Tag Archives: taxes

Life before the social welfare state

In 1779, before the advent of the welfare state or even a federal government in the US, when taxes were virtually non-existent, François de Barbé-Marbois wrote: “Begging is unknown in America. There are, in almost all towns, hostels which take in old people or those who are unable to work. As for the unemployed, there are other institutions where care is taken that they lack neither work nor food.” Barbé-Marbois, Our Revolutionary Forefathers 71

Taxing offshore accounts would solve 6% of the problem. What about the 94%?

Proponents of big government and haters of the rich are making a big deal about $21 trillion that is being hidden in tax-free offshore accounts. The Observer reports:

A global super-rich elite has exploited gaps in cross-border tax rules to hide an extraordinary £13 trillion ($21tn) of wealth offshore – as much as the American and Japanese GDPs put together – according to research commissioned by the campaign group Tax Justice Network.

James Henry, former chief economist at consultancy McKinsey and an expert on tax havens, has compiled the most detailed estimates yet of the size of the offshore economy in a new report, The Price of Offshore Revisited, released exclusively to the Observer.

He shows that at least £13tn – perhaps up to £20tn – has leaked out of scores of countries into secretive jurisdictions such as Switzerland and the Cayman Islands with the help of private banks, which vie to attract the assets of so-called high net-worth individuals. Their wealth is, as Henry puts it, “protected by a highly paid, industrious bevy of professional enablers in the private banking, legal, accounting and investment industries taking advantage of the increasingly borderless, frictionless global economy”. According to Henry’s research, the top 10 private banks, which include UBS and Credit Suisse in Switzerland, as well as the US investment bank Goldman Sachs, managed more than £4tn in 2010, a sharp rise from £1.5tn five years earlier.

The information I wanted didn’t appear until paragraph eleven:

Assuming the £13tn mountain of assets earned an average 3% a year for its owners, and governments were able to tax that income at 30%, it would generate a bumper £121bn in revenues – more than rich countries spend on aid to the developing world each year.

That £121 billion is about $200 billion. The global budget deficit runs at about $3.5 trillion or 5.3% of GDP.  (The United States leads the way with a deficit of $1.3 trillion or about 9.3% of GDP.) If these hidden assets suddenly became taxable, the global budget deficit would decline by about 6%, assuming the governments don’t just spend the newfound money.

No plan to “tax the rich” or “close loopholes” can possibly reduce the budget deficit by a significant amount. As I noted previously, the U.S. government would need to double income tax rates to close the budget deficit. Obviously, this is unfeasible because tax avoidance would rise when the “wealthy” are faced with a 70% income tax rate in addition to state and other taxes. Additionally, this doubling would also apply to the poor and middle class.

The government simply cannot raise taxes enough to make any significant dent in the deficit. The idea of taxing “hidden” money would only solve 6% of the problem and that excludes the cost of enforcement. Maybe we should focus on the other 94% of the deficit rather than the 6%.

A proposal to satisfy Warren Buffett and raise his taxes

I’m tired of hearing Warren Buffett complain about not paying enough in taxes.

I propose a 10% property tax on all Americans with personal wealth in excess of $40 billion. This should bring the government about $10.5 billion in new revenue; $4.4 billion from Warren Buffett and $6.1 billion from Bill Gates.

What say you Mr. Buffett? Willing to put your money where your mouth is?

The government would have to double income tax rates and not see any tax avoidance or evasion to close the deficit.

Did you know? The government would have to double income tax rates and not see any tax avoidance or evasion to close the deficit.

Windfall profit tax on ex-government officials

For the second time in three days, Glenn Reynolds of Instapundit mentioned the idea of a “50% surtax on the earnings of former government officials.”

On April 10, 2011:

SO OBAMA’S PEOPLE ARE TALKING TAX INCREASES AGAIN. Here’s my proposal: A 50% surtax on anything earned within five years after leaving the federal government, above whatever the federal salary was. Leave a $150K job at the White House, take a $1M job with Goldman, Sachs, pay a $425K surtax. Some House Republican should add this to a bill and watch the Dems react.

Then on April 12, 2011:

FORGET JOHN GALT, WHO IS PETER ORSZAG? Peter Suderman writes: “Here’s my answer to the question: He’s a pretty-boy pencil pusher whose business, as the top budget brainiac in the administration, was to mislead the public about the budget. . . . Ultimately, it doesn’t really matter what Orzag is doing for Citibank. His primarily job duties are intangible. Mostly it seems he’s there to cast his sexy geek-boy light on the institution and serve as a conduit to Washington’s power centers.”

