The Darkest Hours

SUBHEAD: But like all addicts, we have to hit bottom before anything like clarity returns to our daily doings.

By James Kunstler on 18 December 2017 for Kunstler.com -
(http://kunstler.com/clusterfuck-nation/the-darkest-hours/)


Image above: The Republican senate leadership gloat after passing self-serving tax reductions for the wealthy. From (https://www.economist.com/news/united-states/21732096-todays-bill-does-not-much-resemble-1986-tax-overhaul-how-republican-tax-bill).

The Tax “Reform” bill working its way painfully out the digestive system of congress like a sigmoid fistula, ought be re-named the US Asset-stripping Assistance Act of 2017, because that’s what is about to splatter the faces of the waiting public, most of whom won’t have a personal lobbyist / tax lawyer by their sides holding a protective tarpulin during the climactic colonic burst of legislation.

Sssshhhh….

The media has not grokked this, but the economy is actually collapsing, and the nova-like expansion of the stock markets is exactly the sort of action you might expect in a system getting ready to blow.

Meanwhile, the more visible rise of the laughable scam known as crypto-currency, is like the plume of smoke coming out of Vesuvius around 79 AD — an amusing curiosity to the citizens of Pompeii below, going about their normal activities, eating pizza, buying slaves, making love — before hellfire rained down on them.

Whatever the corporate tax rate might be, it won’t be enough to rescue the Ponzi scheme that governing has become, with its implacable costs of empire.

So the real aim here is to keep up appearances at all costs just a little while longer while the table scraps of a four-hundred-year-long New World banquet get tossed to the hogs of Wall Street and their accomplices. The catch is that even hogs busy fattening up don’t have a clue about their imminent slaughter.

The centerpiece of the swindle, as usual, is control fraud on the grand scale. Control fraud is the mis-use of authority in applying Three-Card-Monte principles to financial accounting practice, so that a credulous, trustful public will be too bamboozled to see the money drain from their bank accounts and the ground shift under their feet until the moment of freefall.

Control fraud is at work in the corporate C-suites, of course, because that is its natural habitat — remember that silver-haired CEO swine from Wells Fargo who got off scot-free with a life-time supply of acorns after scamming his account-holders — but their errand boys and girls in congress have been superbly groomed, pampered, fed, and trained to break trail and cover for them.

The country has gotten used to thinking that the game of pretend is exactly the same as what is actually going on in the world. The now-seminal phrase coined by Karl Rove, “we make our own reality,” is as comforting these days to Republicans from Idaho as it is to hairy, “intersectional” professors of post-structural gender studies in the bluest ivory towers of the Ivy League.

Nobody in this Republic really wants to get his-hers-zhe’s-they’s reality on.

Ah, but reality wants to do its thing regardless of our wishes, hopes, and pretenses, and you can kind of see how these moves taken in the dark waning hours of 2017 will play out in the quickening weeks of 2018. Long about March or April, something’s got to give.

Other players around the world are surely eager to assist shoving this mad bull of a polity towards the critical state it deserves to enter, though we are doing quite enough on our own to put ourselves at ground zero of financial and political implosion.

The addiction metaphor does apply to America. We are simply addicted to our own bullshit. But like all floundering addicts, we have to hit bottom before anything like clarity returns to our daily doings.

When that does happen, it will be as far from intoxicating as you can imagine. The smoldering wreckage of The World’s Highest Standing of Living will be visible in a 360-degree panorama. A lot of familiar faces will be among the suddenly missing. But we’re already prepped for this by the sexual purges of the season.

One day, the reassuring figure of ole Garrison Keillor is there to remind you of the exquisite taste of Midwestern sweet corn on an August night; and the next morning, you’re up to your eyeballs in the colonic explosion of unintended consequences engineered by the least reassuring cast of characters ever assembled under one capitol dome.

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Trump won't cut taxes

SUBHEAD: It demonstrates the monumental magnitude of the Debt Trap that has enveloped the Imperial City.

By David Stockman on 1 April 2017 for Bonner & Partners -
(http://bonnerandpartners.com/reagan-adviser-why-trump-wont-cut-taxes/)


Image above: "The Nightmare" oil on canvas (30"x40") by Mark Bryan who says "The Kraken has been released from the depths, and the Trumpocalypse is at hand. Hang on tight, it’s gonna be a rough ride Back to when things were “great”." Click to enlarge. From (http://www.artofmarkbryan.com/the-nightmare/).

The mules of Wall Street were back at it again, buying the dips after the overnight whoosh downward in the futures market. Apparently, it will take an actual two-by-four between the eyes to break a habit that has been working for 96 months now since the March 2009 post-crisis bottom.

We think it is plain as day, however, that we are in a new ball game that the "stimulus-blinded” mules don’t see coming at all. To wit, they have been juiced for eight years running by the Keynesian apparatchiks at the Fed who needed permission from exactly no one to run the printing presses full tilt or to rescue the market with a new round of QE or an extension of ZIRP whenever the indices began to wobble.

But now, even the money printers have made it clear in no uncertain terms that they are done for this cycle, anyway, and that they will be belatedly but consistently raising interest rates for what ought to be a truly scary reason.

That is, the denizens of the Eccles Building have finally realized that they have not outlawed the business cycle after all and need to raise rates toward 2-3% so that they have headroom to "cut" the next time the economy slides into the ditch.

Instead, they are merely storing up monetary ammo for the next downturn.

But the Wall Street mules keep buying the dips anyway because they are under the preposterous delusion that one source of "stimulus" is just as good as the next.

And since the gamblers have now decreed that the "stimulus" baton be handed off to fiscal policy, it only remains for Congress and the White House to shape up and get the job done with all deliberate speed.
But they won’t.

Not in a million years.

The massive Trump tax cut and infrastructure stimulus is DOA because Uncle Sam is broke and the U.S. economy has slithered into moribund old age.

In that context, it’s not remotely the same as the 12  members of the FOMC sitting behind closed doors for two days jawing about the short-term economic weather; and then at the conclusion of their gabfest, ordering the New York Fed’s open market desk to flood the canyons of Wall Street with cash by buying another $80 billion of bonds with digital credits conjured from thin air.

Au contraire. Fiscal policy is inherently an exercise in herding cats and an especially impossible one when the cupboards are bare.

The essence of the matter at the present state of play is the legislative equivalent of "no ticky, no washy."

Without a 10-year budget resolution for FY [fiscal year] 2018 and associated reconciliation instructions, there is no possibility of passing a tax bill or even an infrastructure spending boondoggle.

But hammering out a budget resolution, passing it in each house, and reconciling the differences in conference would take months under the best of circumstances. But given the parlous state of Uncle Sam’s fiscal condition and the partisan acrimony that already suffuses Washington in the era of Trump, passage of a budget resolution by summer would be a miracle in itself.

Indeed, even the thought of surmounting this next daunting legislative obstacle course puts to rest this week’s particular Wall Street fantasy. Namely that after being burned by the Freedom Caucus on Obamacare Lite, the Trump White House will now "pivot" to the middle and form a coalition with the Democrats to make a deal on corporate tax cuts and infrastructure spending.

Yes, and if dogs could whistle, the world would be a chorus.

That is to say, there is no conceivable fiscal policy menu that could be agreed upon by Speaker Ryan, Nancy Pelosi, Chuck Schumer, and the Donald, and then be shoe-horned into a 10-year budget resolution.


In effect, the Fed is saying to Wall Street: "Price in" a recession because we are!

After all, our monetary central planners are not reluctantly allowing interest rates to lift off the zero bound because they have become converts to the cause of honest price discovery—-nor are they fixing to liberate money rates, debt yields, and the prices of stocks and other financial assets to clear on the free market.

Yet without a budget resolution and reconciliation instructions, there is not a fiscal stimulus "ticky" and no grand bipartisan compromise on building airports and slashing corporate tax rates.

So what lies directly ahead, therefore, is another bumbling attempt by the White House and Congressional Republicans to hammer out an FY 2018 budget resolution and what amounts to a 10-year fiscal plan. And it is there where the whole fantasy of the Trump Stimulus comes a cropper.

There are not remotely 218 GOP votes for what would be a $12 trillion-13 trillion add to the national debt with the Trump Stimulus program over the next decade—-even with all the "dynamic" scoring and revenue "reflows" that are imaginable.

To be sure, this is why the GOP Congressional leadership stoutly insists on a deficit-neutral tax cut. They are keenly aware of the debt monster they have been kicking down the road—-even if the headline-reading robo-traders of Wall Street are not.

