Federal Reserve official proposes plan to tax the cash in your pocket
WASHINGTON, DC -- A Federal Reserve official wants to add "tracking devices" to U.S. currency so the government can tax your cash -- a bizarre scheme that could cause your money to plummet in value and tighten the government's noose around the economy, the Libertarian Party warned today.
"If the politicians gain the power to track and tax currency, then financial privacy will be dead, your money will grow more worthless every day, and the government's power over the economy will be virtually unlimited," said Steve Dasbach, the party's national director. "This idea deserves a swift kick in the cash."
According to Wired.com -- the online version of Wired magazine -- Marvin Goodfriend, a senior vice president at the Federal Reserve Bank of Richmond, wants the government to tax private possession of cash via a high-tech tracking device on currency notes.
In a 34-page paper presented at a Federal Reserve System conference in Vermont, Goodfriend wrote: "[A] magnetic strip could visibly record when a bill was last withdrawn from the banking system. A carry tax could be deducted from each bill upon deposit according to how long the bill was in circulation."
Or, banks could mark bills with a visible "date issued" stamp when distributed via tellers or an ATM, he said. Either way, the longer you hold currency without depositing it in a bank account, the less that cash would be worth.
Such a cash tax could discourage people from "hoarding" currency and deter black market and criminal activities, Goodfriend argued.
Besides its longstanding opposition to any new tax, the Libertarian Party rejects Goodfriend's scheme for several reasons, said Dasbach.
"The intent of this plan is to drive all commercial transactions through the banking system, so the government could snoop on -- and tax -- every aspect of the economy," he charged. "In the guise of monitoring cash, the government wants more power to monitor and control the economy.
"But this plan wouldn't just punish businesses that operate in the cash economy: It's also a huge burden on people who don't trust banks or who prefer the security or convenience of cash. Every American would suffer from this proposal, as the government nibbled away, termite-like, at the value of their cash."
Besides, said Dasbach, the government already has a "carry tax" that decreases the value of your money: It's called inflation.
"Thanks to politicians' fiscal irresponsibility and the Federal Reserve's ability to print more money at will, the value of your cash already decreases every day because of government-caused inflation. To add another tax to the inflation that's already eroding the value of a dollar bill would add insult to injury."
The Libertarian Party isn't sure if Goodfriend's proposal is a "trial balloon" from the government or a fanciful scheme from one renegade Federal Reserve official, said Dasbach -- but it doesn't matter.
"Here's our two cents (which would probably be worth a cent and a half under this proposal): If this is a trial balloon, it deserves to be shot down immediately. The government needs to be told, in no uncertain terms, that Americans will not stand for such an intrusive, costly scheme," he said.
"If it isn't a trial balloon, then Mr. Goodfriend should be fired immediately, because this kind of totalitarian scheme has no place in a free country. Mr. Goodfriend may deserve a job in North Korea or Cuba -- but the Federal Reserve shouldn't employ people who advocate such un-American, constitutionally bankrupt proposals."
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