Asher Sisneros

The United States of America was founded on one principle: democratic representation. After all, it was the lack of representation in Parliament regarding taxes that led to the legendary conflict in 1776. If Parliament abstained from taxing the colonies, which were outside of their jurisdiction, there would have been no war. For the Founding Fathers, this simple issue of taxation without representation was such a fundamental principle that they were willing to die for it. 

With that in mind, look at how far the U.S. has come. 250 years later, prosperity has had its toll on the moral condition of the American soul. What was once a nation full of proud patriots willing to sacrifice their lives to displace tyranny and embrace liberty, is now a nation of passive serfs. When did Lady Liberty perish? 

Shockingly, citizens in colonial America only paid the equivalent of a 1% income tax to the British Empire, a measure that was low by modern and historical comparisons.¹ Even so, the audacity of Parliament to implement taxes on the American settlers when they received no representation in Parliament was enough to send the Founding Fathers into a frenzy; enough for them to start a revolution. 

Despite the historical significance of the American slogan “No taxation without representation!”, it did not take long for the bureaucracy in Washington, D.C., to take its foothold and undermine everything fought for during the American Revolution. With the emergence of the Federal Reserve in 1913, the slogan initiating the birth of the nation was vanquished and transformed from a principle doctrine guiding the American heart to a mere footnote in history. Through its monetary policy, the Federal Reserve—an organization that acts independently from congressional oversight (i.e., independently from representation)—autonomously enforces the most crippling tax on the poor and downtrodden: the inflation tax. 

The inflation tax is by far the worst because it presents the facade of not being a tax. American citizens are raised to believe that 5% inflation per year is somehow natural. However, history proves otherwise. Both the Roman Empire and later the Byzantine Empire experienced prolonged periods with minimal inflation so long as they avoided currency manipulation.² Proponents of inflation will argue that it is a tool used to create wealth. However, this is only true for the wealthy who can afford to invest in assets such as real estate and stocks. The poorest in the country cannot afford to purchase appreciating investment assets, and the only thing that rises for them is the cost of living. As such, the inflation tax is not only an invisible tax enacted without democratic representation, but it disproportionately impacts the poorest class in society.

To quote Beardsley Ruml, the former chairman of the Federal Reserve of New York: “The United States is a national state which has a central banking system, the Federal Reserve System, and whose currency, for domestic purposes, is not convertible into any commodity. It follows that our Federal Government has final freedom from the money market in meeting its financial requirements. Accordingly, the inevitable social and economic consequences of any and all taxes have now become the prime consideration in the imposition of taxes. In general, it may be said that since all taxes have consequences of a social and economic character, the government should look to these consequences in formulating its tax policy. All federal taxes must meet the test of public policy and practical effect. The public purpose which is served should never be obscured in a tax program under the mask of raising revenue.”³ 

His premise—the premise of a Federal Reserve chairman—was that taxes are, as the name of his article suggests, obsolete for governmental revenue. The United States government can fund its ventures solely through the monetary policy implemented by the Federal Reserve, making other taxes unnecessary. 

If that is true, however, then why are we, the United States citizens, taxed so heavily? Dr. Ruml continues in his essay by arguing that taxes exist to promote (i.e., control) certain behaviors not to fund the government bureaucracy. This issue raises critical concerns. Not only is the inflation tax a tax implemented that the American people have no control over because the Fed is an autonomous agency, but the taxes that are passed in Congress are thereby crafted, as Dr. Ruml argues, to control American behavior. This truth is apparent when looking at the cigarette industry or the gasoline industry. In both cases, taxes are levied to promote certain behavior. In the case of cigarettes, the “sovereign” State levies obscene taxes on cigarettes because the populace is somehow incapable of evaluating the risks of tobacco themselves.⁴ Thus, they need the sovereign State to make decisions for them. The same is true of gasoline. Because the State has determined diesel fuel is worse for the environment, it taxes diesel more heavily⁵ to encourage automobile owners to purchase gasoline cars or electric vehicles. In both cases, the State uses taxes to promote behavior among her citizenry. 

