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Australia Wants To Tax Bank Deposits: Will The US Follow?

Tyler Durden's picture




 

Submitted by Simon Black via Sovereign Man blog,

Several months ago, the government of Australia proposed to tax bank deposits up to $250,000 at a rate of 0.05% (5 basis points).

Their idea was for the money to be invested in a rainy day Financial Stabilization Fund to insure against in the unlikely event of a banking crisis… or all-out collapse.

And as of this morning, it looks like the levy might just pass and become law in Australia. All parties support the idea. Which means that Australia might just have a tax on bank deposits starting January 1, 2016.

To be clear, the proposal seems to plan on taxing the banks based on the amount of deposits they’re holding—but it’s pretty obvious this will be passed on to consumers in the form of lower interest rates.

Let’s look at what this means:

1. Taxes on bank deposits are generally the same as negative interest rates.

Australia is a rare exception.

Interest rates on bank deposits in most developed nations are practically zero… if not already negative.

So charging a tax above and beyond this would clearly push rates (further) into negative territory.

I have, for example, a small bank account in the United States that pays me about .03% interest (three basis points). If the government imposes a tax of 5bp on interest of 3bp, I’m left with negative interest.

Australia (along with New Zealand) is a rare exception since interest rates are actually positive. You can get 2-3% on a savings account. So a 5bp tax still results in positive interest.

2. Taxes always start small… then increase over time.

Of course, the proposal on the table right now is a 5bp tax. There’s nothing that says this can’t increase to 50bp over time.

When the United States government first imposed the modern federal income tax a century ago, the top tax rate was just 7%. These days that would qualify the US as a tax haven.

Over time, tax rates rose to as high as 92%. Tax rates can (and do) rise. And once they’re passed, they’re almost never abolished.

3. Taxes are rarely used for their stated purpose

Politicians create and raise taxes all the time for special purposes. And again, over time, they are often diverted away from those purposes.

In 1936 after a devastating flood in Johnstown, Pennsylvania, the state government passed a ‘temporary’ 10% tax on all alcohol sold in the state in order to help pay for disaster relief.

Six years later the work was complete. But the tax is still on the books (now at 18%), with all the revenue going to whatever the state lawmakers want to blow it on.

FICA is another great example. Though payroll taxes in the US were initially established to fund Social Security and Medicare, the federal government steals this revenue every year to haplessly try and plug budget deficits.

So a tax to build a financial stabilization fund might sound comforting in theory… but will all the revenue actually be allocated for that purpose? Doubtful.

4. If this can happen in Australia, is anyone foolish enough to think it can’t happen in the US or Europe?

Australia has a sound and sturdy banking system.

Banks in Australia are actually, you know, solvent. Capital ratios and liquidity rates are solid. Australia’s is a well-capitalized banking system—far more than in the US and Europe.

The numbers tell a very clear story. Banking systems across Europe in particular have had to be routinely bailed out over the past few years—Slovenia, Spain, Greece, Cyprus, etc.

In the United States it is perhaps even more absurd. Based on their own numbers, US banks are highly illiquid, still gambling away customer funds in trendy investment fads that will likely suffer an epic meltdown.

Backing up this little scam is the FDIC, which itself is pitifully undercapitalized to support any significant problem in the banking system.

Backing up the FDIC is the US federal government, which is already drowning in more than $60 trillion in liabilities (based on the most recent GAO report).

And supplying crack to the crack head is the US Federal Reserve, America’s central bank.

With net capital just 1.26% of total assets, the Fed is so pitifully capitalized they make Lehman Brothers look like Berkshire Hathaway.

So if the government of Australia is concerned that their well-capitalized banking system needs a safety net and wants to tax deposits for such purpose, how in the world can we possibly expect the US and Europe, with all of their banking system risk, won’t do the same?

 

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Thu, 04/02/2015 - 16:35 | 5953426 LawsofPhysics
LawsofPhysics's picture

Well, between "bail-in" and this, that should be the end of banks (and saving)...

 

the guillotine grows hungrier by the second...

