I’m Smarter, That’s Why I’m Richer Than You – Is The Rich War Cry…Uh, Maybe, Then Again Maybe Not!… But Either Way Governments Are Getting A Little More Desperate Now, And The Rich Are Making Themselves Into Very Colorful Feathered Targets For New Mega Wealth Taxes!

Posted By on November 5, 2013

The easy target with colorful feathers spread wide are the rich and the super rich.  Ice Cap Asset Management explains and the IMF builds the case…..Absent economic growth, higher taxes are the only perceived option. Be prepared.

Ice Cap in summary….”Meanwhile, our analysis of the global economy continues to show a lack of any acceleration. Instead growth remains quite stagnant. As a result, we fully expect to see tax increases in many countries with a particular focus on property taxes, surtaxes on the rich, as well as the potential for a one-off wealth tax on everyone but the poor.”

“Investors should expect unusual times to continue.”

Here are a few snipets from a presentation given by Ice Cap Asset Management…

Those that truly follow global markets and understand the very big picture painted by our central banks and government finance departments understand that financial markets today do not represent the economic reality that we have all been trained to believe. After all, the confusion emanating from financial markets, individual companies, and macro data points certainly bakes one big confusion pie. It just seems that nothing makes sense. Or does it?

Further on…..

Since losses or write-downs will only be delayed, we should understand that the only way for governments to seemingly get their fiscal house under control is first to rely upon a significantly stronger economy – the kind of economic miracle that will allow a country to grow out of their debt problems. This mystical economic miracle has never occurred: don’t hold your breath waiting.

This leaves our governments with the option of increasing taxes and/or reducing spending. As we’ve seen in Europe and America, governments are simply incapable of spending less. They may find a way of slowing the amount of spending growth, but at the end of the day the net effect is still more spending, more deficits and subsequently – more debt.

In their minds, this leaves higher taxes as the only option. And, of course when their eyes spy who, and what, they can tax – the transformation from tiny pupils to mammoth saucers is complete; the wealthy are about to get hit with some pretty big tax bills.

There’s no escaping it. The wealthy make up a minority, meaning they do not control the vote. How much the wealthy can really contribute, is irrelevant; as President Obama says they must “pay their fair share.” Of course, what is swinging in the wind is the subjective definition of the all important word – fair.

To begin with, the IMF produces a very nice, voter friendly summary of the exact benefits of taxing the super rich. Reading the tea leaves, it shows a 1% tax on the top 10% of the richest Americans will produce tax revenue equal to 1.7% of GDP. Better still, if the Americans taxed the really, really rich an extra 1% on top of the already proposed 1%, this will dream up a wind-fall of 3.1% of the GDP.

On paper, this sounds marvelous. With America running about a 7% spending deficit in 2012, this new IRS Form will help to cut the deficit almost in half. Better still, if we can all hope (there’s that word again) for real economic growth of 4% – deficits everywhere would be under control.

Now, this dream of taxing the super rich is not only beginning in America, it is already doing full-on cartwheels in the most socialist country in the world – France.

Dropping down a page we read……

The point we make, is that many countries around the world have now reached the stage where they realize the tax noose is their only way out of fiscal hell.

The other point we make, is that people are catching on and are in the process of moving their wealth to protect what they have earned.

Yet, this battle between the rich and the state will eventually pause as soon as the state realizes that they have to tax everyone.

A few weeks ago, the IMF published a whopper of a tax study. For some reason, the main stream media either ignored the most important policy paper of the year, or maybe they were simply distracted with Washington’s debt ceiling crisis. Considering, one is the result of the other, it’s only prudent for your investment and tax professionals to consider the implications.

The so-called Super Tax is buried deep on page 49………. In its simplest form, the IMF suggests taxing everyone 10% of their net worth. Yes, net worth – not your income. The good news is that in the minds of the IMF, this will restore some level of debt sustainability.

The biggest jaw droppers include the recommendation that this 10% be implemented overnight, without any warning whatsoever. The IMF believe that if the super tax is implemented overnight, people will actually feel all warm and fuzzy as they’ll instantly believe the tax will never be repeated and that it will not distort tax payer and investor behavior.

In sum…..

Absent economic growth, higher taxes are the only perceived option. Be prepared.

Sources: IMF, www.icecapassetmanagement.com, Wise Dog Research

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