In a testament to the literal bankruptcy of socialism, a report released by the International Monetary Fund (IMF) advocates for both a massive tax increase and a “one-off” worldwide tax of approximately 10 percent on anyone with more assets than debt. The former idea is a proven economic non-starter. The latter idea amounts to outright plundering.
Released in October, “Taxing Times” makes the case that ever-expanding government debt, coupled with rising levels of income inequality, leaves policy-makers with few other options for dealing with the fiscally irresponsible welfare states they themselves created. It is a level of fiscal irresponsibility that has pushed the average level of public debt to a “historic peak” of 110 percent of Gross Domestic Product (GDP), which is 35 percent higher than it was in 2007.
Two “solutions” mentioned by the IMF are “repudiating public debt” which amounts to nothing less than sovereign defaults on government bonds, or “inflating it away,” which is what the massive creation of currency out of thin air, better known Quantitative Easing (QE) policy, courtesy of the Federal Reserve, is all about.
Yet the most outrageous part of the IMF’s proposal has been reduced to two sentences. “The sharp deterioration of the public finances in many countries has revived interest in a ‘capital levy’–a one-off tax on private wealth–as an exceptional measure to restore debt sustainability. The appeal is that such a tax, if it is implemented before avoidance is possible and there is a belief that it will never be repeated, does not distort behavior (and may be seen by some as fair).”
As despicable as the proposal itself is, amounting to nothing more than outright confiscation by an elitist cabal of government and bank officials, note the method these would-be gangsters would employ. “If it is implemented before avoidance is possible,” means they would be willing to appropriate billions of dollars of individual wealth in a globally coordinated effort–after secretly agreeing to do so.
Amazingly, the report makes no effort to hide that reality. “Financial wealth is mobile, and so, ultimately, are people. … There may be a case for taxing different forms of wealth differently according to their mobility … Substantial progress likely requires enhanced international cooperation to make it harder for the very well-off to evade taxation by placing funds elsewhere.”
While “enhanced international cooperation” sounds somewhat innocuous, it amounts to tossing the concepts of national sovereignty, the rule of law, and the democratic process on the ash heap of history. Moreover, is anyone supposed to believe that the very same elitists who hatched this scheme would leave their assets vulnerable for the taking?
Unfortunately outright plundering of peoples’ wealth is only part of the equation. As the IMF reveals, “revenue-maximizing top income tax rates” would also be part of their gargantuan wealth redistribution plan. The report contends that the average revenue-maximizing tax rate for the primary Organization of Economic Cooperation and Development (OECD) countries would be approximately 60 percent. Singling out the United States, the IMF notes that a top tax bracket of 70 percent, far above the already high 45 percent in local, state and federal taxes currently paid by wealthier Americans, would yield a maximum amount of revenue–even as the IMF admits their approach fails to consider the well-being of the individuals and/or businesses that would bear the brunt of their proposals. “A revenue-maximizing approach to taxing the rich effectively puts a weight of zero on their well-being–contentious, to say the least…,” the report states.
Writing in Forbes Magazine, Competitive Enterprise Institute Fellow Bill Frezza hones in on the combination of duplicity and myopia such thinking represents.
First, he explains that the IMF is well aware of the reality that even if 100 percent of the so-called One Percenters’ wealth were confiscated, governments would remain under-funded. Hence the 10 percent one-off on everyone with positive net worth. Even worse, by the IMF’s own admission, this plan would merely “restore debt sustainability.” That means those same governments would once again be free to run up even more debt, precipitating an even bigger crisis. And despite their empty assertion that it would never be repeated, another plundering–or worse–would undoubtedly be part of the mix.
Yet what really bothers Frezza is the notion that the only other alternative proposed by the IMF other than what he rightly characterizes as “wholesale robbery,” is default, either outright, or by Weimar Republic-like hyperinflation. “Structural reform proposals for the Ponzi-scheme entitlement programs that are bankrupting us are nowhere to be seen,” he explains.
What can be seen are the results of the first round of plundering that has already occurred. In Cyprus, where bank holders’ deposits were looted beginning last March by the European Union (EU), the International Monetary Fund (IMF), and the European Central Bank (ECB)–collectively referred to as the “Troika”–the economy has endured its largest contraction since the mid-1970s. According to estimates by the Troika, the Cypriot economy is expected to shrink by a staggering 8.7 percent in 2013, and another 3.9 percent next year. They claim it will grow by a paltry 1.1 percent beginning in 2015, but it is worth remembering their miserable track record of predictions with regard to Greece, which remains mired in the sixth year of an outright depression that has produced a 25 percent unemployment rate, and an economy only three-quarters of its pre-crisis size.
“From New York to London, Paris and beyond, powerful economic players are deciding that with an ever-deteriorating global fiscal outlook, conventional levels and methods of taxation will no longer suffice,” writes Romain Hatchuel, managing partner of Square Advisors, LLC, a New York-based asset management firm, in the Wall Street Journal. “That makes weapons of mass wealth destruction–such as the IMF’s one-off capital levy, Cyprus’s bank deposit confiscation, or outright sovereign defaults–likelier by the day.”
No doubt for much of the American left, the IMF’s idea of outright confiscation is irresistible, one they would undoubtedly justify as a viable solution for America’s ever-increasing income gap that has reached its worst level since 1928. Yet those would be the very same leftists who have applauded the Obama administration’s massive spending spree, in all its national debt-exploding glory, despite the reality that the average American has seen a 4.4 percent decline in wages since the recovery began in 2009. Even worse, they have heartily supported the Federal Reserve’s unconscionable QE policy that one of its own implementers characterized as “the greatest backdoor Wall Street bailout of all time.”
Furthermore, any American who wants an up-to-date look at the ultimate destination of government-sponsored confiscatory policies can look at what is occurring in Venezuela. It is there Chavez successor President Nicolas Maduro has carried on his “economic offensive” against “bourgeois parasites,” aka the private sector. Maduro has seized electronic stores and arrested “unscrupulous” businessmen who are “gouging” people with “unfair” prices on their wares. Lost in the manufactured populist rage is the reality that the nation’s inflation rate is currently 54 percent. Shortages in basic goods such as milk and toilet paper further epitomize the failure that 15 years of socialism has wrought on a nation with the biggest oil reserves in the world–and all of this is occurring before businesses currently being looted will somehow be expected to re-stock their inventory.
That the IMF would remain either unconcerned or willfully oblivious as to what would eventually happen if individual bank accounts were looted–”before avoidance is possible,” no less–is impossible to imagine. That socialism inevitably evolves into outright gangsterism is not. As Ryan Bourne, head of economic research at the Centre for Policy Studies explains, IMF policies such as this one are based on “an ideological assumption that wealth is a collective resource, with governments the benevolent seekers of the common good, whose ability to provide services is undermined by an eroding tax base.” He further notes such policies “should be anathema to anyone valuing individual freedom, growth and long-term fiscal responsibility.”
Whether those who value individual freedom, growth and long-term fiscal responsibility can withstand the onslaught of those who value power and control engendered by dependency, entitlement and outright looting–sold as benevolent governance–remains to be seen.
Freedom Center pamphlets now available on Kindle: Click here.