Matthew Lynn, a columnist for Bloomberg, has a good and succinct take on the latest nonsense about actions by the German and British government to use information – obtained in highly dubious circumstances – to go after people who have put their money away in tiny European tax havens such as Liechstenstein. Philip Chaston of this blog has already touched on the subject. The difficulty that even any pro-freemarketeer politicians – if there are many – have in defending tax havens is defending the right of people to essentially flee from an oppressive but still-democratic regime. In chatting to people on this issue and reading the commentary, a lot of people make the assumption that wealth is collectively owned if enough voters wish it so and that therefore no-one has the right to flee from the looting intentions of such voters. In other words, non-domiciled residents who want to get away from the British taxman are not being good, democratic citizens by shirking their ‘responsibilities’.
At its core, what this issue throws up, beyond the practical issues of how tax rates hurt economies, is a broader issue of the obligations, if any, that an individual has to his fellow citizens. If one believes the classical liberal idea that governments exist to serve the individual and not the other way round, that individuals have no apriori obligations to others, then the crackdown on tax-avoiders should be seen as the power grab that it is.
Another issue, of course, is this: democracy and liberty are not the same thing, a point that has been remarked at this blog many times before. For sure, democracy may – may – be the least-worst way to kick out a government and replace it with a hopefully better one, but the idea that freedom comes from letting 51% of the electorate steal from 49% of the electorate has precious little to do with liberty. The right to own property and enjoy its fruits unmolested is as important as freedom of speech or the right to self defence. Tax havens rile communitarians precisely because they are a standing reproach to the looters who use democratic mandates to justify their depredations. They act as a brake on the power of governments with a temporary majority in a democratic assembly every bit as powerful as other checks and balances such as independent courts and upper chambers. And as traditional checks and balances are eroded – as they have been in Britain recently – we need all the constraints on national and supranational power we can get. We should therefore see the efforts by EU and other nations to create a global tax cartel as being every bit as dangerous as the alleged cartel deals forged by the 19th Century “robber barons”, except of course that this latter group were usually unfairly maligned. Compared to the tax-cartel zealots, Rockefeller and Co. were strict amateurs.
When the UN was set up it had something like 40 to 50 original members. Today there is over 190 independent states. The number of states is set to grow and hopefully also the number of tax havens. Separatism creates competition between states and therefore leads to a downward pressure on tax rates.
I’d love to know how tax authorities can possibly keep tabs on everyone’s global earnings. Okay, if you have millions salted away then hiding that interest could be hard, but relatively small amounts? Surely, the truth is, tax declarations are largely based on trust. Until governments ban cash and introduce a universal tax id there will always be tax dodgers.
The B.B.C. often broadcasts various “exports” (from the O.E.C.D. or from some university) who declare that as countries benefit from trade (it is beyond them to think that it is individuals in these countries who trade and who benefit) the governments of all countries have a duty (or “obligation”) to assist in crushing tax evasion and avoidance (the speakers deliberately confuse the two). And to assist in social justice stuff generally.
World government ideas did not die with President Woodrow Wilson and his “other self” Colonel E.M. House (he of “Philip Dru: Administrator”) – indeed they are stronger than ever.
People who denounce the European Union as “inward looking” miss the point that it is part of a world wide movement (stongly supported by the academics and those they influence – such as the main stream media).
I am sure that a President Hillary Clinton, or a President Obama will make sure that the United States puts all of its weight into helping eliminate “tax havens” and other such enemies of social justice and the World Community.
Mark, from the perspective of those who would control, the reality you point out is not a bug. It is a feature. I think it is a big part of the reason that most high profile rich people profess leftist ideology. To discourage punitive enforcement.
Ah,yes;51 wolves and 49 sheep voting on what’s for lunch.
And yet punitive enforcement seems the order of the day. Tax officials spend months chasing down discrepancies of a few hundred pounds but miss the big one. I guess it’s all about low hanging fruit, isn’t it?
“…but the idea that freedom comes from letting 51% of the electorate steal from 49% of the electorate has precious little to do with liberty”
It wouldn’t be too bad if the percentages were even that close. As it is now, as of 2005, the bottom 50% of US taxpayers pay only 3.6% of the federal income taxes where the top 25% pay 83.6%. The Bottom 75% of US taxpayers pay only 16.4%. So you have essentially, 195million people filing tax returns who are in a postion to essentially steal via the ballot box from the 65 million in the top 25%.
Quite correct JohnnyL – and there is no Federal sales tax, so “the rich” are the ones who pay for the Federal government.
