IMF Discusses 'One-Off' Wealth Tax

Tyler Durden's picture

Submitted by Pater Tenebrarum of Acting-Man blog,

IMF Discusses 'One-Off' Wealth Tax

It is undoubtedly nice to have a job with the World Bank or the IMF. One of the most enticing aspects for those employed at these organizations (which n.b. are entirely funded by tax payers), is no doubt that apart from receiving generous salaries and perks, they themselves don't have to pay any taxes. What a great gig! Since these organizations are so to speak 'extra-territorial', they are held to be outside the grasp of specific tax authorities.

This doesn't keep them from thinking up various ways of how to resolve the by now well-known problem of the looming insolvency of various welfare/warfare states. In fact, they have quite a strong incentive to come up with such ideas, since their own livelihood depends on the revenue streams continuing without a hitch. One recent proposal in particular has made waves lately (it can be found in this paper – pdf), mainly because it sounds precisely like the kind of thing many people expect desperate governments to resort to when push comes to shove, not least because they have taken similar measures repeatedly throughout history. 

The recent depositor haircut in Cyprus has also contributed to such expectations becoming more widespread. We believe is that it is far better to let shareholders, bondholders and depositors (in that order) take their lumps in the event of bank insolvencies rather than forcing the bill on unsuspecting tax payers via bailouts. What was odious about the Cypriot haircut was mainly that the government steadfastly lied to its citizens about what was coming and that certain classes of depositors, such as e.g. the president's relatives, got all their money out just a week or two prior to the bank holiday, by what we are assured was sheer coincidence (this unexpected twist of fate which proved so fortuitous to the president's clan increased the costs for remaining depositors).

Still, the entire escapade was a salutary event in many respects. It proved that government bonds are not a reliable store of value (it was mainly their holdings of Greek government bonds that got the Cypriot banks into hot water) and it was a reminder that fractionally reserved banks are inherently insolvent. In short, it has helped a bit to concentrate the minds of many of those who still remain whole and has sensitized them to other attempts of grabbing private wealth that may be coming down the pike.

This is probably also the reason why a paragraph in an IMF document that may otherwise not have received much scrutiny as it would have been considered too outlandish an idea, has created quite a stir. That such proposals are made from the comfortable environment of a tax free zone is quite ironic. Here is the paragraph in question:

 

“The sharp deterioration of the public finances in  many countries has revived interest in a “capital levy”—  a one-off tax on private wealth—as an exceptional  measure to restore debt sustainability. The appeal is that such a tax, if it is implemented before avoidance is possible and there is a belief that it will never be  repeated, does not distort behavior (and may be seen by some as fair). There have been illustrious supporters, including Pigou, Ricardo, Schumpeter, and—until he  changed his mind—Keynes. The conditions for success  are strong, but also need to be weighed against the risks  of the alternatives, which include repudiating public  debt or inflating it away (these, in turn, are a particular form of wealth tax—on bondholders—that also falls on nonresidents).

 

There is a surprisingly large amount of experience to draw on, as such levies were widely adopted in Europe after World War I and in Germany and Japan after World War II. Reviewed in Eichengreen (1990), this experience suggests that more notable than any loss of credibility was a simple failure to achieve debt reduction, largely because the delay in introduction gave space for extensive avoidance and capital flight—in turn spurring inflation.

 

The tax rates needed to bring down public debt to  precrisis levels, moreover, are sizable: reducing debt ratios to end-2007 levels would require (for a sample of 15 euro area countries) a tax rate of about 10 percent on households with positive net wealth.”

 

(emphasis added)

It is actually not a surprise that there is a 'wealth of experience to draw on'. Throughout history, governments have thought up all sorts of methods to get their hands on their subjects' wealth. It would have only been a surprise if there had been no 'experiences to draw on'. In fact, as wasteful and inefficient as the State is otherwise, this is one of the tasks in which it proves extremely resourceful, inventive and efficient. The extraction of citizens' wealth is an activity at which it excels.

Apparently the IMF judges that stealing 10% of all private wealth in one fell swoop is perfectly fine as long as 'some see it as fair'. Some of course would. There is however a crucial difference between imposing such a levy at gunpoint and letting bondholders take losses. The latter have taken the risk of not getting repaid voluntarily. No-one forced them to buy government bonds.

