Nobel Prize winning economist Joseph Stiglitz admits that U.S presidential candidate Mitt Romney is not a tax evader because this can only be proved after a successful criminal investigation by the US Internal Revenue Service; but according to the economist he is a tax avoider of the highest order.
Stiglitz believes that Romney’s brand of aggressive tax avoidance, which amounts to spending hundreds of thousands of dollars to legally ‘organise your affairs’ so that you pay only the tiniest fraction of your tax bill, undermines democracy.
Writing in the Guardian, he argues that:
“Democracies rely on a spirit of trust and co-operation in paying taxes. If every individual devoted as much energy and resources as the rich do to avoiding their fair share of taxes, the tax system either would collapse, or would have to be replaced by a far more intrusive and coercive scheme. Both alternatives are unacceptable.”
The economist takes equal exception with Warren Buffets tax strategy which according to this ‘free market’ titan means that he is only prepared to pay the taxes that he ‘must’.
The Noble Laureate goes on to explain that the nature of the problem is “a system which taxes speculation at a lower rate than hard work and distorts the economy. Indeed, much of the money that accrues to those at the top is what economists call rents, which arise not from increasing the size of the economic pie, but from grabbing a larger slice of the existing pie.”
He goes on to say that “those at the top include a disproportionate number of monopolists who increase their income by restricting production and engaging in anti-competitive practices; CEOs who exploit deficiencies in corporate-governance laws to grab a larger share of corporate revenues for themselves (leaving less for workers); and bankers who have engaged in predatory lending and abusive credit-card practices (often targeting poor and middle-class households)”
For Stiglitz the issue is the private sector’s refusal to pay its fair share to bankroll key items of ‘public good’ like innovations in technology, publicly funded schools and infrastructure from which we all benefit, but that would be under-supplied (or not supplied at all) were we to rely on the private sector.
Worse still is the terrible example set by Presidential aspirants like Romney, who because they underestimate the importance of publicly supplied goods refuse to pay their ‘fair share’ of taxes. In so doing he and others like him discredit belief in the inherent fairness of the tax system and erode the bonds that hold the society intact.
In the final analysis, Stiglitz suggests that if the tax avoidance strategy of Romney – the would- be president of a country which is the unquestioned leader of the ‘free world’ is ‘rotten’ then as the adage goes and working on the principle of ‘leadership by example’ the tax affairs of everyone else in America and the rest of the world will be just as foul!
The full piece is worth a read.