The Second Income Tax

Guest Post by Eric Peters

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.

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.

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.

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.

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.

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.

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.