Unwarranted Jurisdiction Over US? 16th Amendment and Constitutional Income.

Have We the People "elected" to leave the jurisdiction of the Constitution?  Into a jurisdiction foreign to our constitution, such as a corporate reality?   If so, to be sure, we elected to do this without knowing what we were doing. 

The ratification of the 16th amendment was one of the biggest issues  in 1913 because the American people thought this federal income tax would tax the accumulated wealth of the country: basically what the Vanderbilt’s, Rockefellers, and the Morgan’s, etc--those few people who benefited from the Industrial Revolution and the monopolization of American industry-- owned,  the millions of dollars in bonds and investment on Wall Street that were generating enormous income. That and only that income  was supposed to be taxed and the American people were all for it.

In other words, the purpose of the 16th amendment was to bring tax relief to working class wage earners by taxing the top 2% (at the time, a single person making over $3,000 year or a married couple making $4,000 year.  Remember the average working family made $450 year).

So how did we go from the top 2% paying income tax to the bottom 95% paying the majority of income tax?   Well, the answer lies in who wrote the amendment, Senator Nelson W. Aldrich married to a Rockefeller, and how it was written, in vague language that could be manipulated later. And let's not forget the creation of the Federal Reserve system which, since that time has seen the value of the dollar fall by more than 98%.

Through  manipulation of the word income, and the tinkering of jurisdictional boundaries,  more and more of us were incorporated into the taxable bracket: bracket creep. However, the income tax is an indirect tax determined in the case of Brushaber v. Union Pacific Railroad, which means that it only taxes income that is discretionary, whereas a direct tax taxes our labor, wages and salaries, our very existence.

“In briefs and argument before the Supreme Court in the case of Brushaber v. Union Pacific Railroad, both Brushaber and the Government claimed that the 16th Amendment provided for a direct tax exempted from the Constitutional apportionment rule. The High Court called this claim an "erroneous assumption...wholly without foundation." Constitutional Income: Do You Have Any? by Phil Hart pp. 204-210.

The courts are not going to unravel this web of deceit because the supreme court refuses to take cases that would clarify jurisdiction and meanings related to our convoluted tax system.

Source:

In the thoroughly researched book (19,000 pages of statutes and regulations)  Constitutional Income: Do You Have Any? by Phil Hart you will read about the intent and the constitutional underpinnings of the Sixteenth Amendment, the Income Tax Amendment and how the American people are being taking advantage of by our government through making the average person pay taxes on money that is not legally taxable.

Clubb, John Scott. "The new man on the job" 1913.
From the Library of Congress Prints and Photographs Online Catalog Collection:
http://www.loc.gov/pictures/resource/cph.3b30704/

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California Deficit is a Big Lie

Clint Richardson, author of the Reality Blog, and producer of the documentary, Corporation Nation, which exposes the Comprehensive Annual Financial Report (CAFR) - the full accounting of government and its investments...the true source of financial auditing for government that's  never spoken about publicly -in his latest article, reports once again, on "the purposeful omission of massive amounts of wealth by your government". Specifically, Jerry Brown's big lie: that California's deficit is now "$15.7 billion, far greater than the original $9.2 billion estimate in January. (CNN, May 15, 2012)"

The Simple Truth

The State Government of California has $100′s of billions in liquid investments and assets, could easily pay off all of its debt tomorrow, and would have $100′s of billions left over.[...]

Richardson  explains and proves that over $577 billion in investment fund balances aren’t being reported by the California State, (California CAFR) contrary to what Jerry Brown claims in the government's latest propaganda video.

"So… is California in such a financial deficit, as the Governor and his proposed and revised budget plan so matter-of-factly states?

This is the question that we will be answering today. But in order to answer this question, we must go to the true source of financial auditing for government, the Comprehensive Annual Financial Report (CAFR). This report – the full accounting of government and its investments – is virtually never spoken of publicly. It is not mentioned on the nightly news. And it is not referred to when addressing the people about taxpayer issues and budgetary considerations and shortfalls. In short, this CAFR report is the Holy Grail of government accounting; very difficult to read and comprehend, and worse of all… it is hidden in plain sight."

Below, Brown addresses and purposefully lies to the people of California, threatening to cut school funding by multiple billions if the people of the State do not vote in favor of his new budget plan.

Now, the first thing that must be understood is the difference between the partial “budget report” as referred to above by the Governor, and that of the Comprehensive Annual Financial Report – which is the full audit of the California government. The following paragraph is taken directly from the 2011 CAFR report, and explains this difference quite succinctly…

On page 200, the 2011 California State CAFR explains the following (emphasis mine):

“On a budgetary basis, the State’s funds are classified as either governmental cost funds or nongovernmental cost funds. The governmental cost funds include the General Fund, most of the funds that comprise the Transportation Fund, and many other funds that make up the nonmajor governmental funds reported in these financial statements. Governmental cost funds derive their revenue from taxes, licenses, and fees that support the general operations of the State. The appropriations of the budgetary basis governmental cost funds form the annual appropriated budget of the State.

