Beating the Piñata

by Jeff Thomas
International Man

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In Latin-American culture, the beating of a piñata began as a religious activity, but, today, it is more secular and generally takes place at celebrations. The general idea is that someone (usually a child) is blindfolded and given a stick, then spun around several times to disorient him. He then begins swinging the stick in the air, trying to locate the piñata, which is suspended overhead. Once he finds it, he beats it until it breaks open, spilling out goodies – sometimes candy, sometimes toys, coins, or food.

In concept, this is much like taxation, with the rich being the piñata.

Taxation Seems Reasonable

Throughout the world today, governments pay for their existence mostly by way of taxation. On the surface of it, this isn't an especially unreasonable concept. Candidates are elected to take charge of the government, and they then need to be paid to do their jobs.

Taxes are also intended to pay for the programmes that government representatives come up with. Unfortunately, a common trend in politics is that once someone has been elected to office, he wants to remain there, often for the remainder of his working life. Once someone has become a career politician, it is a logical step for him to realise that the more he can tax the population, the more goodies he can get for himself. After all, he is in a position to be able to increase his own salary and benefits. Additionally, he may be tempted to siphon off a portion of funds intended for government programmes as they pass through his control.

The difficulty for politicians who increase taxes is that, if they increase taxes on the majority of the people, the people may not vote them back in. Consequently, politicians find that they are more likely to be re-elected if they create or increase taxes that only apply to a minority of the electorate.

Whenever the middle- to lower-income taxpayers outnumber the more wealthy (which is, of course, most often the case), politicians tend to propose higher taxes on "the rich." The reason this is a safe bet is that the rich are in the minority and therefore do not have the power (on their own) to vote such politicians out of office. Hence, most developed countries not only tax the rich more heavily than others, but also create and maintain a "tax the rich" mentality amongst the electorate. Today, most every country that regards itself as a democracy has a "tax the rich" consciousness, and those who are not "rich" generally support the concept. As George Bernard Shaw said,

"A government that robs Peter to pay Paul can always depend upon the support of Paul."

But Excessive Taxation of the Rich is Not Necessarily Reasonable

And why not tax the rich? After all, the rich have more, so why shouldn't they give more? Well, there are two reasons why not. The first is that the concept is inherently unjust. As Thomas Jefferson is said to have argued,

"A democracy is nothing more than mob rule, where fifty-one percent of the people may take away the rights of the other forty-nine."

The second reason why the rich should not automatically pay more is that they may possibly be taxed to the point that they choose to opt out of the system. As Maggie Thatcher said,

"The trouble with socialism is that, eventually, you run out of other people's money."

Of course, who "the rich" are has never been accurately defined. Is it the top 5% of earners? The top 10%? Politicians avoid such questions; they prefer to keep it vague. After all, if they got specific, many of them would qualify as being amongst "the rich."

And of course, one of the best aspects of taxing the rich, from the politician's point of view, is that they can't really do anything about it. The rich are, by their very nature, generally speaking, very responsible citizens. They are easily tracked down and will generally prefer to pay a higher tax than to be imprisoned. Consequently, there is much to gain and little to lose for a politician if he proposes further taxes on the rich.

The Rich Are Much Like a Piñata

The rich are much like a piñata:

• Those who are gathered around the piñata know that it contains goodies and they would like to get some share of those goodies.
• They are unconcerned as to whether the piñata is destroyed, as long as the goodies are forthcoming soon.
• Someone is elected, who beats the piñata repeatedly, knocking the goodies out.
• This person wears a blindfold, so, although he knows what his objective is, he cannot actually see the results of his actions.
• The more he beats the piñata, the more goodies fall out.

But, beyond this point, public opinion would diverge as to the comparison of the piñata and the rich. Those who wish to be receivers of the government largesse would argue that the process is endless, as the rich will always have plenty of money. But those who are more productive and choose to sustain themselves through their own efforts will take a different view.

How to Stop Being a Piñata Through Internationalisation

The fact is, the rich do, in most cases, have an ability to opt out. Historically, this does not take place through violent means, such as revolution. Rather, it is by quiet means – by exiting the jurisdiction if it becomes too oppressive.

There is now a growing trend toward internationalisation. It has never been easier to physically move one's self or one's possessions from place to place. Through technology, it has also never been easier to move wealth from place to place. In fact, the only exception to this trend is governments themselves. Some governments are placing ever-increasing restrictions on the ability to move one's self and one's wealth from one jurisdiction to another.

Considering this to be the case, many older people are quietly moving themselves and their wealth away from those countries that are becoming increasingly draconian in their laws. Additionally, many younger people are beginning to see the handwriting on the wall. Whilst they may not yet have amassed much in the way of wealth, many are assessing their futures in jurisdictions that are becoming oppressive, and choosing to vote with their feet now, rather than wait until it is no longer possible.

Many people are fond of their present jurisdiction but are watching the door slowly closing. Those who take the next step – that of seeking out other possible destinations – are finding that in some other jurisdictions the doors to personal economic prosperity are opening wider. However, should an exodus occur into these countries by frustrated First-Worlders, there is the possibility that, in time, their immigration laws may tighten up. Therefore, the time of greatest opportunity may well be right now. Those who are older and have attained some measure of wealth would do well to consider whether they are tiring of being hit with a stick and worrying that, in the future, they may well be hit a great deal harder. Those who are younger may feel that, if they succeed in creating wealth for themselves, their reward may well be to become a piñata.

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Reprinted from International Man with permission.

May 7, 2012

Jeff Thomas is British and resides in the Caribbean. The son of an economist and historian, he learned early to be distrustful of governments as a general principle. He began his study of economics around 1990, learning initially from Sir John Templeton, then Harry Schulz and Doug Casey and later others of an Austrian persuasion.

Copyright © 2012 International Man