Big Brother’s Money
Big Brother’s Money
J. Bradley Jansen
July 12, 2001
A few years ago, Marvin Goodfriend, a senior Federal Reserve official, proposed a “carry tax” on cash under certain conditions. The idea was to impose a tax on dollar bills using the magnetic strip as a tracking device to tabulate the tax. The suggestion was criticized in Congress and quickly died. Or so we thought.
Hitachi has developed a silicon chip so small at just 0.4mm long that it could be embedded in money for security applications [“Money tracking by micro chip,” by John Leyden, The Register, April 7, 2001]. The chip was designed to help stop counterfeiting of currency notes. Hitachi set up a joint venture on July 1, 2001 called Mew Solutions and dubbed the product the Mew chip.
The Richmond Fed senior vice president explained that the carry tax idea is an old Keynesian one but was abandoned due to the lack of technology. He was excited that new technological developments might make it feasible again [“Cash and the ‘Carry Tax,’ by Declan McCullagh, Wired News, October 27, 1999].
Rep. Ron Paul labeled the idea “preposterous” and said that the notion that we’re going to tax somebody because they decide to be frugal and hold a couple of dollars is economic planning at its worst.” He introduced H.R.3399 in the last Congress to stop the Federal Reserve official’s plan to impose the “carry tax” on currency notes. The “Currency ‘Carry Tax’ Prohibition Act of 1999,” would have prohibited the Secretary of the Treasury and the Board of Governors of the Federal Reserve System from including any information storage capability on the currency of the United States or imposing any fee or penalty on any person for the holding by such person of currency of the United States, including Federal reserve notes, for any period of time.
Those observers at the time who derided the bill and the whole issue as silly and irrelevant should reconsider in light of recent government proposals and the new technologies that make them possible. It might just be the government officials’ ideas that are out of this world: Los Angeles County is trying to impose property taxes on space satellites.
Los Angeles County Assessor Rick Auerbach said that they are going to continue their court appeal after the California State Board of Equalization ruled against them. Just because the General Motors unit Hughes Electronics Corp. is based in Los Angeles does not make the satellites taxable property there. George Jamison, a Hughes vice president, calls the idea ludicrous.
The LA tax assessor would find himself right at home at many of the multilateral organizations dealing with tax issues. The Organization for Economic Cooperation and Development is trying to thwart what it calls “harmful tax practices.” The OECD thinks that low tax rates or businessmen considering the tax implications of their decisions as “harmful” practices. Their sister organization the Financial Action Task force might want to consider hiring Mr. Goodfriend or his compatriots at Hitachi: the FATF is waging a global You’re your Customer campaign to be able to track financial transactions.
A recent United Nations report of the High Level Panel on Financing for Development to the General Assembly recommends the creation of an International Tax Organization (ITO). The ITO would “sponsor a mechanism for multilateral sharing of tax information, like that already in place with OECD, so as to curb the scope for evasion of taxes on investment income earned abroad.”
The European Union Commission’s EP Civil Liberties Committee just approved a report by Marco Cappato that favors “strict regulation of law enforcement authorities’ access to personal data of citizens.” Under the European Convention of Human Rights, along with ruling by the Court of Human Rights, any form of wide-scale general or exploratory electronic surveillance is prohibited.
These developments bode well for the rise of electronic monies such as e-gold, goldmoney.com and other ventures. With government bureaucrats so schizophrenic on privacy and security, let us hope that good sense reigns in Congress. If not, I’m banking on financial alternatives.