The Second Income Tax

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One of the reasons people haven’t got much money anymore is probably due to the fact that the insurance mafia takes more and more of it all the time.empty pockets

Using the government as its muscle.

First car, now “health.”

Soon, no doubt, mandatory life insurance will be required as well.

Insurance has become a de facto second income tax. Except instead of paying the government mafia, we’re forced by the government to pay the insurance mafia.

In economics, this is called rent seeking.

So-called “private” (and inevitably, for-profit) businesses make money the new-fashioned way, by seeing to it that laws are passed requiring the populace to purchase its products or services. So much easier (and so much more profitable) than the old-fashioned way of having to persuade people to freely purchase what you have to offer.

Imagine the Hamburger Lobby ( a consortium of McDonalds, Wendys and Burger King) got Congress to pass a law requiring the purchase of at least one hamburger a week from the “provider” of your choice. Would you expect the price of a hamburger to go up – or down? Probably the only reason there isn’t a mandate to buy hamburgers (yet) is because the Hamburger Lobby hasn’t figured out a way to frame such extortion in terms of a “public good.”

Give them time.cost of insurance pic

Meanwhile, insurance costs continue to skyrocket – precisely because we’re not permitted to say no.

How much is the average person paying out to be “covered”? (Which, by the way, is not the same thing as actually getting anything, in the event you file a claim.)

At-gunpoint car insurance costs in the neighborhood of $1,300-$1,500 a year for most people (see here) or about $120 a month.

How about health insurance? It’s currently about $250-$350 month for a very basic (and basically worthless) Obamacare policy for a single (healthy) young adult (see here). This works out to about $3,000-$4,200 annually. You will be (forced) to pay much more if you are older – or have a family. Just as you will be forced to pay more for car “coverage” if the mafia’s enforcers select you for a roadside “tune-up” (i.e., give you a ticket for the manufactured, victim-free offense of driving faster than they like), the fact that you’ve never filed a claim – or had one filed against you – being immaterial.

But, let’s call it $600 a month – a very conservative figure – to be “covered” for car and health insurance.obamacare pic

Grab your pay stub. Have a look at federal and state tax withholding. Odds are you are paying less to the federal and state mafia (er, government) than you are to the insurance mafia.

If not, you will be.

Obamacare costs are skyrocketing, in some cases by 30-40 percent. So is car insurance – in part because the government keeps mandating expensive new “safety” features that cost a small fortune to fix when the car is in an accident.

This is what happens when there’s no saying no.

Street muggers aren’t going to leave you a $20 in your wallet. They’re going to take everything. Why? Because they have the power to do so.

So does the insurance mafia. Expect the same, accordingly.van by the river

Car insurance is arguably even worse than health insurance. Among other things, you’re forced to buy multiple policies if you have more than one vehicle – even though it’s not physically possible to drive more than one of them at a time. And you’re usually required to maintain “coverage” even if the car never moves.  Which is like being forced to buy health “coverage” for a mannequin, when there is no possibility of it even catching the sniffles.

The fact is that as much as we’re bled white by the tag team of fiat currency and government filching through whatever’s left in our pockets, it’s the growing burden of insurance-at-gunpoint that’s eventually going to leave us all living in a van down by the river.insurance quotes

To really get a handle on just how much they mulct from us, look at the numbers from a different angle.

What if you simply put the money you were forced to pay the insurance mafia into an interest-bearing account (or better yet, a mutual fund) with the principle and interest accrued remaining your property unless you actually caused damage to someone else’s person or property – in which case, the funds would be used to compensate the person for his loss?

Take the low figure of $1,300 annually. Over just ten years’ time, you’d have a principle of $13,000. But the miracle of compounding interest would increase that sum considerably. Invested conservatively, as in a mutual fund, that $13,000 would probably be $20,000 after ten years’ time. And after another ten years, that $20,000 might be $35,000.don corleone

This is not chump change. But what about “what if”?

How many of you have ever caused $35,000 (or even $10,000) in damages to anyone? It is much more likely that you won’t have an accident … which of course is why insurance is profitable.

It would still be so if the operation were run on a free market rather than a gangster basis.

Just less so.

Insurance issuers (as opposed to a mafia) would need to earn your business. By offering you a policy that seemed like a good buy. The ability to say no would impose the same positive pressure on insurers that the same market forces impose on McDonalds and Wendys.

They have to convince you to buy their burgers – because they can’t force you to buy them.

Nevertheless, they still manage to make billions of dollars – without resorting to mafiosi tactics.

