The Quiet Tax

...Because the Quiet Tax began the problem in the first place, the solution is of course to cut taxes to give back to workers what the progressive income tax overtaxed...

...In 20 years, if his pay increases merely offset the rise in the Consumer Price Index, his annual salary would be $103,210, which would put him in the 70% tax bracket...

...it's a quota system...

...Now you know that $722 million isn't going to save that military situation at all...

...In my opinion, few topics have produced so much intellectual misfortune as the ultimately unsuccessful republic founded by the Germans at Weimar in 1919—and rapidly subverted by Hitler in 1933...

...It is as clear as the sun in a noonday sky, as Sam Ervin likes to say, that if this process continues the American economy not only will have no growth, but will move backwards...

...No one should begrudge the government its fair share of an increase in income that simply reflects inflation, but in jumping up tax brackets individuals have to yield more than proportional shares of their incomes to the government, with dire consequences to the economy...

...When the inflation rate was only two or three percent a year, nobody paid much attention to this government subterfuge...

...He deals with the Weimar period as a self-contained epoch rather than as the prelude to a wholly predictable catastrophe...

...As a mass political movement, National Socialism distorted thought by vulgarization...

...Only the government grows fatter, inexorably expanding while the private sector shrinks...

...The difference between the 52% and 43% reflects the regressive nature of the Quiet Tax, which works most against people who are in nontaxable brackets, by moving theminto taxable brackets, and not at all against people in the highest bracket, since they can be pushed no higher...

...A: No, I think Watergate just gave us the PR to cover up, and a lot more bogus fears...

...It's confusing when President Ford gets up and demands $722 million for South Vietnam...

...Q: What about your magazine itself...

...The already progressive tax schedules are becoming steeper in progression, and nominal incomes are jumping faster up the brackets in an attempt to maintain real incomes in an inflationary era...

...It injected a lot more silliness into public discourse because I must say I have yet to see the tablets handed down containing those great lessons that we're all to learn...

...If he wanted to save that military situation he'd have gotten up and demanded B52s...

...If it does, we get more inflation...

...The most extreme racial and imperialist policies of the Nazi movement had only a tangential connection to those views being advocated by the major ideologues and intellectuals of the twenties...

...The more serious roadblock is that while there's nothing Congress likes better than to cut taxes, there's nothing it loathes more than to cut taxes for the well-to-do...

...it's a "goal" system...

...When Nixon went to China and popped off in the way he did about the Great Wall and Chinese society and utterly ignored the enormous bloodshed and the terrible tyranny that existed and exists now in China, it was inevitable that he would confuse a great many people in America, and our people don't need to be confused any more than they already are...

...When you have inflation," he says, "the costs of government go up, and if you didn't have the extra revenues you get by people moving into higher brackets Congress would have to raise taxes...

...At this point they would owe the government the tax on a "capitalgain" of $88,210...

...Moreover, the Nazi victory was achieved through a series of accidents, some of them turned to Hitler's advantage by the blundering and arrogance of military and political leaders, but not by their predilection for an "Aryan Europe...

...As it did in the current recession, Congress usually obliges with both...

...Senator Buckley introduced an indexation bill and got mild support from the likes of Senators Proxmire and McGovern...

...While there has been serious scholarship on Weimar Germany (the books of Karl Bracher come most readily to mind), accounts of how "the Germans tried democracy" (to quote the title of one of the most popular examples of this genre) often tend to generate more heat than light, and to be characterized by a certain smugness masquerading as righteousness...

...Similarly, a couple that buys a house today for $15,000 would, at a 10% annual inflation rate, need to sell it for $103,210 to recoup the original real investment after 20 years...

...With the latter result, everyone turns to Congress with pleas to stimulate the economy, either through increased spending or through decreased taxes...

...Why, you know damn good and well what a goal system is...

...Fellner also calculates that the Quiet Tax got $7 billion more from businesses than it should have, by snatching away unrealized inventory "profits" that are only a figment of inflation...

