Is America Transforming into a Serfdom?

serf, serfdom, hayek

In feudalism, a Serf was the lowest status that one could be with the exclusion of slavery. Serfs were bound to the land and were subject to the will of the powerful landowner. They were not free to move elsewhere nor were they free to excel economically and move up from their lowly position.

Today one can be easily forgiven for believing that America is currently on the road to serfdom. Big government has created a permanent class of politicians and bureaucrats where the spending is so out of control that expenses regularly exceed revenues. In serfdom, a peasant was required to kick up a percentage of the crops they produced to their lords. In American Democracy, we are expected to kick up a large percentage of our income to the government.

The Government Class

In 2020, over two million American civilians were employed by the federal government. In 2015, 8.3% of Americans employed in non-farm major industries were government workers (federal, state, local). In 1910 that number was 2.1%. In 105 years, the government as a whole as an employer grew more than 4x. We are at the point now where we have family dynasties that have emerged as major government power brokers during this past century with recognizable names like Bush, Roosevelt, Kennedy, Pelosi, and Cuomo to name a few.

In 2019, nine of the twenty wealthiest counties were suburbs of Washington DC. Loudon County and Falls Church City, both in Virginia, took the top two spots while Santa Clara County (home of Silicon Valley) took the third spot. Silicon Valley produces technology while Washington DC produces government. Government employees on average enjoy better benefits than those in the private sector. This was justified in the past with the argument that public sector wages were lower than the private sector, but as of 2010, the circumstances have changed. It’s unsustainable for the public sector to outearn their private sector counterparts while the generations of tomorrow are expected to foot the bill.

The simplest and most honest way to handle the underfunding would be to reduce spending, but the politicians and bureaucrats are averse to this because the bureaucrats need their jobs to have a livelihood, and the politicians need the bureaucrat voting block in order to stay in power.

They Want to Stop You From Voting with Your Feet

California has the highest state taxes in the nation and this has resulted in a population exodus from the most populous state in the union. Many of the residents who are leaving also tend to be wealthy and pay a large percentage of the state’s tax revenue. California’s government could focus on being more efficient or they could cut spending and lower taxes to keep their tax base in the state, but they chose a more unprecedented option.

California has proposed to institute an Exit Tax on its residents. This tax is a wealth tax that will be paid over a ten-year period that will amount to a total of 1.80%. Wealth taxes are currently unconstitutional but that has not held back “progressive” politicians from proposing them.

A national wealth tax was a key component of Elizabeth Warren’s 2020 presidential platform. Her pitch to the American people was that only the top one percent of the country’s richest would be forced to pay this tax. Students of history would be wise to remember that the concept of Income Taxes was sold to the American public under the same pitch and now every working person pays them.

World-Wide Income Taxes

Almost every modern nation imposes income taxes on its population to fund the government, but the United States of America holds one major distinction from everywhere else on Earth. Canadians are only taxed on the income they earn within Canada’s borders. Americans are liable to be taxed on their worldwide income.

Under the American model, an American can be hired by a foreign company in a foreign company and then still pay taxes to the federal government. How free are we when the money that we earn that’s not on “the lord’s” land still needs to be kicked back the lord?

Estate and Inheritance Taxes

Even after one has paid their income taxes along with being a productive member of society, the legacy that they leave behind for their children is subject to estate and inheritance taxes. In most cases, the public is unaware of these taxes at the federal level because the exemption is $11.58 million so it’s the rich who are affected by this. But these taxes can be more damaging than just socking it to the rich.

$11.58 million is the value of the estate at the time of transfer from the deceased. In theory, there could have a thriving business that employs dozens of people which is privately owned and after the owner’s death, the new owner now has to pay the federal government 40% of the company’s value despite any of the shares of ownership being realized. Part of the business will need to be liquidated and jobs will be lost so that Uncle Sam can wet his beak.

In addition to the federal government, twelve states have their own estate taxes with the exemption being as low as $1 million in two. This means that an upper-middle-class person who has worked and saved their whole lives will have a chunk of their life savings taken when it’s passed on to their families.

Inheritance Taxes are imposed by six states and in some states, the only amount of inheritance exempt from these taxes is only $500. More people are affected by this death tax because the exemption amount is so low and usually the amount taxed is between 5 and 16% depending on the state and amount being passed on.

The difference between an estate tax and an inheritance tax is that estate taxes are paid by the estate before it is transferred while inheritance taxes are paid by the beneficiaries. But they’re both the same things in concept; death taxes that take money away from widows and orphans.

How Free are We?

We are taxed when we work and taxed when we die. We are regulated with laws and we are regulated with bureaucratic dictates. When we leave the country, we still have to send our kickbacks home and now politicians are trying to implement that at state levels to restrict movement within the nation. The government class keeps growing in power and in order to fuel their growing machine they now want to tax us on our wealth; the things we have managed to get for ourselves with the money they let us keep.

We might not be serfs in the strict medieval definition but as Fredrick Hayek’s book warned, we are on the road to it and if we stay on autopilot, we will no longer be able to call ourselves the land of the free.

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Daniel Kowalsk

Daniel Kowalski is an American businessman with interests in the USA and developing markets of Africa.