Economic Fascism and Tax Slavery

"Words mean what I say they mean, Alice," said the Mad Hatter

by Nelson Hultberg

For a number of decades, our universities and colleges have been
teaching a serious fallacy in political philosophy (or "poly sci" as it
is now called) that has distorted our thinking about governments and
corporations in the modern world. This fallacy is that our present
system of political organization is a free enterprise system, i.e.,

This is not true. What we are calling capitalism in our schools and in
our media is not capitalism. We abandoned free enterprise long ago in
the aftermath of WW I in favor of Mussolini's "corporatism," i.e.,
economic fascism, where Big Business, Big Government, and Big Finance
form combines to exploit the people with monopolized prices and
corrupted dollars.

This is one of the crucial issues of our time, and it needs to be
clarified if we, who believe in the propriety of capitalism, wish to
lead America back toward a free-market system of sound money and fair
taxation. It becomes especially crucial, seeing that the next 5-10 years
threaten us with a collapse of the Western economies that could bring
severe chaos and misery, out of which would arise great pressure to
further centralize our government in Washington and further suppress our
fundamental freedoms.

Defining Our Terms

To get at the roots of this fallacy, we first need to define the terms
of fascism and capitalism. Webster's Ninth New Collegiate Dictionary
says the following (to which I have added clarifying remarks in

Fascism -- a political philosophy, movement or regime that exalts nation
and often race above the individual, and that stands for a centralized
autocratic government headed by a dictatorial leader, severe economic
and social regimentation, and forcible suppression of opposition. (The
state has power over every aspect of the economy to plan and regulate
its workings. The factors of production are owned privately, but
controlled by the gov-erning authorities as to what and how they are to
produce, and what level of profits they are to retain.)

Capitalism -- an economic system characterized by private or corpor-ate
ownership of capital goods, by investments that are determined by
pri-vate decision rather than by state control, and by prices,
production, and the distribution of goods that are determined mainly by
competition in a free market. (The state is neither to own nor operate
the factors of production, nor to interfere in the peaceful decisions of
their operation, leaving them to be controlled by the natural laws such
as supply and demand that operate within the marketplace.)

Obviously the two systems are different in the fact that fascism
advocates STATE control over the factors of production and their
profits, while capitalism advocates PRIVATE control over those factors.

The primary distinction between the two systems is that capitalism is a
system of economic organization without government involvement, thus its
descriptive adjective of "laissez-faire," which means to leave alone.
The government's job is basically to preserve the peace and perform
those few limited functions granted by the Constitution.

Under fascism, the government's job is to intervene into the marketplace
to control all the various economic interactions of its participants.
Its role is to manipulate the economic interactions through regulations
and the conveyance of special privileges. Government assumes this power
because it is felt that this is the only way stability and order can be
maintained in society.

Under capitalism, the term "private" means free of government control or
involvement. Thus, PRIVATE enterprise is FREE enterprise. Private
businesses are entities in which the individual owners (rather than
public officials) make the decisions of hiring, pricing, wage
determination, production levels, policy planning, profit disposal, etc.
Government is divorced from these economic decisions.

Under fascism, ownership of businesses are left in "private" hands, but
the government rigidly regulates all businesses confiscating much of
their profits and using them as the government sees fit. Thus business
entities are private in name only. The term "private" is still used, but
it no longer means free of government involvement. It is used within the
context of government-business "cooperation." However, such terminology
is a fraud because there is never any cooperation when government is
involved. Government simply tells businesses what it wants done and
legally mandates that it be done. There is no choice in the matter.
Those who don't do as the government says are imprisoned or fined

Fascism is thus a command economy where massive centralized government
is developed to regulate its citizens' lives. The major power centers of
society -- government, corporations, and banks -- form a triad to
monopolize and manipulate the economy according to their liking, their
aggrandizement, and their profit at the expense of the individual and
his rights.

"The essence of fascism," writes Thomas J. DiLorenzo of Loyola College,
"is that government should be the master, not the servant, of the people.

Think about this. Does anyone in America really believe that
this is not what we have now? Are Internal Revenue Service agents really
our "servants"? Is compulsory "national service" for young people... not
a classic example of coercing individuals to serve the state? Isn't the
whole idea behind the massive regulation and regimentation of American
industry and society the notion that individuals should be forced to
behave in ways defined by a small governmental elite?" [Ideas on
Liberty, June 1994, p. 289.]

"Virtually all of the specific economic policies advocated by the
Italian and German fascists of the 1930's," says DiLorenzo, "have also
been adopted in the United States in some form, and continue to be
adopted to this day. Sixty years ago, those who adopted these
interventionist policies in Italy and Germany did so because they wanted
to destroy economic liberty, free enterprise, and individualism. Only if
these institutions were abolished could they hope to achieve the kind of
totalitarian state they had in mind." [Ibid., p. 292]

Who Benefits from Fascism?

