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December 12, 2013
Sovereign Valley Farm, Chile
The IMF just dropped another bombshell.
After it recently suggested a “one-off capital levy” – a one-time tax on private wealth as an exceptional measure to restore debt sustainability across insolvent countries – it has now called for “revenue-maximizing top income tax rates”.
The IMF’s team of monkeys has been working around the clock on this one, figuring that developed nations can increase their overall tax revenue by increasing tax rates.
They’ve singled out the US, suggesting that the US government could maximize its tax revenue by increasing tax brackets to as high as 71%.
Coming from one of the grand wizards of the global financial system, this might be the clearest sign yet that the whole house of cards is dangerously close to being swept away.
Think about it– solvent governments with healthy economies don’t go looking to steal 71% of people’s wealth. They’re raising this point because these governments are desperate. And flat broke.
The ratio of public debt to GDP across advanced economies will reach a historic peak of 110% next year, compared to 75% in 2007.
That’s a staggering increase. Most of the ‘wealithest’ nations in the West now have to borrow money just to pay interest on the money they’ve already borrowed.
This is why we can only expect more financial repression from desperate governments and established institutions.
This means more onerous taxation. More regulation. More controls over credit and capital flows.
And that’s only the financial aspect; the deterioration of our freedom and liberty will continue at an accelerated pace.
Can a person still be considered “free” when 71% of what s/he earns is taken away at the point of a gun by a bankrupt, bullying government? Or are you merely a serf then, existing only to feed the system?
This is why we often stress having a global outlook and considering all options that are on the table.
Because the other side of the coin is that while some countries are tightening the screws and making life more difficult, others are taking a different approach.
Whether out of necessity or because they recognize the trend, many nations around the world are launching new programs to attract international talent and capital.
I’ve mentioned a few of these already– economic citizenship programs in places like Cyprus, Malta, and Antigua (I met a lot of these programs’ principals at a recent global citizenship conference that I spoke at in Miami).
[Note to Premium Members: you’ll receive the details and contact information for the Antigua program today.]
Then there are places like Chile and Colombia which have great programs for entrepreneurs and investors. Other places like Georgia and Panama have opened their doors to nearly all foreigners for residency.
Bottom line– there are options. Some countries are really great places to hold money. Others are great to do business. Others are great places to reside.
The era we’re living in– that of global communications and modern transport– means that you can live in one place, your money can live somewhere else, and you can generate your income in a third location.
Your savings and livelihood need not be enslaved by corrupt politicians bent on stealing your wealth… all to keep their destructive party going just a little bit longer.
The world can truly be your playground. You just need to know the rules of the game.
Canada is among the developed countries that do the least to reduce income inequality, according to an analysis from Mother Jones’ Kevin Drum.
Drum looked at the degree of income inequality before taxes and government transfers, and compared those numbers to the degree of income inequality after taxes and transfers, for various developed countries.
Not surprisingly, he found the U.S. was worst when it came to ironing out inequality. Taxes and government transfers reduce inequality by about 26 per cent in the U.S.
But Canada fared little better, coming in third, tied with Australia and behind Israel, out of 22 countries surveyed. Canadian governments reduce inequality by about 31 per cent, Drum found.
Drum’s data is based on income inequality research carried out by Janet Gornick, a professor of political science at the City University of New York, whose work appeared in this recent New Yorker article.
Some interesting tidbits from Gornick’s research: U.S. incomes before taxes and transfers are surprisingly equal — pre-tax inequality is roughly the same in the U.S. as in Sweden or Norway.
But the U.S.’s tax system, which provides all sorts of loopholes for the wealthy, does far less than Sweden’s (or anyone else’s) tax code to reduce inequality. Thus the U.S. ends up with the highest after-tax income inequality, despite being naturally no more unequal than other countries.
In Canada, our pre-tax incomes are slightly more equal than the U.S. or Sweden. On that measure, Canada ranks 13th of 22 countries — right in the middle of the pack.
But when taxes and transfers are taken into account, Canada shoots up on the inequality rankings, and becomes the fourth most unequal of 22 countries, behind the U.S., Israel and the U.K. (See chart below.)
That means Canadian policies do far less than the policies of most other countries to reduce inequality.
Canada’s tax reforms of recent years have largely favoured corporations. The federal corporate tax rate has been nearly cut in half since 2000 — from 28 per cent at the turn of the century to 15 per cent in 2012. Personal income tax brackets have fallen only slightly during that time.
Opposition politicians have been criticizing the government for hiking EI premiums to $4,277 this year from $3,412 in 2008. Some call it a hidden tax hike that primarily affects low- and middle-income earners. (EI premiums are capped, with everyone earning more than $47,000 paying the same amount.)
A 2007 study from the left-leaning Canadian Centre for Policy Alternatives found that, after years of tax cuts, Canada’s one per cent wealthiest families pay a lower effective tax rate than the country’s poorest 10 per cent of families.
Here is Gornick’s chart of measuring inequality, before and after taxes and transfers.
The numbers are each country’s Gini coefficient — the standard measure of income inequality. A Gini coefficient of 0 means everyone in the country earns the same amount of money. A Gini coefficient of 1 means one person earns all the money, and no one else earns anything. Obviously, all countries are somewhere between 0 and 1.
- Fixing the Fiscal Gap: A Smart Idea Backed by Both Parties (Seriously) (businessweek.com)
- Study: U.s. Debt Obligations $70 Trillion… (breitbart.com)
- News from 2010 … America is bankrupt (jng1234.wordpress.com)
- We’re missing jobs, not skills, Mr. Kenney (theglobeandmail.com)
- Unemployment rate remains unchanged at 7.1 per cent (macleans.ca)
- Canada’s unemployment rate steady, as economy takes breather (thestar.com)
- Developed nations squandered earth’s resources: Samaram (thehindu.com)
- Statistics – national statistics: Sustainable development indicators (SDIs) (gov.uk)
- The United Nations Praises Results of Cuba’s Environmental Actions (youthandeldersja.wordpress.com)
- We are way off target if we hope to feed everyone by 2050 (io9.com)
- Algae Biofuels Unsuitable For Developing Nations, Study (asianscientist.com)
- EU and China together explore the benefits of green growth (ec.europa.eu)
- Tax cut for shale gas firms planned (bbc.co.uk)
- Jeremy Warner on Spain’s Insolvency (gilescadman.vg)
- Read Between the Lines: IMF Admits Spain is Bankrupt; Get Your Money Out While You Can (silveristhenew.com)
- Spains Problem is Europes Too (thedailybell.com)
- Child Well-Being In Spain: The Impact Of The Crisis – Analysis (eurasiareview.com)