What that means, in turn, of course, is that the rapidly fracturing Trump/Republican coalition must find the offsets on the spending side of the ledger.

In short, the whole enterprise amounts to budgetary madness and demonstrates the monumental magnitude of the Debt Trap that has enveloped the Imperial City.

And the “buy the dip” crowd will soon be getting that two-by-four between the eyes.

So now is not the time to buy.


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How big a deficit with Trump?

SUBHEAD: The U.S. debt ceiling is set to explode beginning this month under Trump’s planned tax cuts and spending.

By Benjamin A. Smith on 7 Mrch 2017 for Lombardi Letter -
(https://www.lombardiletter.com/how-much-is-the-u-s-debt-ceiling-how-high-will-it-go-under-trump-presidency/7724/)


Image above: Political cartoon by Jim Darcy on 12 April 2011  labeled  "Yes, we are open... until the debt ceiling collapses". From (http://www.cleveland.com/darcy/index.ssf/2011/04/us_debt_ceiling_editorial_cart.html).

Like the smell of Washington’s cherished Magnolia trees blooming in April, the waft of deficit spending is in the air.

The U.S. debt ceiling is poised to explode under Trump’s planned slash & burn tax cut policy, bringing with it significant budget uncertainty. How much is the U.S. debt ceiling in 2017 anyway? That’s a moving target depending on how fast Republicans can legislate tax changes through Congress.

As it stands currently, the U.S. debt ceiling is suspended until March 15, 2017 under an agreement struck by President Obama and Congress in late 2015. The last official debt ceiling limit was $18.113 trillion.

On March 16, however, the debt limit will reset to account for all debt issued while it was suspended. This could trigger something called “extraordinary measures” provisions, which are accounting maneuvers the government can use to temporarily keep the debt under the “limit.”

This maneuver would essentially legally prevent the United States from technically defaulting on its debt (Source: “Bipartisan Budget Act of 2015,” U.S. Government Publishing Office, last accessed March 3, 2017.)

Exactly how long these extraordinary measures will last is uncertain. It isn’t spelled out explicitly in the Budget Act, so it could be a few weeks or a few months, though many budget experts say it could last into August or September. It will be up to new Treasury Secretary Steve Mnuchin to avert a potential U.S. debt ceiling crisis before it begins.

Indeed, Steve Mnuchin has already stated his preference to avoid Congressional drama and raise the debt ceiling promptly. There’s no doubt the Treasury Secretary recognizes the importance of the situation. “Honoring the U.S. debt is the most important thing…I would like us to raise the debt ceiling sooner rather than later.” (Source: “New Secretary’s first job: Avoid a crisis,” CNN Money, February 13, 2017.)

Eventually, the current U.S. debt ceiling will be raised again beyond its reset level (likely north of $20.0 trillion). Politicians from both sides of the isle will look to extract concessions for votes, and a new limit will be born. But what will the U.S. debt ceiling 2017 look like once the ink is dry? This depends on several factors.

As the U.S debt ceiling is simply legislation limiting the amount of debt that can be issued by the U.S. Treasury, Congress (with the President as signatory) ultimately decides what the limit will be. Since the incumbent Republicans currently hold majorities in both the House of Representatives and the Senate, there’s reason to believe the President will attempt to push the limits of the debt ceiling.

How Much Is the U.S. Debt Ceiling in 2017?It’s important to look at context when attempting to ascertain how high the limit can be raised. After all, Trump has used debt financing his entire life to build his empire. As a former real estate mogul, the vast majority of properties couldn’t have been developed without it.

Trump has even self-proclaimed himself as “King of Debt.” There’s little reason to believe this mentality has changed significantly since his business years.

In fact, Trump has said as much. On the campaign trail, despite soaring debt levels, Trump stated that America should borrow more while rates are low. “What’s going to happen when the rates eventually will go up and you can’t borrow, you absolutely can’t borrow because it’s too expensive?

It would destroy our balance sheet, totally destroy the balance sheet. So you’d be paying so little interest right now. This is the time to borrow.” (Source: “Trump: This Is The Time to Borrow,” The American Spectator, August 11, 2016.)

And as readers might expect, planned proceeds of a larger U.S. deficit should filter into capital expenditures (CAPEX) projects throughout the country.

Construction development was Trump’s calling card as a civilian, and he’s indicated the desire to modernize the nation’s infrastructure once in the Oval Office.

Just a few hours after his election victory, Trump said “We’re going to rebuild our infrastructure, which will become, by the way, second to none.” (Source: “What You Need To Know About Donald Trump’s $1 Trillion Infrastructure Plan,” Fortune, December 21, 2016.)

While it’s clear that planned infrastructure spending will require the Federal government to borrow more if passed, it isn’t the only thing. Proposed tax cuts could cause upwards pressure on the U.S. debt ceiling as well.

According to The Tax Foundation’s “Taxes and Growth” model forecasts, Trump’s income and corporate tax reductions would cut federal revenue by between $4.4 trillion and $5.9 trillion on a static basis.

Even when the stimulatory effects to the larger economy are accounted for, the Tax Foundation still forecasts that revenues would decrease on aggregate between $2.6 trillion and $3.9 trillion (Source: “Details and Analysis of Donald Trump’s Tax Plan,” Tax Foundation, September 19, 2016.)

If proven true, the U.S. debt ceiling will need to be raised even higher to avoid the ballooning budgets deficits sure to follow.

As we can ascertain from the debt ceiling by year table below, the debt is rising fast enough on its own. Slashing revenue collection, while simultaneously increasing CAPEX spending is not a recipe for narrowing deficits going forward (as needed as it may be).

Components of Debt Subject to Limit, Full Year 1996-2015

	TOTAL
Fiscal Year	Debt Limit	$ Billion (U.S Debt, Actual)
1996	$5,500	$51,37.2
1997	$5,950	$5,327.6
1998	$5,950	$5,439.4
1999	$5,950	$5,567.7
2000	$5,950	$5,591.6
2001	$5,950	$5,732.8
2002	$6,400	$6,161.4
2003	$7,384	$6,737.6
2004	$7,384	$7,333.4
2005	$8,184	$7,871.0
2006	$8,965	$8,420.3
2007	$9,815	$8,921.3
2008	$10,615	$9,960.0
2009	$12,104	$11,853.4
2010	$14,294	$13,510.8
2011	$15,194	$14,746.6
2012	$16,394	$16,027.0
2013	$16,699	$16,699.4
2014	*	$17,781.1
2015	$18,113	$18,113.0

* At the end of FY2014, the debt limit was suspended. It was reinstated on March 16, 2015, at $18,113 billion.
Source: The Debt Limit: History and Recent Increases, Congressional Research Service, November 2, 2015

Recognizing the writing on the wall, the administration is already thinking of innovative ways to extend debt maturity beyond what is currently available.

Treasury Secretary Mnuchin caused a stir in the 5-30 Treasury yield curve by suggesting maturities on future Treasury issuance could be extended to as long as 50 or 100 years. Mnuchin stated,

“We’ll look at potentially extending the maturity of the debt, because eventually we are going to have higher interest rates, and that’s something that this country is going to need to deal with.”

(Source: “Steven Mnuchin Roils Bond Markets With Suggestion Of 100 Year Treasury Bond,” Zero Hedge, November 30, 2016.)

The United States Treasury’s longest dated issuance currently stands at 30 years, with 5.7 years being the average weighted maturity of outstanding U.S. debt.

What Does Raising the Debt Ceiling Mean for Average Americans?

Since the Federal Government breaks the debt ceiling on a regular basis, a higher ceiling effectively equals higher spending. Higher spending will lead to higher deficits if offsetting revenue is not achieved. Since taxation is expected to lag behind Federal outlays, the end result will be expanding deficits as long as the Trump administration is governing.

This will have consequences regarding consumer financing over time.

As indicated, there may be a plan in place to extend maturities beyond 30 year Treasuries to lock in low rates longer-term. But what if they’re unsuccessful in doing so?

Regardless, when the Federal Reserve purchases Treasuries, they usually unwind their portfolio to drain credit out of the system. If they fail to take action to unwind, they effectively increase the monetary base and erode the value of the dollar by creating excess dollars.

But it’s a tricky maneuver to unwind a portfolio when the Federal Reserve has been the biggest buyer in the market. So once they unwind, there a risk yield curve interest rates increase meaningfully, raising the costs of consumer finance.