Yet the education system (both schools and universities) still teach, and the main stream media still support, the attitude that “the rich” avoid taxation in various corrupt ways leaving the weight of it to the poor.
The idea is flatly contradicted by the facts (which show the opposite), but who cares about facts?
Midwesterner – yes some of the handful of SUPER rich (such as billionare George Soros) do seem to get round taxes. Perhaps this has something to do with their leftist ideolgy.
It can also be a sort of perverted guilt.
For example, Warren Buffet endlessly complains that he pays a lower rate of tax than many of his employees (this is because he built up his money long ago, it is capital gains now – but he “forgets” to mention that).
He should simply be told the following.
“You are always boasting of giving X billions away – give the billions to the taxman instead if you are so pro higher taxes on the super rich”.
Of course how Buffet, Gates (and so on) can “give their fortunes away” and yet seem to be as wealthy as they were before is another question.
In my less complex world, if one gives money away one does not have the money anymore.
Hey tax protestors! (slash complete economic hacks slash clowns). If you don’t like taxes, then work to elect a party that will lower them or move to another country. Illegally refusing to pay the taxes you lawfully owe just makes the rest of us pay more than we should. We could lower everyone’s tax rate by a couple percent if nobody cheated on their taxes. Only following the laws you like is not how democracy and the rule of law works. Even your judicial heroes Scalia/Thomas/Roberts will tell you that.
It is very important for the IRS to catch people and publicize the people it catches cheating on taxes. The more it does to publicly enforce tax laws, the more efficient the tax system will be and the less cheating there will be (hence the lower rates can be everyone). The IRS currently does a really good job of publicizing its cases against tax cheats. This deters other would be tax evaders from cheating on their taxes. Statistically, based on audit lottery numbers, you would expect many more people to cheat on their taxes than who actually do. Much of the difference is due to highly publicized cases like this one you cite. People are afraid to cheat on their taxes as they should be. If they weren’t, law abiding citizens like myself would be forced to pay much higher rates to cover all the revenue lost from joe taxcheats like these people.
Wow that was one of the most spectacularly economically illiterate comments we’ve had for a long while.
Why do you seem to think that Governments have a God given right to raise taxes from us the citizens, without a clue as to how much they need or what they are going to waste it on and expect us all to meekly pay up?
responsiblelib, you’re delusional if you think the system can be reformed. Too many people are net beneficiaries of other people’s taxes, so what you’re really saying is “bend over, shut up and take your fucking like a man”. Sorry, no deal. I threw my US Passport in the Rio Naranjo two years ago and it was the best goddamn move I ever made. The economy here is great but as a US citizen I still owe your precious IRS tax on what I make in Costa Rica. Yeah, that’ll happen. Not. Don’t like it? Tough shit.
Why do you think organisations and wealthy individuals contribute hundreds of millions to the Obama and Clinton campaigns? It’s certainly not because they are stupid liberals.
I never thought I could ever approve of corruption, but when it’s all that remains……
responsiblelib:
A couple of points to make you think, if you care to try.
1) Economic hacks? What’s your degree in? Can you comment on the concavity of the Laffer curve, just so we know why we should bow to you, educated one? What was your Ph. D. thesis on?
2) “It is very important for the IRS…” And we care what is important FOR the IRS… why again? You probably mean to say that it is important THAT the IRS catch yada-yada – get a refund from your 4th grade teacher, and please ponder to whom it is important that tax cheats are caught?
3) If you don’t like “tax cheats”, move to another country or elect a party that will make them illegal.
4) So, let’s see if I follow…
Reconcile the 2 statements. Are you saying that a couple of percent is “much higher”? Whoopee-doo, a couple of percent less, on marginal tax rate in the 40-50 range… I am moved to tears…. at the naivete you have amply demonstrated.
Dear Res-Lib.
It is precisely your type of reasoning that the EUtopian authorities use when bullying countries like Switzerland into ‘changing’ (raising) their tax rates- that EUtopia needs the money, even if Switzerland IS a sovereign country. apparently people are fleeing their own countries and taking their cash out of the system and into switzerland. Even London might soon lose people because the Brownies are going to raise taxes. By your reasoning, they should first make emigration illegal, and then raise the taxes, knowing the victims can’t escape. It is impossible for governments to ever LOWER taxes, after all, and since they can’t spell, they think competition is a four-letter word.
I would like to thank responsiblelib for one of the most valuable comments I have seen here in quite some time—not because it is correct in its analysis, but because the errors made are so painfully commonplace and widely believed.
