I recently noted that the French government has resorted to desperate tax cuts. These cuts reflect a major change in economic thinking in Paris, but the decisiveness of this turnaround struck me as a bit odd. After all, there was no unpredictable economic news out there to explain why it happened now.
Or was there?
British newspaper Independent has the story:
The land of 400 cheeses, the birthplace of Molière and Coco Chanel, is facing an unprecedented exodus. Up to 2.5 million French people now live abroad, and more are bidding “au revoir” each year. A French parliamentary commission of inquiry is due to publish its report on emigration on Tuesday, but Le Figaro reported yesterday that because of a political dispute among its members over the reasons for the exodus, a “counter-report” by the opposition right-wing is to be released as an annex.
And why is this such a controversial topic? The Independent explains:
Centre-right deputies are convinced that the people who are the “lifeblood” of France are leaving because of “the impression that it’s impossible to succeed”, said Luc Chatel, secretary general of the UMP, who chaired the commission. There is “an anti-work mentality, absurd fiscal pressure, a lack of promotion prospects, and the burden of debt hanging over future generations,” he told Le Figaro.
That is France in a nutshell. No other country in Europe, not even Sweden, has been able to combine welfare-state entitlements with ideologically driven labor market regulations to the extent that the French have. (In Sweden, labor market law delegates the right to regulate the labor market to the unions instead, effectively elevating them to government power without government accountability.) But this is not the work of two years of socialism under President Hollande – it has been very long in the making. Alas, the Independent continues:
However, the report’s author Yann Galut, a Socialist deputy, said the UMP was unhappy because it had been unable to prove that a “massive exile” had taken place since the election of President François Hollande in 2012. What is certain is the steady rise in the number of emigrants across all sections of society, from young people looking for jobs to entrepreneurs to pensioners. According to a French Foreign Ministry report published at the end of last month, the top five destinations are the UK, Switzerland, the US, Belgium and Germany.
So here we have the explanation of why the French government is now scrambling to cut taxes. Their tax increases were the straw that broke the camel’s back. By raising the top income tax bracket to a confiscatory 75 percent they gave tens of thousands of entrepreneurs, medical doctors, computer engineers, finance experts, investors and business executives the final reason they needed to leave the country. As a result, tax revenue from the punitive taxes introduced under Hollande are nowhere near what the socialist government had planned for. As a result there is less money in government coffers to pay for the same socialist government’s entitlements.
The smaller-than-planned revenue stream in combination with larger-than-affordable entitlement spending opens up a budget deficit. The French government is already in breach of the EU balanced-budget law, often referred to as the Stability and Growth Pact. A self-inflicted escalation of the deficit puts Hollande in direct confrontation with the EU Commission, which is already loudly complaining that France seems perennially unable to bring its deficit down under the ceiling of three percent of GDP mandated by the aforementioned Pact.
Back now to the Independent for some more details on the French exodus:
Hélène Charveriat, the delegate-general of the Union of French Citizens Abroad … told The Independent that while the figure of 2.5 million expatriates is “not enormous”, what is more troubling is the increase of about 2 per cent each year. “Young people feel stuck, and they want interesting jobs. Businessmen say the labour code is complex and they’re taxed even before they start working. Pensioners can also pay less tax abroad,” she says.
Wait… what was that?
Businessmen say the labour code is complex and they’re taxed even before they start working.
Those evil capitalists. Two 20-year-old guys from working class homes have a passion for fixing people’s cars. They decide to open their own shop and start by working their way through the onerous French bureaucratic grinds to get their business permit. (I know someone who tried that. A story in and of itself. I’ll see if he wants to tell it in his own words.) Once they have the permit they scrape together whatever cash they can, buy some used tools and put down two months rent on a garage at a closed-down gas station. While they get the tools together, find the garage and get everything set up they obviously have no revenue. But that does not stop The People’s Friendly Government from showing up at their doorsteps to collect taxes on money they have not yet made.
These two young Frenchmen do not exist. And if they did, they would move to England and open their shop there instead, thus joining the growing outflow of driven, productive Frenchmen from all walks of life. But it is actually good that the Independent is less interested in reporting on the young French expatriates and instead puts focus on the country’s hate-the-rich taxes:
As for high-earners, almost 600 people subject to a wealth tax on assets of more than €800,000 (£630,000) left France in 2012, 20 per cent more than the previous year.
