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., capitalism.

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
, 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 parentheses):

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 govᆳerning 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 corporᆳate
ownership of capital goods, by investments that are determined by priᆳvate
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 egregiously.

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.

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 inflation.

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 Washington.

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

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 Constitutional).

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 be.

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 future.

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.

Nelson Hultberg is founder and Executive Director of Americans
for a Free Republic
and 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, The
AIER Report, and American 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.