Too often, as at any site with a specific philosophical or political viewpoint, we talk to each other about commonly held ideas, and forget that we are very much a minority in the west, and even more so in the world at large, in our general committment to a minimally intrusive state.
It is good to be reminded on occasion that a strong belief in the fundamental value and sanctity of individual rights and liberties is the anomaly, and the enthusiastic statism of those imbued with the conventional wisdom of responsiblelib are the norm.
How has this happened?
This is a basic question that I have pondered for many, many years. It is truly one of the most perplexing elements of the entire perplexing cultural scene, in the west and across the globe, in which normally intelligient, rational people acquiesce to the most outrageous, outlandish excesses by routinely clueless politicians and members of the state apparat, apparently from some generalized belief that “if it’s for the common good, it must be OK”.
That so much of state activity over the course of time is clearly and blatantly NOT for the common good, but, in fact, painfully contrary to anyone’s good except the pols and apparatchiks who have championed it, seems to be consistently ignored, or at least minimized, even by those who have suffered a large part of the depridation caused by statist public policy.
My conclusion is both depressing and, at the same time, somehow energizing—the social and cultural elites whom ordinary people have counted upon to guide, inform, and administer major elements of social theory, moral values, and cultural structures over the course of many centuries have very poorly served the interests of ordinary, working people, those same “common people” that so many have claimed to represent and be devoted to, especially over the last few centuries.
For millenia, the cultural truths that formed many societies openly declared that every member of a particular culture, every inch of property, every grain of wheat or rice, every head of cattle, every blade of grass, belonged to the lord of that realm, and he could do with any or all of it as he saw fit.
Everything, and everyone, was “held of the king”. If anyone dissented from that theory of how society should be formed, they were summarily disposed of, often in a most gruesome and painful way, along with their entire family, and all they possessed was forfeit to the crown, whether worn by an emperor or khan, king or pharoah.
But, in an event unprecedented in human affairs, an alternative theory was proposed—that governments derived their just powers from the consent of the people—and that theory was defended successfully with the blood of its adherents from the swords of the agents of the king.
It is not surprising, then, that the reaction to such infamous heresy was immediate, relentless, and often violent.
Even as these ideas suffered a trial of blood and fire in their own homeland, from around the world, political theorists, religious leaders, and academic scholars combined to deny their validity, and, instead, proposed an endless series of variations of the theory that it was the collective that mattered, not the individual, and that the leader must determine what will be done for the common good, and who must be sacrificed to achieve it.
Thus, we are confronted with the likes of responsiblelib, who arrogantly and confidently proclaims that keeping one’s own money, the products of one’s own mental and physical effort, is immoral, and rightfully illegal, and tracking down such selfish, evil people is a valuable expression of the needs of the state to finance its activities.
That such a complete moral inversion has become the conventional wisdom of a developing world culture, preached from innumerable pulpits, proclaimed by an endless parade of officials, and taught across the globe in classrooms by earnest and well meaning academics, must give any of us committed to the sanctity of the individual and his rights, and her liberties, as a free and self-owned entity, serious pause.
Opposing such a formidable structure of political, religious, and educational leaders is, indeed, a daunting prospect.
I can well understand the frustration, and even despair, of many who observe such a world, committed to the collective, which consistently disparages the importance of the individual, and the rights which we believe must sustain and protect him in his journey through the complexities and challenges of life.
But, as someone once said, if you observe a confident and seemingly powerful evil challenging a cringing and seemingly weak moral good, you are witnessing a profound moral inversion, in which that which is truly neccesary for a fully human life has been denied, and that which leads only to death, both spiritual and physical, has been exalted.
Such is the challenge of our age. We have been called upon to re-enact, on an intellectual and moral battleground, the efforts of those whose exertions were deemed “their finest hour”.
In some cases, a physical battleground may also be necessary, as the current effort against religious totalitarianism demonstrates.
Therefore, we must gird ourselves, and energize our every fiber, every synapse, every capacity, so that free men and women, a thousand years from now, might say, “they were a light against the darkness”.
If an electrician can stand against the most ferocious tyranny in history, or a formerly imprisoned author lead a movement towards freedom for his enslaved countrymen, there is every chance that freedom could succeed, and the endless tyranny of the collectivist state could be defeated.
A chance is all we ever get in life. If we don’t take on this challenge, and do what needs to be done, who else will?
My children, to the hundredth, and thousandth, generation, will live as free men and women, so help me god.
Nothing else matters.
We could lower everyone’s tax rate by a couple percent if nobody cheated on their taxes.
