In 1986, U.S. President Ronald Reagan famously summarized the big-government view of the economy: “If it moves, tax it. If it keeps moving, regulate it. If it stops moving, subsidize it!”
Apparently, there are too many moving parts in the European economy for some socialists to be satisfied. As our own Michael Curzon just reported, a movement is underway in the European Parliament in favor of a global wealth tax. On March 14th, Indian news site News18 reported that over 130 members of the parliament (MEPs) have called for
a tax on wealthy individuals, similar to one on multinational companies, to fund the transition to a carbon-free world. A previous landmark deal for a global minimum 15 percent tax on multinational businesses is set to start into force this year.
French socialist MEP Aurore Lalucq explained that what had been done to businesses “we must now do for the wealthy”—as if putting a tax on them does anything “for” them.
Lalucq presented her idea together with Gabriel Zucman, a public policy professor at infamously radical University of California, Berkeley. Their numbers are simple: they want a global minimum tax of 1.5% on wealth above €50 million ($54 million).
In his reporting on this idea, Curzon cites a tweet by MEP Lalucq where she dismisses any objections that this tax is impossible. After all, she explains in French, people said the same thing about the 15% minimum corporate income tax that was passed by a total of 136 countries in 2021.
It might be worth reminding MEP Lalucq and her economist friend that just because government can do something, does not mean that government should do it. Other than that, there are so many reasons to oppose this tax that they cannot be fully accounted for here. Let us at least get started with four main points ranging from technical and economic to ideological.
To start off lightly on the technical end, it is worth noting that, according to News18, the proponents of this wealth tax want to use the money to finance a “green and social transition.” As with all grandiose ideas that come out of socialism, this one is long on fluff and short on substance.
OK, that is an exaggeration. We actually have a good idea of what the ‘green’ transition means:
- We replace efficient and reliable coal and nuclear power plants with inefficient and unreliable wind and solar power;
- We give taxpayers’ money to car buyers to ignore efficient, reliable, and clean internal-combustion powered vehicles, and instead buy inefficient, unreliable, as well as morally and environmentally disastrous electric vehicles; and
- We build ourselves Green Gulags, a.k.a., city labor camps disguised as 15-minute municipalities.
It is less known what Lalucq’s “social transition” is all about, but until she reveals more details, we can safely assume that she is referring to the environmental and social governance corporate outcrop of the Green Gulag idea. It is a safe way to destroy businesses and bring to a grinding halt the parts that are still moving in our economy.
This is what the wealth tax proponents want to use their newfound tax revenue for, but it will never end up there. The reason is simple: almost every government in the European Union is dealing with a structural deficit in their finances. The United States government runs a huge structural budget deficit. Any new tax revenue that would come in would first and foremost go toward paying for spending that already exists. Virtually no money would end up where Lalucq and Zucman want to spend it.
If they would scrape together some credible numbers on their proposal, they would soon find that taxing ‘the wealthy’ is not nearly as lucrative for government as the Left notoriously believes. Without delving into the technicalities of taxation, the world is full of examples of how wealthy individuals can restructure their equity in ways that always minimize the burden of any tax.
The tax has not been invented yet that can prevent intelligent people from avoiding it (not evading, which is illegal). The only instrument government would have against avoidance is to outright confiscate private wealth.
That, of course, is unabridged communism. I will assume that Lalucq and Zucman are not proposing unabridged communism. Instead, I will conclude that they have never studied the effects of taxes on economic behavior. Therefore, it is reasonable to also conclude that when push comes to shove, they have no idea how they are going to finance their “green and social transition.”
The second main point against this tax is the myth of how the tax is paid, and by whom. The fact that it is called a ‘wealth tax’ makes it look good on paper, but a tax like that never works as intended.
Why? Because nobody pays a tax out of the value of their assets.
It is easy to see this by looking at property taxes. Suppose I own a house worth €200,000. One day, the taxman comes to collect the 2% annual property tax. Do I sell my house and give him the €4,000 I owe him? Of course not. Do I take out a bank loan and pay him? That would be the same as selling the house, only a small slice at a time.
Instead of doing something silly, I do what every rational property owner does: I pay the property tax out of my current income. It does not matter if I make a lot of money or very little—I still owe the government €4,000 per year.
