Tuesday, July 28, 2009

Tax Cut 10: Mongolian Taxpayers Movement

A friend from Ulaanbaatar, Mongolia, Mr. Jargal Dambadarjaa (JD), put up a new non-government organization (NGO) there, called Mongolians for Fair Taxes and Wise Spending (FTWS). The position papers are posted in his blog, http://www.djargal.blogspot.com/.

His last article as of this writing is entitled "Another Tax Load". He rightfully put it when he wrote,

"Today, the single largest factor hindering Mongolian society’s progress is our own ever-growing government. It enforces tax collection from people, but never gives a clear report where those money go, and with what interest rates those funds are kept. Because of this unclear condition of public funds, corruption stems from the government walls. The government is keeping our development stalled instead of facilitating it."

I was also shaking my head to read that Mongolian government officials can have medical treatment in Japan and Singapore for free. Well at least they are not going to UK, France, Canada or the US where medical treatment are very expensive.

I believe that free market think tanks and institutes should include some tax activism in their menu of research work and/or political activities. This will help discipline them NOT to accept any government money, national or foreign aid.

My observation here in the Philippines is that so many NGOs and civil society groups that are supposedly activist, fighting corruption and advocating good governance, are silent when it comes to taxation issues. Why -- I think mainly because they receive funding from some government departments, or from foreign aid bodies (USAID, WB, UN, ADB, EC, GTZ, etc.). WB-Philippines for instance was shameless to openly advocate higher excise tax for petroleum products. I wrote a blog entry about it here.

Meanwhile, I wrote this last February 07, 2009:

On Taxing the Rich

There is an interesting article this week from the NY Times,

Please raise my taxes

Published: February 5, 2009 
Los Gatos, Calif.

The author wrote,

"I'M the chief executive of a publicly traded company and, like my peers, I'm very highly paid. The difference between salaries like mine and those of average Americans creates a lot of tension, and I'd like to offer a suggestion. President Obama should celebrate our success, rather than trying to shame us or cap our pay. But he should also take half of our huge earnings in taxes, instead of the current one-third. 

Then, the next time a chief executive earns an eye-popping amount of money, we can cheer that half of it is going to pay for our soldiers, schools and security. Higher taxes on huge pay days can finance opportunity for the next generation of Americans. 

Clearly, the efforts over the past few decades to control executive compensation haven't accomplished much. Improved public disclosure was supposed to shame companies into lowering salaries, and it obviously hasn't worked. In 1993, President Bill Clinton changed the tax law to effectively cap executives' salaries at $1 million a year, but that simply drove corporate boards to offer larger bonuses and stock options to attract and keep talent. More recently, "say on pay" proposals would have shareholders opine on their boards' compensation decisions, but "say and pay" won't change the fact that luring a top executive away from another company is never easy or cheap. 

The reality is that the boards of public companies hate overpaying for anything, including executives. But picking the wrong chief executive is an enormous disaster, so boards are willing to pay an arm and a leg for already proven talent. Putting limits on the salaries at public companies, or trying to shame them into coming down, won't stop this costly competition for talent.... 

I agree that putting a cap on executive pay is a terrible idea.
But asking that income tax on high-earning people be raised is also a horrible idea.

A better solution is that neither of the above should be done. And if the author believes that parting with one-half of what he is supposed to earn every month or every year, the money be used to fight poverty in America is a good idea, then he can do it himself. If he pays taxes 30 percent now, then he can send the IRS another 20 percent, total 50 percent. Then he can also convince his other friends who are company President and corporate executive to do the same. This is a perfectly fine arrangement. No coercion needed or attempted.

But asking the government that his bright idea be made into a law so that it will apply to everyone including those who do not believe in his bright idea, is wrong. That is coercion. That is dictatorship.

And going back to democracy, technically, one would not need coercion to implement democracy. If the majority think that education for all is a bright idea, then there is no need to employ coercion and force everyone to contribute to that cause, whether they have children or none, whether rich or poor. Non-coercion means parents will be responsible enough to work hard so they can send their kids to a school of their choice (foreign language school, arts and culture school, science and math school, religious school, practical arts school, etc.). For children of lazy and irresponsible parents, they can be adopted as scholars by charitable organizations, or by the local government's special welfare program, provided that these kids will show that they are serious in their studies. Then allow the lazy parents to fade, slowly but surely, to oblivion, unless they will reform themselves and assume more personal and parental responsibilities.

* See also:

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