$32 trillion kept in offshore holdings
Surprise, surprise, the 1% has been hiding their wealth and legally or not avoiding taxes so the rest of us can presumably pay more to maintain the standard of living and/or be pushed into poverty. As the middle class all but disappears, in even wealthy and previously more equally distributed income countries like America, this concentration of wealth has become a problem not too dissimilar to Global warming. Advancing perversely by themselves and difficult to reverse in time to save the globe from becoming too hot for human life, or destroying the very fabric of civil society. How to save the world from itself as climate change renders the planet we all call home uninhabitable and the unrestricted accumulation of wealth (greed) causes the have nots to raise up and destroy the world order.
Let me begin by saying I have no problem with disparate incomes in principle. People who work hard to further their skills and knowledge and then apply themselves diligently in the pursuit of wealth deserve as much money as they feel they need and/or they desire. The basic human right to enhance one’s well being legally over those who fail to work hard and/or have no ambition for a richer life in terms of material well being should be maintained and protected. Freedom to accumulate wealth provides individuals the incentive which invariable creates a higher standard of living. I don’t think anyone genuinely rejects William Gate’s or Edmon Musk’s right to be wealthy and by and large both of these gentlemen are net contributors to a better life for every human being on the planet. Remember life is a game, and money as a system of barter and as a store of wealth, and the rules of the game we play were all created by us. There is nothing natural about money or for that matter for the political economic systems we have created. In a world of “Big Data Analytics” and “digital money flows” we the people should be better able to control and exploit this wealth (play thing) to everyone’s mutual benefit. Change the rules of the game in a positive manner and lives will change for the better and we may not experience the current human outcome of wealth being accumulating and secretly hidden away for fear of taxation?
I also detest “big government” another part of the game and government’s propensity to over tax and often squander the tax receipts. In fact I’m not one of the 1%, but I would wager a bet if one were to interview the super rich hiding their wealth it is certainly their honest belief that governments would “waste the money” taxed away from them which causes their somewhat rational behaviour. Few people, rich or poor, would advocate zero taxes as everyone recognise a need for, and means for paying for, common goods. Most reasonable people recognize that it is neither sustainable nor just for 1% of the human population to control more wealth than the remaining 99% when a majority of the world still lives in abject poverty and millions of people living in poverty, due to circumstances beyond their control (for example being born into poverty) actually work harder every day of their poor lives than the 1% ever did. We all seem to understand the problem that the rich get richer and the poor get poorer and we should all be able to see an unhappy ending for this trend. So what is to be done? Change the rules of the game.
I believe the solution lies in “coached philanthropy” not forced higher taxation. My father always told me as a young boy, “From those according to their ability to those according to their needs” which seemed a pragmatic way to solve our dilemma but education and incentives for the 1% to follow the example of those relatively few noteworthy extremely wealthy people who have chosen to give of their time and their wealth seems a more appropriate method of correctly today imbalances. It seems so much more acceptable than yesteryear’s rant “to tax the rich and give to the poor”, and one only need look at supposedly communist China to see how well this philosophy of income redistribution works. China which has nominally been a communist country for 67 years (since 1949) has had a consistently higher Gini Coefficient (0 represent perfect equality of income and 1 represents perfect inequality – one person receiving all the income) or less income equality than Canada (my home) and most other wealthy G7 countries each and every year since 1949 in which it has been measured and China’s Gini is still increasing.
What humanity needs I believe, is a United Nations sanctioned multilateral worldwide tax on savings or “parked capital”, regardless of which country in which it being saved (or which mattress it is hidden under). This may seem heretical to many people’s ears, “isn’t a lack of personal savings part of the problem in America?”, but wait there are two caveats; only savings above a prescribed maximum amount “being the rainy day fund” a level of saving set by national governments based on the national cost of living would be taxed, and there would be heavy taxation on personal consumption. Capital that sits and accumulates more capital into fewer and fewer hands simply by being held is a wasteful distortion or unintended consequence of the rules of the game. Rather than causing exceptionally wealthy people to feel they need to squirrel money away I would advocate zero tax on worldwide incomes, a slightly burdensome tax on consumption and an extremely burdensome tax on “parked capital”, that is money that is not being re-invested as working capital.
The $32 trillion which the Panama papers say is parked in offshore deposits, should be being spent to create income, fueling rapid economic growth for the betterment of humanity and via a ripple effect increasing incomes worldwide. Only when capital is consumed, or money is spent for personal consumption on nonessential goods or services; luxury cars, travel, luxury homes expensive jewelery, alcohol and substances would it be taxed by governments which will be pared down and form a smaller and smaller proportion of the economy (and yes the work force) perversely because all this “parked capital” will be put to work building infrastructure (building roads, bridges, parks, hospitals,schools, arenas) to create untaxed income. The effect would be that very rich people instead of accumulating capital (money) would begin to accumulate goods which have higher utility to humanity than parked capital. Why wouldn’t a rich person pay someone more money to try to create more income which is not being taxed ? Income is good realized profits are not. Just keep investing round and round we go with brand new rules of the game.
The rules will dictate and I advocate that this unprecedented rush – this virtuous cycle of private money flowing through the veins of a supercharged healthy economy be spent by the private sector who are much better equipped and skilled to spend societies excess capital (savings above the rainy day fund) than would be any bureaucratic civil service. Let’s make money and increase incomes worldwide, no taxes on incomes for anyone. Even the very wealthy will be relieved of their current deviant behaviour of hoarding money for the sake of hoarding money and will be pleased to keep money cycling through the economy, paying higher wages to make more income, for only when it is parked would it become taxable. What do you think is it time to change the rules of the game of life?