Governments in high-tax countries rarely pay any attention to the outflow of their young, productive and aspiring citizens. The argument is that those young people don’t pay much taxes anyway. Right now. Of course, if they are allowed to work and build careers and businesses instead of emigrating, they will become wealthy and create lots of jobs in the future. That, however, is a perspective that big-government proponents notoriously overlook. Therefore, there is really just one way to explain to them what harm their punitive tax policies do, and that is to shed light on the exodus of wealthy, productive people happening right now. Such news can actually work.
As indicated by my earlier article on the desperate French tax cuts, it may already be working. The French government cannot ignore forever how its combination of a wealth tax and a 75-percent tax on top incomes destroy existing jobs and, more importantly, solidly and decisively prevents the creation of new ones. They cannot forever dwell in the delusion that government somehow can raise GDP growth above the current level of zero percent, and they certainly cannot use government to create jobs for the more than ten percent of the work force that are currently unemployed.
It remains to be seen how sincere the French socialist government is about reversing course. It is by no means certain that the newly announced tax cuts mark a turning point. It could just as well be that they are mere token gestures, aimed at giving false hope of a better future to new prospective emigrants.
The problem with tax evasion is the tax, not the evasion. Never forget that.
Desperate European politicians, pushed against the wall by an insatiable welfare state, lash out in every direction, at every square inch of remaining economic freedom in order to satisfy the fiscal monster they have created, bred and fed at ever growing costs to the private sector of the economy. They keep pushing taxes upward, and when they can’t raise them anymore they cut spending while maintaining maxed-out taxes.
Not even this helps, though, because people still have the opportunity to move to countries and territories with lower taxes. A recent and well-known example is the French actor Gerard Depardieu who left France and its hate tax on high incomes to take refuge in Belgium. (Someone said he bought a house so close to the French border that he can go out in his back yard and pee on France. I am not going to vouch for the truth in that, but it’s a good story…) But it is not just the French that want to evade – or avoid – high taxes. Many other Europeans do the same, and some of their favorite places to go to are within the jurisdiction of the British government.
This has led Prime Minister David Cameron to issue an edict against British-affiliated low-tax jurisdictions The EU Observer reports:
EU leaders will make another bid to agree rules on tax evasion after UK Prime Minister David Cameron called on 10 British tax havens to “get their house in order” on secret bank accounts. In a letter released Monday (20 May) to the leaders of the British islands, including the Channel and Cayman islands, Cameron urged them to disclose details of accounts used for company ownership.
This is all ridiculous:
The islands should “provide for fully resourced and properly managed centralised registries, that are freely available to law enforcement and tax collectors, and contain full and accurate details on the true ownership and control of every company,” he said “We need to know who really owns and controls each and every company,” he added.
Why? What business is it of the British government’s to know who owns what company where?
The reason, of course, is taxes. They do not want anyone to be able to organize their private finances in such a way that they can reduce their tax burden. In fact, what Cameron is trying to do is nothing short of creating a high-tax cartel where Europe’s welfare states can rob their citizens of the right to bring their property wherever they go.
EU Observer again:
He noted that the reforms were at “the heart of the ambition of Britain’s G8 to knock down the walls of company secrecy.” Cameron’s move is the latest attempt to break the deadlock on EU rules aimed at requiring the automatic exchange of data on tax cheats within the bloc.
And what is a “tax cheat”? It is very important to be mindful of what language these high-tax advocates use. By the use of the word “cheat” in the context of tax competition between high- and low-tax jurisdictions, Cameron wants us to believe that the only people who choose to invest in a low-tax jurisdiction are those who want to “cheat” on their taxes – i.e., do something immoral and even illegal.
The fact of the matter is that tax competition is almost always about entirely legal economic activity. The vast majority of people who open a bank account in a lower-taxed country or territory are lawful citizens who just want to keep more of their own property. But this is a fact that high-tax advocates like Prime Minister Cameron is unwilling to acknowledge.
Instead they ramp up their fight against legitimate tax competition, behaving like a pack of fiscally obese bullies, hungry for more and more of their citizens’ money:
EU finance ministers [have] … agreed to start talks with Switzerland, along with Liechtenstein, Monaco, Andorra and San Marino, on swapping bank account information. Tax avoidance and bank secrecy have leapt up the political agenda in Europe as cash-strapped governments bid to maximise their tax revenues. A paper prepared for the European Commission by tax expert Richard Murphy and his UK-based Tax Justice Network think tank claimed that up to 1 trillion of tax revenues are lost each year by EU countries.