As to the pseudo-consolation that such a confiscation should be presented as a 'one off' event so as 'not to distort behavior', let's be serious. The moment  governments gets more loot in, they will start spending it with both hands and in no time at all will find themselves back at square one.

 

States and Taxation

As Franz Oppenheimer has pointed out, States are essentially the result of conquests by gangs of marauders who realized that operating a protection racket was far more profitable than simply grabbing everything that wasn't nailed down and making off with. In modern democracies it has become easier for citizens to join the ruling class (i.e., the more civilized version of these marauders), which has greatly increased acceptance of the State. Also, a large number of people has been bought off with 'free' goodies and all and sundry have had it drilled into them throughout their lives that the State is both inevitable and irreplaceable.

There are of course other advantages to be had in democracies, such as the fact that a market economy is allowed to exist (even if it is severely hampered) and that free speech is tolerated. One considerable drawback though is that taxation has historically never been higher than in the democratic order (and still these States are all teetering on the edge of bankruptcy anyway).

As an aside, conscription and the closely associated concept of 'total war' are also democratic 'achievements'. Whereas war was once largely confined to strictly localized battles between professionals, the French revolution and its aftermath was a pivot point that marked a change in thinking about war and ultimately paved the way for legitimizing the all-encompassing atrocities of the 20th century, with civilians suddenly regarded as fair game.

A little historical excursion: Under medieval kings there was at least occasionally a chance that a tax might actually be repealed, even if only temporarily. For instance, in 1012 the heregeld was introduced in England, an annual tax first assessed by King Ethelred the Unready (better: 'the Ill-Advised'). Its purpose was to help pay for mercenaries to fight the invasion of England by King Sweyn Forkbeard of Denmark.

Ethelred had been forced to pay a tribute to the Danes for many years, known as 'Danegeld'. In 1002 AD he apparently got fed up and in a fit of pique ordered the murder of all Danes in England, an event known as the St. Brice's Day Massacre. Not surprisingly, this incensed the Danes and Sweyn Forkbeard's invasion was the result. Sweyn seized the English throne in 1013, but died in 1014, upon which Ethelred was invited back by the nobles (under the condition that he 'rule more justly'). However, he soon died as well, which left Edmund Ironside in charge for a few months in 1016. Sweyn's son Knut eventually conquered England later in the same year. Knut simply continued to collect the heregeld tax after ascending to the throne. The heregeld was a land tax based on the number of 'hides' one owned (the hide is a medieval area measure, the precise extent of which is disputed among historians; one hide was once thought to be equivalent to 120 acres, but this is no longer considered certain). The tax was finally abolished by King Edward the Confessor in 1051 (Edward was Ethelred's seventh son and was later canonized. He was the last king of the House of Wessex). The tax relief unfortunately proved short-lived. Shortly after Edward's death in 1066, the Normans conquered England and 'hideage' was reintroduced.

 

Ethelred_the_Unready

 

Ethelred the Unready, inventor of the heregeld tax, holding an oversized sword. Although he is generally referred to as 'the Unready', this translation of his nickname is actually incorrect: rather, it should be 'ill-advised' or 'ill-prepared'. In the original old English “Æþelræd Unræd”, the term 'unread' is actually a pun on his name.  'Ethelred' means 'noble counsel' (in modern German: 'Edler Rat') – his nickname thus juxtaposes 'noble counsel' with 'no counsel' or 'evil counsel'.

(Image source: Wikimedia Commons)

Sweyn_Forkbeard

Ethelred's nemesis, the Danish King Sweyn Forkbeard, likewise holding an oversized sword

(Image source: Wikimedia Commons)

 

Edward_the_Confessor

The man who abolished the heregeld tax, St. Edward the Confessor. It is noteworthy that he is usually not depicted holding an oversized sword (he was however reportedly not inexperienced in military matters. When Welsh raiders attacked English lands in 1049, they soon had reason for regret. The head of one of their leaders, Rhys ap Rhydderch, was delivered to Edward in 1052. The head was no longer attached to the rest of Rhys). Edward is probably not mainly remembered for this, but he gave England fifteen glorious years free of hideage tax.