Mortgages, credit cards, and car loans are among the most common consumer purchases on credit. This poses significant challenges to people who’ve become accustomed to easy credit and planned for lower payments.

Adding additional layers of debt will make the Federal Reserve’s job that much tougher down the line. It’s basically a can-kicking exercise for a later term, but eventually the consequences .come due.

But it’s not all bad news. Much of financing stemming from a large U.S. debt ceiling increase will flow into infrastructure spending, which is badly needed. According to the American Society of Civil Engineers (ASCE), the foremost experts in the field, this is certainly the case.

Their 2013 report card determined that America has a significant backlog of overdue maintenance across several area of infrastructure, and that modernization is desperately required.

Their worst grades were awarded to levees (D-) and inland waterways (D-), and they give the state of American infrastructure an overall grade of D, which is a barely passable assessment. (Source: “Save America’s Infrastructure, American Society of Civil Engineers,” last accessed March 3, 2017.).

And the neglect of America’s crumbling infrastructure is starting to have real word safety consequences for large segments of the population.

Recently, 180,000 residents had to be evacuated due to when heavy rains caused a 250-foot section of the Oroville dam spillway to collapse. The crisis has exposed the vulnerability of many public works projects due to age.

It’s estimated that by 2020, the number of dams in the U.S. living past their designed lifespan will reach 65%. The Oroville dam will be among them; it was built 49 years ago this year. (Source: “What the Oroville Dam Disaster Says About America’s Aging Infrastructure,” Fortune, February 18, 2017.)

So, what is the debt ceiling now? We should find out in the second half of 2017 what the new figure will be. Most would agree that debt is much too high right now, but politically, there’s little chance of a slowdown any time soon. Not with Trump’s extensive history of private deficit financing, or America’s need to modernize infrastructure.

Only a significant pushback from Congress, with deficit hawks like Rand Paul breaking ranks, can seemingly slow this trend down.

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California threat to cutoff $ to DC

SUBHEAD: State studying suspending money to Washington after Trump threatens sanctuary cities.

By Tyler Durden on 31 January 2017 for Zero Hedge -
(http://www.zerohedge.com/news/2017-01-28/california-threatens-cut-funds-washington)


Image above: Map of USA showing net donor states to federal revenue versus subsidized states. From original article.

[IB Publisher's note:  Map at bottom of article show the final Electoral College count. It is interesting to me that the Trump support came largely from states that are net receivers of federal tax dollars and the the states that went for Clinton are large net donor state to federal coffers. The "Clinton" states actually support the "Trump" states. Somewhere in there is a strategy for the future.]


With secession threats looming, the state of California is reportedly studying ways to suspend financial transfers to Washington after the Trump administration threatened to withhold federal money from sanctuary cities.

With California counties among the Top 10 who stand to lose tax-payer funding for providing sanctuary to illegal immigrants...


Image abovce: Chart of funds at risk in sanctuary cities. From original article.


KPIX5 reports that officials are looking for money that flows through Sacramento to the federal government that could be used to offset the potential loss of billions of dollars’ worth of federal funds if President Trump makes good on his threat to punish cities and states that don’t cooperate with federal agents’ requests to turn over undocumented immigrants, a senior government source in Sacramento said.

The federal funds pay for a variety of state and local programs from law enforcement to homeless shelters.

“California could very well become an organized non-payer,” said Willie Brown, Jr, a former speaker of the state Assembly in an interview recorded Friday for KPIX 5’s Sunday morning news.

“They could recommend non-compliance with the federal tax code.”

California is among a handful of so-called “donor states,” which pay more in taxes to the federal Treasury than they receive in government funding.


Image above: Map of USA showing final Electoral College results. From (http://www.businessinsider.com/final-electoral-college-map-trump-clinton-2016-11)


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India bans large denominations

SUBHEAD: India ditches 500 and 1000 rupee notes. For the first time the rich beg the poor to help them.

By Amrit Dhillon on 18 November 2016 for Sidney Morning Herald -
(http://www.inkl.com/news/for-the-first-time-in-india-the-rich-beg-the-poor-to-help-them)


Image above: Indian woman shows discontinued Indian currency notes and a photocopied ID card as she queues outside Reserve Bank of India. Photo by AP. From original article.

Driver Rahul Sharma, 25, remembers the exact day when his employer turned from a wolf into a lamb. It was November 9 when his employer called him  beta  - Hindi for "dear" - for the first time. The maid was asked to give him a cup of tea, for the first time.

"I was shocked at his sudden niceness. It went on for two days," said Sharma. For the past three years, his New Delhi-based employer has been abusive, bad-tempered, and imperious, often demanding that he turn up for work at 6am after finishing work at midnight.

"He didn't even bother to remember my name. When he wanted to summon me, he'd call out 'driver!'," Sharma said.

"On the third day, the penny dropped. He asked me to deposit 250,000 rupees ($4900) in my bank account on his behalf so that he could get rid of his black money."

Maids, drivers, nannies, and cooks in India are experiencing unusual politeness from their employers. Beyond the work they do every day, they suddenly have another use – to launder the undeclared cash which the rich have been hoarding in steel wardrobes, under the mattress and in under-bed storage.

This sudden outbreak of niceness is the outcome of India's current crackdown on "black money" - income in the form of cash that has not been declared to the tax authorities.

On November 8, the day before Sharma's employer became a lamb, Indian Prime Minister Narendra Modi scrapped 500 and 1000-rupee notes to root out corruption and force more Indians into the tax net.

In one fell swoop, the tens of millions of rupees that the rich kept at home in these denominations became worthless. If they deposit the money in the bank tax officials will pounce, imposing staggering penalties and taxes.

However until December 30, each Indian is allowed to deposit a smallish sum of 250,000 rupees in such defunct notes in their bank accounts without questions being asked. That is why the rich need the service of the poor.


Image above: A presswallah who irons the clothes in the Indian capital says he was asked by three clients to deposit 200,000 rupees in his account in return for a payment of 10,000. From original article.

Sharma and others like him have been implored by suddenly humble employers to deposit the amount in their accounts by the deadline - to be returned to their employers later.

"I refused him. I don't want to get into trouble later if someone asks me how I got this money when I'm only a driver," Sharma said.


Image above: Coconut water seller Mohan Kishore says the cash crisis has made it hard for him to pay his suppliers but he feels the hardship is worth it for the "punishment" of the rich. Photo by Amrit Dhillon. From original article.

Domestic staff and factory employees are going around with big grins, delighting in the panic and anxiety etched on the faces of the fat cats who never showed them any consideration, not to mention the delicious irony of being beseeched by their now squirming masters.

Modi's message in a recent speech - "see how I make the powerful suffer with you" - has resonated powerfully. "For once the rich are as troubled as we poor Indians are every day," said Akash Atwal, a driver with a New Delhi car rental firm.


Image above: Coconut water seller Mohan Kishore says the cash crisis has made it hard for him to pay his suppliers but he feels the hardship is worth it for the "punishment" of the rich. Photo by Amrit Dhillon. From original article.

In return for depositing the scrapped notes, domestic staff and others are being offered 10 to 25 per cent as commission. Some have accepted, happy to pocket an unexpected windfall; others, fearing trouble, have refused; and others have refused out of the principle that, if some big fish have been caught, leave them wriggling at the end of the line.

In their desperation to get rid of their ill-gotten money, rich Indians are dumping sacks of notes into the River Jamuna in New Delhi.

Some have made a bonfire of their cash at some deserted place before running away to avoid identification. Police have stopped cars filled with suitcases stuffed with 1000-rupee notes, their drivers rushing to distant relatives they haven't seen for years to ask them to deposit their cash.

"Some families who buy fruit from me regularly wanted to get rid of 100,000 ($1900) worth of notes by paying me in advance for the fruit they will buy over the next year" said Bittu Bharati, who runs a fruit stall with his uncle in Lajpat Nagar.

Others who are usually paid in cash – florists, beauticians, personal trainers and "presswallahs' who iron clothes in neighborhoods – have also been told they can have their services paid for two years in advance, just so that affluent families can dispose of their expired cash. Then it's up to them to exchange the money at the bank.


Image above: Indians stand in a queue to deposit and exchange discontinued currency notes outside a bank in Allahabad, India. Photo by AP. From original article.

Some Indians are being too clever by half. A divorced man who had defied the courts by refusing alimony to his wife was seized with a new respect for the law and offered to pay her the arrears - in the banned currency notes. The judge threw him in jail until he paid in the new notes.