Nongovernmental cost funds consist of funds that derive their receipts from sources other than general and special taxes, licenses, fees, or state revenues and mainly represent the proprietary and fiduciary funds reported in these financial statements. Expenditures of these funds do not represent a cost of government and most of the nongovernmental cost funds are not included in the annual appropriated budget…”

And so we can see that governments participate in many business activities; and we must first and foremost understand that a large portion of liquid investment assets are held within what the government calls “non-governmental” activities, including “Enterprise Operations”. These investment assets are usually kept in what are called “Investment Funds”.

But government is only obligated (by its own law) to report what it refers to as “governmental” or “taxpayer” activities to the citizenry on its “Budget/Appropriations Report”. Tax in… Tax out…

In short, the Governor of the great corporate State of California is lying to his taxpayers through the act of omission of these CAFR facts, by only referring to a hand selected portion of that CAFR, which is called the State’s annual budget report. While this should be tried as perjury, the laws of the State/Federal government protect him from this ever happening.

To help in your understanding, let’s say that you were to have a checking account with $1,000 and a savings account with $10,000 in two different banks, and that you only reported to the government that you had $1,000 dollars as your net worth because you don’t want to use your savings account to pay bills (taxpayer obligations) to government. You’d be audited and put in a federal debtor’s prison. But for government, the simple designation of “non-governmental” or “non-taxpayer” income and investment returns allows them to hide all of this wealth from the people and the “Budget Report”, while never mentioning the funds and wealth in the CAFR report. The only difference is that government does this legally – because government makes its own laws!

Why do they do this?

The answer is simple, really… TO JUSTIFY THE CONTINUATION OF, THE RAISING OF, AND CREATION OF NEW TAXES!!!

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Is Mitt Romney a Financial Parasite?

“Labor is prior to, and independent of, capital. Capital is only the fruit of labor, and could never have existed if labor had not first existed. Labor is the superior of capital, and deserves much the higher consideration.”. -- Abraham Lincoln

How does the good of a few greedy parasites, beholden to nothing, outweigh the good of the nation? How does anyone justify legislation and policy that further lines the pockets of these parasites? Even if parasitic wealth was taxed at the same rate as the rest of us, they would still be filthy rich! And, they don't create jobs. Hell, most of them never worked a day in their life. But apparently, enough of us believe in their speculative finance economy that has made them obscenely wealthy, and the propaganda that they spew that we are willing to risk an economic catastrophe to protect that obscene wealth.

Which brings me to presidential candidate, Mitt Romney, whose fiscal plan delivers huge tax cuts to the wealthiest Americans while simultaneously forcing massive cuts to public services and social security on which the middle class rely. Then, there is the matter of his personal finances...

Not only, according to his released tax returns, did Romney make $42.7 million over the past two years, paying only $6.2 million in taxes - that’s an effective tax rate of less than 13.9% for doing nothing - he took advantage of a giant tax loophole that's available to only a very select few. It's called the carried interest loophole, or as it's often called the hedge fund manager tax loophole (in 2009 Top 10 Hedge Fund Honchos Averaged $900,000/Hr). Why hedge-fund tax loophole? Because hedge fund managers, partners in real estate ventures, and private equity kingpins are the select few who can use this legal provision to escape paying what the 99.9999 of the population are forced to pay.

What exactly is carried interest? 

Well, aside from the fact that closing this loophole could save taxpayers and the deficit $15 billion by 2015, it is the percentage - usually 20% - that  hedge fund managers and private equity kingpins can claim as investment,  taxed at the long-term capital gain of 15% rate,  instead of claiming what it actually is, fees or income,  which would be taxed at what the rest of us pay, 35%.

Wait, it gets better.  The maximum amount a married couple can pass to their children without paying gift taxes is $10 million, but Romney paid zero gift tax on the $100 million trust funds he set up for his sons. That's right, they avoided $31 million in gift tax that 99.9999% of the population would've had to pay if they did the same thing! According to David Cay Johnston, they "gave their sons some of their carried interest. And because the carried interest is not an ownership, it is a right to receive profits, Congress lets you value that gift at zero". 

In a nutshell, top hedge fund managers, gifted with a much lower tax rate, who do not produce anything tangible, or, some might argue, anything of any value whatsoever, make  more hourly, than most Americans will earn in a lifetime,  and financial parasites presidential candidates, who left their company 13 years ago,  still receives a share of the firm’s “carried interest” profits – taxed at the same low rate. It's the gift that keeps on giving to those with ghastly gobs of power and privilege.

