On Aug. 6 Democrat kingmaker Bernie Sanders Tweeted out this message: “I will be introducing legislation tomorrow to tax the obscene wealth gains billionaires have made during the public health crisis.”
Sanders is not running for president but has pushed his party far left. All Democrats essentially advocate heavily taxing the few to provide increasing benefits to the many.
Those of us who oppose this approach are called Trumpies, Fox Newsies or worse. But we oppose on grounds of practicality and fairness. We know there is no political system worldwide where this narrowly focused tax policy works. Some writers in these pages claim my thinking shows ignorance. So be it. I believe true ignorance resides in viewing everything that happens worldwide through an inflexible ideological prism and not having the intellectual honesty to take facts into account.
Sanders’ proposal amounts to taxing unrealized gains on stocks held by billionaires. Unrealized gains means paper profits, with no income realized. Anybody out there willing to have your paper profits taxed? What happens if the market subsequently crashes, do you get your money back? Even some Democrats think this may be unconstitutional; it is certainly not a tax in any realistic sense, it is simply a taking, and a taking entirely grounded in the holder’s wealth.
Furthermore, this taking is predicated on paper gains only since March 18, 2020! Surely, Sanders is aware the stock market plunged more than 30% from Feb. 12 to March 16. Since then, driven by optimism over a coronavirus vaccine and massive amounts of money pumped out by the Federal Reserve, it has rallied strongly. How disingenuous he is to measure “obscene” gains from the March 18 low and ignore the wealth decline in the 5-week plunge before that date. So total 2020 annual gains are generally far lower than the numbers he is bandying about. He would take all of that, or more.
It is obvious that tax overhaul is coming in this country. We simply cannot continue to pay benefits to more and more people financed by massive and growing debt. But to claim you can impose enormous taxation on the very few to pay outsized benefits to everyone is without precedent in our world. If Democrats attain power based on such a promise it’s guaranteed to lead to very serious economic consequences down the road.
My wife and I have traveled to literally every social democracy in the Euro Zone of Western Europe, in aggregate spending several years there. We travel independently. We’ve biked and walked thousands of miles, visiting large cities and tiny villages. We rub shoulders with locals on public transit and we shop with them in the markets. So please allow me to take you into the weeds here a little bit and tell you what we have learned.
Although there are some differences among countries, in funding their benefits there is one unassailable fact: Everybody pays, and they pay a lot. Europeans are not stupid. They understand the wealthy will pay a lot more than average people, but if you promise huge benefits to everyone without requiring contributions from everyone, not only will social cohesion be undermined, there simply will never be enough money to pay the tab.
Let’s not forget, in our country, these billionaires employ millions of our people and are world business leaders. Their wealth comes from the visionary companies they have started; most of us frequently use their products and services. Each of them has created great wealth for many shareholders (your 401K among them) and employees, not just themselves. The share value of Amazon, Google, Facebook, Walmart and others have risen this year simply because in a public health crisis Americans have turned to them more and more to sustain themselves, socially and materially. Tesla billionaire Elon Musk is leading the way in green automobiles and battery storage. He has done more for greening the economy than all the leftist pontificators combined. But Sanders says his stock value is obscene so let’s just grab what we can.
Now please consider the way advanced social democracies in the Euro Zone plus Scandinavia pay for their benefits. Averaging out a lot of numbers this is generally what you will find:
Total tax burden as a percentage of their national output is about double what it is here in the USA.
Value Added Tax, a form of sales tax, is 20% to 25% on virtually all purchases. There are exceptions but in some countries even groceries carry a 15% tax. Fuel taxes run $4 or more per gallon as opposed to an average 50 cents per gallon here. Such taxes on “production and consumption” equate to about a third of the total tax bill in these countries, a huge factor in funding social benefits. Another third of the take are social welfare taxes, and only about third comes from income taxes.
Social welfare and consumption taxes fall across total populations regardless of income. EU Income taxes are also much higher, not just at the top but at all levels. In comparison, almost half of all Americans pay no federal income tax yet 50% of federal revenue is derived from income tax.
Europeans understand and accept that without everyone paying into the system there is simply no way to fund these benefits. Surely, Democrat proponents of major social change know this well. The reason we hear nothing of it is because they could never win an election if they advanced such facts openly. So they spin a myth of the few supporting the many and figure they will sort things out after the election.
I encourage readers to do a little research to substantiate this. These countries have been doing social democracy for a long time and there are no secrets about how it’s paid for. Except here.
Ken McCord of New Castle is a retired small business owner with a keen interest in contemporary affairs. His education is a result of visiting 80-plus countries in a lifetime of world travel. The views expressed are the writer’s.