Domestic staff have been chuckling while exchanging stories of what's been happening in the homes of their employers: sudden palpitations, wailing wives, altercations over how to get rid of the banned notes, profuse sweating and pure despair.

Chemists have reported a spike in the sale of sleeping tablets. Mumbai hospitals have reported a surge in panic attacks. But some doctors are feeling queasy themselves – it's estimated that about 40 per cent of doctors are paid in cash.

"I'm an ordinary man and I'm suffering hardship too. I was in a long queue on Saturday. But it's worth it. The rich need to be punished for being greedy. I am savouring the moment," said a smiling Mohan Kishore, who sells fresh coconut water on a South Delhi street.


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Trump's 1995 tax records leaked

SUBHEAD: A "Deep Throat" emerges leaking Trump's $900+ million 1995 income loss.

By Tyler Durden on 2 October 2016 for Zero Hedge -
(http://www.zerohedge.com/news/2016-10-02/trump-deep-throat-emerges-unknown-source-leaks-donalds-95-tax-filing-nyt)


Image above: Page on of three pages of Donald Trump's 1995 New York State Income Tax Form IT-201 indicating an adjusted federal gross income of of -$915,729,293. Click to enlarge Page 1. Click to see  Page 2. Click to see Page 3. From original article.

For months democrats had complained that it was only damaging information associated with Hillary and the Democratic party that had been leaked during the election season, a string of hacks which was promptly assigned to Russia and Putin. That changed overnight.

In its leading Sunday story, the New York Times reports that "Trump Tax Records Obtained by The Times Reveal He Could Have Avoided Paying Taxes for Nearly Two Decades."

Specifically, it reports that according to a previously undisclosed 1995 tax filing, Trump reported a $916 million loss on his income tax returns that year which could have allowed him to legally avoid paying any federal income tax for up to 18 years.

As it explains, "the 1995 tax records, never before disclosed, reveal the extraordinary tax benefits that Mr. Trump, the Republican presidential nominee, derived from the financial wreckage he left behind in the early 1990s through mismanagement of three Atlantic City casinos, his ill-fated foray into the airline business and his ill-timed purchase of the Plaza Hotel in Manhattan."

To be sure, since Trump has never released his tax returns, it's still unclear if he paid federal income tax in subsequent years.  At Monday’s presidential debate when Hillary Clinton accused him of not paying federal income taxes, he replied, “That makes me smart.”

As the NYT further details, in the early 1990s, Trump's real estate projects and other businesses were quickly losing money, New Jersey casino regulator records and other documents have shown, which has been known for years as was the fact that Trump faced near-ruin in the mid-90s.  The Times said that Trump reported earning $7.4 million in interest income for the year but just over $6,000 in wages, salaries and tips.

“He has a vast benefit from his destruction” in the early 1990s, said one of the experts, Joel Rosenfeld, an assistant professor at New York University’s Schack Institute of Real Estate. Mr. Rosenfeld offered this description of what he would advise a client who came to him with a tax return like Mr. Trump’s: “Do you realize you can create $916 million in income without paying a nickel in taxes?”

Of course, the NYT discovery in itself is hardly as exciting as it makes it out to be: all the paper has found is that Trump established a substantial Net Operating Loss, or NOL, which courtesy of the US tax code, could be carried forward for years.

Reports by New Jersey’s casino regulators strongly suggested that Mr. Trump had claimed large net operating losses on his taxes in the early 1990s. Their reports, for example, revealed that Mr. Trump had carried forward net operating losses in both 1991 and 1993. What’s more, the reports said the losses he claimed were large enough to virtually cancel out any taxes he might owe on the millions of dollars of debt that was being forgiven by his creditors. (The I.R.S. considers forgiven debt to be taxable income.)

Indeed, as the NYT itself admits there was nothing illegal about using such a manoeuvre: the world's rich take advantage of NOL tax planning all the time, and in fact acquiring corporations for their NOL benefit has long been a strategy in corporate America designed to minimize Federal and State tax outflows.

The tax experts consulted by The Times said nothing in the 1995 documents suggested any wrongdoing by Mr. Trump, even if the extraordinary size of the loss he declared would have probably attracted extra scrutiny from I.R.S. examiners. “The I.R.S., when they see a negative $916 million, that has to pop out,” Mr. Rosenfeld said.

Considering that according to Trump he has been the subject of numerous tax audits by the IRS that appears to be indeed the case.

Furthermore, the NYT itself is perfectly happy to take advantage of the US tax to minimize the amount of money it pays to the government: in 2014 the company got a tax refund of $3.6 million despite having a $29.9 million pretax profit, an effective negative tax rate for 2014, which it explained was favorably affected by approximately $21.1 million for the reversal of reserves for uncertain tax positions due to the lapse of applicable statutes of limitations.

owever, the biggest news in the NYT report is not so much the glimpse into Trump's income statement over 20 years ago, but the fact that unexpectedly a Deep Throat appears to have emerged within Trump's organization, someone found directly inside the Trump Tower. This is how the NYT explains where it got the questionably obtained filings:

The documents consisted of three pages from what appeared to be Mr. Trump’s 1995 tax returns. The pages were mailed last month to Susanne Craig, a reporter at The Times who has written about Mr. Trump’s finances. The documents were the first page of a New York State resident income tax return, the first page of a New Jersey nonresident tax return and the first page of a Connecticut nonresident tax return.

Each page bore the names and Social Security numbers of Mr. Trump and Marla Maples, his wife at the time. Only the New Jersey form had what appeared to be their signatures.

The three documents arrived by mail at The Times with a postmark indicating they had been sent from New York City. The return address claimed the envelope had been sent from Trump Tower.

Missing, however, was Trump's comprehensive Federal tax return: "because the documents sent to The Times did not include any pages from Mr. Trump’s 1995 federal tax return, it is impossible to determine how much he may have donated to charity that year.

The state documents do show, though, that Mr. Trump declined the opportunity to contribute to the New Jersey Vietnam Veterans’ Memorial Fund, the New Jersey Wildlife Conservation Fund or the Children’s Trust Fund. He also declined to contribute $1 toward public financing of New Jersey’s elections for governor."

Understandably, the Trump campaign was troubled by the leak: as the NYT notes, a lawyer for Mr. Trump, Marc E. Kasowitz, emailed a letter to The Times arguing that publication of the records is illegal because Mr. Trump has not authorized the disclosure of any of his tax returns.

Mr. Kasowitz threatened “prompt initiation of appropriate legal action.” Incidentally, Kasowitz is also somewhat well known in the investing community for threatening to sue outspoken critics of problematic stock narratives, having threatened with lawsuits investors and journalists divulging negative information involving such Canadian firms as Fairfax, Valeant and Brookfield.

It remains to be seen if legal action against the NYT will indeed be taken. The Trump campaign promptly responded to what it alleges was "illegally obtained" information as follows:

"The only news here is that the more than 20-year-old alleged tax document was illegally obtained, a further demonstration that the New York Times, like establishment media in general, is an extension of the Clinton Campaign, the Democratic Party and their global special interests. What is happening now with the FBI and DOJ on Hillary Clinton's emails and illegal server, including her many lies and her lies to Congress are worse than what took place in the administration of Richard Nixon - and far more illegal.

"Mr. Trump is a highly-skilled businessman who has a fiduciary responsibility to his business, his family and his employees to pay no more tax than legally required. That being said, Mr. Trump has paid hundreds of millions of dollars in property taxes, sales and excise taxes, real estate taxes, city taxes, state taxes, employee taxes and federal taxes, along with very substantial charitable contributions. Mr. Trump knows the tax code far better than anyone who has ever run for President and he is the only one that knows how to fix it.

"The incredible skills Mr. Trump has shown in building his business are the skills we need to rebuild this country. Hillary Clinton is a corrupt public official who violated federal law, Donald Trump is an extraordinarily successful private businessman who followed the law and created tens of thousands of jobs for Americans."

However, while the story of Trump's use of NOLs may be overblown, the big news of the day is that a deeply-embedded, and well-connected mole appears to have emerged within Trump's organization, someone close enough to have access to Trump's tax filings, albeit at least for now, going back more than 20 years in time.

As such suddenly the odds that the "October Surprise" will be a leak not so much of additional Hillary hacked data, but of adverse infromation impacting the Trump campaign has surged. That said, we doubt if the media will blame the Kremlin for this particular leak, as it has done all along whenever Hillary's own dirty laundry was released into the open.
The three leaked state tax filing pages are shown below:

---

Trump may have avoided 18 years taxes

SUBHEAD: Trump may have 18 years of no federal taxes from 1995. Question is was it a "real" net operating loss.