This is perverse for two reasons. First, it is perverse that the State would rob her people of taxes when those taxes are unnecessary. If the inflation tax can supposedly pay for all of the government’s expenditures, the rest is purely excessive robbery. Secondly, it is an abuse for the State to levy taxes to promote behaviors that are supposedly in the name of the greater good. Thomas Sowell states: “This [the root of liberal political problems] is the notion that ordinary people cannot be trusted to make the decisions that they’ve been making, but they must be preempted—either by judges in the case of crime, or by the schools in their taking over the indoctrination of people’s children behind their back and against their protest… or taking money from the tax-payers and subsidizing behavior….”⁶ Sowell’s point is that taxation to control behavior completely rejects the autonomy of the individual man. It assumes all people are serfs to the government, incapable of thinking for themselves. That is a subhuman view of the populace, it is anti-democratic, and it rejects man’s individual sovereignty. 

In light of this, it seems redundant to keep both taxation systems. It is not so much that congressional taxes override the sovereignty of people to make decisions for themselves in and of themselves. It is not the tax itself that does that. It is the politician using the tax who corruptly tries to control the behaviors of his constituency. Thus, congressional taxes are only immoral to the extent that they attempt to control human behavior, and this only occurs when the Federal Reserve’s inflation tax is enough to fund the federal government. 

Once again, the issue regarding taxation is an issue of morality. One form of taxation is anti-democratic, and the other is not; one is anti-American, and the other is not. When Congress enforces taxes, the people receive representation. They elected each congressman. Some may argue that politicians care about the special interests of lobbyists more than their constituency. There is validity to such rebuttals. Even so, Congress cannot ignore the will of the people. At the end of the day, each congressman answers for their actions come Election Day. If the citizenry stood firm, Congress would listen. As Thomas Jefferson famously said, “The government you elect is the government you deserve.”⁷ While Congress certainly oppresses the people with immense taxes, the people still receive representation. The same cannot be said of the Federal Reserve’s inflation tax, and that is what makes it fundamentally anti-American. 

As long as the Federal Reserve exists and the inflation tax burdens middle-class America, her people cannot be truly free. Former congressman Dr. Ron Paul states: “Since the creation of the Federal Reserve, middle and working-class Americans have been victimized by a boom-and-bust monetary policy. In addition, most Americans have suffered a steadily eroding purchasing power because of the Federal Reserve’s inflationary policies. This represents a real, if hidden, tax imposed on the American people.”⁸ The American government presents the facade of protecting the life, liberty, and property of all her citizenry. This is a lie. The Federal Reserve is a private club of intellectuals and bankers endowed with sovereignty over the American economy. This is done to supposedly “protect” the populace from economic turmoil. Yet as Dr. Paul once again points out, the Fed achieves the reciprocal effect and only causes more economic turmoil than existed previously. He states: “From the Great Depression, to the stagflation of the seventies, to the burst of the dotcom bubble last year, every economic downturn suffered by the country over the last 80 years can be traced to Federal Reserve policy. The Fed has followed a consistent policy of flooding the economy with easy money, leading to a misallocation of resources and an artificial ‘boom’ followed by a recession or depression when the Fed-created bubble bursts.”⁹ The Federal Reserve’s sole obligation is to mitigate economic turmoil. It attempts to achieve this by maintaining consistent, reasonable levels of inflation and maintaining low unemployment. But as history proves, this organization is entirely incapable of that task. On every front, the Federal Reserve has failed in its objective. Despite this failure, it is still permitted to exist. The question is why? 

Fiat currencies such as the U.S. dollar all face the same issue: they have no intrinsic value. Aside from its standing as the world reserve currency, the dollar is virtually worthless. Unlike commodities, it cannot be used for productive material means, and in this capacity, it, like all fiat currencies, has no tangible value. The value it possesses is a charade. In this respect, the U.S. dollar is no different than cryptocurrency because both lack intrinsic value. Some worried the U.S. dollar would collapse in the near future because of reports that Saudi Arabia would stop using the “petrodollar” for its oil dealings. Though these reports turned out to be fake, Ryan McMaken from the Mises Institute points out that the trend line away from the dollar is still present¹⁰; it only means the U.S. dollar may not collapse as quickly as some were speculating. But the fact remains that it is a fiat currency with no tangible value. 

