If you believe Earth is flat, driving due east on the equator for 24,900 miles will leave you unconvinced that it’s in fact round. Only arriving back at your point of embarkation one mile later will persuade you.
Or rather, it should—but probably wouldn’t, judging by how stubbornly leftists cling to beloved economic notions that have been disproved time and again.
No matter that socialism has failed to end poverty, let alone create prosperity, everywhere it’s been tried. Americans who think they know better continue to insist that confiscating an ever-larger share of other people’s money will bring happiness to everyone else.
But wait. Today, in Cuba, the communist government announced that all Cubans will now pay a percentage of their income in the form of taxes. This follows on the heels, as CNBC put it, of free-market reforms that were introduced in the last couple of years in order to “encourage small businesses, private farming and individual initiative.”
In other words, a top-down economy fails, even on an island nation with a captive work force and a brutal, totalitarian dictator who believed for decades that he could mandate prosperity.
The government also envisions replacing subsidies for all with targeted welfare, meaning that the largely tax-free life under a paternalistic government is on its way out.
Weaning the Cuban populace off the public teat after 50 years and three generations won’t be easy, so the Castros wouldn’t be doing this if things weren’t worse than advertised.
“This radically changes the state’s relationship with the population and taxes become an irritating issue,” said Domingo Amuchastegui, a former Cuban intelligence analyst who lives in Miami and writes often about Cuba.The new code covers 19 taxes, including such things as inheritance, environment, sales, transportation and farm land, various license fees and three contributions, including social security.A sliding scale income tax – from 15 percent for earnings of more than 10,000 pesos (about $400) annually, to 50 percent for earnings of over 50,000 pesos, (about $2,000) – adopted in 1994, remains in the new code for the self-employed, small businesses and farms, but it also includes a series of new deductions to stimulate their work.
So Cuba now agrees that incentives play an important role in how humans behave, and that productivity is one byproduct of an incentivized work force. It also means that, as a percentage, more Cubans will be paying income taxes than Americans. How long before Cuba is more of a free-market economy than the U.S.? (Don’t laugh.)
In the United Kingdom, meanwhile, the magic word is disincentive.
It turns out that a recent tax hike on millionaires, who saw their marginal rate raised to 50 percent, has resulted in fewer millionaires residing in the UK.
This was utterly predictable and foreseeable by everyone except those on the left, including former prime minister Gordon Brown (whose previous post was chancellor of the exchequer, our version of treasury secretary), who believe tax rates have no effect on behavior or productivity of “the rich.” To compile their projections, they simply add another ten percent of what Mr. Millionaire is paying onto what’s already there, as if the numbers would be a zero-sum constant.
But oops, some people don’t take kindly to having their income confiscated.
It is believed that rich Britons moved abroad or took steps to avoid paying the new levy by reducing their taxable incomes.George Osborne, the Chancellor, announced in the Budget earlier this year that the 50p top rate will be reduced to 45p from next April….Last night, Harriet Baldwin, the Conservative MP who uncovered the latest figures, said: “Labour’s ideological tax hike led to a tax cull of millionaires.Far from raising funds, it actually cost the UK £7 billion in lost tax revenue.
It would be fine if those who believe the world is flat were the only ones headed toward the fiscal cliff. But they’re intent on taking the rest of us with them.
Prediction: A year from today, I’ll be able to replace United Kingdom with California and have the result be the same.
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