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Taxes - The Great Bluff
by Nico Beckert
Email: marc1seed (nospam) yahoo.com
06 Jan 2019
A tax-cutting lobby exploits our unease over taxes for their purposes. Tax flight and an increasingly unjust tax system are connected with inequality, trifling chances of advancement and the decay of social cohesion.
TAXES – THE GREAT BLUFF
By Nico Beckert
[This book review published on 11/1/2018 is translated from the German on the Internet, https://makroskop.eu/2018/11/steuern-der=-grosse-bluff.]
Every attempt at getting the wealthy to contribute more to financing the community is branded “as cold expropriation of the successful.” Norbert Walter-Borjans gets even with the tax cutting lobby… Paying taxes is not a popular hobby…
In “Taxes – The Great Bluff,” the former finance minister of North Rhine-Westphalia (2010-2017) Norbert Walter-Borjans explains how a tax-cutting lobby exploits our unease over taxes for their purposes. He shows how tax flight and an increasingly unjust tax system are connected with inequality, trifling chances of advancement and the decay of social cohesion.
A Society Drifting Apart
Walter-Borjans starts with a merciless analysis of social conditions in Germany. He names missing mobile Internet in rural areas, hnou9sing shortage, and school toilets as infrastructure deficits that crassly “put in question the picture of highly developed Germany.” Walter-Borjans sharply criticizes the opening gulf in the distribution of income and wealth. Germany has the second-highest inequality in the euro zone. The chances of advancement in Germany are lower than in other industrial lands. This society drifting apart contributes to fears of falling. Social cohesion declines and milieu egoism increases. A wealth produced by many that only benefits a few “threatens to become an explosive charge for the stability of society.”
Tax Flight and an Unjust Tax System as Problem Causes
Corrective state interventions are necessary to stop the exploding inequality. The state must intervene where the market cannot offer any adequate solutions. The state needs tax revenues to act.
The German state loses at least 130 billion euros annually in revenue through tax gifts, tax avoidance and tax evasion. In the realm of tax avoidance and illegal tax cheating, Walter-Borjans names examples from the manipulation of treasuries that has assumed completely new dimensions and location competition between small German communities with trifling trade taxes and property taxes, tax evasion through profit-shifting abroad to the “tax robbers” who are refunded taxes they never paid. All this contributes to the state losing its capacity to act. Austerity policy and the zero-deficit criticized by Walter-Borjans take away from the state the possibility of reducing ineq2uality through debts.
The author notes: “The mantra of private over the state with a zero deficit and simultaneously reducing expenditures and revenues to which everything else is subordinated leads inevitably to a growing de-solidarity of regions and population groups.” With that, Walter-Borjans describes the ideologies and attitudes that define society and politics today and how they prevent countermeasures against the accelerating inequality. Every attempt at getting the wealthy to contribute more to financing the community is branded “as cold expropriation of the successful.”
The Power of the Tax-Cutting Lobby
These ideologies and dogmas were brought into public discourse by a tax-cutting lobby. In the third chapter, Walter-Borjans explains how our tax system moved away from just distribution of the tax burden.” His book reads like a guide for seeing through the tricks and deceptions of lobby organizations.
Walter-Borjans describes how the Alliance of Taxpayers pretends to be the champion of normal persons. With the same model, these lobby organizations execute the interests of the wealthy and businesses by persuading the afflicted that they are worried about alarm, fears and the normal citizen. The normal citizen would profit from tax relief and is affected by tax hikes of every kind.
The tax-cutting lobby speaks with false statements and deceptive claims that they have been bled too much. Thus, they organized a majority against the allegedly “greedy state” and for tax cuts from which only a very well-to-do minority profits. Walter-Borjans opposes the golden mean of tax cuts because money is lacking through tax cuts and services must be cut.
On the day of the taxpayer, the Alliance of Taxpayers gains media attention every year. The Alliance of Taxpayers suggests “all taxpayers must work for more than half a year only for the state.” However, the calculation of the Alliance of Taxpayers is based on an intentionally incorrect selection of data. In truth, the part of the income that flows to the state from the majority of taxpayers amounts to less than a quarter of the gross national income. Thus, the true day of the taxpayer must come in March. Walter-Borjans calls the day of the taxpayer a deeply anti-social construct,” an artificially inflated calculation that fuels “state weariness” and perpetuates the picture of the “greedy state.”
