Posted on 07/21/2002 3:19:29 PM PDT by Tailgunner Joe
Falling stock prices are big news, and with good reason. If current trends continue, the market will have declined for three years in a row, something that has not happened since the Great Depression.
Unfortunately, some bureaucrats at the IRS and the Treasury Department are trying to make the market fall even more by driving foreign investors out of the U.S. economy.
They are trying to convince President Bush to approve a tax harmonization scheme called the European Savings Tax Directive. This proposal could push $1 trillion out of the economy, driving the markets lower and destroying U.S. jobs.
The EU Savings Tax Directive is an enormous threat to America's long-term prosperity. The proposal would compel U.S. financial institutions to collect private financial data on non-resident investors so it can be turned over to foreign tax collectors.
The plan is designed to stop money from escaping Europe's high-tax economies and fleeing to low-tax economies like America or Switzerland. In other words, the EU wants to help high-tax countries to collect tax on income outside their borders. This would create a global tax cartel, sort of an OPEC for politicians.
From the European perspective, a tax cartel makes sense. The European Union is very uncompetitive in the world economy. The average tax burden consumes almost 45 percent of GNP, and regulatory red tape makes it very difficult for the private sector to create jobs.
With this track record, it is not surprising that per capita income in the EU is much lower than it is in the United States.
To make matters worse, many European governments face huge unfunded liabilities for pensions, so it is likely that the burden of government will climb rather than fall. Because government in Europe is so expensive and the long-term outlook is grim, capital is fleeing from Europe to low-tax countries.
While a tax cartel makes sense for nations like France and Germany, it is hard to think of a good reason why the United States should participate in any tax harmonization schemes.
First, this initiative is an assault on American sovereignty. European politicians may believe it is unfair for jobs and capital to flee from high-tax countries to low-tax countries, but the United States has no obligation to prop up Europe's welfare states. The Savings Tax Directive is a significant threat to market-based policy and fiscal competition. But most of all it is a threat to America's interests.
Second, America is the best tax haven in the world. Low taxes and a strong commitment to financial privacy combine to attract more than $9 trillion of foreign capital to the U.S. economy. For instance, Congress repeatedly decided, with few exceptions, not to tax the investment income of foreigners and not to report this income to foreign governments. And since European politicians are too greedy to cut taxes, European workers and investors are wise to invest their money in the United States.
This inflow of money is a key determinant of American prosperity. Yet the EU initiative - and the power it would give to countries like France and Sweden to impose oppressive tax rates on income earned in America - would drive capital out of the U.S. economy. This would mean fewer American jobs and lower wages for American workers.
Of course, the European politicians claim that their "true" goal is to reduce tax evasion. They claim that the complete destruction of financial privacy is the only way to address widespread tax evasion.
Yet, real world evidence shows that lower tax rates and tax simplification are much more effective tools to prevent tax evasion. European governments should try tax reforms instead of trying to force other nations to adopt their bad tax policies.
This issue does not generate big headlines, but it represents an enormous threat to America's competitive position in the global economy. That is why it is important for the White House to take control.
If career bureaucrats get to decide this issue, the wrong choice will be made. And since EU officials have been bragging that America is capitulating on this issue, presidential leadership is desperately needed.
The EU tax cartel would have a terrible effect on the U.S. economy. The United States should reject this ludicrous scheme. Treasury and IRS bureaucrats are wrong: Foreign tax collectors are not more important than American workers. Let's hope that the Bush administration will soon tell the EU to take its plan elsewhere. That will give investors confidence and help boost the stock market.
Yes, as you may well suspect, I am quite familiar with Mr. Achtung Amerika.
But, this is not the focus or intent of the article -- the focus and intent is to warn America about the European Liberal/Socialist/Marxist "Tax Harmonization" scheme, which will invariably lead to less FReedom and higher taxes for both US and foreign investors.
Well, even though I'm opposed to globalism, I don't see where providing financial information to foreign tax collection agencies constitutes "Tax Harmonization". We still have our tax system and they have theirs. And I could care less how foreign nations choose to tax their own citizens, whether they're the Euroweenies or OPEC Oil Princes and terrorists. They are not U.S. citizens protected by the guarantees or subject to the responsibilities defined by our Constitution.
The more sinister threat to our sovereignty is the extreme proposition of a National Retail Sales Tax. This abomination places the entire burden of taxation directly on the American consumer while extending the benefits of participation in our free trade zone (defined by the jurisdictional limits of our Constitution) to those who are not bound to observe the common set of laws and regulations established by our Constitution.
Freedom Is Worth Fighting For !!
Molon Labe !!
There is a hellofa difference between the two! Both the European Liberal/Socialist/Marxist Bastards’ "Tax Harmonization" plan and their plan to invade our financial privacy are an affront to the US Constitution. Every Real American should oppose these ideas.
