Perverse Tax Incentives

My wife recently came home from work with a debit card specifically meant to be used in restaurants and supermarkets. Instead of getting her full salary deposited as cash in her bank account, she now gets part of it paid into her debit card account.

This new arrangement is prompted by tax rules, and has nothing to do with free market capitalism. However, the impression is that it is another ploy by entrepreneurs to secure deals among themselves. The company that my wife works for has teamed up with a debit card company in order to secure itself lower taxes. Greedy business owners are once again at it.

But the arrangement wouldn't have come into place had it not been for tax incentives, and it's naïve to believe that the bureaucracy of the state was unaware of this loophole. Rather, the intention of the tax rule was to make companies pay part of their salaries in the form of modern day food stamps.

What's interesting in this respect isn't the rational reaction by my wife's employer, but the motivation by the bureaucrats. What is the state attempting to achieve through the introduction of this new system?

A quick look in the history books will tell us what's going on.

Being paid for labour in sound money is in fact a relatively new idea. As recently as the start of the industrial revolution, many workers were paid with tokens that could only be used in the factory store, the factory pub, and for rent at the factory lodging. Workers paid in this way had no choice but to put up with whatever standard of comfort that the factory owner deemed sufficient.

Going farther back in history, we find that most workers were paid with food and lodging. Trade with money was the preserve of the elite. Workers would either have to put up with what they were offered, or find work in some other place, and to prevent workers from simply leaving one employer for another, there were laws preventing this from happening. A serf was not free to move anywhere he chose. He needed written permission to do so. No serf was allowed to leave the grounds of the lord without a passport.

It appears then that the bureaucracy in Portugal is working towards a plan where the ultimate goal is to recreate the conditions that were considered normal until relatively recently. A gradual shift from sound money towards credit based payments will achieve this.

The system being introduced in Portugal is to the benefit of large corporations, and at the expense of smaller stores, because the debit card that we've received only works with supermarkets and restaurant chains. We are therefore likely to spend more money with corporations going forward, and this is to the detriment of smaller independent operators.

The net effect of this will be economic stagnation, because the quality of products and services will be increasingly determined by corporate entities favoured by the state. The state can in turn dictate the type of products and services provided. The entrepreneur is kicked out of the economic equation. The driving force for economic growth is being neutered.

The state is once again busy trying to revert the processes that were unleashed during the Victorian era when sound money reigned supreme. Small businesses and entrepreneurships are to be stifled. The vision is that of a society where most people own nothing, and only a few powerful lords engage in trade.

This push towards feudalism is very much in the spirit of the WEF which has openly stated that their vision for the future is on in which ordinary people own nothing. With many politicians firmly in the grip of the WEF, it shouldn't come as a surprise that measures are taken in this direction.

Klaus Schwab

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