When evaluating the Federal Reserve’s failed track record when it comes to preventing economic disasters, evaluating the horrible ramifications of the inflation tax that only widens the inequality gap, and evaluating the wonderful track records of historical nations that did not engage in currency manipulation but linked their currencies to gold, it only seems sensible to immediately abolish the Federal Reserve and return to the gold standard. Even Alan Greenspan, the former chairman of the Federal Reserve, could not ignore gold’s implications. He stated: “Gold and economic freedom are inseparable…. Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process.”¹¹ 

Returning back to the central theme, it seems curious how any American would have ever permitted the creation of a beast as horrid as the Federal Reserve. At its core, it is taxing the American citizenry without representation. The Founders would be aghast. In fact, Thomas Jefferson told President John Taylor the following regarding a national bank: “And I sincerely believe, with you, that banking establishments are more dangerous than standing armies; and that the principle of spending money to be paid by posterity, under the name of funding, is but swindling futurity on a large scale.”¹² This nation has come far. Seeing as how the current inflationary tax is an invisible—unrepresented—tax on the middle class and the congressional taxes are implemented to control behavior and trample over the autonomous individual, it seems everything the Founders fought for regarding taxation has been eroded in a mere 250 years. To quote Lew Rockwell: “If you hate war, oppose the Fed. If you hate violations of your liberties, oppose the Fed. If you want to restrain despotism, restrain the Fed. If you want to secure freedom for yourself and your descendants, abolish the Fed.”¹³ We live in a democratic republic. How have the people allowed this? How have they sold their liberties? One generation demanded their freedoms, and our parents gave it away. This generation of Americans faces one inevitable question: which generation will we emulate?

1.  Dr. Gary North, “Tricked on the Fourth of July,” (Dallas, Georgia: Gary North’s Specific Answers, July 4, 2011), web. https://www.garynorth.com/public/8215.cfm ↩︎
2.  Rome: A Thousand Years of Monetary History, web. https://numismatics.org/rome-a-thousand-years-of-monetary-history/ ↩︎
3.  Beardsley Ruml, “Taxes for Revenue are Obsolete,” American Affairs, Vol VIII, No 1, 1946 ed. Garet Garrett (New York, New York: National Industrial Conference Board, Inc., January 1946), p. 36. https://cdn.mises.org/AA1946_VIII_1_2.pdf ↩︎
4. “How do state and local cigarette and vaping taxes work?”, (Washington, D.C.: Urban-Brookings Tax Policy Center, January 2024), web. https://www.taxpolicycenter.org/briefing-book/how-do-state-and-local-cigarette-and-vaping-taxes-work#:~:text=These%20taxes%20are%20sometimes%20called,as%20increased%20health%20care%20costs). ↩︎
5. Benjamin Taubman, “Why diesel is more expensive than gasoline,” (Washington, D.C.: CNN Business, July 26, 2022), web. https://www.cnn.com/2022/07/26/business/diesel-prices-gas/index.html ↩︎
6. Thomas Sowell, “Season 1: Episode 63: The Vision of the Anointed,” Think Tank with Ben Wattenberg, American Enterprise Institute, aired October 12, 1995, video of lecture, 20:05, https://www.youtube.com/watch?v=waEc4YbQQX0
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7. Thomas Jefferson, “The Debate and Government You Deserve,” ed. Patrick McCorkle, (San Fransisco, California: Medium, September 30, 2020), web. https://theprimacyofpolitics.medium.com/the-debate-and-government-you-deser-13fb3afb65ba ↩︎
8.  Dr.  Ron Paul, “Abolish the Fed,” (speech delivered at House Floor, Washington, D.C., September 10, 2002), paragraph 2, web. https://www.lewrockwell.com/1970/01/ron-paul/abolish-the-fed-2/ ↩︎
9. Dr. Paul, “Abolish the Fed,” paragraph 3. ↩︎
10. Ryan McMaken, “Saudi Arabia Drifts Away from Washington and the Dollar,” (Auburn, Alabama: Mises Institute, June 15, 2024), web. https://mises.org/mises-wire/saudi-arabia-drifts-away-washington-and-dollar
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11. Federal Reserve Chairman Alan Greenspan, “Gold and Economic Freedom,” Capitalism: The Unknown Ideal, ed. Ayn Rand (New York, New York: New American Library, 1966), web. https://economistsview.typepad.com/economistsview/2012/09/alan-greenspans-gold-and-economic-freedom.html ↩︎
12.  An excerpt from Thomas Jefferson’s letter: https://oll.libertyfund.org/quotes/thomas-jefferson-in-a-letter-to-john-taylor-condemns-the-system-of-banking-as-a-blot-on-the-constitution-as-corrupt-and-that-long-term-government-debt-was-swindling-future-generations-1816 ↩︎
13. Lew Rockwell Jr., “Help End the Fed on Lew Rockwell’s 80th Birthday,” (Auburn, Alabama: The Mises Institute, 2024), web. https://mises.org/mises-wire/help-end-fed-lew-rockwells-80th-birthday
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