By John Hempton on 2 October 2016 for Bronte Capital -
(http://brontecapital.blogspot.com/2016/10/some-comments-on-new-york-times-story.html)

Decades ago - before I was a fund manager - I was the resident expert on tax avoidance working for the Australian Treasury. That was where I started to hone the accounting skills sometimes shown on this blog.

I very rarely do anything in tax - but now I think it is time.

The New York Times has published a story (including extracts) about Donald Trump's tax returns over two decades ago. The money-quote is this:

Donald J. Trump declared a $916 million loss on his 1995 income tax returns, a tax deduction so substantial it could have allowed him to legally avoid paying any federal income taxes for up to 18 years...

According to the New York Times the losses came

... through mismanagement of three Atlantic City casinos, his ill-fated foray into the airline business and his ill-timed purchase of the Plaza Hotel in Manhattan.

There is an issue here.

Donald Trump did not repay all the debt associated with those investments.

Either

• the loss is a real loss and the Donald was really was out of pocket by $916 million, in which case he has legitimate Net Operating Losses (NOLs)
• or the loss was passed on to someone else by The Donald defaulting on debt - in which case Donald Trump should be assessed for income from debt forgiveness.

After all if the debt is forgiven it is not Donald Trump's loss. The loss is borne by the person who lent Donald money and did not get it back.

That - clearly stated by example - is why most income tax systems assess debt forgiveness as income.

Okay - I do not know whether Donald Trump had the wherewithal in 1995 to bear $916 million of losses personally. But I doubt it. (If he did his financial career is different from what is popularly accepted.)

So the alternative is the debt was forgiven in some way. But then the story the New York Times is running is wrong - because the $916 million of losses would not have survived the debt forgiveness and hence would have wiped out his NOLs and thus he would not be allowed to shelter his income for the next 18 years.

Unless that is there is an avoidance scheme the New York Times has not worked out. Those schemes go by the name of "debt parking".

Debt parking
Here is how debt parking works. Suppose the debtor (in this case The Donald) is going to get his debt cancelled for (say) 1c in the dollar. When he gets the debt wiped out the debtor (ie The Donald) will have to report assessable income equal to the debt wiped out (in this case 99 percent of $916 million).

The alternative though is for the debtor to set up a dummy party. The dummy party might be his wife or children or some company or trust set up by them or more likely some completely opaque offshore trust.

And that dummy party goes and buys the debt for say 1.1 cents in the dollar. Then they just sit there.

They don't force the debtor (ie The Donald) to repay. They don't make a profit or loss on the debt. And because the debtor never has his debt forgiven he never gets the assessment on debt forgiveness and he gets to keep his NOLs even though the losses did not come out of his pocket.

Every tax system worth its salt has some rules on "effective debt forgiveness" to prevent debt parking. And - from my experience which is now over twenty years old - none of them work entirely.

Now if Donald really has all those tax losses its pretty clear that the debt must be parked somewhere.

There is a vehicle out there (say an offshore trust or other undisclosed related party effectively controlled by Donald Trump) - which owns over $900 million in debt and is not bothering to collect it.

I do not have the time or energy to find that vehicle. But it is there. Now that this blog has gone public journalists are going to look for it.

There is a Pulitzer prize for whoever finds it. Just give me a nod at the acceptance ceremony.


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Tax breaks for Hawaii organic farms?

SUBHEAD: Legislation awaiting the governor’s signature would give tax breaks to farmers for the costs of organic certification.

By Carla Herreria on 13 May 2016 for Huffington Post -
(http://www.huffingtonpost.com/entry/hawaii-organic-tax-break_us_57351758e4b08f96c182c52d)


Image above: Hanalei Valley taro fields on island of Kauai, Hawaii. From original article.

Hawaii has become the first U.S. state to approve tax credits for organic farmers, a huge potential boost for the industry.

A bill now awaiting Gov. David Ige’s signature would provide farmers up to $50,000 in tax credits to help offset the costs of getting certified as organic by the U.S. Department of Agriculture.

The measure, if it becomes law, may encourage similar programs in other states and help feed America’s growing appetite for organic foods.

“Organic agriculture has a huge role to play in addressing some of the most pressing issues of our time — economic revitalization, climate change, public health and environmental protection,” Ashley Lukens, director of Hawaii Center for Food Safety, said in a statement praising passage of the legislation.

Such initiatives, Lukens said, show the state is stepping up “to fulfill its responsibility to support local food and recognize organic farming.”

Organic certification often is a significant financial challenge for farmers — costing hundreds to thousands of dollars, according to the USDA.

The USDA’s Organic Certification Cost Share program currently helps farmers with up to 75 percent of their certification costs, but it has a maximum of $750. If signed into law, Hawaii’s tax breaks would reimburse farmers for the remaining costs, and would help small farms cover additional expenses like application fees, inspection costs and equipment to grow organic products.

The U.S. has seen a 300 percent increase in certified organic farms since 2002. But the surge isn’t enough to satisfy the growing demand from consumers. Some businesses, like Costco, have resorted to financing organic farmers directly to meet demand.

Hawaii’s legislation would “make a huge difference, particularly for a new generation of farmers who want to farm differently in a more sustainable way, but lack the resources to get started,” state Rep. Chris Lee, who introduced the bill, told The Huffington Post.

A whopping 88 percent of Hawaii’s food is imported. 

“If we want to help grow local agriculture and truly change our precarious reliance [on imported food],” Lee said, “then we need to take big steps.”


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US Tax Revolt Methods

SUBHEAD: The US commits war crimes. They order us to pay them to commit them. Don't be a war criminal.

By Gary Flomenhoft on 2 December 2014 for Club Orlov -
(http://cluborlov.blogspot.com/2014/12/tax-revolt-methods.html)


Image above: "The Tax Collector". Painting by Pieter Brueghel the Younger, 1640. From (http://en.wikipedia.org/wiki/Tax).

[Dmitry Orlov note: This is a follow-up by Gary Flomenhoft on last week's post, "The Only Way to Stop the Empire".]

“It is just as difficult and dangerous to try to free a people that wants to remain servile as it is to enslave a people that wants to remain free.”
Niccolò Macchiavelli

‘Resolve to serve no more, and you are at once freed. I do not ask that you place hands upon the tyrant to topple him over, but simply that you support him no longer; then you will behold him, like a great Colossus whose pedestal has been pulled away, fall of his own weight and break into pieces.”

I am pleased that many people have expressed interest in getting more information about different methods of joining a tax revolt.

The reasons for wanting to do so are plain to see: if the US government is no longer a legitimate government, then you owe them nothing. Consider that it has been violating all four Nuremberg Principles for decades: crimes against peace (wars of aggression), conspiracy to commit crimes against peace, war crimes (torture), and crimes against humanity (drone killing of civilians).

They have violated Articles 27, 31, 32, 45, 49, 87, 97, 124, 125, 127 of the Geneva Conventions, the US Army Field Manual, and the US Constitution, especially Habeas Corpus and Posse Commitatus.  They continue to use cluster munitions and refuse to sign the international ban on cluster munitions or land mines.

They use radioactive depleted uranium shells that cause massive birth defects wherever they are deployed.  The entire Bill of Rights has been shredded except for Amendments 2 and 3.  They have allowed a criminal banker elite to commit epic fraud and theft without any prosecution. The electoral system has been turned into an auction. And that's just to mention a few of the reasons; this is by no means an exhaustive list.

But, friends, what more do they have to do to convince you? Kill you? Well, they can do that too now, very easily, with no repercussions of any sort. Or they can just imprison you for life without ever charging you with a crime or sending you to trial.

Please let me remind you of a few sentences from our Declaration of Independence penned by Thomas Jefferson:

"…when a long train of abuses and usurpations, pursuing invariably the same Object evinces a design to reduce them under absolute Despotism, it is their right, it is their duty, to throw off such Government, and to provide new Guards for their future security."

But apparently things have not gotten bad enough in the US to trigger a revolt, because most of the mischief up to now has been done overseas, and most people don’t give a rat’s ass what we do to other people.

But it’s finally starting to come home, so maybe you do want to do something, and you want to know all the options, not just the simple expedient of writing “Exempt” on a W4 form we presented in “The Only Way to Stop the Empire”.  OK, no problem, we are here to help.
 
First let me clarify a few misunderstandings that came up in the comments posted on ClubOrlov and over at ZeroHedge where the article was also carried, because they are relevant to this issue. By the way, I am grateful for the intelligence and sincerity of most of these comments.

