Ronald Sokol

mr-sokol-v3Our loves and friendships are not immune from the weight of taxes. They contribute to broken marriages, ruined friendships, the breakup of businesses and the downfall of states.
Democratically elected governments try to tax as heavily as they think they can get away with so that those who win elections can distribute the revenue in the hope of getting re-elected. The taxpayer is both beneficiary and victim, and the balance between the two is often not in the taxpayer’s favor.
The taxpayer strives to reduce his cost but knows that it is unlawful to evade taxes. If done deliberately and fraudulently evasion is a crime.
The tax minimization industry consists mostly of accountants and lawyers who scour the tax code to find ways for Amazon, Starbucks and Depardieu to lawfully reduce the amount they pay. A move to a low tax jurisdiction is a simple solution. But in the war between the state and the taxpayer the state has more weapons.
Governments are notoriously bad at managing the money they collect. In fairness, the obstacles are many: incompetency, corruption, the sheer complexity of disbursing huge sums, the multiplicity and difficulty of the tasks at hand — defense, education, health, prisons, courts, police, disaster relief, regulation of markets, banks, drugs, food safety. The result is the state is always in need of more money.
No matter how high the taxes, there is never enough.

2 thoughts on “Ronald Sokol

  1. shinichi Post author

    Taxes matter. Benjamin Franklin, America’s first ambassador to France, observed that nothing is certain but death and taxes. Few would disagree. Certainly not Gérard Depardieu, whose choice to move to Belgium provoked the French prime minister, Jean-Marc Ayrault, to call the move unpatriotic.

    Yet the French actor simply exercised a right granted by the European Convention on Human Rights, the Universal Declaration of Human Rights, and in the United States by the 14th Amendment to the Constitution. It is a human right to be free to leave any country, including one’s own.

    While flight may cost the French tax man to lose his chance to get at the purse of the ultrarich, he has long experience in emptying the purses of those who stay. French kings, emperors, consuls and elected leaders have devised ingenious ways of raising revenue. Near to where I am writing lie the ruins of a château torn down in the 17th century because the owner could not afford to pay the tax on the windows.

    The tax collector bites when one is alive and bites again when one dies. In France, if the survivor at the time of death is not a spouse, child or sibling, the tax man bites off a 60 percent chunk. While one is still alive, France will tax gifts so as to prevent the taxpayer from escaping taxes by dying.

    France has value-added taxes, taxes on the sale of real estate, on occupying real estate, on owning real estate, on divorce settlements if real estate is involved, taxes on employers and taxes on employees, taxes on using the judicial system, custom taxes, taxes on wealth itself, and, of course, taxes on income. It has even devised a tax on income that it tries to conceal by calling it a solidarity tax. It can then claim its income tax rate is lower than it really is.

    No one believes this pretense except the American tax man who happily plays along with the French game. It allows him to deny the French solidarity tax as a credit against American taxes. America thus adds its own tax on top of the French tax. The poor taxpayer shows his solidarity by paying a tax to each country on the same income despite a treaty that exists to avoid double taxation. Such is the honesty of governments.

    Yet few subjects are more fascinating than taxes. Not of course the intricacies of whether Section 12345, Part A, Subsection 3 applies to some exotic transaction. It is not the minutiae that fascinates, but rather what taxes are all about. How democracies, kings, tyrants and dictators seek to fill the state’s coffers, for what purposes, and how people respond to those efforts.

    Our loves and friendships are not immune from the weight of taxes. They contribute to broken marriages, ruined friendships, the breakup of businesses and the downfall of states.

    Democratically elected governments try to tax as heavily as they think they can get away with so that those who win elections can distribute the revenue in the hope of getting re-elected. The taxpayer is both beneficiary and victim, and the balance between the two is often not in the taxpayer’s favor.

    The taxpayer strives to reduce his cost but knows that it is unlawful to evade taxes. If done deliberately and fraudulently evasion is a crime. No government will take lightly a flaunting of its tax system. France’s prime minister saw Depardieu’s change of domicile as a deliberate evasion of French taxes. So it was, but while deliberate it was not fraudulent. While it is unlawful to evade taxes, it may be lawful to minimize them or even to avoid them altogether.

    The tax minimization industry consists mostly of accountants and lawyers who scour the tax code to find ways for Amazon, Starbucks and Depardieu to lawfully reduce the amount they pay. A move to a low tax jurisdiction is a simple solution. But in the war between the state and the taxpayer the state has more weapons.

    It may, like Canada, place an exit tax on leaving the country, or, like the United States, tax citizenship. The French state has a quiver full of arrows available to aim at the next French actor, athlete or business mogul who wants to exercise his human right to leave France.

    Oliver Wendell Holmes was happy to pay taxes. “Taxes,” he said, “are the price we pay for civilization.” This is surely right. The real issues are what kind of civilization we want and whether we get the civilization we pay for.

    Governments are notoriously bad at managing the money they collect. In fairness, the obstacles are many: incompetency, corruption, the sheer complexity of disbursing huge sums, the multiplicity and difficulty of the tasks at hand — defense, education, health, prisons, courts, police, disaster relief, regulation of markets, banks, drugs, food safety. The result is the state is always in need of more money.

    No matter how high the taxes, there is never enough.

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