Why then do our political elites, our corporations, and our bankers
attempt to maintain the fiction that we are a capitalist economy when we
are so obviously becoming every decade more and more of a government
manipulated FASCIST economy?

Whenever the facts of reality are being distorted by the authorities of
a society, one needs to ask, "Cui bono?" Who benefits? In this case, the
beneficiaries are those who seek the regimentation of Americans under a
massive centralized government in Washington. Our political elites, our
corporations, and our bankers wish to smuggle us into a centralized
despotism because they envision more power and wealth for themselves,
but they clearly realize the strong positive connotation of the words
"private" and "free." Thus they continue to use these words to describe
their policies, even though they know that what they are implementing is
neither private nor free.

The semantic corruption that is happening here permeates our entire
society. Our courts and our government operated schools maintain the
fiction that all businesses in today's economy are FREE, PRIVATE
entities, when in actuality the government is subtly making them into
CONTROLLED, PUBLIC entities by usurping their rights and instituting a
myriad of regulations over their business policies.

To understand this requires only simple logic and common sense. Business
owners do not have true control of their businesses without the right to
freely set prices and wages, retain their profits, formulate policy as
they see fit, etc. Ownership without control is a fiction, a
contradiction in terms. But this is what we have in America today --
ownership without real control. Government sets price ceilings and
floors, dictates wages through laws and labor courts, and confiscates
profits. This is Mussolini's corporate-statism, i.e., fascism -- not
full blown fascism yet, but well on its way. Under such a regime,
government becomes a "partner" to all corporations, and they, in
essence, operate jointly. But as Ayn Rand pointed out decades ago, what
kind of "partnership" can there be when one of the partners makes use of
arbitrary dictates backed up by guns and the law?

Indeed, what kind of "partnership" is it when Washington's black
limousine crowd skims off whatever profits it can bamboozle 51% of the
people to vote for? What kind of partnership is it that allows
businesses to continue to operate only if they remain obedient to
Washington's dictates? This is not free enterprise! This is the
evolution of economic fascism! Our corporations in America become more
and more fascist every decade because the Federal Government assumes
more and more control over them through regulations or tax policy, or
both. Ironically many corporations welcome the omnipresent regulatory
arm of government, because it can often be used to monopolize their
markets and protect them from competition.

A perfect example of corporations welcoming government involvement to
establish a monopoly of their industry is our mega-banks and the Federal
Reserve System. Through special privilege legislation granted by the
Federal Government, our banks have succeeded in forming a giant fascist
cartel that now wields enormous and dangerous power over our economy and
our lives. Because the Federal Government has granted to the banking
cartel the power to indiscriminately print paper money via the legal
tender laws, they can now siphon off our wealth at will through monetary

What we have here is the two-fold tyrannization process that Marx
advocated: Corrupt the language and the money, and capitalism will fall.
Take all the important words that support a free society and turn them
inside out. If it is done in a sophisticated enough manner, the
intelligentsia will buy into it, and the people will follow. Combine the
debasement of words with a debasement of money through a centralized
government-run bank, and a free society can be enslaved. Is this not
what has been happening to us over the past century in America? Vital
words such as "freedom," "private," "rights," and "enterprise" are being
twisted in the schools and the media to mean what the collectivists want
them to mean. In addition, the value of our money is being steadily
depreciated to line the pockets of mega-bankers and government
bureaucrats. And the people are ignorantly buying into it to sanction
more and more government.

Marx's prediction is coming true, but ironically not in the form of his
espoused socialism, which died in 1989 with the collapse of the Berlin
Wall. It is coming true in the form of Mussolini's "corporate statism."
The collectivists of the world have merely shifted to the ideology of
fascism; their tyrannical goals are alive and well in both Moscow and

Fighting the Tyrants in Washington

Hopefully the reader can see that fascism is growing in America through
government intervention into the economy and the myriad controls that
Washington forces upon our businesses and banks. But it is not
inevitable; we do not have to meekly tolerate its growth. Fascism (like
any other form of collectivism) cannot be sustained without confiscatory
taxation. Thus if we wish to stop today's tyrannical drift in
Washington, we must become concerned with RADICAL TAX REFORM.