Some people criticized my claim about the Tea Party’s reason for shutting down the government: “They thought that the welfare system is bankrupting the country. This is a laughable claim, because welfare spending looks negligible when compared to military spending.”

They pointed to the $850 billion social security program, the $821 billion Medicaid and Medicare program, and the $521 billion in other mandatory programs, calling them “welfare.”  There is just one problem with this critique: none of these programs are funded using the income tax.

They are called entitlements, and the way you entitle yourself to them is by paying into them using a special payroll tax. Same goes for unemployment insurance, by the way.

All of these are funded using something that is called a tax, but in essence they are joint savings accounts that you hold in common with many other people, with some rules on how the money is then spent on those who have payed into them.

Clearly, the Tea Party doesn’t like these joint savings accounts either, we still need to distinguish them from “welfare,” or we won't even know what we are talking about.  If you are not aware of this, the employer and employee each pay half of the payroll tax to the government, although if you are self-employed—lucky you!—you get to pay both halves.

So, just to make things perfectly clear, the entire issue of tax revolt we are talking about here has to do with income taxes, not payroll taxes. Go ahead and revolt against payroll taxes too if you want, but that’s off-topic.

If you look at the US budget, on Table S-4 p. 168, you will see the distinction between mandatory programs paid by payroll tax and “appropriated” programs paid by income tax.  There may be some overlap, but this gives you a general idea:

Subtotal, mandatory programs: $2,234B
Subtotal, appropriated programs: $1,174B

“Welfare” is a different story. Let's define it as unearned payments, based on means testing or other measurement of need, funded through income taxes paid by others.  If you look at the US discretionary budget, on Table S-11. p. 203 you will see that the entire Health and Human Services (HHS) budget of $79.8B, does indeed look small compared to the defense budget of $496.0 billion: for every 6 dollars that go to defense, less than one goes to HHS. But that's not the relevant number either.

Because when most people talk about welfare, and especially Tea Party people or other ideologues, they are undoubtedly talking about transfer payments to individuals (who presumably are lazy, no good bums, who don’t want to work).

In that case you have to look at the HHS budget in more detail.

Welfare as such no longer exists, but on page 113, you will find the line item for “Temporary Aid to Needy Families”  (TANF), Bill Clinton’s idea for “eliminating welfare as we know it”, which totals $17.35 Billion.

This is what I call welfare, and it looks extremely negligible compared to the $496 billion offensively large defense budget. For every 28 dollars spent on defense, less than one goes to the “lazy bums” (if that's what you wish to call them). I could rest my case here, but there's more.

You see, the “defense” appropriation doesn’t even come close to capturing the entire military budget, because it leaves out Homeland Security, The War on Terror (“Overseas Contingencies”), interest on the debt, nuclear weapons managed by the Dept. of Energy, and many other items.

For that you will have to look at the War Resisters pie chart. They’ve taken payroll tax funded programs out of the picture and show that total military spending amounts to $1,307 Billion for fiscal year 2015.

They use 80% as the portion of the federal debt due to military spending, which could be questioned, but the rest of their analysis looks pretty much rock solid.  In any case we are talking about over $1 Trillion dollars per year to maintain the US global hegemonic empire.

And so, in the final analysis, for every 75 dollars spent on so-called “national defense,” less than one goes to people in need. Will the real welfare queens please stand up!

And so it stands to reason that you may not want to send your hard-earned money to pay off all these lazy no-good bastards who hide behind the cannon fodder dressed up in military drag. The question is, how?

War Resisters web site has an excellent page on the various means of refusing to pay income tax, and a page on consequences. According to War Resisters, only one person since WWII has been jailed for war tax resistance.  I once read on their website that the IRS is able to recover more money from people who report their income and file a return, than people who don’t file at all and give the IRS no information.

However, you should know that there is no statute of limitations if you don’t file, while it is 10 years if you do file.  This worked to my advantage once when the statute of limitations ran out in 2005 from a return in 1995, and the IRS was unable to collect all the interest and penalties, which I refused to pay.

Incidentally, they attempted to collect the money after the statute of limitations ran out, so don’t expect criminals to follow the law.  I was only able to avoid it because an honest Taxpayer Advocate was able to stop collection.

Let me cover a few of these methods in more detail and one they left out.  I’ll cover legal methods, semi-legal, and illegal methods.  Take your pick.

LEGAL METHODS

Increase withholding
If you want to reduce the amount that is withheld from your paycheck it is perfectly legal to increase the number of withholdings you submit on the W-4.  The IRS in fact provides a calculator to figure it out.

This calculator will supposedly figure out how to withhold exactly the right amount so your tax liability will match what you owe at the end of the year.  You might be able reverse engineer it to figure out how many withholdings to claim, based on how much or how little you want withheld.

In the past if you submitted more than 10 withholdings or “EXEMPT” on your W-4 to your employer, they were required to report it to the IRS. According to an update in 2012, this is no longer the case.  See update.

 If you withhold less tax than you owe, then after you file your tax return by April 15 you will owe the IRS money, instead of getting a refund.  Then you can decide if you want to pay it or not, but at least it will be your choice.  Normally the IRS already has your money, and collects extra from 80% of employees, as an interest-free loan.

Live Below the taxable level
The War Resisters update document lists the 2012 figures for gross income level you need in order to live below a taxable level. It may be higher in 2013 or 2014, but it’s not much!

$9,750 for a single person
$15,700, married filing jointly
$9,750, married filing separately
$12,500 Head of Household
Over 65 or blind add $1,150 for a married taxpayer; $1,450 for a single taxpayer

The update has a link to a website by David Gross providing extensive information on how to live below the taxable level using what he calls the “Don’t Owe Nuthin’ (DON) method and using certain tax credits.

Use as many deductions and tax credits as you can find.  You may be able to reduce your tax liability to zero, even if you have substantial income.  Many people are confused about the difference between a deduction as listed on Schedule A for “itemized deductions”, and a tax credit, which is found on 2013 IRS form 1040 lines 47-53.

A deduction is subtracted from your income, so it reduces your taxable income.  Most people use the standard deduction, but if you have a lot of deductions including mortgage interest, it is often advantageous to itemize your deductions.  Itemized deductions include things like:  Medical and Dental Expenses, Taxes you paid, Interest you paid, Gifts to Charity, Casualty and Theft Losses, Job Expenses, and Certain Miscellaneous Deductions.

A tax credit is much better because it is subtracted straight off your taxes.  These are things like Credit for child and dependent care expenses, Education credits, Retirement savings contributions credit, Child tax credit, and Residential energy credits.  There have been others over the years that I have used such as electric vehicle tax credit, investment tax credit, and first-time homebuyers tax credit, etc.

I decided in the end not to live below the taxable level because I was sick of being poor, and saw no reason to suffer just because psychopaths in government were committing mass murder all over the world.  I decided to use tax credits and if I owed anything would simply refuse to pay on the basis of the Nuremberg Principles.

SEMI-LEGAL METHOD

File an “exempt” W-4 form.  The form states that in order to file an exempt form, you must meet two criteria: You owed no tax last year, and you expect to owe no tax this year.  So technically it is not legal to file this form “exempt” if you owed any taxes the year before, but in practice I have never been questioned about this.

As mentioned in the previous article the employer is not allowed to question your W-4 unless instructed by the IRS.  The IRS has taken up to 3 years to notify my employer to start withholding after filing an “exempt” W-4, even after just ending a previous dispute with them.  One hand literally does not know what the other hand is doing.  The IRS is a huge dysfunctional bureaucracy.

ILLEGAL METHODS

Self-Employment
The simplest way to avoid taxes is to be self-employed and not report your income to the IRS.  If they don’t get any information, it is hard for them to come after you.  You may have to take other measures to make sure it doesn’t get reported.

If you do work for others, they may give you a 1099 form, and it will be sent to the IRS.  I would avoid that.  If you accept credit cards, as of January 2011, the IRS requires your bank to report all credit card transactions to them.  What’s wrong, don’t they trust us anymore?

Working for cash works fairly well, but working for favors is by far the best. For instance, you can live rent-free as a caretaker, have the use of a free car for driving someone around or handling someone's deliveries, eat free by growing somebody else's food and so on.

Legal Challenges
Many patriots over the years have attempted to prove that income taxes are unconstitutional, were not properly ratified, or are illegal for various other reasons.  I have tried a few of these methods myself, which my employer promptly ignored after receiving instructions from the IRS to withhold from my paycheck.