...I get the impression a businessman always thinks an intellectual is up to something, and I guarantee I have fewer businessmen associated with me in any way than the New Republic or The Nation...

...Unfortunately, issues are deeper than that...

...The bureaucracy degrades it so much...

...The government thus gets not only a proportional share of any wage increase, but an added dollop as well...

...A: No, I'm not proud of it particularly because I think Schumpeter's insight that businessmen or the bourgeoisie would never be able to defend itself against the antibourgeois elements is one of the lingering tragedies of Western life, because bourgeois society with all of its philistinism has ushered in more freedom and more prosperity for more people than any other system...

...By far the most important reason why politicians like the Quiet Tax is that it is political insurance against having to vote explicitly for tax increases...

...It would take an Act of Congress, but at least politicians would not have to vote directly to reduce taxes of the well-to-do and businesses...

...Why isn't indexation an idea whose time has come in the United States...

...Putnam's $8.95 come as a welcome surprise...

...Except for stopping inflation in its tracks from here on out, which is hardly a likely possibility, there seems only one solution to this diabolical process: an an-nual, automatic correction of the tax schedules to adjust for inflation...

...To anyone who has encountered such writings, Walter Laqueur's book should Weimar: A Cultural History by Walter Laqueur G.P...

...But on the assumption that the Quiet Tax will soon have inflation back into the double-digits, it is predicted here that indexation is an idea whose time is coming...

...If the Federal Reserve increases the money supply enough to accommodate this combined wage increase, inflation is spurred on a little faster...

...But almost all of them, whether Democratic or Republican, liberal or conservative, keep quiet about it, for one reason or another believing it serves their interests...

...It does so silently, automatically, daytime, nighttime, and Saturday, too...

...To maintain his purchasing power, the wage earner must demand a pay increase not only to offset inflation, but also to recoup the tax-bracket bite...

...A: As with all intellectual reviews we, of course, lose money...

...And because the high-income classes pay more taxes than the low-income classes, a tax cut that only adjusts for the overtaxation of inflation would mean Congress would have to cut higher income-tax classes more than lower income-tax classes...

...Politicians have a duty to carry on an intelligent discourse with the American people—not to confuse people and not to degrade political discourse any further than it already has been degraded...

...On January 1 of every year, Canadian taxes are lowered by precisely the amount required to correct for the inflation in the year ending the previous September...

...In contemplating it, Democratic spenders in the early 1960s drooled over several years of projected fiscal dividends and spent them in advance on the Great Society...

...This Quiet Tax results from the effect inflation has on the progressive income tax schedules...

...Book Review/Paul Gottfried The Sorrows of Young Weimar • • According to the German poet Heinrich Heine, there is "nothing so unfortunate as an unsuccessful revolution...

...Unlike most intellectual reviews, we're one of a few pro-capitalist magazines that actually loses money...

...I refer, in particular, to the work of obsessive Teutonophobes and grisled Marxist emigres from Germany, still posing, like Erich Fromm, as the former democratic adversaries of Hitler...

...There was a brief flurry of interest a year ago, when the Consumer Price Index was taking discouraging monthly leaps...

...Even mossback Republicans would blanch at having to vote for such an act...

...Indeed, politicians dressed it up by terming the increase due to overtaxation "the fiscal dividend...

...And, at best, Congress promised to give back about $3 billion of that in the future, if businesses stepped up investment in plant and equipment...

...Republican budget-balancers clammed up, hoping to one day use the magic fiscal dividend to reduce the national debt...

...In fact it is merely a matter of time before Bloomington invites us to leave...

...Jude Wannisid The Quiet Tax • Every day of the week the federal government raises your taxes...

...Professor William Fellner of the American Enterprise Institute, a former member of President Ford's Council of Economic Advisers, points out that in 1974 some 52% of federal income taxes collected came from households with incomes above $20,000...

...All in all, I think it is safe to say that by the time Tyrrell left Washington on his evening flight back to Southern Indiana, we were guaranteed that one more city would be added to the expanding list of cities to which The Alternative will never be invited to move its editorial offices...