And without bankrupting us.

Why can’t insurance work the same way?

Probably, because that would work for us.

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37 COMMENTS

    • Good comment Me2. I started to post that myself. Hard questions just piss the elite to no end. You aren’t supposed to ask them about the elephant in the room.

  1. Don’t forget the huge deductible you must endure before your Obamacare policy kicks in. You could be out $10-12K before it starts paying your bills.

  2. Let’s not forget the property taxes extracted for the privilege of living here in my paid – for house. By the time that’s added up with everything else there isn’t enough left over to buy the proverbial hamburger.

  3. A little rant here:

    Insurance is, basically, just gambling against “The House”, as you may do at a casino. You bet the insurer a few grand against a few hundred grand that you are going to have a loss. The House takes the other bet, that you aren’t going to have the loss. Each coverage period is a roll of the dice. If you incur no loss, The House rakes your chips, and the bet is renewed. So far, it’s like betting in a casino, with similar odds that favor The House.

    The difference comes in when you have a loss, and win the bet. A casino slides your racks of chips over to you and you can choose to take your chips to the cage and cash out. An insurer, instead, gets to delay paying the winner while they conduct an investigation during which they can change the terms of the bet, called “post-claim underwriting”, or even “deny the claim”, which amounts to welshing on the bet.

    Another difference between a casino and an insurer is that you can choose not to gamble at any casino, while you’re forced by law to gamble with one or another insurer. Cheating, or trying to cheat in a casino is fraud, an actionable offense whether the cheating is done by the casino or by the bettor. Cheating an insurer, on he other hand, is a felony called “insurance fraud” which will get the insured arrested, while cheating the insured is called “bad faith”, which is a civil matter, actionable only through civil court.

    There are other parallels, I’m sure. Use your critical thinking skills and list more examples if you like.

  4. Health Insurance as a Prisoner’s Dilemma – B. Caplan

    I’ve got a little toenail fungus.

    Now that you’re done cringing in disgust, let’s get to the economics. My HMO doesn’t cover treatment, because the problem is “merely cosmetic.” Until recently, though, I didn’t care, because they’re weren’t any good treatments for nail fungus. There’s a pill that works, but also occasionally causes liver damage. No thanks.

    Then I learned about a new laser treatment that’s supposed to be both safe and effective. Now I wish my HMO covered it. But as an economist in good standing, I’m happy to go out-of-pocket as long as MB>MC. So I called up the clinic for more information. When the secretary informed me that, “Insurance doesn’t cover this treatment,” I was positively delighted.

    Why, you ask? It’s not envy – I don’t mind if other people have better insurance than I do. The reason for my delight: As soon as she said that no insurance companies covered this treatment, I knew it would be reasonably priced!

    The moral: Health insurance is, in large part, a Prisoners’ Dilemma. If everyone but you has it, medicine will seem prohibitively expensive. Demand is high, comparison shopping is unheard of, and no one cares but you. When nobody has insurance, though, you probably don’t need it. Lower demand and more comparison shopping make treatment affordable. Which makes me wonder: Where would you rather live – a country where everyone has health insurance, or a country where no one does?

    Kool-Aid ad from sixty years ago
    https://www.youtube.com/watch?v=yKY2O4KFmMU

    Health Care “Industry”(cough cough) Economics
    http://www.econlib.org/library/Enc1/HealthCareIndustry.html

  5. It used to be frowned upon for lawyers and doctors to advertise. I wish that was still true.

    I’m sick of hearing about calling the Hurt Line and begging compensation as the remedy for whatever injury anyone is suffering. As though massive applications of money makes pain and suffering go away.

    Every conceivable disease and corrective pharmaceutical is smeared across the land, I think illnesses are created to market more drugs. Just ask your doctor if this is right for you.

    Major problem with compounding is nothing expands exponentially forever. Everything has limiting factors that regulates growth. Everything. That includes money.

      • I’ve been hit a few times. One was a minor fender bender. The other driver (late model Mercedes) readily agreed he was at fault. He just wandered across the line and did to me what the iceberg did to the Titanic.

        My car at the time was a POS VW and the creased fender did it no harm. I told him not to worry about it – provided he would agree not to report the incident and deal with his car on his own nickel, as I did not want any such incident involving me (even when not at fault) reported to the got-damned mafia.

  6. It’s more like the third income tax. Eric didn’t even mention the scam that is called social security that drains your paycheck too. Does anyone under age 55 think they will ever see a dime of that ripoff when we get to age 67 (or by that time you probably have to be 80-85)? Even if it does, what will that money be worth? Probably next to nothing if current trends continue. And those that set it up KNEW it would do that!

