Higher Taxes Result In A Higher Standard Of Living? How Stupid Do They Think We Are?

    Do not think about, write about or deal with  human behavior without determining the effects of incentives.

     "That men do not learn very much from the lessons of history is the most important of all the lessons of history." – Aldous Huxley

    Wherein we see that one of the unlearned lessons is that the bigger the state, the lower the standard of living of those who support the state. Those who benefit from the state, whether those who work directly for it, or those who are given special privileges from it, continue to do better.

Daniel J. Mitchell
In the OECD’s
Fantasy World, Higher Business Taxes and more Government Spending Are Good for Growth

Over the years, I’ve shared some ridiculous arguments from our leftist friends.

Paul Krugman, for instance, actually wrote that “scare stories” about government-run healthcare in the United Kingdom “are false.” Which means I get to recycle that absurd quote every time I share a new horror story about the failings of the British system.

Today we have some assertions from a statist that are even more absurd

“Taxes for thee, but not for me!”

Pascal Saint-Amans is a bureaucrat at the Paris-based Organization for Economic Cooperation and Development. He has spent his entire life sucking at the public teat. After spending many years with the French tax authority, he shifted to the OECD in 2007 and now is in charge of the bureaucracy’s Centre for Tax Policy Administration.

I don’t know why he made the shift, but perhaps he likes the fact that OECD bureaucrats get tax-free salaries, which nicely insulates him from having to deal with the negative consequences of the policies he advocates for folks in the private sector.

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   Nothing like a tax-free (high, I’m sure) salary to insulate one from one’s recommended policy. The activity of these people is so sacred it must be protected against the commonplace indignity of taxes.

Anyhow, Saint-Amans, acting on behalf of the uncompetitive nations that control the OECD, is trying to create one-size-fits-all rules for international taxation and he just wrote a column for the left-wing Huffington Post website. Let’s look at a few excerpts, starting with his stated goal.

    To regain the confidence and trust of our citizens, there is a pressing need for action. To this end, the OECD’s work…will pave the way for rehabilitating the global tax system.

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    In order to meet the obligation that  the trust people have in us engenders, we must take more money from them.

You probably won’t be too surprised to learn that the OECD’s definition of “rehabilitating” in order to regain “confidence and trust” does not include tax cuts or fundamental reform. Instead, Monsieur Saint-Amans is referring to the bureaucracy’s work on “tax base erosion and profit shifting (BEPS) and automatic exchange of information.”

I’ve already explained that “exchange of information” is wrong, both because it forces low-tax jurisdictions to weaken their privacy laws so that high-tax governments can more easily double tax income that is saved and invested, and also because such a system necessitates the collection of personal financial data that could wind up in the hands of hackers, identity thieves, and – perhaps most worrisome – under the control of governments that are corrupt and/or venal.

So let’s focus on the OECD’s “BEPS” plan, which is designed to deal with the supposed crisis of “massive revenue losses” caused by corporate tax planning.

I explained back in March why the BEPS proposal was deeply flawed and warned that it will lead to “formula apportionment” for multinational firms. That’s a bit of jargon, but all you need to understand is that the OECD wants to rig the rules of international taxation so that high-tax nations such as France can tax income earned by companies in countries with better business tax systems, such as Ireland.

In his column, Monsieur Saint-Amans tries to soothe the business community. He assures readers that he doesn’t want companies to pay more tax as a punishment. Instead, he wants us to believe his BEPS scheme is designed for the benefit of the business community.

    Naturally, the business community feels like it’s in the cross-hairs. …But the point of crafting new international tax rules is not to punish the business community. It is to even the playing field and ensure predictability and fairness.

And maybe he’s right…at least in the sense that high tax rates will be “even” and “predictable” at very high rates all around the world if government succeed in destroying tax competition.

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   In my little jurisdiction, Ontario, the provincial government, harmonized its sales tax with the federal government, producing a 13% tax on goods and services and resulted in greater government revenue. Six hundred thousand jobs over 10 years were promised. These jobs have materialized as non-jobs. I think I’ll go out and “create” two million non-jobs today. It’s so easy, you just say it and, in political terms, it’s done. Add the famous GREEN JOBS to this total and, together with real jobs, one has more jobs than people willing to work.  It’s magic.