Let us use this point with direct reference to MEP Lalucq’s wealth tax. Suppose a friend and I want to invent a new medical instrument that will help doctors to quickly and safely cure all kinds of cancer. We work our regular jobs while using all our spare time and spend all our savings on our invention.
One day, we get it right. We file for a patent and set up our business. Our product is in very high demand, and our business grows rapidly. Within a couple of years, it is valued at €150 million, or €75 million for each one of us founders. That €75 million is our wealth.
Since the business is in its start-up phase, our production costs still increase faster than revenue. To keep as much money in the company as we can, my friend and I take no dividends and only a salary of €50,000 per year. A lot of new business owners do it this way, but many of them also try to get by without taking any compensation at all from the company in the first few years.
Suddenly, MEP Aurore Lalucq and her economics buddy Gabriel Zucman show up at our business with their wealth tax in hand. They demand that my friend and I pay a 1.5% tax on the stock value that exceeds €50 million per shareholder. That means €375,000 for each one of us.
How are we going to pay for this tax? There is only one way to do it: we have to increase our salaries from €50,000 to €425,000. But wait—that won’t do it either. Once each one of us makes that much, we have to pay a much higher income tax than before. To avoid ending up with a lower annual salary, we thus have to include the higher income tax in our compensation—so that we can pay both our regular income taxes and the new wealth tax.
There is this myth going around among people on the Left that wealthy people are standing up to their chins in piles of money. That picture is, of course, blatantly false. Your wealth has to grow up toward €1 billion before you can pay for anything without it really bothering you. Thus, the only thing this tax will do is make life harder for owners of smaller businesses, and therefore stifle their growth, bring jobs creation to a halt, and deprive more hard-working families of ways to put food on the table.
The third point against this tax is ideological. The very idea that the ‘wealthy,’ whoever they are, owe the rest of us money is plain wrong. Nobody else is responsible for how I provide for myself and my family: that responsibility is mine alone. By the same token, this tax implies that there is something intrinsically immoral with wealth, and that therefore we need to tax it. This implication is false, of course, and it rests on the implicit premise that I, not being wealthy, somehow am entitled to part of the wealth that my very rich friend has.
No such entitlement exists. It is the figment of socialist imagination, rooted in the utterly discredited Marxist idea that capitalists—owners of productive capital—do not add value to the production that their businesses are engaged in.
It is not very hard to refute this pile of Marxist debris, but since there is a fourth point to be made against the wealth tax, I will leave that refutation to another place and time.
Last but not least: once a tax exists, it can only grow. The government’s hunger for more tax revenue is only surpassed by the lust of socialists for more of other people’s money. As a curious little example, consider the new tax that Norway just introduced on electric cars. Starting in January this year, Norwegians who buy electric cars have to pay a value-added tax on the share of the price that exceeds NOK500,000 (€44,211). This means, e.g., a price increase by 13.3% on an Audi e-tron GT, 12.4% on a Tesla Model S, and 8.3% on a Kia EV6 GT.
Not long ago, governments poured subsidies over electric vehicles. The new trend is to reduce those, and as Norway shows, start taxing them just like any other vehicle.
Why? Simple: government still needs its revenue. In Norway, traditional gasoline and diesel cars only account for 20% of new car sales, which means that the revenue from taxes on traditional vehicles has plummeted accordingly.
The same logic applies to the wealth tax that MEP Lalucq so eagerly wants. Once the tax is in place and people start changing their economic behavior in response to it, government will not be satisfied with less revenue than it expected. Legislators hungry for money to spend will lower the threshold for the tax: €40 million, €25 million, and so on. They will also raise the tax rate: as we saw above, the 1.5% that sounds so innocuous, is nothing of the sort. Consider what happens if the rate goes up to 2.5%, 4%, etc.
In the spirit of President Reagan’s point, so long as there is something moving in the economy, there will be lawmakers who will want to subject it to existing taxes. If they can’t do that, they simply invent a new tax.
Like MEP Lalucq’s wealth tax. The more government increases the tax pressure on the productive sector of the economy, the more slowly that sector moves.
Europeans are already struggling to feed their governments. A new wealth tax will do absolutely nothing to ease their struggle. All it will do is force business owners to charge their businesses more money to please the taxman. In doing so, they will force their businesses to produce less goods and services and charge higher prices in the bargain. Workers will earn less as their businesses have to divert more money to the taxman.