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Jackpot Capitalism: Great Fortunes Made Gambling With Other People's Money

Never before in history, have so many, amassed such spectacular fortunes in such a short period of time. Sure, during the Industrial Revolution, the robber barons became tremendously wealthy over a span of about 45-50 years. However, at the very least, this great wealth resulted from exploring new technology and/or finding new resources that did benefit society, despite the extraordinary suffering these men of spectacular fortunes caused.

Fast forward a century, and people are literally profiting immensely from the turmoil that they created. The same cannot be said of this new crop of even faster growing fortunes (approx. 10 year span). Oh, these "jackpot capitalists" have contributed more than their fair share of suffering on a global scale; however, unlike their predecessors, the robber barons, they have produced very little, if any benefit at all, to society. In fact, the opposite can be said. With access to a bull market, and the bank's capital, these new "robber barons" have single-handedly collapsed our economy with their one-way, no risk bets.

How did these individuals become wealthier than some nations? Well, engineered by the Federal Reserve, itself, most of their wealth was made on the sharp fall in the cost of money. After all, the Federal Reserve sets the interest rates for America, as well as greatly influencing global rates.


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Voluminous Codes Eroding the Delicate Balance Between Liberty and Social Order

Liberty is defined as the freedom from arbitrary or despotic government or control. In other words, liberty does not imply the absence of rules and consequence of breaking those rules, only the absence of arbritrary and/or despotic rule. At the other end of the spectrum is social order, or the absence of anarchy, which one could say is of equal importance. The United States of America, it is said, is one of the first nations in history to create a form of government that, as much as possible, harmoniously balances liberty and social order.

As we emerge from the first decade of the twenty-first century, the rules preserving rights and liberties have increasingly been sacrificed in the name of "national security", primarily by lawmakers who have created an ambiguous, incoherent web of laws, leaving the average citizen in the dark.

Take the income tax, which can be traced back to 1862, when President Lincoln and Congress created the office of Commissioner of Internal Revenue and enacted an income tax to pay war expenses. It was passed as an emergency and temporary war-time tax, and in 1894, the Supreme Court declared it unconstitional. That is until the 16th amendment exempted income taxes from the constitutional requirements regarding direct taxes, after income taxes on rents, dividends, and interest were ruled to be direct taxes in Pollock v. Farmers' Loan & Trust Co. (1895). And in 1913 the very first IRS 1040 form was created, and since that point, the IRS code has morphed into an exceedingly convoluted, complex and oppressive creature.

One might ask, “Why can’t the tax laws be more simple?” Well, not only because  of government’s insatiable desire for revenue, but also because Congress uses the tax laws for reasons other than that for which they were intended. The same is true for our legal system, in general.  Our constitutional rights, if we really ever had them to begin with, have essentially been eviscerated by code. What can we do about it? On an individual basis, not much.

The real world determination of legal or "lawful" arguments lie with the immune judges, and prosecutors. Not only can they enforce the law, they can do so with impunity.

In 1976, the Supreme Court decided, in a case called Imbler v. Pachtman, that prosecutors have absolute immunity from civil rights lawsuits for their work in the courtroom. The court acknowledged that its ruling “does leave the genuinely wronged defendant without civil redress against a prosecutor whose malicious or dishonest action deprives him of liberty,” but said the alternative was worse: leaving prosecutors to fear a lawsuit, or even bankruptcy, every time they lose a trial..

Insofar as income tax, code section 6011 and code section 6012 require citizens to file.  Constitutional? No, but go ahead and try to fight it.

The IRS can bring any action in the courts of the United States. There is an entire section of the Internal Revenue code that creates jurisdiction for the IRS to bring a lawsuit. For example, a section 7403 action, which allows the IRS to file a lawsuit against any delinquent taxpayer in a situation where the IRS wants to seize the property of that taxpayer. Although, the IRS is not allowed to seize the home of a taxpayer through the administrative process, the IRS can seek an order from a judge who allows the IRS to seize the property

It will be of little avail to the people, that the laws are made by men of their own choice, if the laws be so voluminous that they cannot be read, or so incoherent that they cannot be understood; if they be repealed or revised before they are promulgated, or undergo such incessant changes that no man, who knows what the law is to-day, can guess what it will be to-morrow. Law is defined to be a rule of action; but how can that be a rule, which is little known, and less fixed? -- James Madison

A Monument of Deficient Wisdom:

The IRS is an agency of the government of the United States; however, it has no respect for the constitution. The courts of the US have enforced the Internal Revenue code to the detriment of the constitution There is nothing morally or constitutionally correct about our current tax law. But, can they as a practical real life matter, enforce it? Yes, they can.

