The world that the International Monetary Fund, or IMF, operates in exists only in theory, it is like the perfectly closed system where energy is a constant which is the the basis of many physics theories. On one hand, the assumption of a closed system is the only way to test a hypothesis. On the other, to assume that the closed system is a given in real world situations is folly in the physics profession.
While the physics professor recognizes the limitations of his theory in practice and makes the requisite adjustments, these limitations are all too often lost on the IMF and others in the economics profession. The situation of the latter is dangerous, as their theories influence wide-ranging policy decisions which affect the lives of billions based on its closed system fantasy.
Such is the case with the recommendations made in its October 2013 World Economic and Financial Survey which is eerily titled “Taxing Times.”
In the report, the IMF makes two data driven observations: That the national debt load in certain Euro zone countries is excessive and that there is a certain level of net family wealth in these countries.
Fair enough, however, what happens next is disturbing, for it reveals both the closed system fallacy as well as the arrogance of those at the IMF. The IMF takes the above two data points and arrives at the following conclusion:
A one time, 10% tax on net family wealth in certain heavily indebted countries would make the national debt loads once again “manageable.”
The IMF believes that this one time family wealth tax would help as it would simply reduce the national debt, specifically in Italy and Spain, who, true to form, have managed to avoid full-scale bailouts suffered by the Irish, Greeks, Portuguese, and Cypriots to this point and gamed the ECB into issuing bonds on their behalf.
This last point should give you, fellow taxpayer, all the information you need to understand why, as ludicrous as a family wealth tax sounds, it becomes even more ludicrous when one thinks that it can be imposed on Spaniard and Italians, who are hands down the world champions in tax avoidance.