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Archive for September 28th, 2012

I spoke at the United Nations back in May, explaining that more government was the wrong way to help the global economy.

But I guess I’m not very persuasive. The bureaucrats have just released a new report entitled, “In Search of New Development Finance.”

As you can probably guess, what they’re really searching for is more money for global redistribution.

But here’s the most worrisome part of their proposal. They want the U.N. to be in charge of collecting the taxes, sort of a permanent international bureaucracy entitlement.

I’ve written before about the U.N.’s desire for tax authority (on more than one occasion), but this new report is noteworthy for the size and scope of taxes that have been proposed.

Here’s the wish list of potential global taxes, pulled from page vi of the preface.

Here’s some of what the report had to say about a few of the various tax options. We’ll start with the carbon tax, which I recently explained was a bad idea if imposed inside the U.S. by politicians in Washington. It’s a horrible idea if imposed globally by the kleptocrats at the United Nations.

…a tax of $25 per ton of CO2 emitted by developed countries is expected to raise $250 billion per year in global tax revenues. Such a tax would be in addition to taxes already imposed at the national level, as many Governments (of developing as well as developed countries) already tax carbon emissions, in some cases explicitly, and in other cases, indirectly through taxes on specific fuels.

Notice that the tax would apply only to “developed countries,” so this scheme is best characterized as discriminatory taxation. If Obama is genuinely worried about jobs being “outsourced” to nations such as China (as he implies in his recent attack on Romney), then he should announce his strong opposition to this potential tax.

But don’t hold your breath waiting for that to happen.

Next, here’s what the U.N. says about a financial transactions tax.

A small tax of half a “basis point” (0.005 per cent) on all trading in the four major currencies (the dollar, euro, yen and pound sterling) might yield an estimated $40 billion per year. …even a low tax rate would limit high-frequency trading to some extent. It would thus result in the earning of a “double dividend” by helping reduce currency volatility and raising revenue for development. While a higher rate would limit trading to a greater extent, this might be at the expense of revenue.

This is an issue that already has attracted my attention, and I also mentioned that it was a topic in my meeting with the E.U.’s Tax Commissioner.

But rather than reiterate some of my concerns about taxing financial consumers, I want to give a back-handed compliment the United Nations. The bureaucrats, by writing that “a higher rate…might be at the expense of revenue,” deserve credit for openly acknowledging the Laffer Curve.

By the way, this is an issue where both the United States and Canada have basically been on the right side, though the Obama Administration blows hot and cold on the topic.

Now let’s turn to the worst idea in the U.N. report. The clowns want to steal wealth from rich people. But even more remarkable, they want us to think this won’t have any negative economic impact.

…the least distorting, most fair and most efficient tax is a “lump sum” payment, such as a levy on the accumulated wealth of the world’s richest individuals (assuming the wealthy could not evade the tax). In particular, it is estimated that in early 2012, there were 1,226 individuals in the world worth $1 billion or more, 425 of whom lived in the United States, 90 in other countries of the Americas, 315 in the Asia-Pacific region, 310 in Europe and 86 in Africa and the Middle East. Together, they owned $4.6 trillion in assets, for an average of $3.75 billion in wealth per person.21 A 1 per cent tax on the wealth of these individuals would raise $46 billion in 2012.

I’ll be the first to admit that you can’t change people’s incentives to produce in the past. So if you steal wealth accumulated as the result of a lifetime of work, that kind of “lump sum” tax isn’t very “distorting.”

But here’s a news flash for the nitwits at the United Nations. Rich people aren’t stupid (or at least their financial advisers aren’t stupid). So you might be able to engage in a one-time act of plunder, but it is deliberate naiveté to think that this would be a successful long-run source of revenue.

For more information, I addressed wealth taxes in this post, and the argument I was making applies to a global wealth tax just as much as it applies to a national wealth tax.

Now let’s conclude with a very important warning. Some people doubtlessly will dismiss the U.N. report as a preposterous wish list. In part, they’re right. There is virtually no likelihood of these bad policies getting implemented at any point in the near future.

But the statists have been relentless in their push for global taxation, and I’m worried they eventually will find a way to impose the first global tax. And if you’ll forgive me for going overboard on metaphors, once the camel’s nose is under the tent, it’s just a matter of time before the floodgates open.

The greatest threat is the World Health Organization’s scheme for a global tobacco tax. I wrote about this issue back in May, and it seems my concerns were very warranted. The bureaucrats recently unveiled a proposal – to be discussed at a conference in South Korea in November – that would look at schemes to harmonize tobacco taxes and/or impose global taxes.

Here’s some of what the Washington Free Beacon wrote.

The World Health Organization (WHO) is considering a global excise tax of up to 70 percent on cigarettes at an upcoming November conference, raising concerns among free market tax policy analysts about fiscal sovereignty and bureaucratic mission creep. In draft guidelines published this September, the WHO Framework Convention on Tobacco Control indicated it may put a cigarette tax on the table at its November conference in Seoul, Korea. …it is considering two proposals on cigarette taxes to present to member countries. The first would be an excise tax of up to 70 percent. …The second proposal is a tiered earmark on packs of cigarettes: 5 cents for high-income countries, 3 cents for middle-income countries, and 1 cent for low-income countries. WHO has estimated that such a tax in 43 selected high-/middle-/low-income countries would generate $5.46 billion in tax revenue. …Whichever option the WHO ends up backing, “they’re both two big, bad ideas,” said Daniel Mitchell, a senior tax policy fellow at the Cato Institute. …Critics also argue such a tax increase will not generate more revenue, but push more sales to the black market and counterfeit cigarette producers. “It’s already huge problem,” Mitchell said. “In many countries, a substantial share of cigarettes are black market or counterfeit. They put it in a Marlboro packet, but it’s not a Marlboro cigarette. Obviously it’s a big thing for organized crime.” …The other concern is mission creep. Tobacco, Mitchell says, is easy to vilify, making it an attractive beachhead from which to launch future vice tax initiatives.

It’s my final comment that has me most worried. The politicians and bureaucrats are going after tobacco because it’s low-hanging fruit. They may not even care that their schemes will boost organized crime and may not raise much revenue.

They’re more concerned about establishing a precedent that international bureaucracies can impose global taxes.

I wrote the other day about whether Americans should escape to Canada, Australia, Chile, or some other nation when the entitlement crisis causes a Greek-style fiscal collapse.

But if the statists get the power to impose global taxes, then what choice will we have?

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I despise protectionism. Mostly because it is bad economic policy, but also because politicians often use protectionism as a way of diverting attention from their own failures.

So when I appeared on Neil Cavuto’s show to comment on President Obama’s criticism of “outsourcing,” I was a tad bit critical.

I think my opening comments were effective. I wanted to help viewers understand that cross-border investment is a big net plus for the American economy. Indeed, this is why I’m so critical of laws such as FATCA that discourage foreigners from making job-creating investments in the United States.

And I hope people understood the moral point I made about how it’s not our business what private citizens do with their own money, but it is our business when politicians squander taxpayer money.

Though perhaps I should have asked the folks at Fox to put this cartoon on the screen.

I also got to take a jab at the failed Keynesian stimulus. And I explained that big government facilitates corruption and that excessive government spending undermines growth, so I’m generally happy with my remarks.

But not completely happy. I should have said that the average corporate tax rate around the world is 15 to 17 percentage points below the American level, not 15 to 17 percent, but hopefully people understood the point I was trying to make.

P.S. Romney’s been engaging in some China bashing, so he also deserves some criticism.

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