I admire people who continue to challenge the questionable legality of the income tax in the courts. But the fact is, the IRS doesn't care about the courts. They know every one of these claims, and even have a website devoted to it, which cites lots of legal cases, all supporting the IRS, of course.

Anyone who files a tax return making one of these legal claims will immediately get fined $5,000 for filing a “frivolous return,” based on their opinion that these claims are a waste of the agency’s precious time.

One individual wrote to Club Orlov claiming that those who follow instructions in the book “Cracking the Code” by Pete Hendrickson at Lost Horizons website, “are never prosecuted, receive ALL of the monies that were incorrectly turned over to the IRS, and have joined the minions [sic] all across the country who are doing the same.”

What he failed to mention is that Hendrickson has been sentenced to jail twice, once for placing a fire-bomb in the mail and once for tax evasion, and all his claims have been disallowed by the courts. So this person is either ignorant or a provocateur. Check your sources!

For pure amusement value, my two favorite frivolous legal claims are the following:

1. The federal income tax laws are unconstitutional because the Sixteenth Amendment to the United States Constitution was not properly ratified.
   
   
2. The Sixteenth Amendment does not authorize a direct non-apportioned federal income tax on United States citizens.

Both are addressed on the IRS frivolous website in section D, here and here.

The Heritage Foundation, which you would think would be sympathetic to the argument about non-apportioned tax, contradicts it. The non-ratification claim is explained here. Both are considered frivolous claims by the IRS and automatically incur a $5000 fine accompanied by jail time if you push them on it. I wouldn’t be surprised if they are true, though! Would that matter? Not a whit!

Your time is not precious in the slightest though, as the IRS will waste epic amounts of your time and money trying to pursue valid legal claims they deny. On the other hand, I have always thought that wasting the IRS's time in ways that don't get you fined might be worth it if they end up spending significantly more in trying to collect from you, than the amount they can ever recover.

I was never charged with a $5000 frivolous claim on any of my tax returns.  I don’t have an ideological bias against paying taxes if they are used to serve the common good. Living in Vermont, which has a reasonably responsive state government, I consider most of the tax money well spent. 

I made it clear to the IRS that I agreed I owed the money. Then I refused to pay it on the basis of the Nuremberg Principles, established after WWII, during trials in which the US was the chief prosecutor, and which resolved that “I was just following my orders” does not constitute a legally valid excuse if the orders are to commit war crimes.

That was the defense offered by Adolph Eichmann, the Nazi bureaucrat who handled the logistics of organizing the death camps, and the judges rejected it. Hannah Arendt wrote her famous book “The Banality of Evil” about Eichmann. “I was just following orders”, he said.

The US defense establishment commits war crimes. They order me to pay them to commit them, in effect enabling them to commit more war crimes. I don't take orders from war criminals.

The IRS didn’t charge me with a frivolous claim, but continued to recover unpaid taxes from previous years. They ordered my employer to withhold at the maximum single level, and kept all the money owed to me in tax refunds. Fortunately, soon thereafter I lost my job, and have since left the country. 

I don’t expect to return until the Neocon psychopaths running the country destroy the empire.

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The Only Way to Stop the Empire

SUBHEAD: The results of collapse later are likely to be worse then the effects of tax revolt now.

By Gary Flomenhoft on 24 November 2014 for Club Orlov -
(http://cluborlov.blogspot.com/2014/11/the-only-way-to-stop-empire.html)


Image above: World War One war bonds (tax) promotion with a few added words by Juan Wilson. From (http://www.ninjamarketing.it/2011/09/21/pubblicita-e-guerra-15-annunci-vintage/).

The final days of US empire are fast approaching. Perhaps its end will pass slowly and gradually, or perhaps the event will unfold rapidly and catastrophically. Maybe chaos will break loose, or maybe its demise will be organized well and proceed smoothly. This nobody knows, but the end of empire is coming as surely as day follows night and sun follows rain.

 Over-expansion, overreach and over-indebtedness will take their toll—as all past empires have discovered. Empires are like bacteria in a Petrie dish; unthinking, unseeing, unfeeling, they expand until they run out of food or contaminate their environment with their waste, and then they die. They are automatons, and they just can’t help it: they are programmed to expand or die, expand or die, and, in the end, expand and die.

What does the empire feed on? It feeds on money and fear; your money and your fear, both obtained with your cooperation. It is bigger now than when it faced an actual adversary in the Soviet Union. Russia is no adversary; all it wants is to be a normal country, at peace with the world. But the empire won’t let it, will it? It must create enemies.

Who are our enemies?

According to the authors of endless war they are North Korea, Iran, Syria, and Islamic terrorists. Are any of them actually capable of threatening the US? Well, yes, but they are all quite easy to deter. But the plan of the authors of endless war is not to deter them; it is to back them into a corner with political instability and sanctions, while whipping up the population on both sides into fear-filled frenzy.

We all know that the US military-industrial complex has become a self-perpetuating and uncontrollable organism, just like Dwight D. Eisenhower warned us in 1961.

Everyone knows the phrase and Eisenhower's warning—it is part of our collective memory. At a trillion dollars a year and growing, with over 1000 bases ringing the planet, it has expanded far beyond what Eisenhower could have imagined in his worst nightmare. We can’t say we didn’t know: he warned us.

After the National-Socialist episode in Germany, many good Germans voiced regrets at not speaking up, claiming that they didn’t know what was being done in their name. But we do not have that excuse: we all knew all along.

Nor was it the first time we were warned. General Smedley Butler told us before, in 1933, and his words are still with us, posted online. Why is it that everyone, generals included, suddenly gain wisdom immediately upon reaching retirement?

Butler offered an explanation: his “mind was in suspended animation while serving as a soldier and following orders.” In 1933 Butler told us that he “was a racketeer, a gangster for capitalism.” He said:

“I helped make Mexico, especially Tampico, safe for American oil interests in 1914. I helped make Haiti and Cuba a decent place for the National City Bank boys to collect revenues in. I helped in the raping of half a dozen Central American republics for the benefits of Wall Street. The record of racketeering is long. I helped purify Nicaragua for the international banking house of Brown Brothers in 1909-1912…I brought light to the Dominican Republic for American sugar interests in 1916. In China I helped to see to it that Standard Oil went its way unmolested.”

This empire is nothing new, and we knew what it is and what it does all along. We can’t say we didn’t know. We have watched throughout our lives as the US put down every popular uprising against local autocrats and oligarchs, placed countries under US control, then helped organize and train the death squads that killed off the opposition.

Think of Indonesia, Argentina, or Honduras. We watched as the empire crushed every democratic government that threatened US business interests under the false pretext of “anti-communism,” starting with Iran in 1953, Guatemala in 1954, and proceeding to Congo, Haiti (numerous times), and most notably and infamously Chile in 1973 (assassinating president Salvador Allende on September 11, 1973), Nicaragua in the 1980’s, and many, many others. (For details see William Blum’s Killing Hope.)

And of course, many of us lived through the epic lies and genocide of millions in Vietnam, Laos and Cambodia during the so-called “Vietnam War.” We knew, we watched, and we paid taxes that paid for the bullets and the bombs.

More recently we’ve seen the barefaced lies of empire laid out for all to see in Iraq, Libya, Syria, Afghanistan, Somalia, Georgia, Pakistan, Yemen, Ukraine... they never end! But the trouble we stir up in other places never seems to come home and ring our doorbell, does it? Maybe that’s why it keeps on going. We think that we can just ignore it and go on with our lives—that it won’t affect us. Or does it?

Let’s leave aside the destruction of democracy that always accompanies a militarized, fascist police state that the US has gradually turned into. And let’s ignore the violence that pervades US society, or the vast gulag of incarceration that disposes of our useless eaters.

 Consider that the only military attack on US soil that actually scored a palpable hit since Pearl Harbor was 9/11. Pearl Harbor was on the periphery, way out in the Pacific, “A Day that will live in Infamy,” the more so since FDR knew it was coming and did all he could to provoke it by cutting Japan off from oil supplies, directly provoking it into launching the attack.

But Hawaii is the periphery while 9/11 struck at the heart of the empire, the financial center in New York that drives the imperial wealth pump, and the Pentagon, which is charged with the mission of US world domination.

Whether you believe that 19 Arabs armed with box cutters who couldn’t fly propeller planes took down 3 World Trade buildings that plummeted straight down at the speed of freefall in what looked like controlled demolition (yes there were 3, look up “Building 7”), and destroyed a section of the Pentagon, or whether you believe it was an inside job, doesn’t matter. The point is, in that act of destruction, the wars of the empire finally came home.