We could. But that’s not what would happen. What would actually happen is Congress would authorize a bunch more “Big Digg” style projects, or more F-22s, or public-finance health care, or… you name it. Taxes wouldn’t go down, but instead would go up when the next economic downturn hit and revenues slumped.
Clinton and Obama aren’t terribly likely to crack down on tax shelters. Bill Clinton didn’t.
As for the income tax figures, it’s not terribly surprising that the top quartile pays most of the income taxes since they, of course, get most of the income. The top quartile starts at about $55k/yr., which honestly isn’t that much.
Another issue, of course, is this: democracy and liberty are not the same thing, a point that has been remarked at this blog many times before. For sure, democracy may – may – be the least-worst way to kick out a government and replace it with a hopefully better one, but the idea that freedom comes from letting 51% of the electorate steal from 49% of the electorate has precious little to do with liberty.
I’ve been saying for a couple of years that the problem is the conventional view of the political spectrum, as extending from dictatorship at one end to democracy at the other. Rightly thought of, democracy is not the end of the political spectrum, but the middle.
One person is sufficient to make a political decision: dictatorship.
A minority of the population is sufficient: oligarchy.
One-half of the population, plus one, is sufficient: democracy.
A supermajority of the population is required: superdemocracy, the system under which, for example, the United States operates, with its requirement for supermajority agreement to amend the Constitution, and its system of courts empowered to overrule legislative acts based on the Constitution.
Unanimous consent is required for any political decision: anarchy, in the philosophical sense, where no one can be required to do anything against their own will.
On one analysis, of course, it can be said that any transaction in a free market is based on unanimous consent; that is, a free market admits all Pareto improvements. But a free market presupposes enforceable property rights in the things that are exchanged. And I doubt that any system of property rights can be said to have unanimous consent; if nothing else, thieves probably don’t consent to the laws that forbid them to steal. I’m not persuaded that a system that actually requires unanimity is workable. But a system with strong supermajoritarian requirements has clear advantages over democracy; so much so that the difference between the two is commonly blurred, with people who favor “democracy” sometimes advocating rule by majorities and sometimes appeal to constitutional law. An explicit case for reliance on supermajoritarian processes seems to me to be worth making.
VR:
Most people seem to have missed the memo, and substituted an elected king for a hereditary one. And increasing numbers of them don’t even bother taking part in the elections any more.
.
ResponsibleLib, other commenters have already kicked the tar out of you for these pathetic attempts to justify the IRS’s absurd, expensive and oppressive operations. Let’s just say that if you really think that if tax avoidance is curbed, that this would mean lower taxes for people in general, then you are really, really naive.
As my article said, the existence of tax havens acts as a curb on the ability of high-taxing governments to continue along this path. Such is the state of politics in the west at the moment, with centrist authortarians fighting for the same, big government credentials, that it is all but impossible for classical liberals to oppose it. And to be quite honest I have spent enough of my free time campaigning and writing for a liberal world and a fat lot of good that has done. If small tax havens in central Europe act as a break on looters, great.
I love the smell of tax-protesters brains in the morning …
>> 3) If you don’t like “tax cheats”, move to another country or elect a party that will make them illegal
3) If you don’t like taxes, move to another country or elect a party that will make them illegal
There fixed it for ya.
Clockwork: I already have offshore arrangements, as do several people I know.
Abusiveness rarely works in these threads, so I would not bother to try to rile us with your asinine remarks.
A ‘quick’ question on this topic – I’m sure it been well answered before on this blog, but bear with me please.
Forbes has just come out with its list of richest (men- but thats another point)
Looking down through the list – I see that most wealth has been earned from those societies that are most regulated and taxed.
i.e. Is not what stable states supply; such as Infrastructure – guarantee of contract – property rights etc .. yada yada yada not predicated on those states being able to supply such services? i.e. the happy customers who provide the wealth exist in well regulated & high taxed zones
It seems to me that people who make HUGE money enough to deposit it offshore can lay some of the blame of their embarassment of riches firmly at the foot of the big bad state who have provided the happy customers.
Why should somebody who benefits (most) from the security (etc etc — customers) offered by the state be so reluctant to give some back. I don’t mind paying taxes – because I use what the state provides to me.
Yes – there is waste generated by the big, bad state. But what sticks in the craw of an ordinary & unknowing mortal such as me is asking — where do certain people get off on thinking they owe the state (and to some small extent me — the customer of both the state and Warren Buffett) NOTHING?
Speaking of Buffet – I heard he bought China just when I gave up Coca Cola last year – so he’s still creaming the profit off me!!
Please excuse my reductionism! And remember to reply more succinctly than me because I’m pretty sure work is monitoring the oul interweb (which began funded by the state I think) – and I’m only checking the odd time! Woop Woop!!
