Wednesday, July 11, 2007


(By Stevan Douglas Looney, JD)

When somebody says that s/he is a “taxpayer,” typically s/he means that the taxes on our “incomes” from whatever source derived, and that are assessed and collected by the national and state governments, are used to pay for the various expenses and “essential services” provided, or so graciously bestowed upon some of us by government (the take from Peter to pay Paul paradigm); and that, therefore, s/he is entitled to advance an opinion and to take a stand on some issue or other. When a person uses that term, or one like it, s/he also expects the politicians to listen and take heed.

When I hear this common refrain I shake my head.

To be fair, although I have never used this term, except in jest or as an exaggeration to make a point, as recently as about four years ago I would not have thought to question the core meaning and intent of this exhortation. Speaking just of the federal income tax for purposes of this essay, and in order to simplify the topic without in any way detracting from the accuracy of what I am setting forth herein, when someone makes that statement in a serious way, s/he sincerely believes that his or her income taxes are going to pay for the expenses necessary to operate the national government and to provide for we, the people. This commonly held belief, however, is not true. It has not been true for quite some time. And, with each passing session of Congress and each election cycle, it becomes less and less true, or more and more false; depending perhaps on whether you like to look at the glass as half full or half empty.

To illustrate the point, I would like to share some facts with you; facts that you may find startling and which may give rise to cause for concern. At a minimum, I hope it will give you cause for further research and investigation into these critically important issues; followed by appropriate lawful action.

Fact No. 1: Very little, if any, of the taxes that you pay to the national government on your income (assuming you pay any income tax) is used to pay for the expenses and services that our national government ostensibly provides to we, the people.

Fact No. 2: Most, if not all, of the money, so-called, that the national government, i. e., Congress, appropriates and then uses to pay for the expenses of government is borrowed from central banks, principally from the Federal Reserve.

Fact No. 3: All “money”, i.e., Federal Reserve notes (those pieces of paper in your wallet, purse, pocket, or under your mattress), coins (those clad sandwich copper alloy things), and “weightless photons in the electromagnetic ether” (computer or electronic money) in existence, exists because someone (including business entities), somewhere, at sometime borrowed the “money” and still owes it to a central bank. This process is often referred to as “monetizing the debt,” but is more commonly known as credit. (At its core, credit is our ability and willingness to repay debt, which lenders measure by credit scores and other ratings.) All such “money” is debt-based. In January 1934, Congress terminated the right and ability to redeem “money” for gold. Since 1933-34, no one in the US has been able to “pay” a debt, we have only been able to “discharge” a debt by passing the debt from one holder of the “money” (say, you) to another holder of the “money” (say, me).

Fact No. 4: Most, if not all, of the “money” that is collect by the IRS, paid to the U.S. Treasury and handed over to the US government in the form of income taxes, is applied to the interest, but not the principal, on the “money” that was borrowed from the central banks; again, principally the Federal Reserve, which is the central bank for the U.S. After deducting its expenses and administrative costs, the Federal Reserve remits to the U.S. government the balance of the “money” that was paid towards the interest. The Federal Reserve is a private bank, not a government agency, and it receives many billions of dollars annually from U.S. citizens and non-citizens.

Fact No. 5: The national debt as of July 2007 is 8.9 trillion dollars and rising. The interest on the national debt for fiscal year 2006 has been reported to be 245 billion dollars. (It is probably closer to 500 billion dollars.) Congress has raised the debt ceiling from 3 trillion dollars, to 6 trillion dollars, to 9 trillion dollars. That is, Congress has authorized the national government to borrow up to 9 trillion dollars. (Given that the 9 trillion dollar mark has almost been reached, it is a sure bet that Congress will soon raise the debt ceiling another 3 trillion or so.)

Fact No. 6: We, the people, have been saddled by Congress, the Executive, the Judiciary, and the central banks with the burden of paying, rather, discharging, the national debt.

Fact No. 7: We, the people, will never be able to pay/discharge even the interest on the national debt, let alone any of the principal. (Whether this debt can or should be forgiven invokes interesting and difficult issues.)

Fact No. 8: Congress, the Executive, the Judiciary and the central bankers know (and probably intend, see Fact No. 9) that we, the people, will never be able to pay/discharge the national debt.

