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Losing The Last Accountability in the “Do-Over” Democracies, The Buck Doesn’t Stop.

By now, the Cyprus government is still haggling with EU (and its banks) over how to save Cyprus economy, without anyone paying for it.

But just a few days ago, they almost managed to get away with a “deal” to pay for it by “taxing” 10% of all bank accounts in Cyprus.  This didn’t have much of a shock value in the West, except for perhaps in Cyprus, where the populous protested and forced their representatives to vote “no” on the “deal”.

It should come though as no surprise for the pessimists, because Western Democracies have had a string of such “deals”, which gives new means to the lack of accountability.

Representative “democracies” really ONLY have 1 leg to stand on for its claim of superior legitimacy, that it is “accountable” via its representativeness, through “votes”.

Except lately, it seems, the accountability is turned upside down.  People can feel it, it FEELS like the government representatives, voted into office by the People, seem to be more accountable to the banks (and other elites), and less accountable to the People.

“Too big to fail”, “too big to prosecute”, the messages of excuses are every where, but people can’t put their fingers on what’s wrong with the system.

The answer is:  The system of “votes” is being distorted into a system of “do-overs”.

What do I mean?

“Votes” were meant as a final Consequence for politicians’ decisions.  If politicians do wrong, they get voted out.

But in today’s many “democracies”, it doesn’t matter what politicians do, the People vote for “do overs,” so politicians also vote for “do overs”.  Why?  Because NO ONE want to suffer the consequences.

Oh, the banks and corporations are failing because of politician’s lack of oversight?  “Do over”!  Banks and corporations and government get more money, to fix a financial market that should not have collapsed.

Cyprus was a glaring example of the “do over” system going to the extreme:  Ex Post Facto Taxation (which under most systems and rule of law, is considered to be unconstitutional, although is somewhat OK in US).

Ex Post Facto Taxation is also what’s called “retroactive taxes”.  1 other case of retroactive taxes is where the Indian government raided Nokia’s office in India, claiming that Nokia owed some millions in unpaid retroactive taxes.  Ex Post Facto Taxation is where the government impose a new tax on something that you did or earned back before the new tax law period.  I.e., I bought a new house back in 2009, and if the government decide to pass a new law in 2013 to tax me additional 1% for my house for the year 2009, then this would be an Ex Post Facto tax.  (The unfairness is obvious:  Had I known that the new house would cost me an additional 1% in 2009, I might have decided against buying it, or could have done something to remedy or avoid the tax).

Ex Post Facto Taxes are effectively “Do-overs” for failed economic policies, because if the voters KNEW about such taxes, they probably would NOT have voted for the same politicians who are now taxing retroactively for their own bad planning and to aid banks and corporations.  I mean, think about it:  If you were a voter, and you knew that the politicians suggested that they should BAIL out the banks and the corporations, would you have voted for these politicians??  Not likely.

The Cyprus “raid” on bank accounts was Ex Post Facto Taxation, but they didn’t call it that.  It was essentially a tax on all bank deposits, made years before the tax law.  If people had known about such a tax years back, they probably would have rather put the money in their own mattresses rather than into the banks in Cyprus.

But this only point to why there was little shock generated in the West over this, the West has been doing equivalent of “Ex Post Facto Taxation” for years now to save their economies.

Really, any time the government is spending money that they don’t have, it is “Ex Post Facto taxation” which, by printing more money, is taxing the value of all money held by the People.

Worst part, like Cyprus, the taxes go to save only the Elites, who keep the politicians in power.

Cypriots balked at the deal, because that deal was a little too direct.  There was almost no pretense that the government was raiding private pockets to save their own rich, and to save the hides of their own politicians.  But in the end, if Cyprus just printed more money, would that not also be “Ex Post Facto taxes”?  Yes, just none of the new taxes will go to EU banks at least.

*So there you have it, the last vestige of accountability has gone from the Western Democracies.  Votes don’t mean any thing now, because the governments are doing all kinds of “deals” retroactively to back the wealthy and the elites, at the expense of the populous.  Sure, there is always the NEXT election cycle, but by then, those votes are just really just “polls” after the fact.  You can’t force them to cough up the money they already taxed you.

 

 

  1. DalianPaul
    April 13th, 2013 at 10:59 | #1

    Would this be similar to the 20% tax being placed upon families in China who own one or more property?
    I’m sure you’ve heard of this: an attempt to reign in the housing market (or control the housing bubble).

    I agree that it is seemingly very unfair on those who have invested in the past and now see the return on their holdings set to fall on sale. I include my wife & I on that list.

    But what I won’t do is then infer that that taxation through controlling the economy, keeping politicians in power, saving only the elites and extrapolate this (and my, this article was quite something in the art of extrapolation) to mean that China’s entire political system is at fault. It’s not.

  2. Black Pheonix
    April 14th, 2013 at 07:34 | #2

    @DalianPaul

    No, in fact, it would not be similar.

    It might be similar, if 20% tax are being placed upon PREVIOUS tax years’ property holdings. (And you haven’t even defined your assertion of “20%” tax. Based on what? Property value? What’s your source?)

    The rest of your statements are just your “extrapolations”, based upon your own erroneous assumptions and claims.

  3. DalianPaul
    April 14th, 2013 at 08:19 | #3

    @Black Pheonix

    Ah, so now you redefine ‘Ex Post Facto Taxation” … when it suits.

    The 20% tax is similar to corporate gains tax i.e. taxed on increase in value.

    The rest of my statements are extrapolations??? The rest of my statements were comments on your extrapolations i.e. that because these issues happened in democracies that ultimately it was because of the nature of the political systems that they failed in such a manner.

    In other words, your assumptions and claims. And you your only rebuttal is to state ‘you’re wrong.’

    I would have expected more than a brush-off.

  4. Black Pheonix
    April 14th, 2013 at 08:47 | #4

    @DalianPaul

    Not at all. “Ex Post Facto Taxation” MEANS applying tax for PREVIOUS years’ actions, which were not taxable in the PREVIOUS years.

    I don’t see where I have “re-defined” any thing.

    It’s a simple enough legal term.

    *”The 20% tax is similar to corporate gains tax i.e. taxed on increase in value.”

    Increases that occurred in which tax year? If it is the current tax year, then it’s 20% on CURRENT increases, NOT previous increases.

  5. DalianPaul
    April 14th, 2013 at 09:50 | #5

    @Black Pheonix

    The increase in value of the house since the time of purchase.

    Given that prospective purchasers pay a substantial tax at the outset, knowing that they will only have to pay a tax of between 1% to 2% on the transaction when it is sold, to subsequently impose a capital (sorry, not corporate) gains tax of 20% deemed pertinent after said taxes and tax structure was imposed.

  6. Black Pheonix
    April 14th, 2013 at 09:56 | #6

    @DalianPaul

    That’s increase in value UPON a real estate “TRANSACTION”! I.E. transaction that occurred in the present tax year!

    http://online.wsj.com/article/SB10001424127887324178904578339642890098354.html

    Sorry, that’s not “Ex Post Facto Taxation”, not in any tax law in the world. That’s pretty much how “Capital Gain tax” works, for stocks, etc., BECAUSE you didn’t pay for the capital gain for any of the previous years, and because the GAIN is not realized until the transaction.

    Again, I’m not “re-defining” Ex Post Facto Taxation, (but it sounds like you are).

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