Bloomberg on the Budget Deal

http://www.futureofcapitalism.com/2011/08/bloomberg-on-the-budget-deal

A Bloomberg News editorial on the budget deal opines:

Bold measures -- including overhauling entitlements, rethinking the uniquely dysfunctional U.S. tax code and considering a federal value-added tax -- must be on the table. At an estimated 30.5 percent of GDP in 2011, the total tax burden on Americans is the lowest among the Group of Seven industrialized nations...

In addition to stalled economic growth, we have an aging population and growing inequality, with roughly a third of the nation's wealth controlled by 1 percent of our citizens. The deal amounts to complete denial of these facts by our political leaders.

It'd be a bold (if unwise) measure actually to impose a federal value-added tax. Merely considering a federal value-added tax doesn't exactly rise to the level of bold, if you ask me.

As for the international comparison of tax burden as a percentage of GDP, there's no link, so there's no way to tell where Bloomberg is getting its numbers. The most important word in the sentence is "estimated," because 2011 is only slightly more than half over, so there's no possible way that the Bloomberg editorialists or anyone else can know what America's GDP will be for 2011, what America's tax receipts will be for 2011, what the GDP and tax receipts of the other G7 countries will be for 2011, and what the tax receipts will be for 2011 for all the state and local governments that are an important part of any such comparison. Wikipedia has some numbers from past years, via the OECD, the Heritage Foundation, and Eurostat. The Heritage numbers put America's tax burden higher than China or India, two of our big international economic competitors. And the OECD numbers here put our tax burden higher than that of Chile or Mexico.

The Bloomberg editorial complains about "roughly a third of the nation's wealth controlled by 1 percent of our citizens." First of all, data on this is sparse — the most recent I have seen is based on a 2004 Federal Reserve survey of consumer finances. Second, a lot of that wealth isn't simply "controlled" — it was created by entrepreneurs who worked hard and took risks. Michael Bloomberg started out at Salomon Brothers in the summer of 1966 counting securities by hand in his underwear in an un-air-conditioned vault, and when he started Bloomberg, he spent his weekends dragging cables under customers' desks in 100-degree heat (no air conditioning on the summer weekends) "amid old McDonald's hamburger wrappers and mouse droppings," (according to Bloomberg's autobiography) working till 10 or 11 p.m. Mr. Bloomberg has been a generous philanthropist, but if he really wants to do something about not income inequality but wealth inequality, nothing is stopping him from surrendering ownership of the $20 billion company he built in an initial public offering allotted at one share per American, or per living human being on the planet. But it's not the "nation's wealth," it's Bloomberg's wealth. He created it, and he can do what he wants with it, even if what he wants to do is hire a bunch of left-wing editorial writers who want to take away the property Bloomberg controls and give it to politicians in Washington to redistribute.

by Ira Stoll  |  Aug 2, 2011 at 10:12 am Related Topics:  Income Inequality, Taxes receive the latest by email: subscribe to the free futureofcapitalism.com mailing list