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Struggle for Mastery Submerged in Goo and Treadmills for Shrimp.

As Memorial day approaches, it's somehow comforting to know that our troops may be sacrficing their food-stamp qualifiying pay to ensure the well-being of decapod crustaceans, and   that the sticky residue of self-congratulatory goo that normally remains in the world of metaphor is allowed to manifest and show itself for what it really is.

I mean, I don't know about you, but lately, I've noticed something happening lately: a definite increase in what I call "Triton Driving Welfare Shrimp Queens" (Oh, you didn't know lazy shrimp pilot luxury submersibles fully loaded with leather seating and full air conditioning? Well, guess what? It's as real as Reagan's Cadillac driving welfare queens.). That is, flabby, pathetically out-of-shape, twinkie-crumb-covered entitled shrimp who would rather lounge lazily on their salty shelled sofa beds, watching the Jersey shore, than doing what shrimp are supposed to do: get off their collective asses and WORK-OUT! It really has become quite a problem.

But, don't you worry, the National Science Foundation, having the “gold-standard approach to peer review” for the projects they spend money on is not letting this this fundamental, earth-shattering problem get buried under less important issues. Nosiree! Our tax-dollars are working hard trying to rehabilitate these good-for nothing, sofa-bed-shrimp. How? You ask. Well, by providing shrimp treadmills, of course!

Now, some of you may be asking yourself [I know I did], what about those people in the Anartica who want to struggle for mastery submerged in goo?

Well, good question. Once again, our tax dollars are seeing to it that these lovely people will not be denied their jello. Never let it be said that  American government  ignores the jello-loving, ice-dwelling Anarticans. They will wallow in nothing but the best

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Seizing the Critical Moment Before it Gets Away.

Critical "moments" are brief intervals of time in any event, when the outcome is either decided, or to a lesser extent, transfers the momentum and advantage from one side to another, whether that event is sports, politics, war, or as simple as a game of poker.

Competing athletes, in order to succeed, must be able to identify and exploit the critical moment, because in that instant, is opportunity. Let that moment go and chances are good that desired change will not occur.

That "moment" is here and we cannot afford to let it go. Electing Barack Obama is only the beginning. We cannot assume that soon-to-be President Obama will be able to read our minds. We the taxpayers need a bullhorn to make sure our voice is heard loud and clear in order to restore our influence over our legislature. Who is our opponent? The answer: the corporate lobbyists. How do we defeat them? Do whatever it is they are doing and do it better.

We already know how successful the lobbyist is in achieving its goals. There is no reason taxpayers cannot do the exact same thing. Some may say we don't have the money, the power, the will, etc. that corporations have. No, that's because we have more...much more!

We pay taxes to support the infrastructure that is supposed to provide for the needs of the people. Not the needs of corporations, not the needs of a few elitists, not the needs of an insatiable the war machine... but the needs of every single one of us. That money is our money. As long as we stay within the constitutional framework that our founding fathers created, we can use that money and the power that it produces to take back our government.

Why can't we fund full-time taxpayer lobbyists? Their main function is to keep our legislators accountable to all of us, making sure full disclosure and transparency takes place in order to combat media bias. They must answer to the people and only the people. As naive and simplistic as this may sound, an idea like this could work if enough people get behind it.

Our goal should be a responsible and efficient government that lives within its means and serves us and only us.

Links:
Campus Activism
Citizens Against Government Waste
Credo Action - e-campaigns.
e-the people is a public forum for a new democracy conversation.
Email Congress
Modest Needs - "works to stop the cycle of poverty BEFORE it starts for the low-income workers whom conventional philanthropy has forgotten".
The Progress Report
Progressive Portal - easy online activism.

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Show Me the Spending.

Showmethespeding.com is a collaborative community of advocates for government "transparency."

(Alexandria, VA) -- The 362,000-member National Taxpayers Union (NTU) today joined with the online resource Sunshine Review in the next major step toward building a collaborative community of advocates for government "transparency." NTU has integrated its Show Me the Spending Web site with Sunshine Review's Wikipedia-like site that enables people to find and share information about whether state and local governments are effective, accessible, and responsible with tax dollars. Now, anyone from think-tank staffers to taxpayer activists can edit the site, available at www.showmethespending.com, to reflect transparency news and updates from their respective states.

"Because of its interactive nature, we expect this Web site to become the 'one-stop shop' for accurate, timely information about transparency in government spending," said State Policy Analyst Douglas El Sanadi. "Its software platform, similar to Wikipedia's, makes it an ideal Web space both for learning and for educating others about how government allocates taxpayer dollars." For example, each month will feature a collaborative transparency project. November's project is to develop a comprehensive list of links to each state's employee salary data.