In the end, we all pay—and we get nothing out of it, except Green Gulags, EVs that can’t take you very far in the winter, and solar panels that won’t keep the light on in my office after sunset.
Stop the Global Wealth Tax!
In 1986, U.S. President Ronald Reagan famously summarized the big-government view of the economy: “If it moves, tax it. If it keeps moving, regulate it. If it stops moving, subsidize it!”
Apparently, there are too many moving parts in the European economy for some socialists to be satisfied. As our own Michael Curzon just reported, a movement is underway in the European Parliament in favor of a global wealth tax. On March 14th, Indian news site News18 reported that over 130 members of the parliament (MEPs) have called for
French socialist MEP Aurore Lalucq explained that what had been done to businesses “we must now do for the wealthy”—as if putting a tax on them does anything “for” them.
Lalucq presented her idea together with Gabriel Zucman, a public policy professor at infamously radical University of California, Berkeley. Their numbers are simple: they want a global minimum tax of 1.5% on wealth above €50 million ($54 million).
In his reporting on this idea, Curzon cites a tweet by MEP Lalucq where she dismisses any objections that this tax is impossible. After all, she explains in French, people said the same thing about the 15% minimum corporate income tax that was passed by a total of 136 countries in 2021.
It might be worth reminding MEP Lalucq and her economist friend that just because government can do something, does not mean that government should do it. Other than that, there are so many reasons to oppose this tax that they cannot be fully accounted for here. Let us at least get started with four main points ranging from technical and economic to ideological.
To start off lightly on the technical end, it is worth noting that, according to News18, the proponents of this wealth tax want to use the money to finance a “green and social transition.” As with all grandiose ideas that come out of socialism, this one is long on fluff and short on substance.
OK, that is an exaggeration. We actually have a good idea of what the ‘green’ transition means:
It is less known what Lalucq’s “social transition” is all about, but until she reveals more details, we can safely assume that she is referring to the environmental and social governance corporate outcrop of the Green Gulag idea. It is a safe way to destroy businesses and bring to a grinding halt the parts that are still moving in our economy.
This is what the wealth tax proponents want to use their newfound tax revenue for, but it will never end up there. The reason is simple: almost every government in the European Union is dealing with a structural deficit in their finances. The United States government runs a huge structural budget deficit. Any new tax revenue that would come in would first and foremost go toward paying for spending that already exists. Virtually no money would end up where Lalucq and Zucman want to spend it.
If they would scrape together some credible numbers on their proposal, they would soon find that taxing ‘the wealthy’ is not nearly as lucrative for government as the Left notoriously believes. Without delving into the technicalities of taxation, the world is full of examples of how wealthy individuals can restructure their equity in ways that always minimize the burden of any tax.
The tax has not been invented yet that can prevent intelligent people from avoiding it (not evading, which is illegal). The only instrument government would have against avoidance is to outright confiscate private wealth.
That, of course, is unabridged communism. I will assume that Lalucq and Zucman are not proposing unabridged communism. Instead, I will conclude that they have never studied the effects of taxes on economic behavior. Therefore, it is reasonable to also conclude that when push comes to shove, they have no idea how they are going to finance their “green and social transition.”
The second main point against this tax is the myth of how the tax is paid, and by whom. The fact that it is called a ‘wealth tax’ makes it look good on paper, but a tax like that never works as intended.
Why? Because nobody pays a tax out of the value of their assets.
It is easy to see this by looking at property taxes. Suppose I own a house worth €200,000. One day, the taxman comes to collect the 2% annual property tax. Do I sell my house and give him the €4,000 I owe him? Of course not. Do I take out a bank loan and pay him? That would be the same as selling the house, only a small slice at a time.
Instead of doing something silly, I do what every rational property owner does: I pay the property tax out of my current income. It does not matter if I make a lot of money or very little—I still owe the government €4,000 per year.
Let us use this point with direct reference to MEP Lalucq’s wealth tax. Suppose a friend and I want to invent a new medical instrument that will help doctors to quickly and safely cure all kinds of cancer. We work our regular jobs while using all our spare time and spend all our savings on our invention.