You’re probably thinking that Saint-Amans has a lot of chutzpah for making such a claim, but that’s just one example of his surreal rhetoric.

He also wants readers to believe that higher business tax burdens will “foster economic growth.”

    The OECD’s role is to help countries foster economic growth by creating such a predictable environment in which businesses can operate.

I guess we’re supposed to believe that nations such as France grow the fastest and low-tax economies such as Hong Kong and Singapore are stagnant.

Yeah, right. No wonder he doesn’t even try to offer any evidence to support his absurd claims.

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    Facts? We’re government, we don’t need no stinkin’ facts. Like the church of yesteryear, we’re right, no matter how wrong we are.

But I’ve saved the most absurd claim for last. He actually writes that a failure to confiscate more money from the business community could lead to less government spending – and he wants us to believe that this could further undermine prosperity!

    Additionally, in some countries the resulting lack of tax revenue leads to reduced public investment that could promote growth.

Wow. I almost don’t know how to respond to this passage. Does he think government should be even bigger in France, where it already consumes 57 percent of the country’s economic output?

Presumably he’s making an argument that the burden of government spending should be higher in all nations.

If so, he’s ignoring research on the negative impact of excessive government spending from international bureaucracies such as the International Monetary Fund, World Bank, and European Central Bank. And since most of those organizations lean to the left, these results should be particularly persuasive.

He’s also apparently unaware of the work of scholars from all over the world, including the United States, Finland, Australia, Sweden, Italy, Portugal, and the United Kingdom.

<snip>

Not that I think it would matter. Saint-Amans is simply flunky for high-tax governments, and I imagine he’s willing to say and write ridiculous things to keep his sinecure.

Let’s close by reviewing some analysis of the OECD’s BEPS scheme. The Wall Street Journal is correctly skeptical of the OECD’s anti-tax competition campaign. Here’s what the WSJ wrote this past July.

    …the world’s richest countries have hit upon a new idea that looks a lot like the old: International coordination to raise taxes on business. The Organization for Economic Cooperation and Development on Friday presented its action plan to combat what it calls “base erosion and profit shifting,” or BEPS. This is bureaucratese for not paying as much tax as government wishes you did. The plan bemoans the danger of “double non-taxation,” whatever that is, and even raises the specter of “global tax chaos” if this bogeyman called BEPS isn’t tamed. Don’t be fooled, because this is an attempt to limit corporate global tax competition and take more cash out of the private economy.

P.S. High-tax nations have succeeded in eroding tax competition in the past five years. The politicians generally claimed that they simply wanted to better enforce existing law. Some of them even said they would like to lower tax rates if they collected more revenue. So what did they do once taxpayers had fewer escape options? As you can probably guess, they raised personal income tax rates and increased value-added tax burdens.

P.P.S. If you want more evidence of the OECD’s ideological mission.

It has allied itself with the nutjobs from the so-called Occupy movement to push for bigger government and higher taxes.

The OECD is pushing a “Multilateral Convention” that is designed to become something akin to a World Tax Organization, with the power to persecute nations with free-market tax policy.

It supports Obama’s class-warfare agenda, publishing documents endorsing “higher marginal tax rates” so that the so-called rich “contribute their fair share.”

The OECD advocates the value-added tax based on the absurd notion that increasing the burden of government is good for growth and employment.

It even concocts dishonest poverty numbers to advocate more redistribution in the United States.

P.P.P.S. I should take this opportunity to admit that Monsieur Saint-Amans probably could get a job in the private sector. His predecessor, for instance, got a lucrative job with a big accounting firm, presumably because “he had ‘value’ to the private sector only because of his insider connections with tax authorities in member nations.” See, it’s very lucrative to be a member of the parasite class.  

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Cheerio and ttfn,
Grant Coulson
Cui Bono–Cherchez les Contingencies

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