Doug Casey lays out yet another reason for China’s rise in a way I hadn’t considered…

Take an American and a Chinese, each with a dollar. Say both are equally smart and hardworking, and each is able to double his dollar every year—2, 4, 8, 16… The only difference is that the American pays 35% in taxes and the Chinese pays nothing. Actually the American is paying close to 50% and the Chinese is paying something, but the difference is about the same. With only that differential, by the time the American has one million dollars, how much does the Chinese have? The answer is that by the time the American has a million dollars in 28 years, the Chinese has 268 million.

Actually the situation is even grimmer. The Chinese will probably work harder. He’s in an environment where, if only because of minimal regulation, he’ll make his capital grow faster. If Herrnstein and Murray are right in their book The Bell Curve, the Chinese guy is smarter (105 v. 100 average IQ for Europeans). And then, when the American dies, the government will take half of his piddling million dollars for estate taxes, so his kids start with no meaningful financial capital. And probably minimal intellectual capital, if the obvious dumbing down of American schools has anything to do with it. Meanwhile, the scions of the Chinese will have an untaxed $268 million, and probably a much better education and stronger work ethic to help them deploy it.

The average American has been so brainwashed that he thinks he has a moral obligation to give the government whatever it asks for; he thinks he’s being dishonest and cheating if he puts his own and his family’s welfare above the demands of the State. At the same time, he thinks the State has a moral obligation to provide for his health, education, welfare, and retirement.

The average Chinese, however, recognizes the government as his adversary and feels no moral obligation at all towards it, only to his family. He knows the guy calling himself “the government” is just a successful warlord, and a successful warlord is just a major league criminal. He considers it his duty to deny resources to the State because he knows he can’t feed the beast and his family with the same grain of rice. And he has no concept of the State taking care of him; that’s something his family does.

Most of the reasons I’ve seen for China’s rise (and the West’s decline) is for economic and cultural reasons. Regardless of its booming growth, in China, the culture is that your kids need to take care of you in your old age. In the West, the culture is that a politician like Bernie Sanders needs to take care of you in your old age.

Yet Casey makes a great point; there are tax and governmental reasons as well. Governments and taxes in the West just keep growing and growing forever, regardless of who you vote for. (Both Trump and Hillary are believers in big government.) At some point, this system will break. Yet China will just keep growing, even if it has problems (which it will; it’s about to suffer a huge real estate crash, but this won’t stop it from ruling the world in a few decades).

As usual, I’m acting on this information. As part of my moving out of the country plan and long-term business plan, I’m now developing plans to get a full-time, year-round office or studio apartment in either Shanghai or Hong Kong. The target time frame for this is 2017-18. Hopefully the real estate crash over there will happen soon, then I can scoop up some property very cheap. Once I have it, I can fly out to Asia literally whenever I feel like it, not worry about office space, meeting rooms, or hotels, not worry about how long I stay there, and be able to actually leave stuff over there.

It will be my home base in Asia, and I will maintain it even if I end up moving to South America in 2025. Any costs I incur because of it will easily be offset by the new business I get over there. It’s a wealthy and hungry market, great for Western business consultants, workshop leaders, and information marketers like me. I’m also penciling out a Chinese version of the Alpha Male 2.0; that has the potential to be bigger there than in the West, not just for economic reasons (wealthier market) but simply because of population size; 1.3 billion people and growing.

One of my long-term business objectives for down the road is to have at least 60% of my income originate from non-US and non-European sources. Asia is the ideal source for this. South America, Australia, and New Zealand are acceptable but not as good as Asia. Income I receive from the US or Europe I consider temporary and not to be relied upon for the rest of my life. I don’t like saying that, but I know the collapse is coming; I just don’t know when it’s coming. Better to be safe than sorry. Even if I’m wrong (and I’m not), China will still have way more money than the West. There’s no reason I shouldn’t have a piece of that. No reason you shouldn’t either.