Fact No. 9: If the principal and interest on the national debt (and all debt issued from a central bank, whether private or public debt) were some how paid, discharged or forgiven by the central banks that created (yes, created) and lent the “money,” the supply of “money” would be reduced by that very same amount. [1] This is so, because, for every dollar of debt-based “money” paid to, or discharged or forgiven by, a central bank, one dollar of “money” is extinguished on the so-called books of the bank(s) and that “money”, thus, ceases to exist. (The process just described is the reciprocal of how “money” comes into existence. That is, for every dollar of debt-based “money” lent by a central bank, one dollar of “money” is created by entries on the books and records of the bank, in some manner of credit and debit bookkeeping, and that “money,” thus, comes into existence.) The event or process of reducing the money supply below a certain threshold would, in turn, trigger an economic depression to one degree or another. The more “money” that is taken out of circulation, the more severe would be the depression. This is one reason why politicians and central bankers will only occasionally willingly allow significant portions of the debt to be repaid, discharged and/or forgiven, and will usually continue to cause the debt to grow, or at least not fall below a certain level—unless and until they want a depression--as they have done in the past. Economic depressions do not just happen due to invisible and unknown economic forces, they are planned and created by the intentional contraction of the “money” supply. (Concerning the past, 1913 is a very, very important year in the area of monetary policy and taxation in the U.S. Among other things, the Federal Reserve System was established in 1913, as was the federal income tax through the ostensible ratification of the 16th amendment to the U.S. Constitution. It is no coincidence that these two events occurred in the same year.)

Fact No. 10: Borrowing by the national government (and state and private borrowing for that matter) from central banks or other banks of issue, increases the supply of “money,” which causes inflation. (Inflation of the money supply is to be distinguished from price inflation. They are related, but with price inflation other economic and social factors enter the equation.) Inflation leads inexorably to the appearance of rising prices for goods and services. In times of inflation, typically and generally, the price of goods and services do not increase, but rather, the purchasing power of “money” decreases.

Fact No. 11: Inflation is a tax. It is a hidden tax. Inflation is a tax because it is the means by which the national government acquires the money to pay the expenses of government; with the burden of inflation then allocated across the board to we, the people, (although, for myriad reasons, inflation is felt more by some than others) in the form of what appears to be higher prices for goods and services. It is a hidden tax because the cost of inflation is not withheld from your income by your employer, and you do not write a check for this tax each quarter or once a year on or before April 15th. Rather, you pay this tax at the register when you buy goods and services. You pay the hidden tax of inflation in addition to all the other visible direct and indirect taxes you pay for goods and services. Congress, the Executive, the Judiciary and the central bankers know that inflation is a hidden tax, although they will not admit that. They are the ones who keep, or try to keep, it hidden from we, the people. They know that if sufficient numbers of we, the people (that elusive critical mass), were to discover what is being hidden from us, we would demand an end to unbridled government borrowing from central banks, as well as out-of-control spending. Indeed, we might even demand the unthinkable—a return to Constitutional money, i.e., silver coin and gold, and a return to limited government as envisioned and intended by the framers of the Constitution.

Fact No. 12: The federal income tax is, in large measure, designed to take some “money” out of circulation in order to reduce the rate of inflation. Thus, a principal purpose of the federal income tax is to attempt to bolster the purchasing power of “money” and hold down or prevent the apparent increases in the price of goods and services. The hidden tax of inflation consumes some or all of any increase you may receive in your income. (It is confiscation and wealth re-distribution at its worst, or best, depending on where you fit in.) So does the direct, un-apportioned tax on your income, i. e., the federal (and state) income tax. All too often, inflation results in a net loss of income even after a raise in your salary or wages, due to the reduced purchasing power of “money.” So, too, does a direct, un-apportioned tax on your income. There is no practical difference to your pocket book and bottom line between inflation and taxation. There is, however, a huge practical benefit to the politicians and central bankers who tax us covertly by inflation, rather than overtly by direct and indirect forms of taxation.

Fact No. 13: Borrowing by the government from a central bank, e.g., the Federal Reserve, is unnecessary and is inimical to the interests of we, the people. If it wanted to the national government could create “money” itself and spend and/or loan it into existence without paying any interest to central banks. That is, it could cut out the middleman and save many, many billions of dollars annually. Better yet, the national government could, and should, return to Constitutional money, i.e., silver coin and gold, and rid the Nation of worthless, irredeemable, debt-based, legal tender created by the fractional reserve banking system called the Federal Reserve.

In fine, we are a nation of debtors, not just taxpayers; and more the former than the latter. Indeed, you are a “debtpayer.” We all are. This is so even if you have never borrowed a dime and even if you currently owe no “money” to any commercial lender or central bank. As of July 2007 every man, woman and child in the U.S. owes about $30,000. Every newborn owes his or her pro rata share of the national debt. That is arguably one reason why a social security number is issued at birth; when in the not too distant past a SSN was not issued in the U.S. until a person attained the age of 16; an age when one typically entered the workforce, if only as a part-time, temporary worker.

The federal income taxes we pay are primarily to service some of the interest on the national debt and to serve as a hedge against inflation by taking money out of circulation, not to provide services for we the people or to fund the expenses of the national government. Don’t believe me! Please, look into this for yourself. Check the sources I have provided to you. Check other sources too.

After we (you) have checked the sources and armed ourselves with the facts and the truth, we should all confront our elected and appointed officials with the facts and demand answers and solutions to the dire economic, monetary and fiscal issues confronting this nation. When we do that, but not before, all else that ails us as a nation will fall into place, root and branch.

But, if you are simply content with whining about out of control and uncontrollable government borrowing and spending, you might consider dropping the “I’m a taxpayer, man” line and preface your remarks with: “I’m a debtor too, man.” Better yet, just tell them you are a “debtpayer.”