This is a totally nonsensical number. A lot of that money would never have become taxable if it was forced to stay within the borders of EU’s high-tax states. To see why, consider this dirt-simple example (obviously too complicated for high-tax advocates). Suppose I am given a business opportunity that will allow me to earn $100,000. To do the job I will hire four people and pay them $10,000 each. I will walk away with $60,000.
Suppose now that government wants a 50-percent tax on my income. That would net me $30,000.
I have worked hard, built a reputation as a professional and invested enormously in building my skills, and now I am beginning to see a chance to reap the harvest of those investments. If I move the company’s headquarters across the border into a lower-tax jurisdiction I will only have to pay, say, ten percent in taxes. The difference to me is $24,000, money that I can invest in the future of the company.
My employees would still live under the oppressive tax system, but at least they would all have a job. But suppose now that my government strikes a deal with the neighboring country under which I as a citizen of Hightaxia have to pay the 50-percent tax after all.
What do I do? One option is to not start my business at all, and instead go do something much more trivial (perhaps even collect entitlements from my high-taxing government). Another option is to move across the border to Lowtaxia and set up both business and residence there. I can still export my intelligent product, but the people I hire will be Lowtaxians instead of my former neighbors in Hightaxia.
If I choose to not start the business, I am not really any worse off than I was before. The Hightaxian economy, on the other hand, is deprived of a couple of well-needed jobs. My fellow Hightaxians are also deprived of a good product that would have made life better for some of them.
If I emigrate, nothing changes for Hightaxia. Lowtaxia on the other hand gets a new taxpayer and a few new jobs.
This is what tax competition is really all about. Yet the leaders of Europe’s insanely taxed welfare states continue to try to say that “avoiding taxes, like eating children, is wrong”. The EU Observer again:
At a time when most Europeans are facing tax hikes to fund deficit reduction, governments are also anxious to demonstrate that the super-rich will pay their share.
This is such an idiotic statement that it really does not belong in the English language. Nowhere in the industrialized world (Europe can still be counted as part of that) does a lawful billionaire pay less taxes than a regular, middle-class worker. But do note how those who are greedy for more taxes do everything they can to castigate the wealthy as borderline criminals just because they don’t give up even more of their property to government.
Can anyone who thinks that the wealthy, in Europe or in America, don’t pay their fair share of taxes please define the term “fair share”. For the most part, people with six-figure incomes in dollars or in euros bankroll the lion share of government. Is that unfair?
Of course it is. It is unfair because a very minimum requirement for tax fairness is that every dollar earned pays the same percentage in taxes. That is not the case in America and it is not the case in Europe. The higher up on the income ladder that the dollar is earned, the more of it government will grab.
High-tax statists refuse to discuss this point. To them, “fair share” is just a talking point. They have no regard for the economic consequences of high taxes and think instead of people who move money abroad as some sort of criminals who steal government property.
Again: the problem with tax evasion is the tax, not the evasion.
The notorious French hate tax on high incomes was supposed to prevent the Greek-Portuguese-Spanish economic disaster from sneaking across the borders into the Land of Cheap Wine and Unreliable Cars. By confiscating most of what high income earners make, the new socialist government thought it would create some kind of economic recovery.
That, of course, did not happen. If anything, the French economy is destined for an even deeper recession than the one it has been stuck in over the past few years. This time, though, there are going to be fewer high-productive, job-creating people around to alleviate the downturn. In addition to the tax emigration by celebrities such as Gerard Depardieu, Brigitte Bardot and former president Sarkozy, many high-earning French professionals are moving to London, where they will soon enough be able to mark their own Frenchtown on the map.
The French Prime Minister, Jean-Marc Ayrault, has called these taxpatriates “greedy”, not stopping to think for a moment who is really greedy here – the people who worked to earn the money or the people who use brute force to take most of that money. But Mr. Ayrault is up against a strong opponent – the desire among human beings to reap the harvests of their own hard work. And there are few places where that desire is more prevalent than in sports, which spells trouble for Mr. Ayrault. Bloomberg reports that the hate tax will hit high-earning soccer stars in the French professional league:
Paris St. Germain, France’s richest soccer club, will have more on its agenda than controlling Lionel Messi when it takes on Barcelona, the world’s best team, tonight. PSG’s Qatari owners also have the tax man to think about. After conflicting messages by government officials, Prime Minister Jean-Marc Ayrault’s office issued a statement today confirming that a 75 percent surcharge on salaries above 1 million euros ($1.3 million) will apply to soccer clubs. At least 12 members of Paris Saint-Germain make more than 1 million a year, according to France Football magazine.