Any perusal of history shows that every dictatorship that has ever
solidified its tentacles around its citizens' lives has used the ability
to tax their income as its lever to power. For this reason, the Founders
were firmly committed to a country WITHOUT AN INCOME TAX. Therefore this
must be our ultimate goal -- total repeal of the income tax. But in
fighting this fight, we must remember two things: 1) We're up against
fascist mentalities. They are ruthless, totally amoral, and in love with
power over all other pursuits in life. They have formed a tacit alliance
with masses of unthinking voters by subsidizing them at the expense of
those productive members of the middle and upper classes. To overthrow
this corrupt game will require courage and commitment of the highest
order. 2) Secondly, we must understand that while radical LEGAL change
can sometimes be won quickly in the courts, radical POLITICAL change
comes about only through incremental victories.

Those who have formed the anti-income tax movement in America today
obviously possess the courage to fight -- people like Irwin Schiff,
Larken Rose, Bob Schulz and their followers. These are the modern day
Samuel Adamses and John Hancocks of America. I have the utmost respect
for them. They have put their money where their mouth is. They've
risked, and often, sacrificed their personal freedoms in the process.
They have challenged Goliath armed with their Constitutional slingshots,
and they have struck some mighty blows. Goliath is still standing, yes,
but no tyranny can forever prevail in the face of such committed
patriots. A day of liberation is coming.

But in the meantime, in order to speed up the process and increase our
chances of winning, I believe what we need is a two-pronged attack on
the federal income tax: 1) attack the actual existence of the tax and
its application legally through the courts as Schiff, Rose, Schulz, et
al are doing, but also 2) attack the progressivity of the tax through
political channels as I have suggested in "Gold Money and Equal Tax
Rates." This way we have a back-up option for reform if the
Schiff-Rose-Schulz constitutional challenges continue to get stonewalled
by corrupt judges.

Our problem lies in the fact that the courts are basically corrupt. Most
federal judges simply look the other way as the U.S. Attorneys engage in
contemptible fabrications when the issue of the income tax is brought
before them. Why? Because the judges know that if the income tax is
declared UNconstitutional in either its writing or its application, then
what is to replace it to shore up all the government programs and
bureaucracies that have been amassed over the years (about $1 trillion
worth of expenditures)? They fear the system will implode without the
income tax; and no judges are going to opt for that. They are going to
PRESERVE the system at all costs. They will justify their corruption of
the Constitution in regard to the income tax with the convenient excuse
that "it's in the national interest."

Thus I have grave doubts whether any court in this land will soon
declare the income tax to be UNconstitutional, even in application, as
long as massive government bureaucracy needs to be paid for. The courts
will always preserve the system by sophistry and semantic corruption.

This means that, though Irwin Schiff, Larken Rose, Bob Schulz, et al are
fighting the good fight, it may not be enough, or at least not enough to
repeal the income tax in our lifetimes! In my opinion, we will have to
dramatically reduce government first before we can get the courts to act
responsibly and declare the income tax to be UNconstitutionally applied,
and then eliminated. This is because we will then have a government that
can be supported by tariffs and excise taxes as the Constitution
authorizes. As a result, the judges will not fear that the system will
collapse, and they will begin to interpret the law correctly.

The position of the anti-income tax movement has always been that we
don't have to worry about the government being supported in the absence
of income tax revenues because we can fund all legitimate federal
functions with tariffs and excise taxes. This is true; we can fund the
legitimate functions in this way. The problem consists in getting from
where we are today to legitimacy. This is a goal that cannot be achieved
overnight. While phasing down to a smaller more Constitutional
structure, the government will still need revenues.

For example, the Federal Government took in about $1.2 trillion in
revenue from the income tax in fiscal year 2000. These revenues went
toward supporting a lot of waste and boondoggles. But lets say that we
chopped $400 billion of waste in three years as The People's Budget
showed could be done [Regnery, 1995]. We still have $800 billion to
account for.

Let's then say that we somehow convince the American people to abolish
the Fed and pay off the national debt by swapping non-interest paper
(money) for interest-bearing paper (bonds) as Vincent LoCascio
recommends. By phasing out the privilege of fractional reserve banking
over 10 years, his plan would be non-inflationary, and it would chop
another $300 billion in annual interest. ["Pay Off the National Debt,"]

We now need only $500 billion in revenue to fund the military and other
assorted functions. Would tariffs and excise taxes suffice at this
juncture? Perhaps, especially if a small national sales tax of say 3% is
enacted (a sales tax is defined in the dictionary as an "excise" tax,
and would, according to some legal minds in the tax reform movement, be

How to Better Insure Victory

But the question is how do we get from where we are to legitimacy? I
submit that this can best be done by eliminating the progressivity of
rates in our present tax system. It is progressivity of rates that leads
to "infinite demand" for government services, which causes relentless
government growth. But if everyone were required to pay out of his own
pocket (i.e., with a flat tax), then the American people would not want
all this government expansion. In fact they would suddenly want just the
opposite. They would start voting for those politicians that campaigned
on REDUCING government instead of EXPANDING it. We would have a
monumental shift in political opinion in this country simply by
eliminating progressivity. If combined with a restoration of gold
backing to the dollar, it would stop government growth cold, and in fact
start shrinking it. [For a more detailed explanation of why this is so,
see my previous article, "Gold Money and Equal Tax Rates."]