Onaclearday, you are correct that most of the wealthy individuals on the Forbes list come from wealthy, overregulated, overtaxed western states, but why should the reason for this be that they are overregulated and overtaxed? Surely it would be more likely that the Forbes list would swell, if more were allowed to retain a higher proportion of their wealth, and to invest it productively rather than in single mothers, military expenditure, and non-job public employees.
Your argument is further refuted if we look at the example of the former Soviet Union. When communism collapsed, and chaos reined, i.e. there was suddenly less regulation and less tax, the number of Russian billionaires soared.
And please don’t put words into our mouths. You said that, “…where do certain people get off on thinking they owe the state…NOTHING?” I am not aware that any full blown anarchists have contributed to this discussion, so I would imagine that everyone thinks that we should pay some tax.
Confiscatory tax rates are not a prerequisite for stability and rule of law. Hong Kong is the best example of this. Also, the Irish economy took off after the government drastically cut the corporate tax rate.
onaclearday –
There’s a huge difference between what we pay and nothing. The vast majority of the dollars I pay in taxes are simply given to someone else as an income transfer. The legitimate functions of the state aren’t all that expensive in comparison.
Australia has a low tax rate, compared to a lot of countries, AND a recent study has concluded that a rags-to-riches success story is more likely to happen here. Coincidence?
Some of the richest people in the world made their money in Hong Kong, famous for not having much in the way of taxes and labour laws. Coincidence?
Bill Gates made his fortune in the free-enterprize market called America, at the cutting edge of computer programs- and America is still less-regulated than a lot of other countries. Coincidence?
Maybe some rule of law is needed, but not much.
onaclearday,
I’m a theoretical anarchist (i.e. I don’t think a state is strictly necessary, but I’m happy with minarchism) so let me explain. I currently owe Warren Buffett absolutely nothing. I also currently owe Coca-Cola absolutely nothing. I am in a cell phone contract with AT&T, though, so I owe them $30 a month. See how that works? Sure, if you use the services of the state, then you’ll owe them something. But otherwise, I should owe the state nothing. Obviously, I use some services of the state and would be willing to pay for them, but not all. And I don’t want to pay for what I don’t use.
If you’re going to treat the state like a corporation and its citizens as customers, fine. But then you have to recognize that we should only pay for the services they offer us and we pay it voluntarily. Right now, what the state does is the equivalent of, say, Coca-Cola robbing me (at gunpoint) because, even though I didn’t just buy a coke, Americans as a whole consume a large amount of coke, and since they want to be fair, they’re going to charge everyone in America. And in order to be really fair, they’re going to charge rich people a much higher rate.
The state exists so we have an independent judiciary, military, and police and fire, and a political apparatus for dealing with other states. Social welfare and other such charitable acts could (and is) easily handled by private organizations, instead of the government. This way, people can choose if, and how much, they want to give, instead of being robbed, not to mention how corrupt the government is. I think we need to privatize a lot of government excess.
Given the vast amount of waste, bureaucracy and the like that comes with modern, western states, the idea that you are “using what the state provides to me” is mind-boggling!
Frankly, if you really did use “what the state provides to me”, you could and should probably pay for most of those things yourself, directly. Of course you don’t want to do that; you want other people to pay for the things that “the state provides for me”.
I could go into a long argument about the proper function of a state, the minimal amount of tax that might be justified to fund it, but I urge you to Google up authors such as David Friedman, Tibor Machan, F.A. Hayek, Milton Friedman, Antony de Jasay and David Kelley for enlightenment and wisdom.
I would love to vote for a poltical party that reduced taxes.
At the local level it is not even possible (and I am “on the Council” myself) – as almost all spending is mandated by national government in Britain.
And at national level none of the major political parties (the ones with the money and the access to the media) are interested in controlling government spending or reducing taxes.
For example, the Conservative party (of which I have been a member since the age of 15) has a national leadership which is divided.
Divided between people who want to match the insane spending surge of the Labour government – and people (such as the Shadow Health Secretary) who want to spend EVEN MORE that the Labour goverment.
Of course there are anti tax-and-spend people in high positions in the Conservative party (“you would say that” – well yes), but one does not hear from them, and they do include either the leader of the party or the Shadow Chancellor.
I’m pleased to see that my column provoked a discussion. I was amazed that Germany’s decision to start paying people to steal data from foreign countries didn’t provoke more hostility. Even more amazing that the British Government paid for the lists. So if the Iranians decide to steal data from Barclays, presumably that is okay with us?
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