How to Really Stick It to Hungary's Rich Bastards

If you've somehow managed to avoid paying attention to the "serious" news in Hungary over the past couple of weeks, it's mostly been about two things: taxes, and the ill-gotten wealth of the country's elite. To the surprise and delight of economic liberals like me, the government of Prime Minister Ferenc Gyurcsány sounds ever more keen to cut the taxes that sit on top of the Hungarian economy like a circus fat lady. Similarly, the flea circus that is Hungarian politics has been buzzing over the appearance in front of parliamentary investigative committees by both Gyurcsány and his arch-rival Viktor Orbán, both of whom stand accused of getting rich through unseemly means. Until now, however, no one has properly explored the connections between these two phenomena, namely, how taxing the tar out of bandits like Gyurcsány, Orbán and the like might help speed along the very overdue reforming of the rest of the Hungarian tax system.

Before getting into the meat of things, a few quick words about the proposed tax changes: welcome; modest; not nearly enough. The cut of the top tax value-added tax rate from 25% to 20% still leaves Hungary a winner in Europe's bleed-the-consumer sweepstakes. (And that's assuming the cut actually comes off.) Meanwhile, the top income tax rate is supposed to be cut from 38% to 36%, and the threshold after which it is applied raised to Ft 3 million (€12,130). This may sound like an improvement, at least until you consider that in order to be "rich" enough to break into this new top bracket, all you have to do is make the equivalent of just over €6.20 an hour - and that America's (slightly-lower) top bracket doesn't kick in until you make roughly twenty times as much.

Now, back to the bandits. Do I really think that Gyurcsány, Orbán and their fellow politicians, family members and cronies possess significant hordes of ill-gotten wealth? You're Goddamn right I do. (Note that this is just my personal opinion, so don't bother trying to sue me, because even in libel-mad Hungary one is entitled to an opinion.) But that's just beginning of Hungary's dirty booty problem, because it is as clear as Bohemian crystal to me that virtually everyone who has made serious money in this country in the last decade and a half made it at least partly through illegal or underhanded means. Bluntly put, the rich in this country are bastards, pretty much down to the last one. And what I propose to do is take away some of these bastards' money.

There are several reasons why I'm keen to see these wretches get soaked. The most important is that until these people are humbled, Hungary will never develop into a progressive liberal-capitalist society where those who actually play by the rules are not considered fools, and the first reflex of those in business is not to cheat their customers and partners. Another is good old fashioned European envy, tempered with a growing thirst for vengeance.

What a lovely house you've bought with our money! Mind if we have a look inside?

I know what you're thinking. (Well, one of the things.) If I'm so interested in soaking the rich, why am I carping about the country's high income taxes? The answer is that there is a big difference between clipping the wings of this country's degenerate overclass, and impoverishing those trying to work themselves into western-style middle-class normalcy. (No one is getting rich at €6 an hour.) So what I propose is that, as part of the much-ballyhooed reform of the country's system of taxation, a significant wealth tax is added to the mix, optimally offset by further reductions in VAT and income tax. Such a tax would be in line with the levy on "luxury" properties worth in excess of Ft 100 million that Prime Minister Gyurcsány has himself proposed. But it would go much, much further, drawing in all the physical assets belonging those over a certain wealth threshold, including real estate, stocks, bonds, bank deposits, shares in business partnerships, cars, planes, paintings, antiques, electronic gizmos, clothes and, if they are rare and inbred enough, pets.

I'll admit that wealth taxes are not particularly efficient or cutting-edge, being costly to administer and encouraging the rich to spirit their capital abroad. Within the EU, only a few countries still apply them - France's impôt de solidarité sur la fortune is the best known - and over the past years several of the countries that did have such taxes have gotten rid of them. Indeed, the mere idea a general levy on personal property deeply offends my Yankee and libertarian sensibilities. Too bad for me.

So who would have to pay this tax, how high would it be, and how would it be administered? Well, I never thought I'd say this, but France seems to offer a pretty good model. Their threshold for taxing the wealth of the wealthy is currently €732,000, based on the fair market value of all assets as of January 1 of each year. The tax is progressive, and goes from 0.55% to almost 2% on those piles taller than €15 million.

I would change the tax as follows. First, given Hungary's much lower per-capita GDP, I would drop the net to €250,000, or slightly more than half the threshold for Gyurcsány's proposed "luxury house" levy. I would also raise the rate to a nice round and flat 10%, to make it worth all the hassle, and to really stick it to the bastards even if they aren't sitting on a huge pile. And then, given the large number of bastards who have grown accustomed to letting the little people carry the country's tax burden, I would create a system guaranteed to ensure they pay the full whack, or lose it all while trying not to.

Step one would be to identify those individuals required to compile annual asset declarations, even if they believe they are not liable for the wealth tax. These would include A) all members of any political party which has been in or near power in Hungary since 1900, most notably the former Hungarian Socialist Worker's Party and the outlaws who have run its legal successor since the changes; B) anyone who has ever held a management position in a company that has won a government tender or received a significant volume of public subsidies; and C) their relatives, dependents, and business partners.

Of course, compelling all these bastards to submit full and truthful declarations, and to pay the appropriate taxes, won't be easy. For the last 15 years the rich and powerful have grown rich by (among other dirty tricks) wholly avoiding the taxes the rest of us just lightly dodge. Which is why it would probably be necessary to have the entire system administered not by the corrupt and inept ÁPEH (National Tax Office) but by PriceWaterhouseCoopers or some similar band of bloodless number-crunchers, who could be better counted on not to look the other way when bigshots file false or incomplete asset declarations. Meanwhile, snitches of all sorts would be encouraged to rat out those who don't come clean. And once the penalty for non-compliance - expropriation of all assets down to a level corresponding to the amount a minimum wage earner is likely to accumulate over 10 years of hard work - is made obvious thanks to several widely-publicized cases, and the snitches are ceremoniously rewarded with some of the former assets of those they ratted out, I think most of the bastards would start to fall in line. Well, except for the fact that these same bastards are still running the place, and would never let any of it happen in the first place.