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, 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)


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

(Image source: Wikimedia Commons)



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.



Lysander Spooner had their number.

(Image source: Wikimedia Commons)


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.

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

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bagehot99's picture

It's not yours. It's 'ours'. Government is the name of the things we do together.


Do your part Citizen! 

DOT's picture

Sharing is so much fun!


btw your share of the $17 Trillion debt is about $189,500.

Ruffcut's picture

Please send me that payment booklet, at the time of death. I'll take care of it then. check's in the mail, seriously.

Liberty2012's picture

LOL - Literally and figuratively true ;)

joego1's picture

This is a hold up! Drop the squid and nobody gets hurt!

Budster's picture

Right. They can't confiscate unknown assets. That's why it's much better to get rid of the debt that that you can find that composes those assets. Start with student debt by making it allowable in bankruptcy. I don't know too many poor people that own that asset. If you like the boost to GDP that that causes, move on to credit card and mortgage and all other forms. Any slight reduction in people's assets would be more than made up by vast increases in personal income and the commendable adjustment in relative wealth.

Max Damage's picture

Thieving bastards. Should all be hung ala the French revolution

dontgoforit's picture

The day is dawning; watch for the signs so you don't miss the show.

Ruffcut's picture

What to watch more of this shit show?

Surging Chaos's picture

Yes, there will definitely be a massive grab for money in a last desperate attempt by insolvent governments.

Let's think about this for a second. Governments are by definition monopolies on violence that acquire money through extortion. How could they NOT be seduced into stealing anything and everything?

Quinvarius's picture

After the stealing, the printing will really begin.  They cannot possibly steal enough to cover their bills.

agent default's picture

One off my ass.  If they get their foot through the door, next year it will be a 30% wealth tax.  And the year after, whatever wealth tax.  Until there is nothing left.

lakecity55's picture

"Today, July 4, 2014, every American is using EBT. We are at last independent from cash! The dream of our Flounders, Marx and Lenin, has been realized! Tonight, Reggie and I will enjoy the fireworks at the Internationale Mall."

BigJim's picture

"Why would you need wealth when the government will provide for you?

Here's your cabbage soup, citizen... don't drink it all at once, though, that bowl is all you get today."

rehypothecator's picture

Coercion is at the heart of government.  It's time to think about alternatives.

Liberty2012's picture

@rehypothecator, there is no "alternative"

Government is what people agree on about how to live together. There's really no such thing as "no government". You can say you're not part of it. Then the guy down the street objects to something you're doing. He gets the neighbors involved. You now have a government.

The question is how we want to live together. I want to live with people who value individual people.

I chose freedom.

Quinvarius's picture

Possibly people will begin to wake up a little more to the fact that they should not keep money in a bank.

krispkritter's picture

If 1-in-10 people I know or are related to believe this, I'd be astounded.  They think I'm nuts because I've dropped so far out of the rat race and I don't play in all their reindeer games.  The Fed and it's Wall Street cronies are keeping the wheels turning but the hamsters are long since dead.  About the time most people get the scent of the rodents demise it'll be too late to get much if anything out.  The Corzine Tax will be a doozy, the ones that follow even worse....

Herd Redirection Committee's picture

Bow down to the ALMIGHTY DOLLAH!

Or not.

WillyGroper's picture

When it happens you'll probably be beaten to a pulp for too much truthiness in not having forced them to take precautions.

No good deed goes unpunished. 

NoDebt's picture

Article had me at hello.  Then it dragged on and on.  Like some hot chick who talks too much.

Griphook's picture

At first I was like "huh?"
Then I was like "What?"
Then I was all "I'm bored"



falak pema's picture

he did say "hot chick"; how does that fit with "I'm bored"?

Don't listen to her words listen to her body.

Housewife's picture

Is a wealth grab "on the way"? Lol. Good one.

XitSam's picture

Note how this is a tax on "positive net wealth".  Not just bank accounts or cash or stocks or bonds or IRAs.  Wealth.  So, own a home and a summer cabin but have no cash and no debt?  You'll need to sell the cabin or take out a loan to pay your wealth tax.

Winston Churchill's picture

Give that man a rubber chicken lunch.

That exactly what they will do.

Kills two birds with one stone: the banks create more money

in a closed loop, and anyone debt free becomes a debt serf again.

Already talking about a mansion tax in the UK.

Appears a mansion is anything with a roof.

Winston Churchill's picture

Seems we have junker that owns a lot of property,and does'nt like reality.

LawsofPhysics's picture

Laws/taxes that cannot be enforced are not very effective, but I suspect the majority might respond like this;


TPTB_r_TBTF's picture

How will the tax collector respond?


IRS Shotgun Qualification Course

The course tests the overall weapon handling ability of the special agent. 



I suspect the majority of sheeple will pay.  They'll bitch; they always do, but they'll pay.

LawsofPhysics's picture

Many well-trained vets in my tribe, good fucking luck.

TPTB_r_TBTF's picture

David Koresh had a tribe.


The ATF tribe is bigger and stronger than your tribe.

lakecity55's picture

"Dear Mr LC, you have a home. You did not build it. I am ordering the IRS to confiscate it as you are wealthy and other people have to rent. I must correct this inequality."



Winston Churchill's picture

You forgot the for  children part.

you may also need to work on faking the sincerity . Get that ,and you can go to congress.

Gmpx's picture

I consider buying Leica and all Leica lenses. They may confiscate gold, but they cannot confiscate my camera and lenses. Right?

Proofreder's picture

Grandfather reputedly aquired our leica II-f on the battlefield in '42.

Good as Gold.  Useful to this day.  None better. Fantastic lenses.


Kirk2NCC1701's picture

A good example of a specific item of Real Wealth that not only retains value, but is also useful. 

The same can be said for any Precious Collectible as a tax-free, untraceable "store of value".  E.g. Sport/Celebrity memorabilia, Precious Coins, Precious Art, Antique cars, etc, etc, etc.

DOT's picture

Look for the weakest supply chain and aquire goods as you can. For the things that may not be stored, learn how to make them. Never before, in my strangest moments, did I think I would spend so much time considering "value".


Liberty2012's picture

Yep, value is transitory. The usefulness of an item changes as circumstances change.

People are the real value. How we trade our time is what really maintains value.

"The price of anything is the amount of life you exchange for it."
- Henry David Thoreau

Kirk2NCC1701's picture

The writer's question is like this year's flock asking if a shearing and fleecing is happening.

Just what do you think happens to each generation of sheep?

p.s. Note that what shepherds say is not always what they do. Especially some of them.

Graze accordingly.

drooley's picture

One of my biggest fears is 401ks / IRAs being grabbed and turned into an annuity/ new social security

LawsofPhysics's picture

Real inflation is already doing that stealing.

MachoMan's picture

bingo...  and doing a damn fine job of it.

Winston Churchill's picture

Not really.

The FedRes wants a lot more inflation but just cannot seem to get it.

Don't worry they will keep trying till they do.

MachoMan's picture

Not at all...  it's the difference between shearing a sheep and skinning a sheep...  they want a "steady" level of inflation to ensure the control structure is never challenged. 

Look at it a different way, they can kill the currency at any time, if that was their objective.  The traditional currency cycles would be much shorter if this was really the goal...  the problem is that diminishing returns kicks in every now and again, and eventually they goose it too much.

Winston Churchill's picture

Either they need growth, and inflation or just inflation.

If its just inflation they need at least 10%.

What do you think they are trying to achieve creating a $1tn a year, apart

from propping up insolvent TBTF..

Liberty2012's picture

Great illustration machoman. Thank you!