And that is just one club.
“This new tax will cost first-division teams 82 million euros,” France’s Football League said in a statement. “With these crazy labor costs, France will lose its best players, our clubs will see their competitiveness in Europe decline, and the government will lose its best taxpayers.”
I cannot help but wonder how many of these soccer players have leftist political sympathies. At least one of the highest-paid players in France, Swedish native Zlatan Ibrahimovic, has on occasion declared strong sympathies for socialist policies. This is usually the case with sports stars – they tend to be a little bit like Hollywood celebrities, with lots of money and conventional, superficial wisdoms to share when it comes to politics.
That aside, it remains to be seen whether or not this tax will survive both the erosion of its tax base and the legal challenges that are apparently still going:
President Francois Hollande made the 75-percent tax a cornerstone of his successful presidential campaign last year, saying the wealthiest had to make a special contribution toward cutting France’s deficit. … A first attempt to put the tax into law was shot down by the constitutional court last December because the tax applied to individuals and not households. While the government then said it would rewrite the tax for 2014, the country’s top administrative court said any rate above 66 percent could be rejected as confiscatory.
Now that’s interesting. How do they determine when a tax is confiscatory – and when it is not? As far as common sense and Locke-based natural-rights theory goes, any tax is confiscatory that does not go toward paying for the minimal state’s functions: the protection of life, liberty and property.
From an economic viewpoint there is no absolute cut-off point where a tax switches from being neutral to being a burden on productive economic activity. The negative effect starts kicking in with the first cent of taxes, but as taxes go up the private sector copes and adapts and continues to function. However, the higher taxes get the more the private sector has to spend on adapting and accommodating. Eventually, the net effect is a steady decline in economic activity and prosperity.
Preliminary numbers that I have yet to publish show that this point lies somewhere around 38-40 percent in taxes on GDP. This does not mean that taxes, up to that point, are free from negative influences on the private sector. But it means that so long as taxes remain below those numbers, the private sector can still survive given its accommodations costs on top of the taxes.
France has since long past the 40-percent marker and its on a path to slow but inevitable decline. The 75-percent hate tax is going to do one thing only, namely to speed up that decline.
Earlier this week I made the point that socialism is a resilient delusion. I exemplified with the arrogance and determination of the newly re-elected Ecuadorean president Rafael Correa. He is not the only socialist-in-chief in Latin America: the notorious Hugo Chavez is still clinging to power in Venezuela, Evo Morales is doing his best to be Chavez’ copycat in Bolivia and Cristina Kirchner is hard at work advancing her own version of the Chavez model in Argentina.
But the political virus we know as socialism is not just spreading in Latin America. Its symptoms of grandeur, political hubris, economic delusion and legislative arrogance are showing up in many places around the world, one of which is South Africa. The ANC, which has governed the country since Apartheid ended 19 years ago, has already built a tragic record of delusional economic policies. Among the many tragic results are a 30-percent unemployment rate and a burdensome, unpredictable tax system, not to mention rampant corruption and a terribly over-regulated labor market.
So far the ANC has not shown much interest in any of the country’s problems. They have allowed crime to run amok, especially in the form of a genocide on white farmers, they have turned a blind eye to government corruption and they have not cared one bit about how poverty has become a plague among the nation’s black majority.
Like all socialists, the ANC leaders were intoxicated with power. But one event seems to have forced them to sober up, namely the Marikana massacre when police killed three dozen striking miners and injured twice as many. Suddenly, the black population in South Africa saw “their” government behave like the Apartheid regime had treated them in Sharpville and Soweto. Long-growing frustration over how the economy has slowly deteriorated under the ANC, paired with quiet whispers among many blacks that it was actually easier to feed your family under Apartheid, now formed a plume of erupting anger, so high that it was visible all the way up to the Ivory Tower dwellers that currently run South Africa.
Panic has now taken hold in the ANC leadership quarters. Realizing that they are actually politically mortal, they suddenly care a great deal about the social destruction they have inflicted on their own people. Worried that the rest of the world is going to take notice of their widespread political, social and economic failure as leaders, they call in Cyril Ramaphosa, a man whose reputation in Europe and America is not far from that of Nelson Mandela.