...How could a sensible man out there in Wisconsin, Iowa or California actually believe that $722 million was going to do what Ford wanted it to do...

...Who can argue with a computer...

...And businesses are steadily clipped of the cash they need to replace old plants and build new ones...

...Congress loves to cut taxes, and everything would work wonderfully if the phony fiscal dividend were simply corrected by an Act of Congress every year in which there is inflation...

...In fact, Prime Minister Trudeau instituted this system in Canada two years ago and it works beautifully...

...But when inflation apparently subsided early this year, coming out of the double-digit range, interest in indexation waned...

...And all the politician needs is a little PR...

...First, The Alternative: An American Spectator October 1975 21 Congressional liberals insist on using some of that phony fiscal dividend to finance new or old spending programs that they say benefit their constituents...

...The same would occur with a share of stock...

...The act would merely state that if there is inflation in some subsequent year or years, a computer would automatically adjust tax brackets and inventory profits so that inflation doesn't overtax anyone...

...At a 10% annual inflation rate, for example, the wage earner whose gross income is $15,000 today would rapidly be pushed into higher tax brackets even though his real gross income would remain the same...

...For one thing, Laqueur rarely anticipates the unhappy ending of his story...

...They, too, believe as do all politicians that all business needs is a little PR...

...The process described above is precisely the path of Great Britain's economy, and the British government now controls 60% of that miserable country's national income...

...Although he does discuss the political and cultural rifts in German society that he believes aided Hitler's ascent to power, he also stresses the openness of history...

...Because the Quiet Tax works automatically against all income classes, an annual Act of Congress to correct its deleterious economic effects requires that the tax cut also be applied across all income classes...

...Almost every politician in Washington who is even half-bright knows it's going on...

...In the Tax Reduction Act of 1975, however, Congress rebated $8 billion to 1974 taxpayers, but gave only 15% to households with incomes above $20,000...

...In the jargon of the economics profession, this is called "indexation" of the tax system...

...then the Nazi vision of the world was further distorted by the whims and fantasies of Hitler and his confidants once they came to power, often at the cost of excluding the intellectual wrapping attached to the older party ideology...

...It's a rare politico who will make such an admission, but Russell Long of Louisiana, Chairman of the Senate Finance Committee, is not embarrassed at all to say he wants to keep the Quiet Tax around...

...The quota system is not a quota system...

...While Hitler's lunacies were often related to the intellectual currents prevalent in Germany and elsewhere during his formative years, they were, as Laqueur implies, double distortions...

...Their voluminous tirades against German character—against, as one putative scholarput it, "character flaws in the German tribes first revealed by the Romans"—can inspire almost as much distaste as the Nazi bigotry they purport to attack...

...Q: And you're not proud of it...

...22 The Alternative: An American Spectator October 1975...

...But two things prevent this from ever happening...

...If the Fed holds back on money growth to fight inflation, unemployment results...

...It'll be a great shame when this system fades from the scene, as I do indeed believe it will as long as businessmen refuse to take a reflective viewon an intelligent and philosophical approach to public life...

...If it doesn't, government spending simply replaces private spending and unemployment remains the same...

...Unfortunately, though, Senator Long doesn't quite understand the problem...

...Do you make money at all on this...

...But increased spending only leads back to the original problem, for the Treasury has to borrow the money to finance the spending, and the Federal Reserve has to print the money to accommodate the Treasury borrowing...

...At any given level of real income—by which we mean the purchasing power of an income rather than the mere dollar amount—households are moved from nontaxable to taxable brackets and from lower to higher brackets...

...I have yet to see the Congress operate intelligently and forthrightly...

...Q: Watergate did not at all expunge this from the system...

...In the current global recession, Canada's recession is among the mildest...

...He calculates that because of the nearly 12% inflation in 1974, the Quiet Tax picked up $8 billion more from individuals than should have been the case, and to correct for the overtaxation 43% of the $8 billion should have been returned to households with incomes above $20,000...

...And I've never voted for a general tax increase in thirty years...