In yesterday’s (October 24) Global Times newspaper there were two stories that caught my eye. One was tiled “EU (European Economic Union) set to launch tax on financial transactions,” the other was “Progressive taxes key to re-balancing (Chinese) incomes.” It occurred to me that the typical government response to almost any problem is a new tax or fee.
The proposed tax EU proposal was aimed at leveling the playing field among the EU countries in terms of fees on financial transactions. Its objective is to raise the price of such transactions in the lower taxed countries up to the levels of those in the already high taxed countries. Not coincidentally, this new tax would raise billions of Euros for the irresponsible European government who have spent their countries into near insolvency.
The second story deals with increasing income disparity in China. While no details of the plan have been disclosed, it will be aimed at a new income tax on the rich. Now most taxes in China are collected through indirect taxes like the VAT and the BT (Business Tax) which fall most heavily on the lower income earners who spend most of their income to live. They have little left to save or invest, which are lightly taxed activities. As a percentage of their income, the lower income earners pay about twice as much of their income in taxes as the high earners.
Both the EU and the Chinese government see the solution to the so-called problem of economic inequality is by taxing the rich, more successful, or under taxed sections of society. This is the typical knee-jerk response by big government lovers. They don’t consider alternatives. But these solutions seldom do little other than deliver more money and more power to the government.
In the U.S. local property taxes are largely used to fund public schools. Public education in America is infamously famous for its poor quality. The standard solution to improving schools is to call for more money, thus higher property taxes. While exact studies are inexact and sometime contradictory, it is clear that taxes have been raised to 3-400% of what they were in the 1950s while test scores have remained more or less stagnant. Clearly blindly throwing money at the schools has not solved the problem, yet the calls for more money and more taxes go on.
In my small home town in the Appalachian Mountains, each student is funded to the tune of $13,000. USD per year. If there are 30 students in a class, this adds up to a staggering $390,000. in funding per class, per year. A senior level teacher may earn $85,000. per year including benefits. No one seems to question what happens to the rest of the $300,000. Instead the government promises better performance if only more money, via higher taxes, is handed to the Board of Education.
The Obama administration attempted to blame the recent Libya debacle on funding cuts for security. In other words, more tax money would have prevented the deaths of four Americans. This was a silly and completely bogus excuse when it was shown the embassies in Barbados and Lichtenstein had armed marine guards that could have been transferred to Libya if more security was needed. Still, the attempt to blame underfunding was one of the first things that came to the minds of government bureaucrats.
There are hundreds, if not thousands, of similar examples that can be sited. If the government wants fewer people to smoke, it taxes cigarettes. If the government decides we drive too much, a higher tax on gasoline is imposed. If people are deemed too fat, tax fattening foods. If the government decides it’s unfair for rich people to own boats, tax yachts. Energy conservation can be attained by higher taxes on electricity. If there is something going on in the internet the government doesn’t like, taxes are proposed on that activity. The list goes on, and on, and on.
Governments seldom examine alternative solutions to problems or behaviors they deem bad or harmful to society. For example, the EU might lower taxes on financial transactions to make things even. China might look at ways to make it easier for the lower classes to rise to higher levels of prosperity by their own efforts. The schools might investigate ways to better spend their existing monies instead of demanding ever more. If smoking cigarettes is bad, they could be phased out of existence.
Governments have a willing ally in the generally left leaning media. Instead of investigating alternatives to new or higher taxes, the media embraces them. The media is the government’s most enthusiastic cheerleader. The average citizen seldom has the time or wherewithal to question what passes as news, so the calls for taxes to solve problems are seldom challenged.
A more important point is the fact that governments and government loving statists always chose solutions that tend to bring the top of society down rather than helping bring the bottom up. At some point this will have to end.