Ramaphosa is charged with repairing the ANC’s reputation, but the product he is trying to sell – the National Development Plan – reveals that nothing, absolutely nothing, has changed in the ANC mode of thinking. The document, which looks good on the website of the National Planning Commission, is a classic socialist mumbo-jumbo product. Back in my naive young days when I was a teenage socialist activist traveling Europe socializing with everything from British Militant activists to Italian communists, I saw tons of the same rich-on-words, void-of-reason kind of products.
The so called National Development Plan, available at the ANC website, is yet more evidence that the ANC is determined to drive South Africa into the ditch, and then have the elephant of big government stomp her to into a pile of trash. Here is, e.g., what they have to say about the young, whose future they have already destroyed:
South Africa has an urbanising, youthful population. This presents an opportunity to boost economic growth, increase employment and reduce poverty. The Commission, recognising that young people bear the brunt of unemployment, adopted a “youth lens” in preparing its proposals, which include:
Before we get to what they suggest in order to help the young, let me point out how the ANC, just like every other socialist movement in the world, compartmentalizes its constituents into distinct mono-characteristic categories. The young are young, and shall be treated as such – and accept to be treated as such. Never mind that the only thing they have in common is their age.
Then we get to the list of policy goals to “help” the young – a list that we might as well read while listening to an appropriate piece of music:
A nutrition intervention for pregnant women and young children. Universal access to two years of early childhood development. Improve the school system, including increasing the number of students achieving above 50 percent in literacy and mathematics, increasing learner retention rates to 90 percent and bolstering teacher training.
Does it get more statist than this? More government-provided entitlements means more government bureaucrats and higher taxes. Where in this chain does a young South African with ambitions to start his or her career get more opportunities to be self sufficient?
Strengthen youth service programmes and introduce new, community-based programmes to offer young people life-skills training, entrepreneurship training and opportunities to participate in community development programmes. Strengthen and expand the number of FET colleges to increase the participation rate to 25 percent. Increase the graduation rate of FET colleges to 75 percent. Provide full funding assistance covering tuition, books, accommodation and living allowance to students from poor families.
Ah. More tax-paid educational programs that won’t lead to any new jobs, because in order to pay for them the government has to put yet more hate taxes on the “rich”. This crushes small businesses, which are almost without exception the best job creators in any economy. And since nothing is being done about the corruption in the country, except talking about it, larger corporations are unlikely to want to expand their operations in South Africa. As a result, the young who are lured into these new ANC-proposed programs – if they ever become reality – will get an education they can’t use. Their frustration with their government may be postponed, but it will be exacerbated by the years that the young feel they wasted on a useless education.
But wait – there’s more:
A tax incentive to employers to reduce the initial cost of hiring young labour-market entrants. A subsidy to the placement sector to identify, prepare and place matric graduates into work. The subsidy will be paid upon successful placement. Expand learnerships and make training vouchers directly available to job seekers.
There are many South Africans already out there looking for the jobs that don’t exist. Perhaps the best irony in this is that the ANC might end up creating a valuable export product: skilled labor.
In the section that looks at the economy, things get even better. Here are some of the ANC’s new ideas for what they want to accomplish by 2030 – a convenient 17 years into the future:
Eliminate income poverty – Reduce the proportion of households with a monthly income below R419 per person (in 2009 prices) from 39 percent to zero. Reduce inequality – The Gini coefficient should fall from 0.69 to 0.6. Enabling milestones Increase employment from 13 million in 2010 to 24 million in 2030. Raise per capita income from R50 000 in 2010 to R120 000 by 2030. Increase the share of national income of the bottom 40 percent from 6 percent to 10 percent.
To begin with, it is easy to promise higher wages over a period of 17 years. Basically, all you have to do is let inflation walk through the economy. At three percent per year, inflation-adjusted income advancement will turn R419 into R692 without the government having to do a single thing about it.
The per-capita income of R50,000 will become R120,000 in 17 years at a slightly higher inflation rate of 5.3 percent. Currently, inflation in South Africa is higher than that. Again, the ANC will achieve two of its key economic policy goals by kicking back and letting employers adjust the earnings of their employees to inflation.
