Less than 10 years ago, many European nations suffered fiscal crises because of a combination of excessive spending, punitive taxes, and crippling debt.
The crises have since abated, largely because of direct and indirect bailouts. But the underlying policy mistakes haven’t been fixed.
Indeed, the burden of government spending has increased in Europe and debt levels today are much higher than they were when the previous crisis began.
Unsurprisingly, these large fiscal burdens have resulted in anemic economic performance, which helps to explain why middle-class French taxpayers launched nationwide protests in response to a big increase in fuel taxes.
The French President, Emmanuel Macron, capitulated.
But some have suggested that Macron’s problem is that he wasn’t sufficiently bold.
I’m not joking. Led by Thomas Piketty, a few dozen European leftists have issued a Manifesto for bigger government.
We, European citizens, from different backgrounds and countries, are today launching this appeal for the in-depth transformation of the European institutions and policies. This Manifesto contains concrete proposals,
in particular a project for a Democratization Treaty and a Budget Project… Our proposals are based on the creation of a Budget for democratization which would be debated and voted by a sovereign European Assembly. …This Budget, if the European Assembly so desires, will be financed by four major European taxes, the tangible markers of this European solidarity. These will apply to the profits of major firms, the top incomes (over 200,000 Euros per annum), the highest wealth owners (over 1 million Euros) and the carbon emissions (with a minimum price of 30 Euros per tonne).
Here are the taxes they propose as part of their plan to expand the burden of government spending.
I’m surprised they didn’t include a tax on financial transactions.
And here’s a video (in French, but with English subtitles) explaining their scheme.
To put it mildly, this plan is absurd. It would impose another layer of government and another layer of tax on a continent that already is suffocating because the public sector is too large.
I’m not the only one with concerns.
In a column for Bloomberg, Leonid Bershidsky points out why he is underwhelmed by Piketty’s proposal.
The reforms proposed by Piketty and a group of intellectuals and politicians — notably Pablo Iglesias, leader of Spain’s leftist Podemos party — include the creation of a European Assembly. It would have the power to shape a common budget and impose common taxes…
Piketty advocates four measures that would collect a total equivalent to 4 percent of Europe’s GDP… What is being proposed is essentially a return to the fiscal policies of the 1970s, which provoked Astrid Lindgren to write her satirical essay “Pomperipossa in Monismania.” In 1976, the children’s author was confronted with a tax bill of 102 percent of her income. …Hit them with new taxes and watch them flee to the U.S. and Asia. They won’t stay like patriotic Lindgren, whose essay helped to topple the Swedish government in 1976. And no amount of government funding…will repair the damage that envy-based taxation can wreak on economies already finding it hard to innovate.
Let’s not forget, by the way, the many thousands of French households who also have suffered 100 percent-plus tax rates.
But let’s not digress.
Writing for CapX, John Ashmore explains why Piketty’s plan will make Europe’s problems even worse.
…a group of politicians, academics and policy wonks spearheaded by…French economist Thomas Piketty…have put their names to a new Manifesto for the Democratisation of Europe. …For the most part, the manifesto reads like a souped up version of the kind of policies
we’ve heard time and again from leftwing politicians. …The details of today’s ‘manifesto’ make Labour’s Marxist Shadow Chancellor John McDonnell look like a moderate centrist. Where Labour advocate putting corporation tax back up to 26 per cent, Piketty and co want it hiked to 37 per cent. And while we Brits spent plenty of the Coalition years discussing whether income tax should be 45p or 50p in the pound, the Manifesto goes all guns blazing for a 65 per cent top rate… these measures are projected to raise 800bn euros, equivalent to four times the current EU budget. …that would be a huge transfer of power, not from the rich from the poor, but from taxpayers to politicians.
A 65-percent top tax rate? At the risk of understatement, that’s a recipe for less entrepreneurship and less innovation.
Moreover, based on America’s experience during the Reagan years, it’s safe to say that actual tax receipts would fall far, far short of the projection.
But the higher spending would be real, as would the inevitable increase in red ink. And it’s worth noting that the Manifesto proposes to subsidize the debt of bankrupt welfare states. Very much akin to the eurobond scheme, which I pointed out would be like cosigning a loan for an unemployed alcoholic with a gambling addiction.
P.S. During my recent trip to London, I repeatedly warned people that a real Brexit was the only sensible choice because the European Union at some point will fully morph into a transfer union (i.e., a European budget financed by European taxes). It was nice of Piketty to issue a Manifesto that confirms my concerns. Simply stated, the United Kingdom will be much better off in the long run if it escapes.
P.P.S. Let’s not forget that Piketty’s core argument for class warfare has been thoroughly and repeatedly debunked. Indeed, only 3 percent of economists agree with his theory.
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Image credit: Thomas Bresson | CC BY 4.0.