Of course, I could be wrong in my estimation of the establishment's
ability to continue to stonewall in the courts. The Constitutional
challenges that Schiff, Rose and Schulz are raising could conceivably
bear fruit sooner than anticipated. Justice has a strange way of working
itself out sometimes. Right when things look bleakest is often right
before an amazing breakthrough comes that liberates us all. But any
objective look at prosecutors and judges tells one that they are
tremendously skilled at twisting language to serve their special
purposes. They learn very early in life the art of sophistry and how to
combine it with twisted semantics to fashion falsehood into bogus legal
decisions that will be tolerated by an unthinking public. This is how
tyranny comes to a country -- via the twisted sophistry of its schools
and its courts.

One thing I am sure of is this: There can be no hope for America until
people understand the connection between progressivity of tax rates and
government expansion. And there can be no hope until they understand
that our currency must have gold to back it in order to keep it sound. I
don't think the people are quite ready yet to listen to these two
truths, but they will be ready to listen when our financial system
implodes sometime in this next decade.

I have read most of Irwin Schiff's books, and I think that he
brilliantly attacked the illegality of the income tax. Also I am
somewhat familiar with the formidable works of Larken Rose and Bob
Schulz. However, just like Schiff before them, I fear that Rose and
Schulz will end up getting stonewalled because of the dilemma in which
the judges find themselves. They can't interpret the law honestly
without destroying the system. So they will continue to misinterpret the
law, suppress the truth, and rationalize their stand -- using the
"national interest" as justification.

This is why we need a two-pronged attack. If we concentrate on
"progressivity of tax rates" as well as the "legitimacy of the tax
itself," and if we promote our cause through a political campaign to the
people as well as a legal appeal in the courts, we could increase
considerably our chances of winning and reversing government expansion.
What a monumental achievement that would be! In other words, we must not
rely solely on the minutia of tax law and its constitutionality because
the judges will probably continue to rule in favor of preserving the
fascist system.

Also, we must never allow ourselves to fall for the establishment's
definition of key words like "private" and "free." Such semantic
distortions are used to perpetuate more collectivism. The dictator
mentalities need for everyone to believe that if business entities are
always labeled "private" and "free," that makes them so despite the fact
that the Federal Government is controlling and manipulating their
economic interactions and confiscating their profits.

"Words mean what I say they mean, Alice," said the Mad Hatter. Our Mad
Hatters are the fascists who sit in our courts and teach in our schools.
We need to conduct an end run around them. That's what I have in mind
with the two pillars strategy for a third political party that I
outlined in my previous two articles, "Gold Money and Equal Tax Rates"
and "The Ark of Freedom." But this would require enacting a modest flat
tax while we are working toward the total abolition of the income tax.
Are the Constitutional purists willing to do this? Hopefully they will

With the income tax and Federal Reserve abolished, the American Republic
would be reborn. The Founders' vision would once more be a magnificent
part of human history. We as a people would once again be free. This
will not be easy; it will require all our efforts, both intellectual and
activist, pulling together with every ounce of courage we can muster.
But when the tide has finally changed, and America is brought back to
her rightful form of government, the sense of reward will be
unimaginable. That shining city on the hill that the philosophers talk
about will be ours to have and enjoy. And if we were to wisely construct
appropriate Constitutional amendments to prohibit any recurrence of an
income tax and a central bank, then our shining city on the hill could
be a reality for our children and their children for centuries into the

This is, after all, what the Founders had in mind in 1787. We were
supposed to be a free country, not just for the 19th century, but for
all of time. What a resplendent vision to fight for. It can happen if we
understand the nature of the powers that oppose us, and if we understand
the tricks and tactics that they are using. It's all in the words we
use, the money we accept, and the taxes we tolerate. These need to be
made true and fair again.

There should be no one above the Law.

Nelson Hultberg Email:

Nelson Hultberg is a freelance writer in Dallas, Texas. His articles
have appeared in such publications as The Dallas Morning News, the San
Antonio Express-News, Insight, Liberty, The Social Critic, Ideas On
Liberty, and The AIER Report.

He is the author of Why We Must Abolish The Income Tax And The IRS
( and, and is presently finishing a
book on political-economic philosophy entitled Reality's Golden Mean:
The Case for Libertarian Politics and Conservative Values.