Senators Elisabeth Warren and Bernie Sanders, acclaim to be the protector and champion of the common people against the plotting rich, in their own words the millionaires, billionaires and Wall Street.

They are supported by the progressive left wing of the Democratic party represented by Alexandria Ocasio Cortes and other likeminded members in the US Congress.

In their ultimate wisdom progressives seek the solution to the structural problems the US is faced with by increasing the civil apparatus and conducting an offensive against Wall Street, the private equity industry and with new tax proposals targeted at the rich and introducing the deeply flawed wealth tax. The wealth tax, or better said the “looters” tax calls for 2 percent annual levies on net wealth above $50 million, and 3 percent above $1 billion.

But then we should not be surprised since Senator Elisabeth Warren has a plan for everything, only restricted by the limits of human ingenuity and imagination as she and fellow progressives determine what is good and just for society and justifies this confiscation of wealth created by others in the name of the public interest and to facilitate more wealth equality.

But as Larry Summers noted “I do not think a focus on wealth inequality as a basis for being concerned about a more just society is terribly well-designed. … I don’t think wealth is a particularly sensible way for judging or assigning taxes.”

As a  John Locke liberal, a neoliberal I believe all men are by nature free, equal and independent, which sovereignty should have meaning and liberty and possessions should not be trampled on by governments. I take issue with the enthusiasm of governments involvement at the levels of society we are seeing today and with the progressive suggestion governments are responsible for delivering happiness to the people.

This progressive approach is insensitive to the idea that people wish to find happiness for themselves based on self-reliance and self-responsibility and do not wish to be steered by the state as guardians of their welfare. Most of us wish to make our own bed and sleep in it based on our own choices, mistakes and actions.

Having said that, there is no all-compassing truth what is best for man and there is definitely the need to defend the less fortunate in society, against some of the vices of capitalism. We hardly  live in an ideal world with environmental, climate issues, inequality and military conflicts, confirming human nature has a lack of understanding, disciple and is not capable of perfection.

Human nature definitely its deficits which need to be corrected sometimes, even coerced, but the kind of government involvement we see today, minimizing self-reliance and self-responsibility is undesirable and contains the seeds of its own destruction.

Governments are not really the epitome of wisdom, morality and ethics and can be often best qualified as rather “a little people, a silly people” as Lawrence called the Arabs in Lawrence of Arabia.

Senators Elisabeth Warren and Bernie Sanders represents a growing progressive movement which fails to observe the rules of Necessity, but is trying to revive and rehabilitate a long dormant delusional tradition. This movement is leading in time to not more “social democracy” but more “democratic socialism” which does not reform but ends capitalism and ignores all the prosperity capitalism and globalism has brought us.

Perhaps as an oversimplification, but governments main role is to prevent it from absorbing unto itself powers it was never intended to have, and ones which distract it from its original and preeminent purpose.

In general the role of the government is to provide and protect its citizen from violence based on the following a. Establish justice – Civil and Criminal Courts; b. Ensure domestic tranquillity – Policing; c. Provide for the common defence – Military and diplomacy; d. Provide and promote education; e. Promote the general welfare – Sound and equitable monetary and fiscal policies.

The rules of Necessity also applies to a free and orderly society in which the state has the power and tools to guarantee liberty, freedom and posterity for current and future generations. This within clear guard lines which limit the government scope and size to those things most critical to the working of a civilized society.

Without these limited state powers which traditionally consisted of police, taxation and eminent domain and in general are enforced by organized coercion mankind would not be able to function and be at the mercy of the strongest and most vicious forces  in society.

The concept of government as provider has evolved over time and has become a  provider of goods and services that individuals cannot provide individually for themselves. Government in this collective concept act as a producer of goods which benefits it’s citizen,

This has led to an overbearing role of governments and the creation of social welfare state which provides social security that enables citizens to create their own economic security, which in some cases they cannot provide for themselves as a result of the more negative side effects of capitalism and economic forces beyond their control. 

This demands that all members of society pay a fair share of maintaining order in society. But “fair” is an elusive term and the principles of taxation are controversial and have been discussed through history and terms and objectives has been interpreted differently. For sure this is not to be avoided, a system developed by fallible individuals will not produce perfection.

In general taxation must be universal and was based on the principle “equity before taxes” and proceeds of taxation were used to the legitimate costs incurred for which the citizen received the benefits, based on the logical principle payment should be equal for all citizen.

In our modern world the sovereign power to tax is used to implement social reform policies and with this we have violated the principle “equity before taxes” and replaced this with “equity through taxes” making this a political and fiscal lever to force changes in society. With this progressives were able to introduce the concept of progressive taxation, claiming “from each according to his ability to pay, to each according to his need.”

In other words those who produce more value should pay progressively greater taxes. This concept is debatable to say the least and should be used in moderation and with caution, otherwise the child is thrown out with the bathwater.

Both Senators Sanders and Warren are the embodiment of this and with their attacks against individual achievements they fail to recognize man’s unlimited right to the fruits of his brain, free of obfuscation and have this bizarre supposition that intellectual products are fundamentally social products.

This supposition is based on a misconception on the progressive side that suggests since we are situated in society there is a vital dependence of the individual on society and this leads them to the conclusion there should be no suitable individual property right to intellectual work. 

The flawed conclusion is a business owner didn’t build his business, but society helped him thrive and made this happen and therefore should share in the profits. This is the delusional Elisabeth Warren argument, from her ivory tower at Harvard and she concludes that nobody gets rich on their own and Barack Obama repeated this argument.

This are the remarkable progressive altruistic ideas which is moving individualism towards collectivism, the same collectivism we see in China and Russia where the highest value is that of the state, which supersedes the individual, liberty, human- and property rights whereby the strong state is seen as the final arbiter and guarantor of the domestic order.

