Archive for July 29th, 2012

Considering that every economic theory agrees that living standards and worker compensation are closely correlated with the amount of capital in an economy (this picture is a compelling illustration of the relationship), one would think that politicians – particularly those who say they want to improve wages – would be very anxious not to create tax penalties on saving and investment.

Yet the United States imposes very harsh tax burdens on capital formation, largely thanks to multiple layers of tax on income that is saved and invested.

But we compound the damage with very high tax rates, including the highest corporate tax burden in the developed world.

And the double taxation of dividends and capital gains is nearly the worst in the world (and will get even worse if Obama’s class-warfare proposals are approved).

To make matters worse, the United States also has one of the most onerous death taxes in the world. As you can see from this chart prepared by the Joint Economic Committee, it is more punitive than places such as Greece, France, and Venezuela.

Who would have ever thought that Russia would have the correct death tax rate, while the United States would have one of the world’s worst systems?

Fortunately, not all U.S. tax policies are this bad. Our taxation of labor income is generally not as bad as other industrialized nations. And the burden of government spending in the United States tends to be lower than European nations (though both Bush and Obama have undermined that advantage).

And if you look at broad measures of economic freedom, America tends to be in – or near – the top 10 (though that’s more a reflection of how bad other nations are).

But these mitigating factors don’t change the fact that the U.S. needlessly punishes saving and investment, and workers are the biggest victims. So let’s junk the internal revenue code and adopt a simple and fair flat tax.

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I wrote last week about David Gauke, a simpering and unctuous statist who said it was “morally wrong” for people to pay cash for services because that made it harder for the state to seize a share of the proceeds.

And last month I condemned the country’s CINO (Conservative in Name Only) Prime Minister for saying that legal tax avoidance is “morally wrong.”

These nauseating examples are just the tip of the iceberg. The U.K. government also has proposed a scheme that would require employers to send employee’s paychecks to the tax police, giving the folks at Inland Revenue the authority to then decide how much can be sent to hapless workers.

Equally disturbing, the government even uses the tax authority and the education system to propagandize kids – even to the point of asking information about people they know who aren’t fully obedient to the state.

Here are excerpts from a report in the Telegraph.

HMRC has set up teaching modules to guide children through the hazards of pay as you earn and National Insurance contributions. Some of the modules – which can be downloaded from HMRC’s website – teach school children as young as 11 about paying their fair share of tax. …One lesson plan – targeted at 14 to 16 year olds – requires students to “discuss whether it is good to pay the tax we do, considering the benefits we receive. If it is good, then why do people try not to pay?” It continues: “Show class the remaining factfile slides on tax evasion. What do students think of those who refuse to pay tax…? “Can they think of any example they may have heard of in their local area?” …The modules were criticised by thinktank Civitas. David Green, its director, said: “This sounds a bit too ‘Big Brotherish’. People ‘in their local area’ are most likely to be parents or close relatives. Turning children into state spies is un-British.”

The government denies that it collects and uses the information as part of its tax enforcement activities.

An HMRC spokesman said…”We certainly don’t use this to collect information on tax evaders from children. These materials are solely designed to help children to learn about how tax works in Britain.”

I’m willing to assume that the government is being honest about its actions today, but that doesn’t mean the statists won’t decide to expand the system in the future. After all, that is the history of government.

But even in the unlikely event that the tax police never utilize the system to encourage snitching, it is still disgusting and reprehensible that the government is brainwashing children into being compliant serfs.

P.S. The statists in the U.K. say money is needed to fund important social services, but these examples (here and here) show that dysfunctional and destructive impact of the welfare system, and this post (as well as all the examples linked at the end of the post) show that the government-run healthcare system leaves a lot to be desired.

P.P.S. But the U.K. government needs more money. After all, how else can it have taxpayer-financed sex trips to Amsterdam?

P.P.P.S. Thuggish and Orwellian tax enforcement also exists in the United States. You won’t be surprised to learn that Chicago encourages snitches by paying bounties. Yup, the murder capital of the world can’t keep its people safe, but it has resources to implement Soviet-style revenue tactics (and don’t forget the city is against free speech as well).

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