One day, we get it right. We file for a patent and set up our business. Our product is in very high demand, and our business grows rapidly. Within a couple of years, it is valued at €150 million, or €75 million for each one of us founders. That €75 million is our wealth.
Since the business is in its start-up phase, our production costs still increase faster than revenue. To keep as much money in the company as we can, my friend and I take no dividends and only a salary of €50,000 per year. A lot of new business owners do it this way, but many of them also try to get by without taking any compensation at all from the company in the first few years.
Suddenly, MEP Aurore Lalucq and her economics buddy Gabriel Zucman show up at our business with their wealth tax in hand. They demand that my friend and I pay a 1.5% tax on the stock value that exceeds €50 million per shareholder. That means €375,000 for each one of us.
How are we going to pay for this tax? There is only one way to do it: we have to increase our salaries from €50,000 to €425,000. But wait—that won’t do it either. Once each one of us makes that much, we have to pay a much higher income tax than before. To avoid ending up with a lower annual salary, we thus have to include the higher income tax in our compensation—so that we can pay both our regular income taxes and the new wealth tax.
There is this myth going around among people on the Left that wealthy people are standing up to their chins in piles of money. That picture is, of course, blatantly false. Your wealth has to grow up toward €1 billion before you can pay for anything without it really bothering you. Thus, the only thing this tax will do is make life harder for owners of smaller businesses, and therefore stifle their growth, bring jobs creation to a halt, and deprive more hard-working families of ways to put food on the table.
The third point against this tax is ideological. The very idea that the ‘wealthy,’ whoever they are, owe the rest of us money is plain wrong. Nobody else is responsible for how I provide for myself and my family: that responsibility is mine alone. By the same token, this tax implies that there is something intrinsically immoral with wealth, and that therefore we need to tax it. This implication is false, of course, and it rests on the implicit premise that I, not being wealthy, somehow am entitled to part of the wealth that my very rich friend has.
No such entitlement exists. It is the figment of socialist imagination, rooted in the utterly discredited Marxist idea that capitalists—owners of productive capital—do not add value to the production that their businesses are engaged in.
It is not very hard to refute this pile of Marxist debris, but since there is a fourth point to be made against the wealth tax, I will leave that refutation to another place and time.
Last but not least: once a tax exists, it can only grow. The government’s hunger for more tax revenue is only surpassed by the lust of socialists for more of other people’s money. As a curious little example, consider the new tax that Norway just introduced on electric cars. Starting in January this year, Norwegians who buy electric cars have to pay a value-added tax on the share of the price that exceeds NOK500,000 (€44,211). This means, e.g., a price increase by 13.3% on an Audi e-tron GT, 12.4% on a Tesla Model S, and 8.3% on a Kia EV6 GT.
Not long ago, governments poured subsidies over electric vehicles. The new trend is to reduce those, and as Norway shows, start taxing them just like any other vehicle.
Why? Simple: government still needs its revenue. In Norway, traditional gasoline and diesel cars only account for 20% of new car sales, which means that the revenue from taxes on traditional vehicles has plummeted accordingly.
The same logic applies to the wealth tax that MEP Lalucq so eagerly wants. Once the tax is in place and people start changing their economic behavior in response to it, government will not be satisfied with less revenue than it expected. Legislators hungry for money to spend will lower the threshold for the tax: €40 million, €25 million, and so on. They will also raise the tax rate: as we saw above, the 1.5% that sounds so innocuous, is nothing of the sort. Consider what happens if the rate goes up to 2.5%, 4%, etc.
In the spirit of President Reagan’s point, so long as there is something moving in the economy, there will be lawmakers who will want to subject it to existing taxes. If they can’t do that, they simply invent a new tax.
Like MEP Lalucq’s wealth tax. The more government increases the tax pressure on the productive sector of the economy, the more slowly that sector moves.
Europeans are already struggling to feed their governments. A new wealth tax will do absolutely nothing to ease their struggle. All it will do is force business owners to charge their businesses more money to please the taxman. In doing so, they will force their businesses to produce less goods and services and charge higher prices in the bargain. Workers will earn less as their businesses have to divert more money to the taxman.
In the end, we all pay—and we get nothing out of it, except Green Gulags, EVs that can’t take you very far in the winter, and solar panels that won’t keep the light on in my office after sunset.
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