26 December 2012

First Thing We Do, Kill the Taxman

As Regular Reader should remember, I've been fascinated with Bermuda since my visit there a few years ago. Especially considering that I wasn't all that keen on going there, and that the boat ran through the remnants of hurricanes in both directions. The islands (plural when I was growing up and learning 4th grade geography) are quite pleasant.

What makes Bermuda fascinating to a Keynesian, is that it is a micro-USofA. It's economy, which was once based on its inherent competitive advantage, tourism, has in the last couple of decades, been morphed into a mid-ocean Switzerland. Or so they say. In reality, it's just a tax evasion haven for insurance companies. The island is about 20 square miles, and has about 64,000 residents, about one-third of the workforce are imported managers and such for the International Business sector (IB). At the country level, it's nearly the densest on the planet. It has no fresh water reserves, and little arable land. It has no fuel source, other than wind or ocean; neither of which is exploited to any meaningful degree.

Last week was elections, and the black oriented PLP lost to the white/IB oriented OBA. The PLP had controlled parliament since 1998, its first time winning control.

I follow Bermuda through the Royal Gazette, allegedly the least right-wing paper published on the island. Just a week after the election, they published an essay by a Canadian, who's been writing occasional pieces at least as long as I've been reading the paper. He's an apologist for the IB faction; not surprising, I suppose. He calls for regressive taxation as the cure to Bermuda's economic ills.

Why this fascinates me is straightforward: Bermuda is the apotheosis of "service economy". There may be evidence that the 99% of Bermuda are better off with the rise of IB over tourism, but I've not seen it. Given the limit size of the island, those holding dormant residential and commercial property would benefit from a return to more IB presence. Bermuda is a petri dish of social Darwinist experimentation. It also demonstrates that an economy based mostly/solely on currency is inherently unstable. The open question, to me and possibly less so to Bermudians, is whether today's Bermudian 99% would be better off had the country stayed the tourism course, rather than verging off to tax evasion land. It's worth noting that this transformation happened under the previous white/IB oriented party, United Bermuda Party (UPB). As impossible as it sounds, universal suffrage didn't obtain until 1968; previously, one had to be a male landowner, and when that proved to be insufficient (as non-whites acquired land rights), a landowner could vote in as many parishes (voting district) as one held land. 1968!!!

So, a petri dish. Assuming that the tax change occurs, and there's every reason to conclude that it will, the results matter. The transparency matters, too. Right wing governments tend to avoid data, in favour of propaganda. Will the 99% really find themselves better off, if the 1% pay less tax? Or will the situation merely turn Laffable? Enquiring minds want to know!

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