The top rate was only 7 percent when Woodrow Wilson approved the income tax, and the tax only applied to the very richest Americans. But as is so often the case, taxes on the wealthy are a precursor to taxes on the rest of us.
But it doesn’t have to be this way. I’ve been at a conference in Monaco for the past few days and I’ve seen firsthand how a nation with zero income tax can be a prosperous Mecca (and I’ve also noticed that the Princess of the Levant is far more likely to accompany me on a trip when she has an opportunity to show off a new dress).
No income tax, by the way, means no income tax. Nothing. No capital gains tax, either. The main source of revenue is a value-added tax, generally about 20 percent, along with a tax on business income, but only if a substantial share is earned outside Monaco.
So is this benign tax regime actually conducive to prosperity?
Yes. Here is the data from the United Nations on per-capita economic output. You’ll see several of my favorite places, including the Cayman Islands, Liechtenstein, Singapore, Switzerland, and Bermuda. But leading the list is Monaco.
By the way, Monaco’s good policy doesn’t just generate domestic prosperity.
It also means some spin-off employment for France.
Every day some 41,000 people come from outside to go to work and all these non-Monegasque nationals, most of whom are French, depend on our economic success. …commerce and the manufacturing also employ significant numbers; over 3,000 workers are, for instance, taken up by the latter.
While Monaco’s per-capita GDP numbers are very impressive, the numbers on per-capita wealth are even more astounding. The average person has more than $1.5 million of assets.
By the way, the unluckiest people in the world are the residents of Roquebrune and Menton in France. That’s because those towns were part of Monaco until the mid-1800s. Now they’re part of a tax hell rather than a tax haven.
So what’s the bottom line? What can we say about Monaco?
Students for Liberty has a good summary.
P.S. In addition to zero income tax, Monaco also apparently has widespread gun ownership. What a great place.
P.P.S. Monaco is in 5th-place for per-capita readership of International Liberty, so the people are both prosperous and discerning!