You also manifest your confusion when you state that: "The more sinister threat to our sovereignty is the extreme proposition of a National Retail Sales Tax. This abomination places the entire burden of taxation directly on the American consumer while extending the benefits of participation in our free trade zone (defined by the jurisdictional limits of our Constitution) to those who are not bound to observe the common set of laws and regulations established by our Constitution."
First, we have been through this before, Willie, and you still don't get it, do you? Consumers already pay all taxes paid in the United States! And, I am not going to argue the point with you again.
Second, the National Retail Sales Tax is no threat to our sovereignty. On the contrary, it will dramatically improve America's economy and transform America into the economic sponge of the world.
If foreign and domestic investors were all treated equally (as in the National Retail Sales Tax), the capital flight that Action-America speaks to would immediately reverse and become a capital inflow. As you well know, our present tax system punishes domestic investors and rewards foreign investors (foreign investors pay no US taxes).
Five (or nine, depending on who is counting) trillion dollars of foreign investment would be forced from America if we foolishly agree to "Harmonize" our tax system and require American financial institutions to report foreign investor income. If foreign investment in America is forced out, the American economy will collapse.
As for advantaging foreign companies by eliminating the corporate income tax, you have got that wrong, too. In truth, the National Retail Sales Tax, by eliminating the corporate income tax, levels the playing field between foreign and domestic businesses.
All of our trading partners have what is known as a “territorial, border adjustable” tax system. That is, goods exported from these countries bear little to no federal tax burden in their country of origin. Our trading partners impose their federal tax on imported goods when they cross the border.
America, OTOH, does not have a territorial, border adjustable tax system. Under the income tax, US companies must include the "cost of government" in their pricing structure. Exported US manufactured goods carry that burden with them. To which, the importing country adds their Value Added Tax (most of our trading partners have a VAT of roughly 15-19%), causing the product to carry a “cost of government” of roughly 40% of the retail price (25% US, 15% foreign).
The result is that American products sold into foreign markets suffer a double disadvantage in respect of foreign goods, whereas, foreign goods sold into American markets have no tax cost of government imposed at all.
That is right, my FRiends. Goods imported into America from our major trading partners esentially pay no taxes under the present system because the foreign governments rebate their Value Added Taxes at the border when the goods are exported.
Under the National Retail Sales Tax, all products (domestic and imported) sold in the United States will carry the same burden of federal taxation – it will be whatever the National Retail Sales Tax rate is.
So, if the United States shifts to a territorial, border adjustable tax system like the National Retail Sales Tax, one layer of taxation will be removed from American products both at home and abroad, which should make US products more competitive both at home and abroad.
I fail to see how reducing the burden of taxation on American goods in domestic and foreign markets by 25% will negatively affect our sovereignty.
And I fail to see how treating imported goods exactly the same as domestic goods in respect of the National Retail Sales Tax will negatively affect our sovereignty.
But, de Rugy blows it big time, with this statement:
Second, America is the best tax haven in the world. Low taxes and a strong commitment to financial privacy combine to attract more than $9 trillion of foreign capital to the U.S. economy.
Gimme a break!
That's absolute absurdity. The true facts are too easy to verify. Here is just a partial list:
|
Maximum Personal Income Tax Rates |
Maximum Corporate Income Tax Rates |
| United States - 39.6% |
United States - 35% |
| Mexico - 35% |
India - 35% |
| Argentina - 33% |
Japan - 34.5% |
| Canada - 31.3% |
Denmark - 34% |
| India - 30% |
Mexico - 34% |
| Indonesia - 30% |
Argentina - 33% |
| Singapore - 28% |
Brazil - 33% |
| Hong Kong - 20% |
United Kingdom - 30% |
|
Indonesia - 30% |
|
|
Canada - 29.1% |
|
|
Taiwan - 25% |
|
|
Hong Kong - 16% |
|
|
Chile - 15% |
Note: Since NONE of the countries listed, except the US, tax offshore personal income, their effective tax rate is really lower than indicated. Also, most don't tax offshore corporate income and their capital gains rates are either lower or nonexistent, further lowering the effective tax rate.
And as far as privacy is concerned, many of the countries on the above list have long had better privacy laws than the US. But, since the implementation of the massive USA Patriot Act, all but two of those countries now have far better privacy laws than the US. In fact, over one-third of the pages in the USA Patriot Act, pertain not to tracking international funds, but to striking down many of the privacy provisions in US law.
She also mentions the amount of foreign capital that is invested in the US, but conveniently fails to note the tremendous amount of capital flight from the US. In fact, according to the Forbes magazine lists of wealthiest Americans and worlds billionaires, since 1999, the number of US billionaires has dropped by 13%, while the number of worldwide billionaires has risen by 80%. The people that we are most attracting as investors are those from the true high tax countries like France (41.7% corp.), Germany (45% corp.) and Italy (37% corp.). But, Americans are taking their wealth elsewhere.
Even though the general theme of de Rugy's articles is usually very poignant, she often inserts this type of party propaganda, somewhere in the middle. It's really a shame, because when people see such obvious falsehoods, it tends to make them discount the very valid points that she makes in the rest of the article.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.