The talk about reducing income differences is worrisome, and I urge all you South Africans who read this blog (a steady readership down there!) to pay close attention to this part of the National Development Plan. Income differences are typically larger in thriving economies. The reason is simple: when people are allowed to earn whatever they can, they build a career, work hard and make a lot of money. Then they spend their money in the local economy, thus creating more jobs. Many hard working professionals also start their own businesses, creating even more jobs.
The more jobs that high-earning people create or help create, the better the chances are for unskilled workers or newly graduated professionals to find a well-paying job. The closer an economy gets to full employment, the more incomes will grow across the spectrum.
Since the ANC has now – again – declared that income differences are income inequalities, and that they are going to fight such inequalities, we can safely conclude that the ANC will continue down the path with new and higher hate taxes on the “rich”. This means steeper marginal income taxes, chopping the top off high earnings and thus reducing or even eliminating the positive multiplier effects of high earnings. Fewer jobs are created at the bottom of the labor market, leaving more people on the government dole.
And just to drive home the point that government, not individual citizens and certainly not the free market, is the final arbiter of all economic activity, the African Nonsensical Congress makes clear in its National Delusion Plan that ideology trumps reality every day of the week:
Ensure that skilled, technical, professional and managerial posts better reflect the country’s racial, gender and disability makeup. Broaden ownership of assets to historically disadvantaged groups.
In other words, keep the resentment from the Apartheid years alive by blaming today’s whites for historic atrocities. And since the ANC knows that this will anger many non-black entrepreneurs and make them less appreciative of the government’s social-engineering policies, they have to drive home the point that every employer must make sure that his staff reflects “the country’s racial, gender and disability makeup”.
Other than that, it is rather interesting to see that after almost two decades in power, the ANC feels inclined to say that “give us another two decades and we will…”
Increase the quality of education so that all children have at least two years of preschool education and all children in grade 3 can read and write. Provide affordable access to quality health care while promoting health and wellbeing. Establish effective, safe and affordable public transport. Produce sufficient energy to support industry at competitive prices, ensuring access for poor households, while reducing carbon emissions per unit of power by about one-third. Ensure that all South Africans have access to clean running water in their homes.
In 2030 very few South Africans will have any first-hand memories of what life was like under Apartheid. That is probably fortunate for the ANC, if it can cling to power for that long, because the worst that can happen to them is that more and more blacks begin to compare everyday living conditions under the ANC with those they or their parents experienced under Apartheid.
The racism of that government can never be excused or mitigated by attenuating circumstances, but if indeed the black population in South Africa is worse off today than it was back then, it is a monumental failure for the ANC – and for socialism. There is a lot to point in that direction, especially when it comes to unemployment.
For a socialist government to perform worse than a racist, socially and economically stratifying government is an embarrassment of galactic proportions. It is a verdict on socialism so heavy that it can hopefully be eliminated from South Africa’s political institutions for a long time to come.
The National Development Plan shows clearly that with the ANC in power, things are only going to deteriorate. But hopefully it will also be the motivator for the political opposition to begin formulating a common-sense alternative.
South Africa deserves better than socialism.
The vastly unsuccessful French hate tax has driven scores of highly productive French professionals and entrepreneurs into financial diaspora. As things look right now, the French government can be happy of the 75-percent marginal income tax bracket does not lead to a net loss of revenue.
You would expect politicians in other countries to pay close attention to what the French are doing – and learn. However, since the advocates of hate taxes on high-income earners are socialists almost by definition, it would be illogical to expect them to take a logical look at the consequences of hate-taxing the rich. To them, the confiscatory principle behind the tax is an ideological motivator that has nothing to do with economic results.
There is, however, a large segment of people in the middle of the political spectrum who are not ideologically married to hate taxes, who are open to economic arguments but who may be swayed in favor of such taxes just because they are concerned about the government’s budget. Those people are the make-or-breakers of already highly taxed economies: on the one hand, a hate tax will break the back of the last segment of productive citizens; on the other hand, avoiding the hate tax opens for reforms that can actually improve an economy and put it back on its right track again.
Unfortunately, it seems as though the French hate tax initiative could have planted the seed of a global trend. South Africa is considering following in the French footsteps, and there are now voices in Britain in favor of similar policies. From the Daily Express:
Calvin Coolidge, the far-sighted American President of the 1920s, once said that “collecting more taxes than is absolutely necessary is legalised robbery.” Tragically, his wise words appear to have been lost on our political class, whose members spend much of their time dreaming up new ways to grab our cash. As the appetite of the state machine becomes ever more ravenous, so the tax system grows ever more oppressive. Now the Liberal Democrats want to expand the scope of this confiscatory regime even further.