    If you or I were running such a scam, we would be sent off to prison.

    When I was in college, a professor (note, not one of the economics profs, but an IT prof, go figure huh) showed us stunned college kids in a computer lab an interesting lesson. That if we peons were allowed to keep that money we were forced to pay in, and invest it over our lifetimes starting with our first job after college. That we would have a tidy sum at age 65, even if invested very conservatively in a slow market (I was in college during a recession). The amount depending on rate of growth and amount invested from $600k to $2.2 million at age 65. But even someone that never made much would still have at least a six figure amount at age 65.

    It was not part of any class, but it was one of the best lessons I learned in college.

    • Speaking of a lack of interest, we’re in a company town. Nobody is to save. Everyone is supposed to be hand to mouth dependent on the system. If nobody saves they can’t financially deal with things that may happen so they have to buy insurance. It’s one big web of modern serfdom and few see it.

      • It took Wells Fargo 12 minutes after the Fed rate increase announcement to raise their loan rate by the same amount. The deposit interest rate, however, stays at 0.06%.

        There is nowhere good for consumers to put their money.

        • The only place that looks good is the mattress. But good luck getting the money from the bank to the mattress.

          Here’s a way to get some interest income. Open accounts with an offer that has some ‘bonus’ for opening a new account. Once the terms of the deal are complete, close the account and move to the next one at a different bank. Eventually the first one will have another offer to get you back. So far though 9 times out of 10 it isn’t enough to be worth the hassle to do it at all. But sometimes it is.

          • The ultimate goal is to get some sufficient passive income. But that is a daunting goal. Stocks are risky and so is starting a business – plus it’s hard to run a business. I also considered buying real estate, but I won’t have enough for that for years. Guess I should buy a really nice safe/mattress?

            • Everything is too high, but that doesn’t mean it won’t go higher. It’s an intentional squeeze. No safe return and when everyone in the middle class is in risk assets, the plug will get pulled, I feel it.

              There might be a few bargins at the risk end of the real estate market but I’ve had enough of that from what I’ve been living in.

              • My spider sense tells me the Fed’s decision to raise interest rates is the beginning of The End. How will already-tapped-out Americans deal with car loans or even qualify for home loans when the cost of money goes up? I suspect the end of zero percent or 1 percent financing on cars is going to strangle new car sales – and that the real estate market is going to wilt like my dick when I think about Hillary Clinton.

                  • What? You mean you don’t think Hitlery is hot?

                    The scary thing is that there asolutely is some prog-castrato-mangina out there somewhere who truly does have the hots for Hitlery.

                    • I know it, Liberranter. The very thought that some goober is whacking off to a pic of Hitlery just scares the shit out of me. 😉

                      I can imagine some of the dimbulb progs I have met calling Hitlery a MILF…..or maybe a GILF.

                      ahaha.

                    • liberranter, it’s scary indeed to imagine some dimbulb prog thinking of Hitlery as a MILF or maybe a GILF.

                      Try not to think of those goobers whacking off over a pic of her.

                      ahaha

                • Everyone speaks of the Fed as if it were some construct of the govt., part of it somehow instead of an amalgam of super-rich bansters who own the world. Every country needs the Fed like they need a nuclear holocaust. Don’t audit the Fed(I don’t see how it could be done), kill it…..by any means necessary and if that means killing the enablers, so much the better. 2 birds, one stone sort of thing. Better yet, nuke DC while the prez speaks to the assembled Congress with guests Dick Cheney and the entire Bush family in attendance.

                    • Yup!

                      I suspect those two (Bill and Hillary) have an understanding. She is free to chew as much carpet as she likes (not that there’s anything necessarily wrong with that) in exchange for accepting Bill’s serial rape/adultery. They both get power and money out of the deal.

                    • I think of Rodney or Vince or any one of those guys including Emmy Lou now and again and burst out with that song. I promise nobody can hear me over that wailing Detroit but I wish they could. If that wouldn’t put a grin on your face(esp. the way I do it) you’re beyond hope.

                      If some day they drop the big one, I’d say sweet Jesus she’s gonna finally leave me alone. All day long….

                • Peak debt has been reached again that is for sure. But it’s not so much about people being unable to borrow for stuff but more about wealth transfer to the top of the pyramid. The insiders are unloading best I can tell. Now I am not some super researcher so I could be dead wrong but it looks like we are in the unloading phase. The stock buybacks, the pushing of the ordinary person into risk assets they don’t understand. It’s greater fool time I think. But who knows?

