I’ve been in Prague the past few days for a meeting of the European Resource Bank. I spoke today about a relatively unknown international bureaucracy called the European Bank for Reconstruction and Development and I warned that it is going through a process of OECD-ization, which is simply my way of saying it is pursuing bad policy.
I’ll write about that issue in the near future, but today’s topic is based on a presentation from Michael Jäger of the Barvarian Taxpayers Association. He shared some depressing data on how the German government imposed a surtax for the ostensibly limited purpose of helping the finance the reunification of West Germany and East Germany.
But limited apparently means forever.
You’ll notice two things in the chart he shared..
- First, the German government has been the big winner from this new levy, collecting €214 billion euros over the past 15 years and spending less than €157 billion euros. In other words, the politicians now have a lot of extra loot to spend elsewhere.
- Second, revenues continue to rise even though the ostensible purpose of the tax is disappearing. Herr Jäger is pressuring the German government to eliminate the tax, but Frau Merkel apparently has little interest in reducing the nation’s tax burden.
To save non-German speakers from having to translate, the dark blue bars are “federal allocations to new states” and the light blue bars are “revenues from the solidarity surcharge.”
The big lesson to learn from this data is that temporary taxes are like temporary programs. They will last forever unless politicians somehow can br pressured to reduce their grip on the economy.
And that’s not easy, though I told some participants in the conference that it could be done. The United States government actually repealed a temporary telephone tax that was imposed to help finance the Spanish-American War.
That’s the good news.
The bad news is that the tax wasn’t repealed until last decade, more than 100 years after that war ended. I’m not joking.
Another painful lesson is that taxes on the rich often wind up penalizing other people. The Spanish-American War telephone tax was supposed to hit rich people since they were the ones who first utilized telephone technology.
But then the rest of us eventually got telephones as well, and we also had to pay the tax.
Just as the income tax was first imposed on just a tiny handful of very wealthy people, but it eventually morphed into a malignant tax code that now bedevils tens of millions of households with modest incomes.
Something to keep in mind when the crowd in Washington says we should have a value-added tax. Based on what’s happened in Europe, I guarantee it would just be a matter of time before that tax became more onerous to finance an ever-expanding burden of government spending.
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“Germans may be forced to work into their 70’s to pay for Muslim migrants on welfare”
MAY 22, 2018 7:59 AM BY CHRISTINE DOUGLASS-WILLIAMS
https://www.jihadwatch.org/2018/05/germans-may-be-forced-to-work-into-their-70s-to-pay-for-muslim-migrants-on-welfare
In 1913, the initial top rate was 7%. Five years later, in 1918, the top rate was 77%.
While it’s true there was a war to pay for, it’s not a good idea to give legislators even a taste of a new tax source.
I was so pleased that government finally stopped the 100-year-old telephone tax. But my joy was muted by the knowledge that we all continue to pay the “Universal Service Fund” charge on all our land-line and mobile phone bills. This non-tax is levied by the FCC and spent to provided “Lifeline” telephone services to almost 20% of all households. The program began in 1985 as a small effort to assure that all households had a phone for emergency police and medical calls. It now provides free smart-phones mobile service with 250 minutes and 10 MB of data free per month.
The FCC decides how much free service to give away and then raises the non-tax phone fee by whatever it takes to cover the cost. In the last ten years, the number of free phones have more than doubled and the cost more than quadrupled to over $2 billion. All of this largess provided without benefit of any Congressional approval of the tax or appropriation of the funds. Apparently Article I, sections 7 and 8 do not really mean what they say about who can raise revenue and spend money.
One of the cruel ironies is that as more people moved from paying their own phone bills to getting free service from the rest of us, the fee rose even more because the total cost had to be spread among fewer payers.
Look up the German “Sektsteuer” (Champagne tax) imposed in 1902 to fund the expansion of the German Navy. It is still in effect.
As an aside, the Germans might ask what they get for their money, given that all six submarines in the German Navy were recently unable to leave port due to mechanical issues.
Second sentence: “I spoke today about a relatively unknown international bureaucracy called the European Resource Bank…”
Surely you mean the European Bank for Reconstruction and Development.
Otherwise, spot on.
My favorite example of such taxation mission creep is the German ‘Sektsteuer’ (tax on sparkling wine). It was introduced in 1902 to finance the Kaiser’s fleet build-up.
116 years on and there still isn’t much of a fleet but the tax is there, nice and comfy and not going anywhere.