George Rebane

[This is the transcript of my regular KVMR commentary broadcast on 13 January 2012.]

Most people know that governments fund themselves by taxing income, profits, consumption, and assets.  The first three we have become used to at least to a degree where we now debate how much higher or lower such taxes should be.  It’s the tax on assets that causes pupils to dilate and blood pressures to rise – well, at least on those who have assets.  All countries have a natural division between their makers and takers, the latter being reliable backers of any and all taxes on the makers, because that’s where the money is.

But asset taxes are somehow different.  Maybe one reason is that many takers also own assets.  Almost everyone instinctively knows that an assets tax (aka ‘wealth tax’) allows the state to take what you have already worked for, have already paid taxes on, and put aside to support your way of life.  Your assets – like your house, land, car, collectibles, business, and bank account – are part of the extended you, part of the established perpetuity that you want your kids to have.  It is for that reason that you belong to a culture, a society, and a sovereign nation-state, because they claim to provide an environment for guaranteeing your security, property, and liberty.  And it is for that reason that you will man the ramparts, and put your life on the line when your country is in danger.

With the discussion of a new assets tax, all things become possible.  In a recent issue of the Wall Street Journal, Stanford economics professor Ronald McKinnon argues for an add-on assets tax for the purpose of – seatbelts fastened? – for the purpose of mollifying the street occupiers.  He even sprinkles sugar on his proposal by claiming to make “the conservative case” for such a tax.  The example he presents is that the government would annually confiscate 3% of your accumulated wealth in excess of $3M.  And that means everything you own, including the “imputed rental value of owner-occupied homes”.

The impact of asset taxes is already well known to those who own their homes and other real property.  In California, people, especially the poor and retired, were beginning to lose their homes to ever rising property taxes, a recognized and feared assets tax.  Their answer to that was Prop 13 which dramatically limited government’s ability to violate what many hold to be the ‘takings clause’ in the 5th amendment of our Constitution.  This clause enters the argument because asset taxes frequently require the disposal of the asset (a home, farm, or business), often at a loss, to raise money to pay the tax.

With the initiation of an assets tax, the government now comes back for a double dip.  And that’s not even true, the government actually comes back for a double, triple, and keeps coming back for a never ending series of dips until it whittles down what’s yours to some arbitrarily small level for you to have left that it considers is socially just.  But there’s more.  Once assets begin to be taxed, there is NOTHING to prevent our rapacious rulers from upping the tax rate on assets, lowering the deductible threshold, and increasing the asset classes that can be taxed.  Why?  Because this has happened to every other type of tax the government has levied on us.  And we have to remember the cry of the takers and their elites that today echoes across the land, ‘We don’t have a spending problem, we have a revenue problem.’

When a government starts taxing assets which have already been taxed, it taxes them in a manner that requires either their disposal or taking on more risk in the attempt keep them.  Doing so starts a nation on the path to destroy the very economy that generates a society’s ability to produce wealth, fund its government, and secure its people’s future.  It does that because asset taxes put up a barrier to every measured means for creating wealth.

The socialist never sees any of this, because his usual stasist analysis is based on the assumption that the newly taxed and/or regulated will never respond to preserve themselves.  In the socialists’ eyes, those taxed and regulated will simply remain compliant, and continue their previous labors no matter the new burdens that government has in store for them.  And for some reason those same social engineers are forever surprised when things don’t work as planned.  The expected revenues never materialize, and the call goes out for more of the same as the takers continue to cheer from the bleachers.

My name is Rebane, and I also expand on these and other themes in my Union columns, and on georgerebane.com where this transcript appears.  These opinions are not necessarily shared by KVMR.  Thank you for listening.