What was the result? Did these events cause us to reconsider what we are doing? Of course not! Instead, we went all-in for war. Remember, the empire is an automaton, a self-perpetuating organism, living on money and fear.

What better way to whip up fear than to stage, or to allow, or to simply fail to prevent, an attack on the “homeland”—which is, by the way, a Nazi propaganda term. The purpose of war is simply to cause more war, since it is so profitable for the badly misnamed “defense industry.”

Butler told us in 1933 that “war is a racket,” and documented massive war profiteering during WWI. Do you know how much money Lockheed, Northrop-Grumman, Boeing, General Dynamics, Raytheon et al. are making from the “War on Terror”? The sums are astronomical.

As you read these words, the empire is busy doing its work in Ukraine. Here is how that works. First, it overthrows the elected government in a US-backed coup.

Next, it directs its local puppet regime to unleash a military attack and organize death squads to deal with the population in the east that won't go along with the US-backed coup, in this case using actual Nazi-branded death squads, complete with Nazi SS Insignias. (Anyone can verify these facts with the most cursory internet search.)

And for the final, consummate imperialist touch, it votes in the UN (together with Canada) against a resolution condemning the Ukrainian Nazis and other racist murderers, while the Europeans shamefacedly abstain. This sort of plan used to work really well, and so the empire keeps repeating it over and over again, even though the results are worse every time.

Vast numbers of Americans support the empire’s wars of conquest because they help maintain their lavish lifestyles. They bother some of us more than others. Many of us are adamantly against them, but only a few find it emotionally unbearable to countenance the destruction of millions of lives in our names and with our money. What makes them different? Who knows, you would have to ask a psychologist.

The question for those who oppose endless war is, What have we done about it? A mass movement in the 1960’s that added up to an uprising by a vast segment of society perhaps had something to do with ending the conflict in Vietnam.

In spite of these protests, the empire was able to extend the war by an extra five years all the way to 1973, when it agreed to end it on the same terms that had been offered in 1968 to Nobel “peace laureate” Henry Kissinger. There has been no significant anti-war protest since then, and certainly none that succeeded in preventing or ending war. Why?

First, the draft was ended. This put an end to the involvement of average US families in the wars of empire, and therefore ending the requirement for consent of the governed. The strategists realized that the draft was a disaster for the empire.

The new, much better and cheaper way to procure cannon fodder for the endless war is to enlist the children of the underclass, by using economic oppression in order to deprive them of any other means of advancement except military service.

Second, the military has been outsourced and privatized, requiring even less involvement by US families in the military, and less need for their consent. “You’re all volunteers, so shut up” is the attitude.

Third, the vastly increased scope of domestic spying by the NSA and other government agencies has helped keep everyone under control and stifle dissent.

Fourth is the tight government/corporate control of the US media, which has become consummately successful in brainwashing and propagandizing the population.

Finally, there is the war on whistleblowers and journalists who expose the truth, from Tom Drake to William Binney, Sibel Simons, Jesselyn Radack, Bradley Manning and Julian Assange. If necessary, the police, who are vastly more militarized than in the past, together with national guard troops, can squash any dissent like a bug.

All these measures ensure that efforts at reform pursued through legal, nonviolent means such as voting, protest, civil disobedience, civil resistance, etc. will have absolutely no effect. The only action that can possibly stop the empire in its tracks is cutting off its food supply—the tax money on which it lives. We have to starve the beast through divestment, capital expatriation, tax resistance, tax refusal and tax revolt.

Former Secretary of State Alexander Haig told us this flat out in the 1980’s when, being confronted with huge protests over US Central American policy, he said: “Let them protest all they want as long as they pay their taxes.”

Truer words were never uttered by a US official.

Is there any evidence to contradict his statement? Has any other measure had any impact on the war machine? The honest answer is no. Millions of people around the world protested before the 2003 invasion of Iraq. These protests were ignored.

No amount of protest or other efforts can stop it, because it doesn’t cut off the empire’s food supply of money and fear. Only by cutting off its funds by not paying taxes can we stop the empire.

Many have said that the US doesn’t need tax money as it survives on endless debt. Yes, the empire lives on debt, but the ability to sell debt is based on the bond rating of US treasury bonds. Most recently in June, 2014 S&P gave the US a AA+ rating with “stable outlook.”

If there is any doubt about the US credit rating, the ability to sell debt to continue financing the empire comes into question. The ability to collect taxes is what maintains the US bond rating.

Any reduction of the US bond rating, and interest rates have to go up in order to continue attracting more investment. Then the interest on the debt balloons out of control and becomes unrepayable—never mind the principal, which they have no intention of ever paying back.

By the way, the Tea Party’s efforts to shut down government by refusing to raise the debt ceiling was helping this effort for a time, although for different reasons. They thought that the welfare system is bankrupting the country.

This is a laughable claim, because welfare spending looks negligible when compared to military spending. Still, they did manage to lower the bond rating for a time. Shutting down the federal government is a step in the right direction, and since in recent years only the Tea Party has managed to do it, lets give them some credit

If the US became unable to reliably collect taxes, then its ability to finance the empire with debt would be diminished, and the US would have to turn to increasing taxes—another politically unpalatable choice, especially in the age of the Tea Party, when the empire’s main constituency is dead-set against more taxes.

So it is absolutely clear that the only thing that could stop the empire is a tax revolt. It wouldn’t even have to be that big; the slightest question about the ability of the federal government to collect taxes could reduce the bond rating. Even a minor reduction could raise interest rates enough to make the US debt unrepayable.

Let's get down to brass tacks: How do you avoid paying taxes, when the IRS withholds our salaries, and the tables are rigged to withhold about 15% more than necessary on average, so 80% of people get a refund? Did you think that this is a coincidence? No, this is a one-year interest-free loan to the empire from taxpayers.

But it’s actually quite simple not to pay taxes. Get a W-4 form, write EXEMPT in the space provided, and turn it in to your friendly HR office. Your employer is not allowed to change it unless directed by the IRS. Normally they have no reason to question it.

Here’s what happened last time it was tried on a big scale. In 2007, Code Pink joined the War Resisters League to organize a national project for war tax refusal, to “Stop Bush’s Wars.” This was not a true tax revolt, just more or less a referendum on how many people would potentially support withholding a portion of their taxes owed, even a token amount.

The online petition asked people if they would be willing to commit to withhold some of their taxes, even $1, if 100,000 other people would agree to do the same. Out of the US population of 316 million, how many people do you think signed it? About 2,000. So you see, there is not much evidence that people will do the only thing that could stop the empire: a true Tea Party tax revolt.

What this implies is that the empire will continue to churn along, and debt will continue to build up, because any other approach to paying for it is not feasible, and therefore collapse is inevitable.

The aftermath of collapse is unpredictable; maybe there will be a soft landing, maybe not. But unless you are willing to engage in some form of tax revolt, collapse is inevitable. You will get to live with the results: stage a tax revolt now, or face collapse later.

Are you sure you want to take your chances on collapse? The results of a personal tax revolt are predictable: retribution with penalties and interest from the IRS; living in fear of having your salary, your property, even your house seized, or worse, your door broken down by federal agents (although these extreme measures don’t happen too often, they happen often enough to instill fear).

Perhaps there would be loss of income, or even your job. Losing one’s job often leads to depression, divorce, drug or alcohol abuse, etc. So you may prefer collapse after all: loss of your savings, no heat, electricity or trash removal, shops looted or closed, armed gangs roaming the streets... Your choice!

On the other hand, collapse might go well! Hope springs eternal in the optimistic American heart. We are (or used to be) the “can-do” people. Maybe we can-do collapse better than anyone else? Doubtful though if you read Dmitry Orlov’s Collapse Gap presentation.

The results of collapse later are likely to be worse then the effects of tax revolt now. Especially, since the IRS takes years to catch up to exempt W-4 forms, and it would be even harder to crack down if it were being was done en masse.

But it’s perfectly understandable if you opt to do nothing now and suffer no consequences, while engaging in ineffective protest to assuage your conscience. You probably have a family to support, an expensive hobby, or some other excuse. So you decide to take your chances with collapse later. After all, collapse might turn out OK for you! This psychology is quite understandable.

I truly hope that collapse will be as painless as you wish it will be, but somehow I doubt it. Good luck though! Whatever happens, you will have to live with your decision for the rest of your life—be it long or short.


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