Thu, 04/02/2015 - 16:40 | 5953449 max2205
max2205's picture

Wrong they only taxed Income never deposits.?.ever

 

These people are asking for a shitstorm 

Thu, 04/02/2015 - 16:46 | 5953474 LawsofPhysics
LawsofPhysics's picture

Bank fees are taxes.  But yes, people will have no choice now but to get creative with their savings/wealth...

Talk about shooting yourself in the head...

But hey, if the bankers/financiers/politicians want to commit suicide, I say let them.

Thu, 04/02/2015 - 16:48 | 5953483 ImpotentRage
ImpotentRage's picture

I don't keep any more money in the bank than I need to pay off my next round of bills. The rest is "saved" in physical assets (gold/silver, property, and yes even CASH is better than leaving it in the bank, at least your mattress won't charge you to store money in it!).

Thu, 04/02/2015 - 17:32 | 5953619 Arnold
Arnold's picture

Uh...because we've already been taxed on it as income at a confiscatory 50% combined rate?

Thu, 04/02/2015 - 16:37 | 5953437 bigrooster
bigrooster's picture

What bank deposits?  The US has a negative savings rate.  The FEDs will tax credit card balances next!

Thu, 04/02/2015 - 16:39 | 5953448 Ignatius
Ignatius's picture

Better yet, tax 'available credit'.  That'll rattle the masses.

Thu, 04/02/2015 - 16:54 | 5953511 czarangelus
czarangelus's picture

Stop giving them ideas!!

Thu, 04/02/2015 - 18:06 | 5953738 El Vaquero
El Vaquero's picture

Give them every good sounding (to them) but bad idea in the book so that they implode even faster.

Thu, 04/02/2015 - 16:58 | 5953517 AmericasCicero
AmericasCicero's picture

I actually had a shiver run down my spine at that thought

Thu, 04/02/2015 - 20:22 | 5954065 Northern Lights
Northern Lights's picture

I recall listenining to one of these call in radio stations concerning personal finance and debt.  One douchebag called in and bragged about how he had a total of $80,000 in available credit on 5 credit cards (this was back in 2004).  He actually counted it towards his net worth.  I wonder how many other dilusional idiots are out there who think like this.

 

 

Thu, 04/02/2015 - 16:41 | 5953454 khakuda
khakuda's picture

This is genius.  Taken to its natural conclusion, funds will exit the banking system and cause an epic financial disaster as fractional reserve unwinds.  Cash goes to mattresses or gets exchanged for precious metals.

Negative interest, then tax on deposit, then not allowing you to have your money back at all is the script.  Basically, a continuation of theft from the people who did nothing wrong to redistribute to those who overindulge and speculate.  Central planning genius.

The joke will be on everyone, though, as this is just another step towards the end of a leveraged, fractional reserve system that never made a ton of sense anyway.

Thu, 04/02/2015 - 16:59 | 5953526 Bioscale
Bioscale's picture

It's not about central planning anything, it's just plain theft. The banksters just play games and call it planning. It's rather a special form of slavery.

Thu, 04/02/2015 - 17:19 | 5953456 Thirst Mutilator
Thirst Mutilator's picture

...and the band played WALTZING MATILDA

<--- token jew reader[s], junk at will, even though this comment has nothing to do with you... You'll earn yourself another precious sheckel for your hard work in making the world a more TRUTHFUL & PEACEFUL place.

Thu, 04/02/2015 - 20:20 | 5954060 Pickleton
Pickleton's picture

token jew reader[s], junk at will, even though this comment has nothing to do with you...

 

Not a self fulfilling junking at all.  You window licking anti-Semites can't control yourself.  It's like you need to encourage DA JOOOOOS to down vote you to prove to yourself DA JOOOOOS hate you so it's all good that you hate them back.

Thu, 04/02/2015 - 23:58 | 5954582 COSMOS
COSMOS's picture

Go pickle your foreskin you good for nothing anti-gentile.

Thu, 04/02/2015 - 16:42 | 5953461 kaiserhoff
kaiserhoff's picture

 Camel's nose in the tent.  Just more opportunities for Central Planning by the tyrant class.  It's worked so well, we need MOAR!

Thu, 04/02/2015 - 16:44 | 5953469 HonkyShogun
HonkyShogun's picture

Indeed that camel's nose has an odd angle to it.

