[Congressional Record Volume 149, Number 107 (Friday, July 18, 2003)]
[Extensions of Remarks]
[Page E1509]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




LEGISLATION TO PROHIBIT THE FEDERAL GOVERNMENT FROM IMPOSING A ``CARRY 
                                 TAX''

                                 ______
                                 

                             HON. RON PAUL

                                of texas

                    in the house of representatives

                        Thursday, July 17, 2003

  Mr. PAUL. Mr. Speaker, I rise to protect American liberty, privacy 
and economic well-being by introducing legislation to prohibit the 
Federal Government from imposing a ``carry tax.'' A carry tax is a tax 
imposed on Americans that requires them to pay a tax whenever they make 
a bank deposit. The amount of the tax is based on how long their money 
has been in circulation. Hard as it may be to believe, some in the 
Federal Government have actually considered imposing this tax on 
American citizens. Since this bill punishes those who rely on cash for 
the majority of their economic transactions, and since lower income 
Americans tend to rely on cash for their economic transactions, this is 
a highly regressive tax plan. Furthermore, since the plan is designed 
to lower interest rates, it will negatively impact those who rely on 
investment income for a significant part of their income. Thus, the 
carry tax will lower the income of millions of senior citizens.
  Proposals to punish people if their economic behavior meets with the 
disapproval of government officials form the foundation of the type of 
central planning which caused so much misery in the last century. The 
carry tax proposal is obviously incompatible with a free market. This 
proposal is also a major threat to personal and financial privacy and 
thus individual liberty. In order to enforce the carry tax, the 
government would need a means of monitoring how long each piece of 
currency has been in circulation and how many hands it passed through 
before coming into the possession of the person on whom the tax is 
assessed. Thus, enforcing this tax would also give the government the 
power to monitor the transactions of individual Americans. The Federal 
Government should not abuse the authority granted it by our current 
monetary system and legal tender laws as a backdoor means of prying 
into the private economic transactions of American citizens. That is 
why my legislation also forbids the Federal Government from placing any 
information storage capacity on any Federal Reserve notes.
  The carry tax was proposed as a measure to counteract the perceived 
risk of deflation. Yet, the problems this carry tax is intended to 
solve are caused by our government's boom-and-bust monetary policy. Any 
perceived deflation in the American economy is the result of the end of 
the inflationary period of the nineties that created the stock market 
bubble. When the bubble burst, there was the inevitable process of 
liquidating bad investments caused by the misallocation of credit as a 
result of the Federal Reserve monetary policy. In fact, this 
liquidation is necessary for the economy to recover from the economic 
misallocations caused by the Federal Reserve's monetary policy.
  Unfortunately, rather than finally putting an end to the boom-and-
bust cycle, most in Washington are preparing to resume the cycle by 
calling on the Federal Reserve and the Treasury to flood the economy 
with new money. If Congress is not going to stabilize the American 
economy by reforming our unstable monetary policy, it should at least 
refrain from using this government failure as an excuse to further 
restrict the American people's liberty through an odious carry tax. I 
therefore hope my colleagues will join me in supporting this 
legislation.

                          ____________________