The British Liberal Democrat party has long claimed that its reason to exist is that British politics needs a strong middle-of-the-road party, a compromise between conservative Tories and social-democrat Labor. That has changed over time, of course, as the Tories have drifted in toward the middle and the Liberal Democrats have become an increasingly clone-like copy of the main stream of the Labor party.
Nevertheless, it is noteworthy that this is the party that now proposes a hate tax. It verifies the theory that there is a critical mass in the center of politics that can be swayed by socialists into supporting anti-rich taxation, typically in the name of fiscal responsibility.
QED, as the Daily Express reports:
A plan drawn up by the party’s Federal Policy Committee proposes a wide-ranging new so-called “wealth tax”, targeted at anyone with assets estimated to be worth more than £2 million in total. The sum would include not just property but all possessions, including shares, paintings, jewellery, cars, and furniture, on which the owners have probably already paid tax.
Imagine the bureaucracy needed to assess the values of all these various kinds of property. Of course, the Liberal Democrats have already thought of this, as they suggest that “tax inspectors would be given unprecedented new powers to go into homes and check the valuations of personal effects.” So much for personal integrity, something European liberals typically claim to be staunch supporters of.
Daily Express again:
This is not the first time the Lib Dems, always eager to differentiate themselves from the Tories, have demanded an attack on the affluent. The party has long been wedded to the idea of a “mansion tax”, focused on houses worth more than £2million, while last autumn the Deputy Prime Minister [Liberal Democrat] Nick Clegg urged the introduction of “an emergency wealth tax on Britain’s richest” as part of the “economic war” against the deficit.
Just wait for that term to make it Stateside. It almost sounds like the campaign slogan of an Andrew Cuomo or a Martin O’Malley running for the Democrat ticket in 2016. Especially Governor O’Malley would be ready to validate virtually any tax policy under the guise of a “war against the deficit”. During his tenure as chief executive of Maryland, O’Malley has raised a tax on average every ten weeks.
Back to Britain, where the Daily Express makes a formidable point about hate taxes:
Enthusiasts for this sort of aggressive taxation like to pretend that only the very richest will be hit. But the lesson from history is that, once a new tax is established, ever larger numbers are sucked within its destructive embrace. That is certainly true of the upper rate of income tax. Only 30 years ago, just 3 per cent of taxpayers fell into this category. Now, through the cynical process of failing to raise thresholds in line with inflation, more than 15 per cent of earners are upper rate taxpayers. Soon, more than five million people, including ordinary middle- class people, will be paying income tax at 40 per cent. The same is true of so many other taxes, such as inheritance duties, which were once aimed at the only the wealthiest but now catch huge swathes of the population in their net.
Americans should take note and remember the Alternative Minimum Tax. The problems caused by the AMT will be absolutely nothing compared to what a “war on the deficit” and its hate-the-rich taxes would do to our economy.
The Daily Express concludes, aptly:
If state control and hatred of the rich really worked, then North Korea would be the most prosperous nation on earth, not a land of misery.
This is a very important point – there is no better place in the world to study the contrast between statism and capitalism than on the Korean peninsula. We should not have to go to such extremes to explain why statism does not work, but on the other hand, if friends of freedom do not take the incrementalist strategy of the left seriously, the only question remaining to answer is how small the difference will be between our society and North Korea before the left is satisfied.
That, in turn, is like asking an American liberal or a European social democrat: when is government big enough? So far I have not heard even a shred of an answer to that question. What I do hear, though, is a cacophony of new ideas for how to expand government, ideas that are produced increasingly by mainstream “moderates” in European as well as American politics.
The fact that hate taxes on the “rich” are back in vogue, despite their abysmal failure in the ’70s, is a testament to how uninterested in reality statists are. It is also a testament to the seductive power of socialist rhetoric, in particular in bad economic times. It is easy to tell someone who is just out of school and has no opportunities on the job market that “the rich took the money you never had and ran with it”. If wrapped in slick rhetoric and sold with the right kind of ad campaign, this kind of hateful politics can easily win the day.
It is the responsibility of every friend of liberty to fight the growth of government, to resist the advancement of hate taxes – and to offer a credible, reliable and realistic path to limited government.