In fact, government officials have already found the site useful as they have sought to expand their respective states' disclosure policies. Nebraska Treasurer Shane Osborn has viewed and praised the site, as has the Director of the South Carolina Transparency Project.

The new Web site continues the efforts of the "Show Me the Spending" Coalition, a group of organizations dedicated to transparency. The Coalition formed in the spring of 2007 under NTU's direction, and already has over 30 member organizations. Prior to founding the Coalition, NTU was a key proponent behind the creation of www.USASpending.gov, a federal transparency Web site launched in 2007. Since then, Coalition members have successfully promoted transparency throughout the country.

Launched in July 2008, Sunshine Review is beginning a nationwide project to assess transparency issues at the state and local level. It features news on government's effort to proactively and voluntary disclose information online, tracks transparency legislation, provides outrageous stories of government spending, and covers open records issues. Sunshine Review and its sponsor, the Sam Adams Alliance, want citizens to be able to easily locate basic facts through their governments' Web sites. The Sam Adams Alliance is a member of the Show Me the Spending Coalition.

"As transparency continues to open windows on the way government operates, our site will help taxpayers and elected officials determine which of those windows allow the most sunshine into the process," El Sanadi concluded. "Transparency is essential for government accountability and, ultimately, it leads to more responsible use of taxpayer dollars. We're confident that www.showmethespending.com, because of its collaborative nature, will serve as the guide for this vital, constantly evolving movement.”

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That Time of Year Again

Tax Prof blog is a very comprehensive and informative about anything and everything having to do with tax news and law.
Of course, the IRS is full of information about taxes:

From the Tax Foundation:
Tax Policy Blog

Here are a few more that might be of interest:
TaxBlogger
TaxMama
taxalicious

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Death and Taxes

"Death and Taxes" is a large representational graph of the federal budget. It contains over 400 programs and departments and almost every program that receives over 200 million dollars annually. The data is straight from the president's 2008 budget request and will be debated, amended, and approved by Congress to begin the fiscal year. All of the item circles are proportional in size to their spending totals and the percentage change from 2007 is included to spot trends and disproportion.

"Death and Taxes" is more than just numbers. It is a uniquely revealing look at our national priorities, that fluctuate yearly, according to the wishes of the President, the power of Congress, and the will of the people. Thousands of pages of raw data have been boiled down to one poster that provides the most open and accessible record of our nations' spending than ever seen before. If you pay taxes, then you have paid for a small part of everything in the poster. "Death and Taxes" is an essential poster for any responsible citizen or information junkie.

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How Many Hours of War Spending Would it Take to Fund Health Insurance?

"We the People" apparently have no problem with spending over $14 million dollars an hour to injure and kill others but can't scrape up the cash to provide health care for our own children. I know I'm repeating myself over and over, trying to present the information in a slightly different way each time, but the basic message is we better liposuction the lip-service and start proving what our priorities are with the real deal, cold hard cash.

It's too easy to blame Bush. Just as Hitler would be powerless without the Nazis, Bush would be powerless without "us". I didn't vote for Bush but I include myself as a "Bush supporter" because it took me far too long to catch on to his plans to eliminate the "New Deal" and shred the Constitution.

I sit safely at my desk typing whatever the hell I feel like without worrying about whether I am risking anything but my eyesight or if I'll hear my alarm clock tomorrow morning. At the same time, I realize all this freedom and security I enjoy could disappear in a flash if America becomes victim to another act of terror.

The opportunity cost of this war is incomprehensible. Not only are we paying out $3,850 per second to fight this war but the cost of what we could be doing with the time and energy devoted to this war is astronomical.

"That translates into $333 million a day, $14 million an hour, $231,000 a minute and $3,850 a second. Even for the world's richest country, this is serious money."

On top of what this war is costing Americans, the toll this war is taking on Iraqis is beyond comprehension.

"Many of the internally displaced Iraqis -- IDPs in the language of aid organizations -- live in grim conditions, in makeshift camps without running water, electricity, even latrines.

[...]

This summer, the Iraq Chief of Mission of the International Organization of Migration (IOM), Rafiq Tschannen, said "only a fraction" of internally displaced Iraqis were getting basic assistance. It was difficult to understand, he said, why there was so little response to appeals for help.

[...]

U.S. contributions to various relief organizations quadrupled in 2007, to just under $200 million from $43 million in 2006, pocket change in terms of the war's cost. The sharp increase makes Washington the biggest single donor in the refugee crisis, according to the U.S. Department of State.

As to the $85 million appeal by the IOM, made in June -- by September, the organization had received $6 million, 5 million from the United States and 1 million from Australia.

The shortfall, $79 million, would be covered by less than six hours of war spending.