Thu, 04/02/2015 - 17:36 | 5953636 Arnold
Arnold's picture

Hey, you're not making new arab friends with that kind of reference!

Thu, 04/02/2015 - 16:50 | 5953462 Yen Cross
Yen Cross's picture

  Next? This story has more mold on it, than Hillary's jock strap.

  Here's a real story. On march 13th the USDX was trading roughly the 101.00 handle with aud/usd trading slightly above todays levels.

 That tells me the aud/usd is approx. 3.00% oversold , based on the USDX currently trading just below the 78.00 handle.

 Additionally the euro is trading 2-3% rich vs the aud.

Thu, 04/02/2015 - 16:44 | 5953464 Kirk2NCC1701
Kirk2NCC1701's picture

A: Not until they ban cash first, and shepherd the Sheeple into electronic transactions first. 

IOW... they plan  to cut off all avenues of escape first.  Then it's shearing and culling time.

Thu, 04/02/2015 - 17:10 | 5953553 Uber Vandal
Uber Vandal's picture

How would "undocumented workers" get paid?

That is the only question I have not quite worked out in such a system, for some countries are more dependent on them than others.

Thu, 04/02/2015 - 20:25 | 5954072 Pickleton
Pickleton's picture

Excellent point.  The progressives aren't going to kill the next great constituency they're going to use to secure total power.

Thu, 04/02/2015 - 16:44 | 5953468 kchrisc
kchrisc's picture

"Australia Wants To Tax Bank Deposits: Will The US Follow?"

Only if bears use outhouses.

The banksters need to repay us.

Thu, 04/02/2015 - 16:49 | 5953482 Chuck DeBongo
Chuck DeBongo's picture

Maybe it can happen in the US and Europe. Maybe it can't.

 

I say, why take a chance? Try to extricate yourself from this corrupt system while you can. Everything you own is only because TPTB can't steal it without losing votes or haven't thought of stealing it yet. It's very easy to steal your cash if it's in a bank. It's difficult if it's in your hands. And it's much more difficult if it is in the form of gold and silver.

 

If we all truly believe that cash will become worthless, we better spend it (within reason!) while it still has some value. If they want to tax pieces of paper, let them. But I, on the other hand, am not going to be there. I'm not going to support this corrupt regime. I am going to exchange MY pieces of paper for gold, silver, food, energy and investments in real assets (i.e real estate, etc).

 

The window to stack and prep is only going to get smaller and smaller.....

Thu, 04/02/2015 - 17:18 | 5953560 MR166
MR166's picture

I too have some real estate but that is even easier to tax than bank deposits, since the system is already set up and case law is not in your favor.  It is not like you get to vote directly on the mil rate.

Thu, 04/02/2015 - 17:24 | 5953597 Chuck DeBongo
Chuck DeBongo's picture

Sorry. I forgot.

 

In the UK there aren't really property taxes. But in the US? Yeah, not such a good idea. But gold, silver and food? Still a good idea, I think....

Thu, 04/02/2015 - 16:49 | 5953491 falak pema
falak pema's picture

All the governments have to try scraping in the money from the Oligarchs to save their own skins.

The "thieves falling out" games are going global; just like they went global to rob the world. 

Thu, 04/02/2015 - 16:50 | 5953494 RSDallas
RSDallas's picture

Man your pitch forks!

Thu, 04/02/2015 - 16:50 | 5953495 Bumbu Sauce
Bumbu Sauce's picture

THe time to start shooting will have finally arrived.

Thu, 04/02/2015 - 17:02 | 5953530 Budnacho
Budnacho's picture

Unless they have guns that shoot High-Veloctiy-Armor-Piercing Wombats at 1,300 FPS I'm afraid the Aussie Revolution will be short-lived.....they haz no guns. 

Thu, 04/02/2015 - 17:30 | 5953612 BlussMann
BlussMann's picture

True, Australia, politically and socially, is a Marxist state. Just ask Brenden O'Connell.

Thu, 04/02/2015 - 16:53 | 5953504 nailgunnin4you
nailgunnin4you's picture

This will have aussies everywhere seething. j/k is the voice on tonight?

Thu, 04/02/2015 - 16:55 | 5953514 divedivedive
divedivedive's picture

I just quickly googled what the current bank interest rates were in Australia - close to 4% - so .05% seems pretty insignificant.

