Most taxpayers have no idea what their federal income taxes actually provide. When I ask folks if they know where their IRS check goes I get answers from, “…it pays for the operation of the Federal Government.” to, “… hummm, I really don’t know.” Actually both answers are partially true. Why were the IRS and the Federal Reserve created by the same act of Congress — what is their relationship to the Federal Government?
About a year ago, I made the assertion that the Federal Reserve through the IRS has the power to tax directly by congressional action and indirectly by inflation. It is very easy to see when you understand the “not quite governmental, not quite private” structure of the Federal Reserve System and its taxing arm the IRS.
Here is how it works. Congress passes a law, the House appropriates the funds. The Federal Treasury Department prints the notes for the appropriation. Then the Federal Reserve purchases these notes/paper at the cost of printing, about 4 cents note. A $1bill, $100 bill, or $1000 bond, costs the same 4 cents. The Federal Reserve then loans this money back to the Federal Government at interest based on face value. This interest rate may fluctuate. The cash is then distributed to the regional Federal Reserve banks from which the appropriations are disseminated as per the Congressional mandate.
Now, as the interest climbs with each appropriation, this debt requires payment your taxes – and occasionally the taxes must be increased to keep up with the “can never be paid off by design, debt”. The Federal Reserve profits greatly on this value created out of thin air paid by IRS collected taxes, and OUR REAL ASSET collateral on loans that go into foreclosure/confiscation.
Periodically, the Federal Reserve will ask Congress for an increase in money supply. This indirectly taxes folks by pumping cash into the economy which decreases the buying power of the dollar. This makes it seem as though prices have risen – not the case, the money added causes the value of the dollar to drop. This is the inflation tax. A tax that causes big problems for people with savings or on fixed incomes. The frightening thing is, the FED-IRS has NEVER had it’s books opened to Congressional scrutiny.
On 2/26/09, Representative Ron Paul rose before the House to introduce his “Federal Reserve Transparency Act” HR-1207. In his speech, he said…
“…Throughout its nearly 100-year history, the Federal Reserve has presided over the near-complete destruction of the United States dollar. Since 1913 the dollar has lost over 95% of its purchasing power, aided and abetted by the Federal Reserve’s loose monetary policy. How long will we as a Congress stand idly by while hard-working Americans see their savings eaten away by inflation? [...] Whenever you question the Fed about the strength of the dollar, they will refer you to the Treasury, and vice versa. The Federal Reserve has, on the one hand, many of the privileges of government agencies, while retaining benefits of private organizations, such as being insulated from Freedom of Information Act requests. [...] The Federal Reserve can enter into agreements with foreign central banks and foreign governments, and the GAO is prohibited from auditing or even seeing these agreements. Why should a government-established agency, whose police force has federal law enforcement powers, and whose notes have legal tender status in this country, be allowed to enter into agreements with foreign powers and foreign banking institutions with no oversight?”
In this unique Federal Reserve/Federal Government relationship the IRS works as the “Taxing Arm For The FED” – NOT the Federal Government which is prohibited from direct taxing at Article 1 section 9 clause 4 of the Constitution! Now you know. Those sneaky-rascal bankers anyway.
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