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Commit New Money to an Effort that Has Already Consumed Billions of Taxpayer Dollars.

With 45 million American citizens going without any type of health care and most Iraqi citizens far worse off than they were before we invaded their country the thought of committing more money to this disaster is tantamount to insanity.

I don't blame the Iraq government for refusing to take possession of thousands of American-financed reconstruction projects considering Iraq has become a boiling cauldron of death and destruction since our invasion, not to mention many of these "projects are crumbling, abandoned or otherwise inoperative only months after the United States declares that they have been successfully completed."

Since the Iraqi government declined formally accepting projects, an official in the inspector general's office said the United States is "finding someone at the local level to handle the project, handing them the keys and saying, 'Operate and maintain it,'"

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Donating Cars to Charity

If you are donating an old car to charity make sure you donate it to a charity that, in turn donates it to someone else in need. Under new IRS rules, in an organization auctions off a used vehicle, the former owner can only claim the amount the group gets for the sale, which could be well below market value.

BUT donations to charities that supply cars to needy people can be taken at full value.
Check out 1-800-CHARITY CARS, the first and only national charity of its kind that
provides donated vehicles free of charge to struggling families willing to work and become self-sufficient, tax-paying members of the community.

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How Your Tax Dollars Are Spent

Do you wonder what your tax dollars buy? As the deadline for filing federal income taxes rolls around again this year, you may well wonder where those hard-earned bucks you've forked over to Uncle Sam actually go. The answer might surprise you.

This year the federal government expects a haul of about $2.7 trillion -- give or take a couple hundred billion or so, depending on the economy, corporate profits and Wall Street and of course, how honest everyone filing a return is.

The Biggest Chunk is Already Spent

In theory, at least, the White House and Congress work together -- or battle it out -- to decide how to divvy up every dollar paid to the federal government. In fact, most of it is already as good as spent.

About 70 percent of the annual budget pays for commitments already incurred -- everything from Social Security benefits to interest on the national debt. Neither President Bush nor Congress has much say over that.

The Social Safety Net

The biggest single chunk of that so-called nondiscretionary spending -- more than 20 percent of the total budget -- is used to pay Social Security benefits to existing retirees.

Another 15 percent pays the tab for Medicare health benefits. An additional 7 percent goes for Medicaid, 3 percent for veterans benefits and 1.3 percent for supplemental security income used to assist the aged, disabled and blind.

All types of aid to the needy -- Medicaid, housing subsidies, aid to poor families with children (welfare, which accounts for about 1 percent of the budget), food stamps, school lunches and so on, plus unemployment benefits -- account for about 16 percent of the budget.

In fact, all government payments to individuals amount to about 58 percent of the budget. That's twice the share of the budget such payments claimed 40 years ago. And the percentage continues to climb -- giving those pushing reform of such entitlement programs a powerful argument.

The National Debt

Interest on the debt claims about 10 percent of the budget. When President Bush took office, the national debt was $5.6 trillion, but deficits have pushed that number closer to $9 trillion today.

Where's the red ink coming from? Depends on who you ask: Democrats blame Bush's tax cuts and wasted defense spending. Republicans say that's not so, claiming that Bush's tax cuts boosted the economy and increased revenue. They blame increased deficits on wasteful social programs and spending necessary to fight the war on terrorism.

The Military's Slice of the Pie

The military gets the biggest piece of what's left -- the 30 percent of the budget called discretionary spending because it's the part of the budget that Congress and the White House can control from year to year.

About two-thirds of this spending (20 percent of the total budget) pays for the tanks, jets, ships, missiles, rifles and other paraphernalia of defense, not to mention the salaries of our country's soldiers, sailors, airmen and Marines. In the next fiscal year, which begins on Oct. 1, this will amount to nearly $600 billion, possibly more if costs in Iraq and Afghanistan climb higher than expected.

Some big-ticket Defense Department projects, such as purchase of new combat fighter jets, Navy shipbuilding and space weapons research, may be trimmed in light of the war costs. But that would barely dent the Pentagon's share of the overall budget, especially with more funds sure to be added to support medical and other needs of Iraq war veterans.

You might think a fifth of the federal government's total spending is a lot to put into defense. But in comparison to some earlier periods in our country's history, it's actually a smaller share. During President Ronald Reagan's defense buildup, the military claimed 26 percent of the budget. And at the height of the Vietnam War in 1968, 46 cents of every tax dollar Americans paid was for defense.

Of the remaining discretionary spending, the Department of Homeland Security claims about 1.5 percent of the budget, or $43 billion. Foreign aid spending, though it raises the ire of many taxpayers, accounts for just half of one percent and is likely to be reduced by Congress even further.