(Image source: Wikimedia Commons)

 

As Murray Rothbard writes in 'The Ethics of Liberty' on the State's monopoly of force and its power to extract revenue by coercion:

 

 

“But, above all, the crucial monopoly is the State’s control of the use of violence: of the police and armed services, and of the courts—the locus of ultimate decision-making power in disputes over crimes and contracts. Control of the police and the army is particularly important in enforcing and assuring all of the State’s other powers, including the all-important power to extract its revenue by coercion.

 

For there is one crucially important power inherent in the nature of the State apparatus. All other persons and groups in society (except for acknowledged and sporadic criminals such as thieves and bank robbers) obtain their income voluntarily: either by selling goods and services to the consuming public, or by voluntary gift (e.g., membership in a club or association, bequest, or inheritance). Only the State obtains its revenue by coercion, by threatening dire penalties should the income not be forthcoming. That coercion is known as “taxation,” although in less regularized epochs it was often known as “tribute.” Taxation is theft, purely and simply even though it is theft on a grand and colossal scale which no acknowledged criminals could hope to match. It is a compulsory seizure of the property of the State’s inhabitants, or subjects.

 

It would be an instructive exercise for the skeptical reader to try to frame a definition of taxation which does not also include theft. Like the robber, the State demands money at the equivalent of gunpoint; if the taxpayer refuses to pay his assets are seized by force, and if he should resist such depredation, he will be arrested or shot if he should continue to resist. It is true that State apologists maintain that taxation is “really” voluntary; one simple but instructive refutation of this claim is to ponder what would happen if the government were to abolish taxation, and to confine itself to simple requests for voluntary contributions. Does anyone really believe that anything comparable to the current vast revenues of the State would continue to pour into its coffers? It is likely that even those theorists who claim that punishment never deters action would balk at such a claim. The great economist Joseph Schumpeter was correct when he acidly wrote that “the theory which construes taxes on the analogy of club dues or of the purchase of the services of, say, a doctor only proves how far removed this part of the social sciences is from scientific habits of mind.”

 

(emphasis in original)

In the pages following this excerpt, Rothbard expertly demolishes numerous spurious arguments that have been forwarded in support of taxes by people claiming that they are somehow akin to voluntary contributions.

 

The Vote Changes Nothing

In the course of this disquisition Rothbard also discusses whether the democratic vote actually makes a difference in this context, whether, as he puts it, the “act of voting makes the government and all its works and powers truly “voluntary.”  On this topic he quotes from the observations of anarchist political philosopher Lysander Spooner, who wrote the following in 'No Treason:The Constitution of No Authority':

 

“In truth, in the case of individuals their actual voting is not to be taken as proof of consent. . . . On the contrary, it is to be considered that, without his consent having even been asked a man finds himself environed by a government that he cannot resist; a government that forces him to pay money renders service, and foregoes the exercise of many of his natural rights, under peril of weighty punishments.

He sees, too, that other men practice this tyranny over him by the use of the ballot. He sees further, that, if he will but use the ballot himself, he has some chance of relieving himself from this tyranny of others, by subjecting them to his own. In short, he finds himself, without his consent, so situated that, if he uses the ballot, he may become a master, if he does not use it, he must become a slave.

 

(emphasis added)

Discussing taxation in the same text, Spooner famously compares government to highwaymen. He is however not merely equating one with the other, but rather concludes that highwaymen are to be preferred. After all, neither are their activities attended by hypocrisy, nor are their demands without limit (we would add to this that no-one ever published learned papers advising them how to best go about grabbing more loot).

 

“It is true that the theory of our Constitution is, that all taxes are paid voluntarily; that our government is a mutual insurance company, voluntarily entered into by the people with each other. . . .

 

But this theory of our government is wholly different from the practical fact. The fact is that the government, like a highwayman, says to a man: “Your money, or your life.” And many, if not most, taxes are paid under the compulsion of that threat.