But individualism, this drive for achievements and money by the enterprising part of society is based on a mentality which is also the basis of Capitalism its success, although sometimes and perhaps unfairly at the expense of others which can lead to tensions in society.   

It’s reasonable to say altruism is not compatible with capitalism and the ethical principle must remain that individual ability is not a social asset freely distributable to others and is incompatible with a free and just society.

It’s most abhorrent how some think, like in the former Soviet Union where the state can take as much and are entitled to the fruits of the work of others or possessions they do not own or had no role in establishing.

With this they are biting the hand which feeds and slaughter the cow which milk they drink and with Bernie Sanders Democratic Socialism he attacks capitalism, the driving force of economic and social dynamism, prosperity and personal freedom together with its long term universal gains.

This new “wealth” tax, is a round of expropriation of assets which is being used as a tool to correct the failure of the government and Congress to address the imbalances in the tax system, the gross inefficiency of the tax system in limiting tax evasion and to close loop holes in the existing income-tax rules and regulations.

The tax system, of which corporate taxation can be qualified as reasonable, would be better served by a more balanced approach, simplification and without exceptions, limitations, credits, subsidies and exemptions.

This wealth tax is being conflated with higher income taxes and will only discourage to hold demonstrable assets, especial in risky ventures and makes investors sell their shares in order to pay their taxes and increases legal tax avoidance schemes.

This also forces companies to disburse cash rather than to invest in the future and this encourages short term- strategies not long-term strategies. It also increases the hold Government hold on peoples life’s given all the information, valuations which will need to be supplied.

I definitely have sympathy for the creators and builders of our world, and for Wall Street which supports the people who build enterprises and create jobs and for their achievements. Good or bad and often flawed men, who have brought prosperity to the many in Society.

The Senators Elizabeth Warren and Bernie Sanders represent today the tyranny of the majority, which thinks they have the right to determine what part of possessions people should be allowed to keep or should share with others less fortunate souls. With these ideas they are leading  the DNC into the desert of their Fata Morgana.

Having said that, there is today definitely the need to find structural solutions for the tensions and unbalances in society which have led to the present disorder. But this disorder and these issues cannot be solved with tribal warfare or a 50/50 vote or a 51 % majority. Nor can this be done by throwing even more money at the people what the democrats have been doing since LBJ which have led to the unsustainable growth the national debt.  

Perhaps not fashionable, but balanced budgets with deficit reduction and the immense growth of the entitlement programs need to be addressed, just like the yearly increasing defence spending will need to be reviewed, trimmed and cut because this growth of the national debt is unsustainable. This must be done in order to enable investments in infra structure, education and climate change which are required.

Although socialism and collectivism has increasing popularity in some progressive circles and is often the result of the imbalances in society, but piling on an increasing mountain of debt, a bottomless pit for which future generations will get the bill, is not the answer.

This are the same ideas of progressive taxation which lived in Europe during the 1960-1980’s when the same initiatives were taken by socialists in different countries, those who believed in their socialist Walhalla and wished with imagination and ambition to facilitate the spreading of money, influence and knowledge by means of excessive and progressive taxation and the wealth tax.

This wealth tax and progressive taxation in Europe during the 1960-1980’s had given the human characteristics which exist in all of us as the natural consequence increased legal tax avoidance and the wealth tax was a total failure in the different countries in Europe. In France when the wealth tax was introduced around 10,000 people left France with 35 billion euros in assets and assets are even easier to move than people.

This confirmed wealth tax, inheritance and progressive taxation comes at a cost and ultimately results in the loss of jobs and loss tax income. Unless there is a global harmonization of taxes, which is not likely at a reasonable level, there will be the optimization of taxes.

The wealth tax and excessive taxation crushed entrepreneurial ambitions and given their sophistication to avoid paying excessive taxes the wealthy relocated and the trend started to restructure companies in a more fiscal friendly manner with holding companies, trusts and foundations in Vaduz, Lichtenstein, Luxembourg, the Netherlands and elsewhere.

In 1990, twelve countries in Europe had a wealth tax. Today, there are only three: Norway, Spain, and Switzerland. According to reports by the OECD and others the wealth tax was expensive to administer, it was hard on people with lots of assets but limited liquidity and made people leave to more reasonable countries and did not raise much revenue. The Swedish wealth tax which led to large outflows of capital which was a major motivation for the repeal of the wealth tax in 2007.

Today in Europe wisdom has prevailed with more reasonable corporate taxation and with personal taxation which compared to the U.S. is still excessive and feels like that. But higher taxation for all is the price Europeans are willing to pay for an more equitable society, one which is in line with the demands of the 21st century.

There is indeed the need in the U.S. for a fairer and more balanced society but instead of the wealth tax and exclusively targeting the rich with progressive taxation measures a different approach should be considered in which the role of America in the world and the military overextension is reviewed.

How to solve the internal imbalances will requires budgetary austerity measures and more balanced (higher) taxation, which means Congress needs to do its job and end its inability and unwillingness to pass legislation to pass more balanced taxation by means of simplifying the tax code and close loop holes in the existing income-tax rules and regulations.

The conclusion must be, internal priorities contradict with the burdens of US primacy around the world and the high level of national debt and a debt / GDP ratio of 140,6 % indicative for the present declining situation.

The history of relative and industrial decline of the major empires during the last 500 years in the world shows, all these empires grappled with the problem of military overextension, as Paul Kennedy pointed out in his excellent book “The rise and fall of the great powers” confirm that once countries overstrain themselves their leadership position starts to show signs of economic and military erosion.

As Paul Kennedy concluded, “They are like an old man attempting to work beyond his natural strength and they have difficulty to paraphrase Bismarck to travel on “the stream of time” and fall into relative decline.”

14.9.2021

WJJH

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