And Everything Else

The last 8.5 percent of Uncle Sam's budget pays for everything else: Transportation -- federal highways and bridges, support for Amtrak, funds to help states with other roads, bridges, railroads, airports and so on.

Science and medical research. Food and drug safety. Guarding the environment. The Strategic Petroleum Reserve. Export promotion. Import protections. Space exploration. Air traffic controllers. The FBI, the Drug Enforcement Agency and the rest of the Justice Department. Federal education funding.

And an alphabet soup of federal agencies tasked with helping to keep Americans safe, healthy and, sad to say, honest -- from the CPSC (Consumer Product Safety Commission) to the NLRB (National Labor Relations Board) to the SEC (Securities and Exchange Commission).

And when all is said and done, the $2.7-trillion tax revenues aren't enough to pay all of Uncle Sam's bills. This year, the federal government will spend about $200 billion more than it will take in.

Next year, the deficit will run about $300 billion. Coincidentally, that's just about the same amount that the government figures it's being stiffed by individuals and companies who don't pay all the taxes they owe, either by intent or by error.

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From A CPA's Point of View

"I am a CPA, CFP who specializes in individual income taxes for affluent Americans. I am shocked by the bad and deteriorating financial condition of many of my clients."

"The underlying cause that is apparent to me is years of unrestrained/uncontrolled spending beyond one's means. This is now catching up with many.

"It is not so much slower income growth or the jump in interest expense.
The problem has progressed through the following stages:

"First: The careless tapping of home equity.

"Second: Extensive use of credit cards while paying the minimum (if lucky); getting killed on interest and the monthly late payment fees.

"Third: To pay bills now due, many are tapping their 401(k)s and or IRAs, taking premature withdrawals (not periodic). The big problem here has been that many have only 20% tax withheld when the burden is closer to 50%, with the U.S. Tax, a 10% penalty and the state tax.

"Two of my clients had to sell their homes last spring to cover their 2005 liabilities; some BIG numbers. These clients had adjusted gross incomes in excess of $200,000. At least they were lucky because the housing market was firmer a year ago!
"Another individual I know (though not a tax client) refinanced to an ARM to lower her monthly payments. Her payments jumped in December by about 20%, which she can't handle. I recently learned that this person opted not to have her real estate taxes paid monthly via escrow. The reason: She couldn't afford the monthly payment when she refinanced.

"WHAT are these people thinking?? They never come for advice before they get themselves in a hole!

"I am afraid that what I have been seeing is just the tip of the iceberg."

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War and Taxes: 94% Tax-Rate from 1944 to 1945 on Income over $200,000!

Aside from the Mexican-American War, the Iraq conflict is the only war that our nation has not been asked to financially sacrifice anything. I believe it is the only war in which our government made sure part of our citizenry intentionally received pecuniary benefit on top of not being asked to forfeit monetarily.

George W. Bush, with the help of Karl Rove understands the only way a nation will tolerate war is if the majority of its people truly believe in the cause, or if its people are spared the reality to the point where the citizens that “count” are flourishing, and many of them to the point of opulence. Of course, the citizens that do not "count" are worse off than they have been in a very long time, especially when compared with that small segment of our population referred to as the "hyper-rich".

Abraham Lincoln introduced an income tax up to as much as 70% on its most affluent citizens to offset the cost of the civil war. The top tax-rate was 77% in 1918 to help pay for World War I. Tax-rates hit an all-time high of 94% on income of $200,000 and above in 1944 in order to pay down the cost of WWII. Unbelievably, the tax-rate remained extremely high until 1964 when it was lowered to 77%. The early 1950s saw an increase in individual and corporate rates due to financing needs of the Korean War. The Vietnam War raised the tax-rate once again in the form of a surcharge.

We cannot put all the blame on George W. Bush because without the support of the American public, President Bush could not have gotten away with creating a war, based on lies, paying for it with borrowed money, meanwhile producing a segment of our population that gives new meaning to the word "wealthy", the likes of which has never been seen before in this country. Let's face it, most Americans only want to hear "tax-cuts", no matter what the situation and without understanding who those "tax-cuts" reward.

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But what about 'money' that's virtual?

NEW YORK (CNNMoney.com) -- In case you haven't noticed, Second Life is booming, and its economy has boomed too - putting the virtual reality world in the crosshairs of tax authorities, experts say.

Entrepreneurs have flocked to Second Life - a computer-based 3-D virtual world where users create their own, well, second lives - in pursuit of making real money. So-called residents can buy and sell goods for Linden dollars, an in-world currency that can be converted into real U.S. dollars.

