Tuesday, March 31, 2009

Can We Handle a 65% Tax Rate?

I was lucky growing up. Until halfway through third grade I had lived in three regions of the USA; California, Illinois and Mississippi. Because of my father’s corporate career, the next ten years were spent in Europe; three in Scotland and seven in Switzerland, and then on to College in California during the late fifties and early sixties. All those different viewpoints seep into one’s outlook on life because one’s frame of reference changes in a fundamental way outside the family. In Geneva, Ecolint was an international school with kids from one hundred and three nations during the time I was there. The corporations made adjustments to help out with the hardships of the expense of the school to soften the blow for the less affluent attendees in order to assure preparations for American colleges remained available. Like I said, I was lucky.

As it turned out, one of my main friends was Swedish. His family had left Sweden to get some relief from the high taxes, about 65%. It was intentional to insert the numbers there instead of letters to impress on my readers the cost of those generous governmental systems. That’s where we’re headed. His father had wanted to get a Pontiac GTO in Sweden, but thought better of it. In the USA, it cost about $3548. In Geneva it was about $7000 and I don’t know what it cost in Sweden at the time. He ended up staying in Geneva and enjoying his GTO.
Even though our free market system has offered a standard of living beyond the wildest dreams of most of the world, part of the massive spare time we have available is filled with apparent guilt that there are people all over the world who aren’t as lucky as we are. It seems ludicrous to many that free healthcare is unavailable to us whereas European countries have resolved the issues, at least on the surface.

When Reagan was researching how to alleviate the financial crisis left by his predecessor, he ended up consulting with an unpretentious fellow by the name of Laffer. I remember having read an article about Laffer at the time. He was a believer in putting money in the hands of consumers rather than having the government whittle it down for them. It worked and the rest of Reagan’s policies changed history. His modesty delivery was refreshing.
Just because a group of people who respect each other agree that something is true doesn’t make it so. If a system has been working however marginally from a perfectionist’s point of view, such as the case with our free market, it’s quite possible that meddling won’t improve its outcome. There has been a burgeoning population that has agreed that the free markets are too tempting for corruption as we have seen with Madoff among others. Corruption can occur with either party, though. Academicians have been salivating at the prospect of proving their theories and wish to dismiss fine tuning is a waste of time since excesses in our systems have caused the proverbial train to jump the tracks. It’s America and elections have put such an academician in the White House. The experiment continues.

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