Sarkozy’s Terrible Tobin Tax

Bob Bauman (January 9, 2012)

How To Escape From America, and Where to Go

French president Nicolas Sarkosy has never met a tax he didn’t like — or a tax haven he didn’t hate.

At this moment Sarkozy’s government is pushing for a European financial transactions tax, even though Germany opposes it. In the past Sarkosy has advocated a worldwide tax on every currency and financial transaction and even on every airplane ticket sold.

France has long been an advocate of this so-called “Tobin tax” on financial and forex transactions. Sarkozy used his 2012 New Year address to argue that a global transactions tax is a “moral” issue and that the financial sector must “repair of the damage it caused.”

He said nothing about the damage caused by high taxing, deficit spending politicians.

Tobin Tax

As my colleague Mark Nestmann has noted: “Imposing tax on forex transactions isn’t a new idea. In 1978 economics professor and Nobel Laureate, Dr. James Tobin suggested that such a tax could help curb volatility in emerging market economies.”

Tobin, who has since disavowed his own idea, proposed the tax to curb speculation in third world countries. But the United Nations hijacked his idea, primarily because the tax offered the UN bureaucrats a possible funding source independent of individual donor governments.

In the mid-1990s the UN made the Tobin tax the centerpiece of its funding proposals to redistribute wealth and income. But the UN wanted a rate of 0.05%, a rate 10 times higher than even the French proposed. According to a 2001 report from the UN’s “High-Level Panel on Financing for Development,” that tax in 2001 would generate up US$400 billion annually.

No Haven for Sarkozy

Since his 2007 election, I have chronicled in this space Sarkozy’s rabid, almost irrational verbal attacks on individual countries that he judges are not taxing their citizens enough – including his neighbor, Andorra, as well as Switzerland, Panama and Uruguay.

By all reports Sarkosy re-election hopes have been hit hard by December 2011 figures showing French unemployment at a 12-year high of 9.3%. Before his election, Sarkozy vowed to lower joblessness to 5%. The news could hardly be worse for Sarkozy, who is facing a tough battle for re-election in April against Socialist frontrunner Francois Hollande, with the economy expected to be the main issue.

Ironic French Statistics

The French love irony and it is certainly ironic that Sarkozy’s France has one of the highest income tax rates in Europe; especially on high salaries, about 50% higher than in the U.S. In addition to a 20% value added tax on almost everything, only 52% of the population pays income tax and currently the maximum marginal rate is nearly 50%.

All those taxes finance big and bloated French government. The public sector employs more than 6 million people, 23% of the total work-force. The national debt is enormous; 65% of the GDP, or €26,129 (US$33,374) per inhabitant. (Americans can take no comfort; our per capita national debt is US$48,879.76 under Obama).

Indeed Sarkosy has demanded that the Organization for Economic Cooperation and Development (OECD) anti-tax haven bar be raised still higher and the goal posts be moved to include blacklisting for legal tax avoidance – which is not a crime – and not just tax evasion, which is.

How and why individual taxpayers or tax haven jurisdictions should be required to ban legal avoidance of taxes that are not owed is a mystery — but this inane demand got the press coverage which Sarkozy seems to love.

Can’t Happen Here?

Before you say, “I can’t happen here,” consider this.

In September 2010 president Barack Obama attended a United Nations summit in New York where he endorsed “innovative finance mechanisms” — global taxes — to be financed by draining more wealth out of faltering U.S. economy and your pockets.

Apparently in 2008 when in Ohio candidate Obama let slip the word to Joe the Plumber that he wanted to “spread the wealth around” he didn’t confine his bog spending vistas to just the U.S.A., but had the whole world in mind.

An “outcome document” at the September 20-22, 2010 UN “Summit on the Millennium Development Goals (MDGs)” committed all nations to support “innovative financing mechanisms” as a supplement to foreign aid spending. Understand that “innovative financing mechanisms” is a UN euphemism for global taxes.

Worldwide UN IRS

The UN long has wanted to create an international tax organization with the power to interfere with national tax policies, a crazy idea that first surfaced in 2001 UN report. Since then, the UN has worked to make this a reality, calling for the creation of a global tax commission.

No matter what it’s called, an international bureaucracy with power over tax policy would be an assault on every nation’s sovereignty.

The last time the UN formally addressed the world economic structure was in 2002 when I reported on another UN conference, that one held in Monterey, Mexico before the current drug violence. At the time I called it “the tax collectors meeting from Hell” where plans were laid for a UN “international tax organization,” a sort of one-world IRS.

With such grandiose ambitions, naturally the UN has been part of the chorus attacking legitimate tax havens, along with the European Union, the OECD, and President Obama, backed by his radical, left-wing allies in the U.S. Congress, led by Senator Carl Levin (D-MI).

Dan Mitchell Says

As the Cato Institute’s resident tax expert Dan Mitchell has said: “There is an understandable temptation to dismiss these UN proposals as silly. After all, the U.S. can veto any bad initiatives. But a passive approach is a mistake.”

But Obama would never veto such a UN plan, as president George Bush actually did. No indeed: Obama already has gone to the UN and endorsed in principle this world tax plan.

I agree with Dan Mitchell. Educate yourself thoroughly about these dangerous proposals. Let your senators and congressman know your strong opposition. Ask 2012 federal candidates where they stand.

It’s bad enough to be forced to pay high taxes in one’s own nation to finance trillion dollar wars and foreign aid giveaways without also having to finance the whole world’s loony Left as well.

The most shocking part of all is that socialists in Congress would welcome such global surrender of our national sovereignty and our Constitutional rights — and that President Obama has had the audacity to endorse it.