 

The government does not, indeed, waylay a man in a lonely place, spring upon him from the roadside, and, holding a pistol to his head, proceed to rifle his pockets. But the robbery is none the less a robbery on that account; and it is far more dastardly and shameful.

The highwayman takes solely upon himself the responsibility, danger, and crime of his own act. He does not pretend that he has any rightful claim to your money, or that he intends to use it for your own benefit. He does not pretend to be anything but a robber. He has not acquired impudence enough to profess to be merely a “protector,” and that he takes men’s money against their will, merely to enable him to “protect” those infatuated travelers, who feel perfectly able to protect themselves, or do not appreciate his peculiar system of protection.

 

He is too sensible a man to make such professions as these. Furthermore, having taken your money, he leaves you, as you wish him to do. He does not persist in following you on the road, against your will; assuming to be your rightful “sovereign,” on account of the “protection” he affords you. He does not keep “protecting” you, by commanding you to bow down and serve him; by requiring you to do this, and forbidding you to do that; by robbing you of more money as often as he finds it for his interest or pleasure to do so; and by branding you as a rebel, a traitor, and an enemy to your country, and shooting you down without mercy if you dispute his authority, or resist his demands. He is too much of a gentleman to be guilty of such impostures, and insults, and villainies as these. In short, he does not, in addition to robbing you, attempt to make you either his dupe or his slave.”

 

(emphasis added)

Somehow we don't think that Mr. Spooner would have been a very big fan of the IMF and its ideas.

 

LysanderSpooner

Lysander Spooner had their number.

(Image source: Wikimedia Commons)

Conclusion:

The particular wealth tax proposal mentioned by the IMF en passant is odious in the extreme, especially as the wealth to be taxed has already been taxed at what are historically stratospheric rates.

It is noteworthy that the alternatives discussed by the IMF for heavily indebted states which are weighed down by the wasteful spending of yesterday appear to have been reduced to 'default' (either outright or via hyperinflation) or 'more confiscation'. How about rigorously cutting spending instead?

One must also keep in mind that any proposals concerning so-called 'tax fairness' are in the main about 'how can we get our hands on wealth that currently still eludes us'. People need to be aware that worsening the situation of one class of tax payers is never going to improve the situation of another. The IMF's publication is a case in point: in all its yammering about 'tax fairness', the possibility of lowering anyone's taxes is not mentioned once (not to mention that it seems quite hypocritical for people who are exempted from taxes to go on about imposing 'tax fairness' on others).

Lastly, a popular as well as populist target of the self-appointed arbiters of 'fairness' are loopholes, but as we have previously discussed, they are to paraphrase Mises 'what allows capitalism to breathe'. Closing them will in the end only lead to higher costs for consumers, less innovation, lower growth and considerable damage to retirement savings.

 

Loot_and_Extortion_-_geograph.org.uk_-_88390

Two apposite statues at Trago Mills, UK, dedicated to HM Inland Revenue – Loot & Extortion.

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
wcvarones's picture

Get your squid off the grid.

They can't confiscate what they can't find.

imapopulistnow's picture

So Soros & Buffet may have to give up a few of their billions.  I'm supposed to be upset?

Ying-Yang's picture

Where is Robin Hood when you need him?

I would wager more than a few Zhers would become his Merry Men!

Dr. Richard Head's picture

Mike Maloney is my Robin Hood.  The Robin Hood of knowledge. 

The wealth grab has been going on for a good century now.  However, as this article points out, the wealth grab will just be more in your face in its tactics.

Here is Mike Maloney putting the wealth grab in the most understandable terms, teamed with a great video production.  Steal this knowledge from him and spread it to your fellow country men.

http://www.maxkeiser.com/2013/10/the-biggest-scam-in-the-history-of-mankind/

DoChenRollingBearing's picture

One-Off Wealth Tax my ass.  Does anyone really think that they would not do it again and again?

Winston Churchill's picture

A bit like a singular gang rape.

It only happened once,what are you comlaining about.

zaphod's picture

And people mock bitcoin. How is the imf going to confiscate that?

lemonobrien's picture

by having the FBI bust in and steal their computers; confiscate their accounts.