                  • Brent, I used to play the stock game. I literally studied data 18 hours a day, paid for good research from Morningstar, Motley Fool and some I won’t name. I came to realize the stock market was simply an invention the uber rich used to make even more money. There were people on the inside who guaranteed huge profits with minimum investments starting at $100K. That was really great money and profit but I never figured out to how to protect it from govt. That was another bunch you paid, probably the same people, but under another name.

                    Even at that, they’d change rules right in the middle of a large buy or sell. I’ve bought, or thought I had bought, some, what I thought was about to be, extremely profitable stock and then watched a hold be placed on buying. Once all the big boys who’d missed one of these small, but hugely profitable stocks, realized they were going to miss out on it, they’d stop the buy, insert a huge buy themselves and then allow buying to begin again, generally a day later. All the little guys like me got screwed, blued and tatttoed when our buys went through.

                    What? That wasn’t the price I put my bid in at. Well, that’s the price you got in so shut up or raise hell, we don’t care. That was often what you got for several months of homework on a particular company.

                    • 8, there was a good description of the stock market in the book ”
                      Confessions of a Monopolist” by Frederick Howe. I read an excerpt on LRC years ago, but it’s out of print now, I think.

  7. PS…the reason for insurance is unfortunately not for compensating for Damages, but for lining the pockets of the PI attorneys with their 33% contingency fees, unreasonable damages, etc. If you ever need that policy, or to pay from your invested money, you would need lawyers more powerful than the plaintiff’s, which means insurance company attorneys…so they have you by “the short hairs” in a hyper-litigious state like California!

    • Which is why I still insist the best method fo dealing with them all, is to kill them.
      As soon as you tolerate rent-seeking actions, in ANY field, you’ve opened the door to all of it.
      E.G., compare Cash accounting vs. Credit accounting. (The big corps all use Credit…)
      Insurance Mafia vs. non-mandatory insurance.
      Lifetime politicians vs. successful businessmen who go to discuss the town’s/state’s/nation’s problems…

      Once you allow someone to muck up your accounts for a percentage of your earnings? Well, imagine that the percentage they charge is 100% of what their labor saved you, and you get the whole package, whole image.

      I’m disgusted with where I work. They’ve discussed how the interest rate will change, and it’ll be “bad for everyone else, but good for us [the company].” YES, it’s a quote. YES, they are trash. YES, they move more money in a day than some countries see in a year.

      I LITERALLY work for the NWO.
      But someone has to pay my bills, right?
      And I’m finding I’m not skilled enough to be anything useful in this world (despite being an “elite” IT guy. I produce things, yes, but nothing concrete, I produce “better software.” It’s like installing a virus scanner on your computer; it doesn’t matter until it doesn’t work, and then you blame the scanner, when it simply ignored the file you ordered it to ignore… )

      So, I’m not a rent seeker, but an EMP puts me in a world of hurt. Not like I’m also an electrician, carpenter, mechanic… 😛

      Which is EXACTLY what they want. I can’t go start a company when the cost of the barebones software is about $500,000.

      (And this is with free “equivalents” in the mix, mind. Imagine if it really DID have market control!)

      • Well Jean, you’re smart. So at least buy some of those “how-to” books. What I learned from the Whole Earth Catalog and the books thereof has been invaluable to me. I didn’t know how to hang meat and heavy age it but I’m an old hand at it now and I can turn an entire deer into jerky that will last for months. I didn’t know how to tan hide but now I do.

        I have books detailing how to process every sort of meat imaginable. Books that I’ve used to grow garden with no commercial fertilizer or pesticides that involve companion planting.

        I got an education when I was young about digging a well…..by digging a well.

        I can have a hot shower in any condition as long as the sun shines. If we had a big EMP strike, I’d miss toilet paper and tooth paste more than anything.

        BTW, I told you once but the guys in the patch that are making the big money are the ones who work in the IT field since it’s all tied together now electronically. Everything you used to pass by and consider just another tank or pumpjack or heater treater or saline dispensary now has an antenna and a solar panel. Some of the largest buildings on pipeline centers are the computer buildings.

        • Got more books than some libraries. 😉

          The key you glossed over, most applicable to me, is your line here:
          “I got an education when I was young about digging a well…..by digging a well. ”

          Lots of reading; not enough DOING.
          I’m trying to rectify that, but I made a mistake some time back, and she’s still accruing interest….

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