Walter-Borjans does not defend politics. The tax avoidance industry has its “people’s representative” in the German Bundestag. The former finance minister Wolfgang Schauble always claimed Germany’s efforts at fighting tax flight were blocked. According to Walter-Borjans, the CSU-CSU fraction and the FDP slammed on the brakes in fighting tax flight. As a social democrat, Walter-Borjans does not recoil from criticizing his own party. Out of fear of the tax-cutting industry, the SPD capitulates again and again on the more just reformation of the tax system. A rotten compromise was made in the coalition agreement. Top politicians in the SPD lack knowledge and expertise to hold their own in discourse with the tax-cutting lobby. The SPD seldom sees through the disinformation campaign according to Walter-Borjans. This led to the SPD yielding again and again in the last decades to the pressure of the top earners. The SPD share the blame for the redistribution from bottom to the top.
An Enlightened Book
Walter-Borjans’s book is an important book in times when a further lowering of business taxes is discussed. It is a guide for the fiscal renewal of the SPD and is a wise book where the author addresses social problems with clear language. Germany’s future would be less beclouded if more politicians read such enlightened books instead of transitioning into the free economy.
CHARTER FOR TAX FRAUDSTERS
By Nico Beckert
[This article published on 10/19/2018 is translated from the German on the Internet, https://makroskop.eu.]
The tax scandals just go on and on: LuxLeaks, Swiss Leaks, Panama Papers and Paradise papers. This has more to do with the failure of the state than with tax criminals.
At regular intervals of one to two years, whistleblower-journalists slip tax data or researchers burrow through gigantic amounts of data on tax cheats. Billions escape the German state annually. The latest scandal involved losses of 31 billion euros between 2011 and 2016. With European partner countries, this adds up to 55 billion euros.
These euros are lacking for financing schools, maintaining or developing the infrastructure, pensions, social housing and battling high youth unemployment. For a long while, the state has not done enough in basic public services…
Half-hearted Struggle against Tax Flight
The struggle against tax flight and tax fraud becomes even more important in times of debt brakes and Europe-wide austerity policy (cf. the reproaches against Italy). Still, this struggle is partly hindered from above and is only waged half-heartedly.
This problem was known since the 1990s… Germany first warned European partners in 2015. A coordinated Europe-wide combating of tax tricks would look different…
Since 2002, the personnel with the taxman were reduced nearly 10%. In his book “Tax Haven Germany,” Markus Meinzer cites the Federal Audit Office: “the execution of the tax laws cannot be guaranteed on account of the personnel shortage.” The director of the German Tax Union speaks of a silent and sinister bleeding of the German internal revenue service. Even state regional banks that had to be preserved from collapse with public funds could join in the great game around frauds with the return or reimbursement of capital gains taxes…
Many Scandals and Hardly Any Protests
Where are the great demonstrations against the billions fraud of the well-to-do, bankers and multinational tax evaders like Apple, Ikea, Starbucks & Co? Although the damage for the general public is enormous, there is no broad civil movement against the tax fraud…
No party writes the battle against tax flight on its banner. This is also irritating. This battle could be a winning theme. A small minority operates secretly to steal billions from the state and the community.
Walter-Borjans explains this missing élan of the parties as lack of understanding and fear. Ignorance about the German tax system and the complex tax avoidance strategies of the propertied classes and businesses prevails in the SPD. In addition, the SPD is worried about tax breaks for lobby associates.
This may seem bizarre or peculiar. Some politicians regard the battle against tax loopholes as amounting to tax hikes
For most, taxes are a book with seven seals. This narrowed view is the basis for enormous profits of the few – at the expense of the general public and social cohesion. Therefore, the theme taxes may not be left to those who want to secure and develop their own privileges and only pretend to represent the general interest.
Whoever has read this well-informed and spirited book of the former NRW finance minister will understand
• why tax tricks and tax evasion endanger our future;
• why a more just fiscal policy comes to nothing again and again;
• how widespread are the legends of the tax avoidance lobby; and
• how vital is the participation of everyone in financing our community.
No politician in the last years has spoken so decisively and fought so consistently against the epidemic of tax fraud as the former NRW finance minister Norbert Walter-Borjans. He gained billions for the community and strengthened public consciousness against tax criminality. Again and again, he tried to move the injustices and weaknesses of our tax system into the center of political discussions and developed ideas for greater transparency, simplicity and justice in taxes. He met with resistance among the lobbyists of big capital and global corporations and in the political parties including his own, the SPD.