Scarlett's picture

>> The particular wealth tax proposal mentioned by the IMF en passant is odious in the extreme  

 

Not at all.  To all those who don't/can't see it coming, well, let them let our gold/silver/land/bitcoin appreciate.  That's capitalism: fools parting from their money.  Fools chose to believe in govt's.  

 

So we get to watch: i) the fools lose it all; ii) gold/land/bitcoin to the stratosphere; iii) the same fools employing guillotines against the IMF robberbarons.  

 

Nice.

zaphod's picture

You obviously don't understand bitcoin. A locked and backed up wallet is inaccessible to the fbi even if they confiscate my computer. See the silk road raid. They only got the coins running on the live server.

MeelionDollerBogus's picture

Doesn't matter - you lose, not them, so it's inaccessible, period.

MeelionDollerBogus's picture

hold on just a second there, pal.
you mean... they LIE?

Ruffcut's picture

Robin Hood is a myth just like these cunts at the I Mother Fucker.  Fucking lunatics, thinking they can bullshit us any longer. They are lucky I never won the big lotto, because I would of had an historical hunting trip.

bob_stl's picture

Robin Hood is that ass hole in the White House who keeps taking my money and giving it to blood sucking lazy asses.

Harbanger's picture

So the IMF is now poised to be the Robin Hoods of the leftist class warfare meme.  A Wealth tax for rich, meaning for everyone not in the club.  And since there's no lie that the statist MSM can't convince the FSA of, we can see where this is heading.

kaiserhoff's picture

Who is the government idiot with the bowl on his head?

Oh.

F-Tipp's picture

Robin Hood robbed from the government, who was extorting and stealing money from the people.

CPL's picture

Yeah, and it didn't fix the problem.  Here we are a thousand+ years later and something new needs to be put in place.

Liberty2012's picture

Nothing in life is set it and forget it. Everything requires maintenance.

CPL's picture

lol...just wait.  It's going to get so weird we won't be needing a robin hood for this one. 

<jazz hands>

 

The Hunters Moon starts tonight all the way to Samhain with a Lunar eclipse for those that are interested.

Lost My Shorts's picture

Here here.  I am totally for a wealth tax, something like 30% of anything over $10 million.  Think about it:

-- The bills for stupid foreign wars in Iraq and Afghanistan will push $4 trillion by the time it's all done.  The people didn't want those wars.  They were forced down our throat with massive blitz of lies and propaganda by the rich.  Let them pay for it.

-- Fake "free" trade and financialization of our economy were engineered by the rich to transfer all the wealth of Main Street into their pockets.  Now let's claw it back.

Let them run to the ends of the earth trying to hide.  We got ace gamers in Nevada with predator drones ready to chase them down.  Blasting oligarchs is more fun that dimwit Taliban trogs anyhow.

Dr. Richard Head's picture

The slight of hand taking place to direct the conversation to equitable taxation is a red herring.  The conversation should, and will always need to be, regarding the monetary system of fiat dollars.  Until the masses understand the incedious nature of our currency, and the currency throughout the world, the talk of taxing this person or that person is merely a means to divide and conquer the many, while the few reap the wealth.  Think about it. 

Anusocracy's picture

It is a matter that those who are human ants want government and all the evil flows from that.

The human ants deserve to get screwed over every second of their useless idiot lives.

Herd Redirection Committee's picture

How about we find a way to end the looting, then afterwards worry about justice in re: the return of that which has been stolen.

dontgoforit's picture

Start with Jon Corizine - but I bet you can't find that billion any more than he can....heeheehee

Proofreder's picture

@head

incedious ???    Maybe incestuous, incredible, incendiary, insidious ???    Ahhhh, they all work.

spellchecker is that little blue ABC with a checkmark ;-)  You could try it sometime.

Liberty2012's picture

Are you really someone who has no standards? He even did it in a playful way.

Life is good- even the bad parts ;)

Liberty2012's picture

And how to do that, short of collapse? Do as you are - speak truth in all matters. Very well said.

Thank you!

