The Dangerous Lie of ‘Tax-To-Spend’

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When you consider the worst ramifications of the most insidious myths of mainstream economic theory, arguably the very worst, most damaging one is the ‘tax-to-spend’ myth, or the idea that we require tax dollars to spend at the Federal level, when the government is the source of all those dollars. 

To declare that myth as ‘the worst one’ is a big claim, considering how awful nearly all mainstream economic myths are – to the point that you’d better be good at arguing, if you wanted to make that claim. 

Speaking of arguing, wish me luck – I’m about to try. 

Despite how damaging the debt/deficit myths are for their ability to make people see our economy incorrectly, or for their penchant for providing a flimsy pretext to enact austerity of the most lethal kind, the tax-to-spend myth is all of that, and more. 

And while nearly every misconstruction of our economy seems to conveniently blame the poor, the way in which the tax-to-spend myth does this is particularly devastating. 

The mechanics of how that works are deceptively simple: If you make people think they are responsible for footing the bill for the payment of legislation, you can make them feel personally invested in that legislation. They begin to feel entitled to dictate limits on who can benefit from that legislation and how much benefit they can receive. They begin to view representation as coinciding on a sliding scale with their ability to pay for it and feel entitled to as much as they can afford. To put it in a box – it encourages resentment, conflict, & division, and mis-directs anger. 

But the tax-to-spend myth is even worse than that. 

What this myth sets up is a situation where class-baiting can be employed. Much like its similarly named sibling race-baiting, class-baiting uses the ‘slightly better off’ by instilling a sense of superiority. Your ‘underlings’ will continue to apply pressure downward for you, as they cannot apply pressure in the other direction. It is a system based on punching down. 

What this means is that the tax-to-spend myth does benefit the 1% most of all, but it does so in a way that makes almost everyone feel elevated above someone else. ‘I contribute more’ to keep the wheels of society turning, after all. This reasoning turns the entire world against the homeless, who have no one lower to feel superior to. It invites resentments of those who are ‘not carrying as much weight’ to support society and are instead just ‘taking’ without the ability to ‘pay back’.  

It over-inflates the egos and sense of entitlement of those who make the most money and deflates the egos of those who make less. Their very worth as human beings is determined by this skewed scale. 

It both invites and empowers racism, classism, and elitism across the board. 

As long as the 99% are locked in conflicts directly attributable to these intentional divisions, we are powerless to protect ourselves from their attacks. We will continue to do the work of policing ourselves for them. And the sooner we all realize that public money belongs to us all, without unfair responsibility on any segment of society, the sooner we can all come together in empathy to finally solve the problems that we face as a nation, not least of which is poverty. 

But there is yet another insidious aspect of the tax-to-spend lie. 

When we consider that we can already spend on whatever we need as a nation without having to rely on working Americans’ ever-shrinking collective wallet, we can start demanding that money be spent on our behalf – and not continue waiting until some point in the future when we’re “better able to afford it” with our tax dollars. Laboring under that false scenario, such a time will never come, and looks a little less likely with every passing year.

Instead, we’re left to shake our fists at the super-rich, who often pay next-to-nothing in federal taxes. “If it weren’t for them…” Again, this anger is completely understandable, but misguided. We do not need rich people’s money to spend as a nation, but we still need to tax them to address income inequality – a threat to national security. 

…So, we wait until we can repeal or amend the tax laws to be able to afford what we need as a nation? 

The tax-to-spend myth doesn’t just institutionalize racism and elitism, it also perpetuates inertia – nothing ever gets fixed, and the system never changes. It’s too mired in pointless excuses. 

Meanwhile, our government is not income constrained. In fact, it is the source of all income. The sooner people realize this, the sooner they realize that corporations and billionaires are simply not the crux of our national spending power as they would have us believe, any more than middle class incomes are. When we can see that the crux actually resides in our own Congress, we can begin to see the place of corporations as secondary, at best – and we can stop looking at our neighbors and wondering if they’re benefiting from the fruits of our labors while we never seem to catch up. 

Finally, we can see our own place, as the intended benefactors of the US Constitution’s mandate to spend for the common defense and general welfare of citizens. 

One of the most important lessons we can learn in this age is the difference between “my tax money” and “our public money”. You can argue either-or, but they are NOT the same argument. 

Finally, this article wouldn’t be complete unless I discussed a possible path toward debunking this myth, once and for all. It is arguably the easiest myth to debunk, out of all of them, and absolutely anybody can do it. The idea behind this is based in simple logic, and grassroots education. It can be presented something like this: 

If someone doubts you when you say that we spend-to-tax, rather than the other way around, present them with the following two well-established points: 
1) A “counterfeit” dollar is any dollar which was not created by the US government. 
2) All US taxes must be paid in US dollars. 
Then ask them this question:  
“How is anyone supposed to pay their taxes in US dollars, BEFORE the federal government spends them into existence?” 
They likely won’t have an answer. Even if they manage something, it will always revolve around using dollars before they are issued or issuing dollars after they are used. It will either upset point one or point two. Remind them that there are laws regulating both sides: upsetting one side makes you guilty of tax fraud and upsetting the other makes you guilty of counterfeiting – both felonies. Just a hint, you may also find yourself needing to remind them that there’s a difference between “cash” and “credit”. One represents value, the other represents a lack of it. 
You will win against neoliberalism, and ultimately, we all will! 

2 thoughts on “The Dangerous Lie of ‘Tax-To-Spend’”

  1. Very good. Although this has been said many times in many places it needs seating and needs to be said in as many ways as it can be said so it finally starts to filter though the sieve of people’s minds everywhere and not just the choir who already know the tune and pitch.

  2. Fantastic dissemination & dismemberment of this insidious neoliberal claptrap.
    Important to note that, though this article is written from the viewpoint of the United States, it’s detail applies to any country that is the sovereign fiat issuer of it’s own currency, so equally valid for the Canadian Dollar, The Japanese Yen & the good old British Pound Sterling.
    Tax to Spend is a trope & it was designed especially to excuse & perpetuate inequality in our societies.

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