakest is often right before an amazing breakthrough comes that liberates us all. But any objective look at prosecutors and judges tells one that they are tremendously skilled at twisting language to serve their special purposes. They learn very early in life the art of sophistry and how to combine it with twisted semantics to fashion falsehood into bogus legal decisions that will be tolerated by an unthinking public. This is how tyranny comes to a country — via the twisted sophistry of its schools and its courts.

One thing I am sure of is this: There can be no hope for America until people understand the connection between progressivity of tax rates and government expansion. And there can be no hope until they understand that our currency must have gold to back it in order to keep it sound. I don’t think the people are quite ready yet to listen to these two truths, but they will be ready to listen when our financial system implodes sometime in this next decade.

I have read most of Irwin Schiff’s books, and I think that he brilliantly attacked the illegality of the income tax. Also I am somewhat familiar with the formidable works of Larken Rose and Bob Schulz. However, just like Schiff before them, I fear that Rose and Schulz will end up getting stonewalled because of the dilemma in which the judges find themselves. They can’t interpret the law honestly without destroying the system. So they will continue to misinterpret the law, suppress the truth, and rationalize their stand — using the “national interest” as justification.

This is why we need a two-pronged attack. If we concentrate on “progressivity of tax rates” as well as the “legitimacy of the tax itself,” and if we promote our cause through a political campaign to the people as well as a legal appeal in the courts, we could increase considerably our chances of winning and reversing government expansion. What a monumental achievement that would be! In other words, we must not rely solely on the minutia of tax law and its constitutionality because the judges will probably continue to rule in favor of preserving the fascist system.

Also, we must never allow ourselves to fall for the establishment’s definition of key words like “private” and “free.” Such semantic distortions are used to perpetuate more collectivism. The dictator mentalities need for everyone to believe that if business entities are always labeled “private” and “free,” that makes them so despite the fact that the Federal Government is controlling and manipulating their economic interactions and confiscating their profits.

“Words mean what I say they mean, Alice,” said the Mad Hatter. Our Mad Hatters are the fascists who sit in our courts and teach in our schools. We need to conduct an end run around them. That’s what I have in mind with the two pillars strategy for a third political party that I have outlined in the AFR Mission Statement. But this would require enacting a modest flat tax while we are working toward the total abolition of the income tax. Are the Constitutional purists willing to do this? Hopefully they will be.

With the income tax and Federal Reserve abolished, the American Republic would be reborn. The Founders’ vision would once more be a magnificent part of human history. We as a people would once again be free. This will not be easy; it will require all our efforts, both intellectual and activist, pulling together with every ounce of courage we can muster. But when the tide has finally changed, and America is brought back to her rightful form of government, the sense of reward will be unimaginable. That shining city on the hill that the philosophers talk about will be ours to have and enjoy. And if we were to wisely construct appropriate Constitutional amendments to prohibit any recurrence of an income tax and a central bank, then our shining city on the hill could be a reality for our children and their children for centuries into the future.

This is, after all, what the Founders had in mind in 1787. We were supposed to be a free country, not just for the 19th century, but for all of time. What a resplendent vision to fight for. It can happen if we understand the nature of the powers that oppose us, and if we understand the tricks and tactics that they are using. It’s all in the words we use, the money we accept, and the taxes we tolerate. These need to be made true and fair again.