Norbert Walter-Borjans, born in 1952, member of the SPD, finance minister of North Rhine-Westphalia from 2010 to 2017. Norbert Walter-Borjans lives in Koln.
STATE DEBTS: THE PRIMAL GERMAN FEAR
[This article published on December 21, 2018 is translated from the German on the Internet, https://zebralogs.wordpress.com.]
Top politicians in the popularity scale stylize themselves as champions of a strict austerity policy. The German finance minister is an example. One either makes policy and debts or carries out conservative policy and a fair budget. A commie seeks a zero-deficit. Saving is held to be a virtue in Germany.
However, an economical state only seems rational on first glance. The country that becomes indebted lives at the expense of future generations. This argument is often hears in political and media discourse. Still, what may be true for an individual budget can be untrue for the state.
The country and the communities invest too little so we leave degenerate streets and ruined schools to our children. According to different research institutes, between 90 and 120 billion euros of investments are missing annually to maintain the infrastructure and adequately financing schools, apartments building, digitalization and the care system. Germany lives from its substance.
Generating growth and prosperity will be harder for coming generations through the decay of the transportation infrastructure and an under-financed educational system. Our children inherit fewer absolute debts through the austerity policy. The debt burden remains the same when the GDP is less because of missing investments in the future and the weaker economy. This is like a house that is passed down. Either we parents invest today in the preservation of the house or we pass down a degenerate house that they could rent for less money or must become indebted for its renovation.
The fear of living at the expense of future generations underlies the worry that future generations will have to repay a huge mountain of debts. Nevertheless, state debts function differently than private debts. Unlike private home builders with their banks, the German state never must completely repay its debts.
All the investors who hold German state bonds will never insist on complete repayment… There will always be new investors buying German state bonds. Germany must never completely repay its debts. For private persons, it may sound shady but the state simply pays old debts with new debts. Thus, unlike private home builders, the state need not save to “pay” the interests to assure the investors.
Investors even want the state to become indebted because German state bonds are a safe investment and investors will never lose their money. For example, pension funds must invest a certain amount in investments with the highest ranking. These include German government bonds.
Debts are assets
With the German anxiety about state debts, the anxious unfortunately look at one side of the “bill,” the debts. Debts always create savings.
When the state becomes indebted, it spends more money than it receives and builds a street or school with the money; it supplies revenue to building contractors. They pay their workers and employees who have more money for additional spending, for example a good meal or a visit to a swimming pool or movie theater. This is also true for teachers, civil servants and other public servants. State spending is for wages and income for employees and the profits of businesses. So more and more people profit from the high debts and the economy grows.
The absolute amount of the debts increases through borrowing. Since the GDP also grows, the indebtedness does not increase in relation to the GDP (debts/GDP) – and can even fall with wise state investments.
State debts also enable private persons to safely invest their income and save. Private persons can purchase national debts through government bonds and profit from a secure return. Thus, state indebtedness stands opposite private wealth formation.
If the state, businesses or private households do not become indebted, the economy grinds to a halt and no one can realize savings. One of these actors must invest. Only the state is left as an investor and motor of the economy when neither private households nor businesses invest.
The results of austerity policy
The consequence of austerity policy is not only that we pass on a crumbling house to our children. Austerity policy already has a direct effect today on the citizen because of late trains, slow mobile Internet and rising rents. The digital and the transportation infrastructure are not modernized and social housing was privatized.
The austerity policy also creates the argumentative foundation for the (partial-) privatization of state infrastructure projects (public-private partnerships), highway tolls and the privatization of public services. When the necessity of a frugal is stressed, the withdrawal of the state seems absolutely necessary. .
Privatization of public goods affects the uncoupled or poorer parts of the population most severely. The cleaning staff, the couriers and the Hartz IV recipients (Hartz IV combines unemployment benefits and income support (475 euros) with a restricted time period and was ruled in violation of human rights by the German Constitutional Court) depend intensely on public functions and services like hospitals, schools and local public transportation because they cannot afford private healthcare, private schools or cars. Public investments benefit these parts of the population.
Austerity policy impacts the taxman and veterinarian- and food monitoring. The internal revenue personnel are greatly thinned. Personnel are lacking to subject businesses to regular audits. Tax tricks at the expense of the general public are given free rein. The situation in animal protection is one example. As the Sueddeutsche Zeitung newspaper recently reported, stalls in Bavaria are only inspected every 48 hours. Non-existent and weak controls mean farmers do not invest in animal protection and more and more complaints are lodged with the meager controls.