By DAVID MOON, Moon Capital Management
A couple of weeks ago, Mexican President Vicente Fox penned an editorial in
the Washington Post calling for a new, never before assessed world tax. That's
right: world tax. The tax would be collected by the United Nations or a
similar international agency and the proceeds would be used to fight poverty
around the world and finance "global public goods."
Despite the billions of dollars U.S. citizens already spend in foreign aid,
the world tax proponents argue that U.S. citizens pay a much smaller percentage
of our GDP for basic necessities and government services than do citizens in
less developed countries. Why shouldn't we help other countries' citizens
if we already enjoy such success and excess? We have a larger percentage of our
income available for trivial pursuits, like cruise vacations and SUVs. It
is not enough that the United States already foots more of the planet's foreign
aid bill than any other country. According to some, we are not paying our
fair share. There are needs to be met and the only people who can meet
those needs are those with those with the greatest resources.
It is not just the Mexican president supporting this world tax. With
the help of Great Britain and Germany, President Fox attempted to get the
International Conference on Financing for Development to adopt the notion into a
declaration last week. The measure was defeated, in part because of
immediate protests from the United States and Japan. Former United Nations
Secretary General Boutros Boutros-Ghali proposed a similar tax in 1996.
The reactions and outcome were similar. In fact, then-senator Bob Bob-Dole
proposed a bill requiring the United States to withdraw from the United Nations
if the UN ever discussed such a tax. Dole's bill had both democrat and
The United States currently provides more than $10 billion a year in direct
foreign aid, not counting cash contributions to the World Bank and United
Nations. President Bush has promised an additional $5 billion. But
the poorer countries need still more, as decades and hundreds of billions of
dollars in foreign aid have done little to improve the collective plight of the
world's poorest citizens.
How does the possibility of a world tax make you feel? What if you are
one of the world's wealthiest, living in a million-dollar house and spending
your days collecting bond interest? You say that's not you? You live
in a modest house and need two salaries to earn $75,000 a year? Do you
think of taxing the wealthy as a tax on "those other people?" Not so in a
global sense. The middle class in the US are wealthy compared to the
entire world population. Even the poorest fifth of our citizens enjoy a
better standing of living than most people in Third World countries. What
is the point? One option is for a world tax to be collected from the same
five percent of the U.S. citizens that already supplies 50 percent of the U.S.
federal government revenues. The only problem with this solution is that
there aren't enough of them to support the entire world. The tax would
have to be borne by the "world's wealthy," which includes the U.S. middle class
and, to some extent, lower class.
Now that sounds preposterous. Tax those who are already struggling to
pay the expenses of those who have even less? How much can you take from
us before we just refuse to pay? Is $10 billion a year enough? It
hasn't permanently solved any problems, yet. What makes us think $15
billion might do the trick?
There are likely some lessons to be learned from this world tax proposal
about federal and state taxation.
David Moon is president of Moon Capital Management, a
Knoxville-based investment management firm. This article
originally appeared in the News Sentinel (Knoxville, TN).