Seems like another good argument for my 50% surtax on the earnings of former government officials. After all, at least half of Orszag’s value to Citibank comes from his prior government service. Why shouldn’t the taxpayers claw some of that back? Shared sacrifice, dude. . . .

While I almost always oppose taxes, I might be able to get behind this one. However, I don’t like the idea of a surtax. I think it should be called a windfall profit tax.

Ballot propositions: The voice of the people or the tyranny of the majority?

When I moved to Phoenix in 1986, the sales tax was 6.7%. Today it stands at 9.3%. How have we let our state legislature, county, and city councils raise our taxes so? Well, actually, they didn’t. We did! Correct me if I’m wrong, but every sales tax increase in Arizona, Maricopa County, and Phoenix, except the recent food tax, has been approved by us at the ballot box.

That’s democracy for you. Aristotle, Polybius, and the Founding Fathers all warned about the evils of democracy. Tocqueville called it the tyranny of the majority. In our case, the majority votes to raise taxes, collected mostly from the rich, to distribute as gifts among themselves.

But hey! We are doing it for the kids. We are doing it because we need more cops and firefighters to protect us. Spending ever-increasing amounts of money on schools, most of which goes to bureaucrats, is not “spending” but an “investment.” An investment in the future.

Just about every year we have tax increases on the ballot. Some fail, but some pass. The result is steadily rising taxes. But when we voted to raise taxes for more police and fire, Phoenix announced cutbacks just a few months later. Taxes rose while the number of police and fire remained largely unchanged. It was all a big shell game. A trick to raise our taxes.

So why do we fall for it time after time? More than 2000 years ago, Polybius wrote that the people become “accustomed to feed at the expense of others and to depend for their livelihood on the property of others.” We just can’t help ourselves. If we didn’t receive our free schools for the kids, our free police and fire services, our cheap public transportation, our welfare, our unemployment, and our food stamps, we’d all suffer the consequences.

Most of you may find this a shock, but I hate democracy. I hate referendum and initiative. Politicians use it to skirt responsibility, saying that they weren’t the ones who raised taxes. Public unions use it to push for bigger government.

Our Founders knew the evils of democracy. Democracy had its place in American cities of the 1700s, at a very small local level, but the Founders knew that it could not work for large numbers of people. It only worked in small communities where just about everybody knew everybody else. The largest American city back then had just 100,000 people or so. Phoenix with well over a million people, Maricopa County with three million people or so, and Arizona with six million or more are just too large for democracy. That’s why the Founders made the US a republic. Except possibly for small communities, all our governments should be republics.

Democracy is based on majority rule. Republics are based on rule of law. I prefer the protection of stable and well-known laws than the whims of the public. The public’s job is not to vote for higher taxes or more “free gifts” either. As Jefferson said, the people are the “ultimate, guardians of their own liberty.” That is our job. To protect our liberty. Protect our liberty from foreign invasion. Protect it from our government. Protect it from each other.

So what is the true purpose of ballot propositions? Are they to defend our liberty? Sure doesn’t seem that way. Or are they designed to trick us and grow government? Based on our history, it sure seems that way.

Republican government merely reflects the people it represents

At my speech on Sunday to the Arizona chapter of the Republican Jewish Coalition, I expressed over and over that republican government merely reflects the people it represents. Let me count the ways:

  • We elect our President. The winner has almost always received the most votes or was in a virtual tie. The exceptions: 1) in 2000 Bush lost the popular vote by 0.5 percent (a virtual tie) but won the electoral count; 2) Hayes lost the popular vote by 3.1 percent in 1876 but still won the electoral count; 3) Harrison defeated Cleveland in 1888 even though Cleveland received 0.8 percent more votes. [Some include 1824, but not all states popularly elected Electors back then.]
  • We directly elect our representatives and, since 1913, we directly elect our Senators.
  • We indirectly choose the political ideology of the Supreme Court. I heard numerous complaints about the Supreme Court and their legislating from the bench, but the Supreme Court must be chosen by the President and approved by the Senate. Thus, the Justices should hold the same values and politics of the people as a whole who elect those who choose them.
  • In my home state of Arizona, our sales tax has risen from 6.7 percent to 9.3 percent in the last 25 years. How can the politicians raise taxes on us time after time thinking we won’t care? But they haven’t; we have. We the people of Arizona, Maricopa County, and Phoenix have voted for new sales taxes to build roads, trains, stadiums, and parks, hire more police and firemen, and support general government operations.

If we have anybody to blame for our government, it is us. We elect these people and often re-elect them, even after they have proven to care little for the Constitution or their constiuents. Heck, we often re-elect these guys even after they’ve been proven to be corrupt. We voted for higher taxes to pay for more government program and then complain about high taxes and government intervention. We have nobody to blame but ourselves.