MachoMan's picture

You're playing with fire.  The power to tax the wealthy is the same power to tax the poor.  If you can accept that a one-off wealth tax wouldn't even pay off the debt and, further, would do nothing but promote fiscal irresponsibility, then the idiocy of a wealth tax becomes apparent...  and I say this as someone who would be completely exempt from your proposal.  In short, be careful what you wish for, as the jackboots will be on your doorstep soon enough.

If you want to fix things, then you need to remove the mechanisms of control and change the incentives of the system, which ensure money flows to the top...  a one-off tax as proposed not only fails to fix the underlying problems, but also sets a dangerous precedent.  My suggestion is to get your jealousy in order and put on your thinking cap.

Herd Redirection Committee's picture

I don't have a problem with the taking/taxing of stolen wealth, but for that money to go into the pockets of gov't, or to pay off the existing debt, HA.  HA HAHAHAHHAHAHAHA.

That is just wealth transfer from one group of criminals to another.

dontgoforit's picture

You would think that with all the PRISM data collected by NSA they would know exactly where to go to pick up the truckload of drug money, Wall St ill-gotten booty, etc.  Right?  Well, think about it.

Liberty2012's picture

@Redirection... The next required step in your line of thinking would be: since everyone is participating in the current system, then everyone is a criminal. Therefore nothing matters and anything goes.

Most people are unwitting accomplices - even you were, and probably still are in some respect.

hound dog vigilante's picture

 

Yes. Build an objective, agnostic system that provides incentives.  Once you start picking winners, losers & targets, the next guy will bend those targets for personal/political ends.  Not good.

But here is my BIG question:  Why is the IMF even having this discussion?  How does this topic arrive on the IMF's agenda? 

The IMF doesn't have the power to tax, nor does it collect/enforce taxes.  How is this subject anywhere near their jurisdiction?  The IMF is WAY OUT OF BOUNDS in approaching the topic of taxation, thus the fact that they have had this discussion - and felt confident enough to issue a statement/paper about it - should tell you something about the IMF itself and how the global elite perceive the IMF and how they intend to use it. This is the truly disturbing aspect of this news/discussion, IMO.

 

Thisson's picture

It doesn't seem that you have comprehended the points expressed by this article.  Perhaps you should read it again.  Stealing more doesn't improve anyone's lot.  Better to downsize the government so that we're all better off.

Marco's picture

Fine, give me about 200K$ worth of arable land and I'm on board.

My current job is completely dependent on the consumer economy filled with service jobs which are only really sustainable through wealth redistribution and I don't have enough savings ... so if you don't have a better alternative I prefer can kicking.

DOT's picture

Down vote for, "give me".

Bob Sacamano's picture

So those not in favor of particular pieces of government should not have to pay for them?  Perfect - because I am not in favor of 70% of what the government does (which is being "forced down my throat").  So I don't want to pay for those.  What I pay in taxes more than covers the government I want.  No wealth tax needed for me, thanks.

Ident 7777 economy's picture

 

 

 

 

 

 Lost My Shorts (BRAINS is more like it) : " Here here.  I am totally for a wealth tax, something like 30% of anything over $10 million.  Think about it: ... "

 

 

Just WHO is it that gets to vote all those G-D shares they confiscate?

 

John McCain?

 

Barack Hussein Obama?

 

What!!? You thought it was ALL tucked away in a corporate mattress somewhere?

 

CLEARLY you have not thought this through ...
Winston Churchill's picture

Like the rich won't be excempt.

You have not been paying attention.

Laws only apply to us serfs.

rlouis's picture

Perhaps only the rich and connected - like the president of Cypress and his relatives and friends, or the big Wall Streeet bankers in advance of the stock market crash 1929 and again in 1932 with the gold confiscation.

CoastalCowboy's picture

Soros and Buffet will be exempt there chief as they are V.I.P's.  This is only for anyone who happens to have a 1/10 of a pot to pee in.

El Vaquero's picture

"So Soros & Buffet may have to give up a few of their billions.  I'm supposed to be upset?"

 

At Soros and Buffet getting bitchslapped, not so much.  At the government just usurping the power to do this?  You should be very upset if it comes to pass.  If they can take billions away from oligarchs, they can take away everything you have. 

 

Although, I will admit that it is entertaining in a perverse sort of way.  It would be like watching a snake eat itself.