What if Taxes are Our Best Defense Against Tyranny?

We’ve all heard the argument: tax the rich so we can afford healthcare, schools, or clean energy. But what if that’s the wrong logic entirely? In this episode, we challenge the myth that taxes are needed to “pay for” public spending—and reveal the deeper purpose of taxation in a modern economy. Drawing on insights from Modern Monetary Theory and the work of Stephanie Kelton, we show how taxes can control inflation, shape social behavior, and most importantly—redistribute power. Because in a democracy, taxation isn’t just about money. It’s about who rules.

Keywords: tax the rich explained, why we tax the wealthy, taxes don’t fund spending, MMT taxation, Stephanie Kelton tax myth, economic power, taxing billionaires, redistribution of power, modern money theory

Transcript

Let me ask you a strange question. If we could fully fund schools, hospitals, housing, and green energy, without taxing the rich at all, should we still tax them? Like, if we were sitting on a $10 trillion surplus and zero national debt, should we still tax wealth? Most people might say no, probably because we've been taught that taxing is about paying for things. The story goes, if you want public services, you have to go get the money from somewhere. The billionaires have money, and so we need to tax them to get the money. But what if that's not the real reason? What if we could fund everything we needed without billionaire tax dollars? What if the real point of taxing the rich isn't about money at all? To see what I mean, let's consider the reverse. What happens when we don't tax the rich? What happens when a handful of people can hoard more wealth than entire nations? They buy up houses, they buy schools, they buy farm lands, they fund think takes, they purchase media empires. They shape our elections, not with votes, but with their money. And they create a world where they make the decisions for themselves, but not for us, not by us, not even with us in mind. This episode isn't about envy or about punishment. This is about power and control. Because once you understand that the U.S. government can create its own money, just like we discussed back in episode 27, you can start to see that we don't tax the rich to fund programs. We tax the rich to protect democracy. And if we don't do that, they'll end up ruling anyway, with or without our permission. Welcome back to American Socrates. I'm your host, Charles M. Rupert. Let's start this episode by dismantling the most common myth that we tax the rich because we need their money. I think most of us have been taught to think that the government is like a big household or a private business. You know, something we're familiar with, how it's basic economics work, But it's not like that. Perhaps the simplest way to think about it is like professional sports. Like the government is the league itself, not a particular franchise within that. league. The rules are different because it's a different kind of entity in that established sport. Like with football, what's good for in any individual team is not necessarily what's good for the league as a whole and vice versa. The league sets rules to make it balanced and fair among the teams. Otherwise, no one would care. No one wants to watch a game where we all know who's going to be the winner because the rules basically establish that they're going to win. They have to win. So it's a mistake to think that if the government wants to spend money, you know, say on schools or health care or infrastructure of any kind, that it has to collect that money first from private citizens through the form of taxes. But because we, by and large, believe this mistake, people often think that, you know, if we want better public services, we have to go get that money from somebody. Someone has to pay for it. This sounds pretty reasonable, but it's completely backwards from how things actually in fact happen. When it comes to how money actually works in a modern economy, as I've already explained in episode 27, the U.S. government actually issues its own currency. It can't run out of dollars, the way that you or I or even Apple or Microsoft could. It can't because it makes its own money. But because it spins its money into existence. In taxes, some of it is returned in order to avoid runaway inflation. That means taxes don't fund spending at all. It's just a way for the government to pull money back out of the economy to avoid inflation, if necessary. Spending then comes first, and taxes come later, again, only if they need to. Stephanie Kelton, the economist and author of The Deficit Myth, put it plainly when she wrote, we should tax the rich more, but not because we need their money. That's the key idea here. We don't tax the rich to pay for things. We tax them in order to shape our economy, to manage inflation, and most importantly to limit how much power they accumulate over their fellow citizens. If this is correct, then the real question we need to be asking is, if taxes art funding, spending, what are we taxing people for at all? OK, there are four reasons we tax, none of them are about raising revenue for the government. The first reason is to create demand for national currency. The U.S. government can print as many dollars as it wants, but how does it make sure that people actually use them? How does it give them a value? And that is pretty simple. The government makes law that you have to pay taxes, and you have to pay them in dollars. This idea is actually Adam Smith's from the wealth of Nations. It's what gives the dollar its power. You need it in order to settle your