(July 10, 2007, revised July 13, 2007)

Stevan Douglas Looney is a lawyer who practices in Albuquerque, New Mexico, and has, like many other American patriots, taken it upon himself to study and gain a working understanding of monetary and income tax laws and policy.


1. G. Edward Griffin, The Creature From Jekyll Island; William Grieder, Secrets Of The Temple: How the Federal Reserve Runs the Country; Devvy Kidd, Why An Income Tax Is Not Necessary To Fund The U.S. Government, ; Bureau of Public Debt,

2. G. Edward Griffin, The Creature From Jekyll Island; William Grieder, Secrets Of The Temple: How the Federal Reserve Runs the Country; (The federal income tax was imposed in 1913. Consider that from 1787 (the date the Constitution was ratified) to 1913, a period of 126 years, the U.S. operated quite well, typically with a surplus, and without an established income tax.)

3. H.R. J. Res. 192, 5 June 1933, Ch 48, 48 Stat. 112; Act of Jan. 30, 1934, § 6. 2 (b) (1), 48 Stat. 337; cf. Edwin Vieira’s scholarly work, Pieces Of Eight, Vol. II, pp. 984-1024 (discussing at length HJR 192); G. Edward Griffin, The Creature From Jekyll Island, (Ch. 8, The Mandrake Mechanism).

4. G. Edward Griffin, The Creature From Jekyll Island.

5. U.S. National Debt Clock,
; U.S. Treasury website (Treasury Direct),

6. Edwin Vieira, Pieces Of Eight, Vol. I and II, passim; G. Edward Griffin, The Creature From Jekyll Island, passim; William Grieder, Secrets Of The Temple:How the Federal Reserve Runs the Country, passim; Eustace Mullins, Secrets of the Federal Reserve, ; Federal Reserve Act, 12 U.S.C., ch 6, 38 State. 251 (Dec. 23, 1913); H.R. J. Res. 192, 5 June 1933, Ch 48, 48 Stat. 112; Act of Jan. 30, 1934, § 6. 2 (b) (1), 48 Stat. 337.

7, 8, 9, 10, 11 and 12 Edwin Vieira, Pieces Of Eight, Vol I and II, passim; G. Edward Griffin, The Creature From Jekyll Island, passim; William Grieder, Secrets Of The Temple: How the Federal Reserve Runs the Country, passim; Stephen Zarlenga, The Lost Science of Money; Eustace Mullins, Secrets of the Federal Reserve, ; John Maynard Keynes, The Economic Consequences of Peace (1920).

13. Stephen Zarlenga, The Lost Science of Money; Edwin Vieira, Pieces Of Eight, Vol. I and II, passim; G. Edward Griffin, The Creature From Jekyll Island, passim; U.S. Constitution, Art I, Sec. 8, cl. 5 (“The Congress shall have power [ ] (5) To coin money, regulate the value thereof, and of foreign Coin, and to fix the Standard of Weights and Measures [ ].“); Art I, sec. 10, cl. 1 (“No State shall [ ] coin money, emit bills of credit, make anything but gold or silver Coin a Tender in Payment of Debts [ ].”)

Other Sources:

Americans For A Free Republic (Nelson Hultberg)

American Monetary Institute (Stephen Zarlenga, author of The Lost Science Of Money)

Carolyn Baker, U. S. History Uncensored, What Your High School Textbook Didn’t Tell You (A Curriculum Abstract For U.S. History 1865 to the Present), Universe Books, 2006

Catherine Austin Fitts, Solari,

Debt Money,

Federal Reserve Board ;

Freedom Force International (G. Edward Griffin, author of The Creature From Jekyll Island)
(One of the very best sites for well-balanced and reasoned information and commentary in the area of money and taxation)

Ludwig Von Mises Institute

US Comptroller of the Currency (Administrator of the National Banks)

Russo, DVD documentary, America: From Freedom To Fascism,

The Money Masters DVD documentary,

[1] It can be argued, and it appears correctly so, that only the principal on the “money” loaned into existence needs to be repaid, discharged or forgiven to withdraw “money” from circulation. That is, the principal plus interest of all loans from central banks, exceeds the money in circulation. This is because when a loan is made only the principal is created, not the interest. For example, a loan of $100,000 at simple interest of 10% to be repaid in one year will result in a total payment of $110,000. Yet, the bank of issue making the loan will only create $100,000, less the reserve requirement of about 10% of the loan. The borrower must compete in the market place to obtain the other $10,000. Under this system, there are always winners and losers. It is a zero sum game.
[2] The number preceding the source relates back to the number of the corresponding fact(s). The author does not necessarily subscribe to or share in all of the views and opinions held by the authors of some of the sources presented herein. The sources are provided as a service, with the intention that the reader might access these materials in the course of the reader’s research. The reader is urged to use his or her independent judgment to arrive at logical conclusions based upon sound reasoning.

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