Thu, 04/02/2015 - 18:08 | 5953745 UselessEater
UselessEater's picture

few get this rate. check terms and conditions we all get hit with a lot of fees for having a small daily use account. the govt is yet again taxing our savings in another way after we have already paid income tax.

at present they trying to teach everyone their personal retirement savings are a national fund, now its another assault on savings

dive somewhere else a quick google search won't cut it, be weary of the safe aussie bank story sold by dumbshit alt media

Thu, 04/02/2015 - 18:30 | 5953803 divedivedive
divedivedive's picture

Here in Mexico we get about 3.4% when we buy government 'CDs' directly (6 month) - requires as little as $10 USD - same rate. Then they turn around and withold .6% for income tax. Inflation is like 4% but I don't know if the definition is the same as the US.  If we were to buy these CDs through a bank they would get their (fair ?) cut as well. Still better than what our retirement accounts are bringing in in the US.

Fri, 04/03/2015 - 04:13 | 5954928 TeraByte
TeraByte's picture

4% applies to certain types of savings accounts only, the rest are on ZIRP or NIRP, when fees included.

Thu, 04/02/2015 - 17:03 | 5953533 JLee2027
JLee2027's picture

Simon Black sure talks a lot about a country he's not a citizen of.

Thu, 04/02/2015 - 17:21 | 5953586 nailgunnin4you
nailgunnin4you's picture

And miners sure are overly concerned about that bird that isn't even a member of their species. 

Thu, 04/02/2015 - 17:37 | 5953640 Never One Roach
Never One Roach's picture

Time to learn how the Pakis do it here and go Black Market -- all cash.

Thu, 04/02/2015 - 17:48 | 5953679 Pumpkin
Pumpkin's picture

LoL!  How damn dumb can you be?  I'm gonna need a bigger safe.

Thu, 04/02/2015 - 18:41 | 5953833 TuPhat
TuPhat's picture

This sounds a lot like the FDIC, which the US already has.  What's the problem?

Thu, 04/02/2015 - 19:09 | 5953890 Bazza McKenzie
Bazza McKenzie's picture

Actually this proposal was made by the previous left wing government which is no longer in power.  The extreme left wing Australian Broadcasting Corporation (taxpayer funded), which every day runs fabrications attacking the current non-leftist government, ran this story claiming the current government is considering levying this tax in the upcoming budget.  If the government, which is currently behind in the polls, does so, it will guarantee its defeat at the next election, and I am sure the government well understand that.

In other words, ain't gonna happen -- at least until the leftists get back in power.

Thu, 04/02/2015 - 20:16 | 5954046 Northern Lights
Northern Lights's picture

I believe in order for the States or Canada to tax deposits, we'd have to see NIRP first.

Those that are doing this are already in the midst of NIRP.

Canada dropped the lending rate to 0.75% back in Jan 2015.  Some are expecting it to go down another 0.25% this spring.  If I see it eventually drop to 0.25%, I'll be emptying out my bank account pronto.

Fri, 04/03/2015 - 14:13 | 5956482 northern vigor
northern vigor's picture

Every time I cash a cheque now, I take out cash and only leave enough to cover the months bills. I'm not waiting for NIRP.

The government used to tax us quite well on the interest we made on bank accounts, GICs, and bonds until the last decade...I suppose taxing bank accounts or NIRP is to make up for revenue losses by the tax man.

Fri, 04/03/2015 - 03:01 | 5954882 peterk
peterk's picture

notice that this levy only applies to  deposits BELOW $250,000

the right wing plutocrats are in full control in australia.

 

AUstralia is a  very PLUTOCRATIC nation,   eagerly swalowing what rupert murdoch prints, both poitical parties are in the same pot.

put a tax on (communism) , but atleast be  EQUAL about it.. let it apply to all

Fri, 04/03/2015 - 04:10 | 5954926 TeraByte
TeraByte's picture

"Banks in Australia are actually, you know, solvent" unless the housing bubble bursts, because 60+ % of the big fours´ assets are in mortgages. In that case at least one of them goes belly up. Lehman´s too used to be solvent until the cards were called.

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