obligations with the state. That is, what makes it legal tender, and gives it a universally recognized value, meaning any vendor is going to accept your money for their goods or services because they know that they can at the very least pay their taxes with it. And so can everybody else. And so everyone should accept it. In that way, taxes don't fund the government. What they do is they actually anchor the currency in its value. This is why the dollar has a certain value. This is why other people will accept it in exchange for services and in exchange for goods. The second reason we tax is to control inflation. If too much money is chasing too few goods, prices go up. So one way to reduce inflation is to take money out of circulation. And taxes are how you do that. Once the government has absorbed that money with taxes, it just essentially disappears. Nobody can spend it anymore. This keeps the value of the dollar stable as long as you can keep the wheel straight ahead. The key idea here is that most inflation fighting tools hurt working class people, like interest rate hikes or budget cuts, but taxing the rich doesn't, because rich people spend and invest the most, pulling the back some of that concentrated wealth slows demand only at the top, where it does the most damage, without forcing anyone to skip out on, say, groceries, or lose their job. So taxes are a non-punitive way to manage inflation, which is good, unless you're a billionaire. The third reason we tax is to shape our society. We could put a tax on things that we want less of, like pollution or, you know, Wall Street speculation or things that make us unhealthy, like sugar or nicotine or alcohol. And we give tax breaks for those things that we want more of, like charities or churches or clean energy or care work or small businesses. In that way, taxes aren't just a funding tool. They're a moral signal and a set of incentives. They help us answer the questions, well, what kind of society do we want to live in? The final reason that we tax is the redistribution of power. And this is the big one. Wealth is more than just money in America. It's control over the actions of other people. It commands obedience. If someone pays you to do something a certain way, you either obey or you don't get paid. Money is power. It dictates housing, rules over health care, over elections, over the media. And it sets policies. When we let billionaires hoard wealth, we give them veto power over our democracy. They start calling the shots, not with votes directly. but through their investments, through their donations, and other forms of influence. So taxing wealth isn't about punishing success. It's about preventing domination in a free state. And as the saying goes, every billionaire is a policy failure. Because in a healthy democracy, no one should be rich enough to rule everyone else without being elected. But if this is all true, if taxes are about power and not about like payments, why is that truth so rarely heard? Why do we never talk about this? We need to discuss who's afraid of it and really why they're afraid of it. Let's take a step back. If taxing the rich isn't about funding public programs, if the government doesn't need billionaire money to fix schools or build infrastructure or give us free college or free healthcare, then why does nearly everyone, from politicians to pundits to economists, still talk like it does? Why is this myth so persistent? It's not a misunderstanding. It's a strategy, a story that serves powerful people across the political spectrum. Here's how it works. As long as we believe we need rich people's money to keep our society running, the rich get to hold the moral high ground. They get to act like they're doing us a favor if and when they pay taxes or donate to a cause or invest in public goods. In other words, they get to act as if we owe them our lives. We are in de debt to them for our very existence. That's the idea. Rich people get to create that kind of narrative and maintain it through our understanding that without access to their money, which they don't have to give us, that we wouldn't be able to take care of ourselves. The narrative then creates leverage. And both political parties have in different ways, helped to protect that. On the right, you tend to hear things like, you can't overtax the job creators. If we burden billionaires, we'll lose in innovation, investment,, prosperity. But on the liberal side, it's often softer, but not so much different. Take Pete Buttigge during the 2020 primary debates, when asked about billionaires, he didn't challenge the existence of extreme wealth. Instead, he said, I'm more concerned about the politicians who suck up to the billionaires than the billionaires themselves. That line got applause, but notice the subtle move. Billionaires aren't our problem, just the bad politicians who take their money. It's not the system, guys. It's just, there's a couple of bad apples here. It leaves the deeper power structure completely untouched, protected, and safe. Both narratives keep us in the same trap. We're told that if we push the rich too hard, they'll stop giving, and that will grind the wheels of our society to a halt. They'll stop building. They'll stop saving us from ourselves. And here's what's even more perverse. Because once we buy into that logic, the very act of being wealthy becomes a kind of veto power over society. If the rich don't like it, it does not happen. Let's say a billionaire doesn't like a proposed housing policy. They don't need to run for office in order to stop it. They fund a think tank. They bankroll a local PAC, or they donate to