Will Cyprus and Italy Start Taxing Savings? Will the US Follow Suit?
Cyprus needs a bailout. They are around $13 billion in debt, 71% of GDP (as of 2011). A pittance compared to the debt of the US, but this is a small island nation in the Mediterranean. The country has no more money, because they don’t have enough revenue, and the money has been mishandled.
They came to a deal with the Euro Zone so they would get a bailout, but it appears that Cyprus has got to procure funds on their own as well.
The target for those funds is anyone with a savings account on Cyprus.
Depositors could see a “tax” as high as 10% if this plan goes through. Over the weekend, people began visiting ATM machines and pulling money out of their savings.
The Cypriot government is to vote on Tuesday about the tax. In the meantime, banks in Cyprus are to remain shut through Wednesday, one day being a holiday, but most likely they are to remain closed Tuesday and Wednesday to prevent bank runs by the public.
In essence, the plan works like this:
If you have up to 20,000 euros on deposit, you are exempt.
If you have up to 100,000 euros, you would be hit for 6.75%.
If you have above 100,000, your tax would be 9.9% (I’ve seen a couple of reports floating around that this could get as high as 12.5%).
It is being rumored that Italy is mulling the same idea. Some are blaming the idea on the chief economist of the German Commerzbank, but the Germans are saying the idea did not originate with them. The IMF, at one point, called for savings to be taxed at the rate of 40%.
Stock markets around the world tumbled with this latest crisis. Greece, Portugal, Cyprus, Italy, France, Spain, Ireland. France increased taxes on the wealthy to 75%, and the rich started to flee.
This is what happens when government goes beyond its role and starts redistributing money.
“I would much prefer to bring them [the Labour Party] down as soon as possible. I think they’ve made the biggest financial mess that any government’s ever made in this country for a very long time, and Socialist governments traditionally do make a financial mess. They always run out of other people’s money. It’s quite a characteristic of them. They then start to nationalise everything, and people just do not like more and more nationalisation, and they’re now trying to control everything by other means. They’re progressively reducing the choice available to ordinary people. Look at the trouble now we’re having with choice of schools. Of course parents want a say in the kind of education their children have. Look at the William Tyndall School—an example where the parents finally rebelled. Of course they did. These schools are financed by taxpayers’ money, but the choice to parents is being reduced.
Look at the large numbers of people who live on council estates. Many of them would like to buy their own homes. Oh, but that’s not approved of by a Socialist government … . oh no! But that’s absurd. Why shouldn’t they? Well over thirty per cent of our houses are council houses. Why shouldn’t those people purchase their own homes if they can?”
These immortal words were from Margaret Thatcher, the Iron Lady, British Prime Minister from 1979 to 1990,in an interview in 1976.
There are persistent rumors that the US Federal government is considering changing some of the tax breaks for 401(k) savings. The idea has been around for awhile, but what taxing savings of any kind amounts to is a punishment for saving. In the Keynesian economic model, saving is bad and a detriment to a strong economy. By taxing savings and retirement accounts, the government accomplishes the following:
- Less saving by individuals, and more spending.
- By taking money from someone’s savings, the government can then spend that money, a key provision to the Keynesian economic model, by giving it back when you retire, or give it to someone else in the form of welfare.
- More government dependence.
Once the government has its hooks in, it is hard and painful to get them out. This is why leftists are so against austerity (we can’t cut our way to prosperity), claiming they don’t work, when in reality, it is the accompanying increase in taxes that is making economies falter.
The whole idea stems from the line of thought that since the government mints and prints the money, it is the property of the government, therefore anything you buy belongs to the government, and anything you save also belongs to them, so they should be able to take it on a whim and give it to someone else, and determine how much you will receive when you need it.
I’m not saying Welfare, Medicare, Medicaid and Social Security are bad things. Sometimes people need help. I’ve needed government assistance in my life, especially in this economy. However, I try to stay off of it as much as possible. There are those who go out and take vacations, go gambling, and eat better than I do because of fraud in the system.
We live in the Digital Age. Most Welfare and Food Stamps are given on cards that are reloaded every week or month, depending on the frequency of payment. If the government knows that people spent money on cruises or on slot machines in Vegas, or purchase lobster and filet mignon (or prime rib) constantly, their computers should flag that account for review. No longer should food stamp recipients be able to purchase prepared food with their cards. But they don’t. That would be trampling their rights.
That’s totalitarianism at its finest. Nothing belongs to you. There is no private ownership of anything, it belongs to the government, and hence, all the people.
During the cold war (near the end of it, when I grew up), Communism was something that we feared. We saw what it did. We saw the corruption in it (that is not to say that corruption doesn’t exist in our system. It does, but that’s another article for another day). We saw it collapse on itself.
Then, when I was in my mid 20’s, I witnessed it starting to creep in. The communists had figured out that if they began to commercialize, they could get their message out.
For years, I saw posters and t-shirts with the likeness of Che Guevara on them. A hero to the counterculture of this country, the man was a butcher. Interesting considering that he was a physician.
It amazes me how people will give butchers like him a pass if they give free stuff to the people. Witness Hugo Chavez, who gave the poor just enough while amassing a fortune worth over $1 billion, up to $2 billion by some accounts.
While the people of Cuba may have initially loved Che and Castro, once they took power, their government did what most communist governments do. People disappeared in the night, were tortured, had unfair trials and were arbitrarily executed, especially if that person was an enemy of the Party.
How anyone can revere these men is beyond me (I’m talking about you Sean Penn, Ed Asner, Michael Moore, and Oliver Stone).
This is what Cuban prosperity looks like. Just like Latin American progress everywhere. There are a few cities where tourists come to, but they are kept modern and clean. Most of these countries look like this.
But, dammit! They have great healthcare. So much so that they flee Cuba and move to South Florida.
What does this have to do with the Cyprus bailout?
The more the government seizes, the more it gives away. The more it borrows to give the people just enough to keep them pacified. When they can no longer afford it, they have to cut. When they have to cut, the people suckling at the government’s tit become angry when they realize that tit is drying up.
President Obama claims that there is no spending problem. He wants a balanced approach which includes more revenue. Well, he wants a balanced approach of more revenue. Thus the government is considering how to best change the tax benefits on 401(k)s so the government can collect more revenue. He says he won’t raise taxes on the middle class, but changing the 401(k) tax laws will do just that.
A leftist friend of mine, who is often a great source of entertainment, believes that the government has the right to tax. I’ve tried to point out to him that governments don’t have rights, they have powers. The Sixteenth Amendment to the Constitution gave the Federal government carte blanche to tax anything and everything, and they are working on that. So many taxes and fees, it has gone beyond ridiculous. The government is enslaving us all to work for the State, and we just smile and ask for another. Those who don’t believe this are ignorant to what is going on in this country.
Oppression is the order of the day. I’m not singling out Obama. It is the government as a whole. The government as a whole has grown into a bloated monstrosity of bureaucracy, with agencies making rules that we must follow, completely bypassing Congress and the process to create laws. That, in and of itself, is tyranny. No agency, outside of Congress and the President, should be able to make laws, so says the Constitution. Just because it has happened before, does not make it right, does not mean it should continue.
How much more do we have to take before we stand up and say “NO MORE!“?