Economy, Issues, Tax

Lessons from Monaco on the Benefits of Zero Income Tax

1

I wonder whether October 3, 1913, was the worst day in American history. That’s when one of America’s worst presidents signed into law the income tax.

The top rate was only 7 percent when Woodrow Wilson approved the income tax, and the tax only applied to the very richest Americans. But as is so often the case, taxes on the wealthy are a precursor to taxes on the rest of us.

And that’s exactly what happened and today we’re burden with a grossly unjust and punitive tax code.

But it doesn’t have to be this way. I’ve been at a conference in Monaco for the past few days and I’ve seen firsthand how a nation with zero income tax can be a prosperous Mecca (and I’ve also noticed that the Princess of the Levant is far more likely to accompany me on a trip when she has an opportunity to show off a new dress).

No income tax, by the way, means no income tax. Nothing. No capital gains tax, either. The main source of revenue is a value-added tax, generally about 20 percent, along with a tax on business income, but only if a substantial share is earned outside Monaco.

So is this benign tax regime actually conducive to prosperity?

Yes. Here is the data from the United Nations on per-capita economic output. You’ll see several of my favorite places, including the Cayman Islands, Liechtenstein,Singapore, Switzerland, and Bermuda. But leading the list is Monaco.

By the way, Monaco’s good policy doesn’t just generate domestic prosperity.

It also means some spin-off employment for France.

Every day some 41,000 people come from outside to go to work and all these non-Monegasque nationals, most of whom are French, depend on our economic success. …commerce and the manufacturing also employ significant numbers; over 3,000 workers are, for instance, taken up by the latter.

While Monaco’s per-capita GDP numbers are very impressive, the numbers on per-capita wealth are even more astounding. The average person has more than $1.5 million of assets.

By the way, the unluckiest people in the world are the residents of Roquebrune and Menton in France. That’s because those towns were part of Monaco until the mid-1800s. Now they’re part of a tax hell rather than a tax haven.

So what’s the bottom line? What can we say about Monaco?

Students for Liberty has a good summary.

P.S. In addition to zero income tax, Monaco also apparently has widespread gun ownership. What a great place.

P.P.S. Monaco is in 5th-place for per-capita readership of International Liberty, so the people are both prosperous and discerning!

This is a guest post by Dam Mitchell “a high priest of light tax small state libertarianism”
  • Robert

    This is the stupidest thing I think I have ever read, it leads people to believe that a country can survive on no income tax, that may be true when the median income of the residents is over $1 million, the reason there is no povert, is because only the rich can live there the rest are shuttled every day to work in Monaco.

    I have been there and you do not see the average tourist there and it is not listed as a vacation spot unless you want to spend $50,000 a monthy for the motly part of Monaco. It is the vacation spot for those who do not even know how much they are worth but never run out of money. Watch some old 007 movies and you will get the idea of how much it cost to visit let alone live there. Not unusual to see $1 million on the turn of a card.

    Housing is outragious, http://www.miells.com/find-a-property/sales?gclid=CM_gjKTzjs0CFdBZhgodUPIP3g

    This is why only the very rich live in Monaco.
    HAVE A GOOD DAY

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