Second Life is a virtual world that anyone with a broadband Internet connection can enter. Users download software and create an avatar - a cartoon-like character that they control with their mouse and keyboard that represents them in the digital world.
When users login to Second Life, they begin the in-world experience. Using the software's tools, they can create objects and communicate with other virtual residents via instant messaging and voice services.

At least one user claims the virtual world has minted her a millionaire - and economic activity is humming along. Users of the virtual world injected about $1.6 million into Second Life in the last 24 hours alone, according to Linden Lab, the creator of Second Life.

Under current tax law, it's clear that earnings in real U.S. dollars generated within virtual realities are reportable to the IRS. If a Second Life real estate mogul cashes out of her in-world property portfolio, she's liable to pay income tax on any profit that's been exchanged into real greenbacks - just as an eBay (Charts) seller is responsible for reporting income generated from an online sale.

Tax law is murky, however, when it comes to dealings that occur solely within Second Life or other computer-simulated environments. For instance, is a transaction that occurs only in Linden dollars and doesn't involve any real-world, dollar exchange taxable?

Questions like that have the tax community buzzing about the issue, said Paul Caron, a professor at the University of Cincinnati who edits the TaxProf Blog.

The issue has also attracted the interest of the Joint Economic Committee of Congress, which said last fall that it was studying issues related to the economies of virtual realities like Second Life and World of Warcraft, an online role-playing game.

Results of the study - due to be released before the end of the month - suggest that "as long as virtual activity stays within the virtual economy, it shouldn't be taxable," said Christopher Frenze, executive director of the JEC, which conducts policy research on economic issues facing Congress

But there is a valid argument that even profits that come from, and stay in, the virtual world are taxable, according to Bryan Camp, a professor at Texas Tech University School of Law. "As soon as you start looking at what's going on in these worlds, they look a lot like real economic transactions," he said.

Even if profit isn't realized in real dollars, there's still an exchange of items of economic value. In the real world, if someone trades goods or services without the exchange of real money - also known as bartering - that's a taxable event, Camp noted.

Given all the attention paid to the topic, the IRS eventually will have to respond to the situation, said Caron. "I think it's on the IRS's radar screen in a way it was not six months ago," he said.

When asked about the agency's position on collecting taxes from virtual economies like Second Life, an IRS spokesman offered the following comment via e-mail: "Any time someone wins a tangible prize or award, the value is reportable as taxable income. An accumulation of 'points' would not result in tax consequences, but redeeming or selling them for money, goods, or services would."

Edward Castronova, a professor at Indiana University who heads the Synthetic Worlds Initiative, a research center focused on online communities like Second Life and World of Warcraft, doesn't see taxes on virtual-only transactions coming anytime soon.

But "in the next three or four years, we'll likely see it. In the next 10 years, there's no question about it," he said. "If you look at these transactions, they're huge."

For its part, Second Life operator Linden Lab isn't concerned about looming tax regulations on virtual economies, at least not yet.

"Given the reassuring statements from the JEC, it's pretty clear this is a moot point," a spokesman for San Francisco-based Linden said. "Linden is focused on what it does best - scaling technology and building Second Life's platform."

Stay tuned.

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Only 10% of All Charitable Deductions Go to Help Poor.

Lots of charitable dollars — especially from the wealthy, who have the most to donate — are going to culture palaces: to the operas, art museums, symphonies, and theaters where they spend much of their leisure time. And to the universities they once attended and expect their children to attend, perhaps with the help of what's known as affirmative action for "legacies."

These aren't really charitable contributions. They're more like investments in the lifestyles the wealthy already enjoy and want their children to have too. They're also investments in prestige, especially if they result in the family name engraved on the new wing of the art museum or symphony hall.

Now it's their business how they donate their money. But not entirely, because, you see, charitable donations are deductible from income taxes.

This year, the U.S. Treasury will be getting about $40 billion less than it would if the tax code didn't allow charitable deductions. By the way, the government now spends less than $40 billion a year on Temporary Assistance for Needy Families, which is what's left of welfare.

I can see why a contribution to, say, the Salvation Army should be eligible for a charitable tax deduction. It's helping the poor. But why, exactly, should a contribution to the Guggenheim Museum or Harvard University?

Not long ago, New York City's Lincoln Center had a gala dinner supported by the charitable contributions of the leaders of the hedge fund industry, some of whom will be receiving billion-dollar bonuses in the next few weeks. I may be missing something here, but this doesn't strike me as charity. I mean, poor New Yorkers don't often attend concerts at the Lincoln Center.

It turns out, in fact, that only an estimated 10 percent of all charitable deductions this year will be directed at the poor.

At a time in our nation's history when the number of needy continue to rise, when government doesn't have the money to do what's necessary, and when America's very rich are richer than ever, we should revise the tax code.

Limit the charitable deduction to real charities.

And have a happy holiday.

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