a nonprofit that is shifting the narrative to something more like what they want. Or they do something even more insidious. They start acting like a government of one. They build their own charter schools. They fund vaccine distributions. They launch disaster relief, all on their own, on their own private terms. Let's take Elon Musk as a particular example. He owns Starlink, the South satellite internet system that Ukraine used during their war with Russia. But when he didn't like how it was being used, he cut their services off, effectively altering US foreign policy all on his own without any government oversight. He forced the USA to act a certain way towards a foreign nation without ever being elected to any office. And that long before DOGE, there was no oversight to this. There's no checks, no balances here. Just a man with a massive wealth and a Wi-Fi on and off switch. Or take Musk's longtime associate, Peter Thiel. He's the billionaire investor in Planter, D data surveillance company with deep contracts and law enforcement, immigration in the military. He used his fortune to fund anti-democratic political candidates, influence crypto markets, and promote ideologies that are openly hostile to pluralism and democracy itself. Thiel sees himself as a future monarch and is actively working to build support for that push. These aren't just isolated rich guys, either. They're symptoms of a deeper problem. The more wealth you accumulate in an unaccountable system, the more public power becomes a private toy. And incidentally, the more sociopathic you become, we'll negotiate with this kind of power. We appeal to it. We beg it to do good, not evil. But if the government can create money, if we could fund public schools ourselves, all kinds of public goods, without the permission of billionaires, then the moral blackmail breaks down. And that's exactly what these elites fear. Not higher taxes. They don't care about paying more in taxes, but losing the story that we depend on them. And nowhere is this dependency myth more seductive or more dangerous than in the world of philanthropy. Charity needs a reckoning in this country. And I don't mean the type of charity that you and I do when we help out our neighbor or donate some canned goods to the local food bank or something like that. I mean the big league philanthropy, the kind that makes headlines, the kind that reshapes entire public systems without anybody voting, this is where the myth that we need billionaire money reaches its most seductive form. Let's take Bill Gates. Through his foundation, he's donated billions to education, public health, and poverty reduction. That sounds pretty good, right? We can get behind that. And to be fair, you know, it has done some good, but there's a catch. We never voted for Bill Gates or his computers or the programs, and yet, his foundation played a massive role in reshaping American public education, especially in pushing standardized testing and charter school expansion. Did parents ask for that? No. Did teachers? No. Did school boards? No. These changes came from the top down. Designed by Tenocrats, funded by private wealth, and implemented across the country using donated money. They resulted in lower education outcomes, but it did make the donors rich in several ways. First, those schools now have to pay Microsoft for the use of their programs, but secondly, because the Gates Foundation isn't just generous, it's tax-exempt. In fact, many of its donations come in the form of appreciated stocks, which avoids capital gains tax, and still counts as a charitable gift. It's not just generosity. It's control, disguised as kindness. Gates decides what's best for students, not educators, not even policymakers. Or we can look again at Elon Musk, who's pledged billions of his own foundation. Much of it goes to environmental causes, but not without strings. And meanwhile, Musk routinely breaks labor laws, and he regularly mocks regulators. He uses his social media megaphone to shape public discourse, like some kind of feudal lord with broadband. Or again, we could talk about Peter Thiel, who's invested in in everything from surveillance tech to right-wing political candidates, all while sheltering hundreds of millions in a raw IRA, a tool that was originally meant for working-class retirements. He doesn't give back. He buys power, cheaply, with a smile. All three of these men use the same formula. You extract massive wealth from the public. You shelter it through charitable vehicles. And then you use those vehicles to reshape society according to your own values without the input of the public. This is not philanthropy. It's an autocracy by the wealthy. It looks generous, but it's deeply, deeply anti-democratic. Because when the rich get to decide where money goes, what problems are the ones that really matter and how those problems can and should be solved, they become shadow governments in and of themselves. The rest of us just get carried along in the tide. Look, a free society should not rely on the kindness of kings. We should be building a public system together and funding it through democratic taxation. That's not radical. That's freedom in a democracy. It's necessary. It's basic for liberty and for peace. Okay, so let's turn away from this and look towards what we can do about this problem. If taxation isn't about raising funds, but about reclaiming power from the rich, what would it look like to tax the rich, not as a transaction, but as an act of democratic self-rule? So let's ask the question again. If we could fund everything, healthcare, housing, education, green transitions, whatever, without