Capitalist
In recent days there has been a suggestion that New Zealand will introduce a wealth tax. In typically ignorant fashion it’s portrayed by socialists as a way to eliminate poverty – (I burst out laughing too, dear reader). Apparently, we are living in some Charles Dickens novel come to life rather than a modern 21st century nation.
In the 1930s there was a childish investigation by the US Congress into the causes of the great depression. Various “Robber Barons” such as John D. Rockefeller jr and JP Morgan jr were dragged before Senate committees to cowardly apologise for being rich (the usual spinelessness from the ruling elite). The result was a wealth tax being introduced.
The “usual suspects” cheered with a “we showed ’em brovvers, youse can feel proud today we stuck it to the rich”.
All was not quite what it seemed, however. The “rich” were not complete muppets and had no intention of having their fortunes taken from them and given to Joe Sixpack – any more than the “rich” in New Zealand today intend their fortunes to end up in the hands of “Rangi” and “Charlene” to be spent on Kentucky Fried Burgers and meth.
In the lead up to the introduction of the wealth tax various rich families – Rockefellers, Mellon, Morgan, Guggenheim, Astor, and various others simply decided to retire.
They sold off their businesses, took the massive pile of cash and became professional “investors”. Oh, and the following generation/s became the “idle rich” rather than creating vast numbers of jobs and economic activity like their ancestors had done.
They bought (or constructed) huge amounts of real estate, bought shares (in other companies), bonds, paintings, and invested a huge whack outside the US (away from prying eyes). Then they had a word in the ear of various congressional leaders and the same tax bill that created the wealth tax included a large number of tax breaks for such things as property investment and excluding foreign-sourced income from taxation.
Also, a little-noticed section in the law exempted taxes on dividends which was frightfully helpful if you own, say, $100 million worth of shares and earn, say, $3 million a year in dividends.
This tax-free dividend lark remained in place until 1954 after a large number of wealthy “idle rich” had enjoyed huge tax-free incomes from their General Motors or Coca Cola (or whatever) shares.
In typical Washington DC fashion, the annual reports from the Treasury and IRS that the amount of wealth tax being collected didn’t cover the cost of buying a cup of coffee was simply ignored as being able to tell gullible people that they were “taxing the rich” was all that mattered.
The average 23-year-old scion of the average rich family lying on a beach on the French Riviera (The Talented Mr Ripley come to life), or attending ‘Charity Fundraisers’, or sailing off Cape Cod, was encouraged not to mention that he wasn’t actually a taxpayer.
I am sure you are getting a general idea, dear reader, of how successful a wealth tax in America has been over the last 83 years. It will be much the same in New Zealand.
In a world where you can sell assets in New Zealand and send the money to Sydney, London, or Hong Kong in the blink of an eye to be discreetly invested, the government’s chances of success in collecting “Wealth Tax” revenue will be similar to that of an Arabian gin salesman!
