November 4, 2010
Cuban Tax Reform and Unfreedom of the WestBy Vasko Kohlmayer
"Cuba has set income tax rates at 25 to 50 percent for its soon to be expanded private sector, with the biggest earners paying the most taxes," reported Reuters last week.
It is telling that the tax rates of Cuban communists are now comparable with those in many so-called free countries. Below, for comparison, are individual tax rates for selected Western democracies:
Denmark 36.57 - 51.5%
United Kingdom 0 - 50%
Belgium 25 - 50%
Germany 0 - 45%
France 5.5 - 40%
Austria 21 - 50%
Germany 0 - 45%
Japan 5- 40%
High as they are, these are not the only taxes citizens of these countries have to contend with. There are almost always some local and an array of hidden taxes to pay. And of course, there is the ubiquitous sales tax or VAT, which must be paid on most transactions. This type of consumption tax ranges from five to twenty-five percent in the nations above. The result is that some people in countries such the United Kingdom and Denmark have to give up close to sixty percent of their annual income to the government.
Be that as it may, it looks like the Castros have finally figured out what their ruling counterparts in Western democracies have known all along: Allow your people a measure of economic freedom and then pocket half or more of the productive's income. That way they can raise handsome sums to finance the state. Had Fidel and Raul not been so ideologically rigid, they could have made their reforms long ago and had a much easier time of it economically.
Cuba's apparatchiks will quickly learn, however, that squeezing taxes out of the population will not satisfy the ever-hungry Leviathan. This is why Western governments supplement their income by incessant borrowing. Unfortunately, the Castros cannot emulate that one yet because of their bad credit history. This being said, the out-of-control borrowing and money-printing in the West make Cuba look better and better every day. If things continue in this way, the Cuban government will soon seem fiscally responsible by comparison.
If anything, the tax announcement from Cuba should open our eyes to the un-freedom we enjoy here. If you happen to be productive a member of this society, you probably now pay a federal income tax of 33 percent, which may well go up to 39 percent in less than two months. Add to that state and local levies along with a number of other taxes, and you are likely to end up with a goodly sum. According to E.J. McMahon and Josh Barr of the Manhattan Institute, "the total federal, state and city income-tax bite will exceed 50 percent" for some residents of New York City.
And if you happen to be one of those to manage to put something aside during the course of your life, beginning January 1, more than half of what you leave behind may be seized by the state after you die. It has been reported that as a result, some people are making arrangements to leave this world before that date in order to escape the grabby hand of Uncle Sam. The level of despair to which our government can drive its citizens is truly mind-boggling.
Most Americans believe that we are free, but this is unfortunately not the case. After all, how can anyone be really free if half of his income is confiscated by the powers that are? Most of us spend most of our waking time in our jobs. The income from those jobs is the material expression of our personal energy, talents, and efforts. We are certainly not free if the government claims for itself such a large chunk of our active lives.
Incredibly, many Americans will have a greater portion of their income seized than their Cuban counterparts in comparable income brackets. Some may object that this is not a fair comparison because the U.S. is so different from Cuba. That may be true, but our ruling elites are working overtime to turn us into a second Cuba. Who would have thought even three years ago that the federal government would nationalize whole industries and set itself up as the country's main health care provider?
In this connection one must note the Castros' relative restraint. They could have set the tax rate at any number, and yet fifty percent seemed about right for the highest bracket. This is sure to come as a bitter disappointment to American liberals and progressives. After all, they unceasingly complain that the "rich" -- which mostly designates the productive, many of whom already pay close to fifty percent -- do not pay their fair share. And now they have been betrayed by Castro, who in his misguided generosity allows hardworking Cubans to keep half of their money. He should have taken a cue from Franklin Delano Roosevelt, who at one point tried to tax all income above $25,000 at 100 percent. Actually, they've already tried that in Cuba, but it did not work out too well.
It is quite possible that American leftists will eventually succeed in raising our tax rates even higher than they are now. But we do not have to feel sorry for the monied among them, since they actually do not pay the taxes they publicly call for. We saw a striking demonstration of this two years ago during the confirmation process for the incoming Obama administration. One after another of various candidates had to withdraw because of tax fraud and evasion...but by no means all of them. In an ultimate twist of irony, one of the tax cheats even became Treasury Secretary.
This just shows that America is still a great country, especially if you are part of the elite and know how to play the game.