taxing the rich, should we still tax them? By now, you probably feel the answer in your bones. Yes, we should. Because in a democracy, taxation isn't just about raising money. It's about drawing a line. Between what's private and what belongs to all of us. It's how we say in a society, there's a limit to how much power one person gets to have over others. You see, we've been trained to see taxes in this form of transaction, right? You give us some money, we give you roads and schools, but that's a shallow, shallow view at best. In reality, taxation is a political act, a way for free people to shape the conditions of life together. So let's try a different metaphor then. Imagine society is a vast landscape. Some people are standing on mountaintops and they're able to see and to build, and to kind of dominate anything below them. Others are down in the valleys. They're always climbing and never resting. The role of taxation isn't to pull the mountaintop down out of spite. It's to level the terrain somewhat so that everyone can stand on some pretty solid, common ground. So they can get along with each other. They can see each other as people who are worthy of each other's respect. When you're looking down on people from the mountaintop, it's really hard to respect them. It's really hard to see them as anything more than little ants that you can use for whatever pleases you. There's a sociopathy associated with wealth. This is marked in studies. You can go look it up if you want to. But that idea is right here. We need to level the playing field so that we feel like we're all part on the same team again, that this is all part of America again, that billionaires don't live in another world from the rest of us. And that matters, because when the terrain is tilted, so is everything else in our country. Elections become merely auctions. Housing becomes a speculative game. Healthcare becomes a mere profit engine. The public good gets carved up into a bunch of little private fiefdoms. And that's the world we live in right now. That's our world. And it's intolerable to anyone who has to work for a living. We hate it. We all want change. Everyone, the Trump supporters, the anti-Trump supporters, it doesn't matter. We all want change. We just disagree on what that change should be. But imagine instead, then, a world where we deliberately limit wealth accumulation, not because we hate success, but because we love freedom that much. A world where no one is able to be rich enough to, say, buy a senator, or their own social media platform, or a school district. where your voice in a democracy isn't drowned out by the scratching sound of someone else signing their checks, where wealth isn't about hoarding power, but continually recirculating it to meet human needs for all of us. And taxation is simply the tool that we use to do that, not to fund services, but to protect democracy from being devoured by an oligarchy. So let me try to paint this picture for you. A just tax system would heavily tax extreme wealth, not just income, but assets, estates, cash, and capital gains. It would close the loopholes that let billionaires shelter trillions in offshore accounts and tax-free foundations, quote unquote. It would make it impossible for a single person to own the equivalent of a small country's GDP, while tens of millions of people of their fellow citizens have to scrape by living paycheck to paycheck. But more than that, it would change how we relate to one another. Because right now, the rich don't just hoard money. They hoard our decision-making power. They get to ask questions like, what should I do with my wealth? As if everything they touch isn't built on public systems, workers, infrastructure, and centuries of collective effort aimed at making life supposedly better for all of us, not just them? A democratic tax system then puts all of that on its head. It asks well what should we do with the surplus values our society has built? What kind of world do we want to build together? And more importantly, it lets us be the ones to answer that question forever ourselves, because we're not just taxpayers. We're not just voters either. We are the co-authors of our shared life, a society that refuses to tax its oligarchs has not failed to raise revenue. It has surrendered its right to govern to the owning class. And that is what we're trying to reclaim here with taxation. I don't want to tax the rich to punish them. I want to tax them because democracy demands boundaries, and they've crossed those boundaries. Freedom doesn't mean everyone gets to do whatever they want. It means no one gets to rule over anyone else, and the owning class in the USA has violated our freedom. So I guess if there's a core takeaway here, it's this. We don't tax the rich to fund society. We just tax them to protect society. And if we can create money, taxation is never about funding. It's only about fairness. The point of democracy is not to beg the rich for favors. It's to make sure that we don't need the rich. The owning class cultivates a sense of dependency on them. That's what their money really buys them. That's why they always want more money. True democracy would do away with such dependency. And I think it's about time we gave True Democracy a chance. The next time you hear someone say, "Look, we can't afford that. Just ask them, "Is that really true? Or is it that we haven't decided to tax the powerful yet?? Because affordability is never the limit. Imagination is. And we've just scratched the surface of what a truly democratic economy could look like. 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