The way most people understand federal taxes is a lie. We’ve been told for decades that taxes fund government spending, that deficits are a crisis, and that the rich pay their “fair share.” But when you look at how the system actually works, a different picture emerges—one where taxation is primarily a tool for economic control, wealth concentration, and keeping workers dependent on wages.

The Myth: Taxes Fund Government Spending

The U.S. government doesn’t need tax revenue to spend money. Unlike a household or business, it can create money at will. The federal government runs a permanent deficit—spending far more than it collects in taxes—yet it never “runs out” of money. Why? Because it can simply issue new debt (Treasury bonds) or have the Federal Reserve create money out of thin air.

If taxes were truly necessary to fund spending, then the government wouldn’t be able to operate with a deficit that’s now over $34 trillion and growing. Instead, taxation serves a different purpose: controlling inflation, keeping workers dependent on wages, and maintaining economic power structures.

The Real Purpose of Federal Taxes

1. Controlling Inflation (At the Expense of the Working Class)

When too much money circulates in the economy, demand rises, and prices go up (inflation). The government uses taxation to pull money out of circulation, reducing spending power. The problem? This burden falls hardest on the working and middle class.

• The rich use loopholes, deductions, and offshore accounts to minimize their tax liability.
• The poor and middle class, who rely on wages, have no way to avoid taxation.
• When inflation is “too high,” the Federal Reserve raises interest rates, making life harder for borrowers, small businesses, and everyday consumers—while banks and corporations profit.

2. Keeping Workers Dependent on Wages

If the government can create money at will, why not just give everyone a universal basic income or invest in major social programs? Because that would give workers too much freedom. By keeping people dependent on wages for survival, the system ensures a constant supply of labor.

• Payroll taxes take money directly out of workers’ paychecks before they even see it.
• Social Security taxes are capped (only applied up to $168,600 of earnings in 2024), meaning the rich pay a lower percentage of their income into the system than the working class.
• The tax burden ensures that people have to keep working just to maintain their standard of living.

3. Protecting the Power of the Elite

While everyday workers pay income tax, the rich play by a different set of rules. They don’t make money the way most people do; they earn wealth through capital gains, dividends, and stock buybacks, which are taxed at much lower rates.

• Capital Gains Tax: Investment income is taxed at a lower rate than wages, benefiting the wealthy.
• Tax Havens: Corporations and billionaires store profits offshore to avoid U.S. taxes.
• Stock Buybacks: Instead of paying workers more, corporations use profits to buy back their own stock—enriching shareholders while keeping wages stagnant.

The Deficit Is a Feature, Not a Bug

If tax revenue really mattered, the government would balance its budget. But deficits are intentional—they serve the interests of the wealthy:

• More debt means more Treasury bonds, which provide a risk-free investment for banks and billionaires.
• Inflation control taxation ensures that wage earners pay the price, while corporations and the ultra-rich continue expanding their wealth.
• The “deficit crisis” narrative is used to justify cuts to social programs while always finding money for corporate bailouts, military spending, and tax cuts for the rich.

The Reality: The System is Rigged

The federal tax system isn’t about funding the government. It’s about ensuring that the economic elite stay in power while keeping workers financially shackled. If the government actually wanted to help people, it could easily fund universal healthcare, free college, and infrastructure investments without raising taxes. But that would shift power away from corporations and the wealthy—so it doesn’t happen.

The next time you hear politicians talk about tax policy, ask yourself: Who really benefits? The answer isn’t hard to find.

Want Change? Start by Challenging the Tax System.

Until we stop pretending that taxation is about “funding the government” and start recognizing it for what it really is—a mechanism for maintaining economic control—the cycle will continue. If we want a fairer system, we need to start by exposing the lie at the core of federal taxation.