China, here I come!

37 Comments on “High Taxes in the West Means China Wins

  1. All this is why I’m learning mandarin right now. I’m using yoyo Chinese which is way cheaper and better than Rosetta Stone. It’s a hard language but becomes easier once you master the tones.

  2. I have recently found a stunning article by Fred Reed that talked about how and why the West (US/EU) is falling into irrelevance and how China is rising and I can’t help but share it because it pushed all the buttons in my libertarian skull:

    https://www.lewrockwell.com/2016/09/fred-reed/bombing-enemies-cant-fight-back/

    I love it when I find arguments on how the military is irrelevant and the right institutions (or lack thereof) are in the long run what decide things and this is the first thing that came to my mind when I read this post. If the opportunity shows for me I’ll leave Europe at a drop of a hat, it’s been decades since we started becoming irrelevant and now all the innovation and growing economies are in the Pacific/ SE Asia. This is something that won’t change anytime soon Europe is headed towards forever increasing levels of collectivism and economic stagnation. Getting out, at least economically, is the only reasonable option.

    QUOTE: “The average Chinese, however, recognizes the government as his adversary and feels no moral obligation at all towards it, only to his family. He knows the guy calling himself “the government” is just a successful warlord, and a successful warlord is just a major league criminal.”

    Hell, this sounds too much like Murray Rothbard: “The State is a gang of thieves writ large.”

  3. What’s your take on what Sam Harris thinks of taxation ?
    https://www.samharris.org/blog/item/how-to-lose-readers-without-even-trying
    In case that article is too long, I copied his main points:
    -“I agree that everyone should be entitled to the fruits of his or her labors and that taxation, in the State of Nature, is a form of theft. But it appears to be a form of theft that we require, given how selfish and shortsighted most of us are.
    -“Would Steve Ballmer, CEO of Microsoft, rather have $10 billion in a country where the maximum number of people are prepared to do creative work? Or would he rather have $20 billion in a country with the wealth inequality of an African dictatorship and commensurate levels of crime? I’d wager he would pick door number #1. But if he wouldn’t, I maintain that it is only rational and decent for Uncle Sam to pick it for him.”
    -“All laws are coercive and take the following form: do this, and don’t do that, or else. Or else what? Or else men with guns will arrive at your door and take you away to prison. Yes, it would be wonderful if we did not need to be corralled and threatened in this way. And many uses of State power are both silly and harmful (the “war on drugs” being, perhaps, the ultimate instance). But the moment certain strictures are relaxed, people reliably go berserk. And we seem unable to motivate ourselves to make the kinds of investments we should make to create a future worth living in.”
    -“Many of my critics pretend that they have been entirely self-made. They seem to feel responsible for their intellectual gifts, for their freedom from injury and disease, and for the fact that they were born at a specific moment in history. Many appear to have absolutely no awareness of how lucky one must be to succeed at anything in life, no matter how hard one works. One must be lucky to be able to work. One must be lucky to be intelligent, to not have cerebral palsy, or to not have been bankrupted in middle age by the mortal illness of a spouse. Many of us have been extraordinarily lucky—and we did not earn it. Many good people have been extraordinarily unlucky—and they did not deserve it. And yet I get the distinct sense that if I asked some of my readers why they weren’t born with club feet, or orphaned before the age of five, they would not hesitate to take credit for these accomplishments.”
    Bear in mind Harris specifically states he doesn’t endorse socialism.

  4. Hell, this sounds too much like Murray Rothbard: “The State is a gang of thieves writ large.”

    Yes. The saddest thing about this entire scenario is that communist Chinese are more for freedom and free markets than “land of the free” white Americans.

    What’s your take on what Sam Harris thinks of taxation ?

    He sounds like a moderate on taxes to me. I could be wrong though.

    I laid out my opinion on taxes here:

    http://calebjonesblog.com/how-taxes-would-work-in-a-free-society/

  5. do you think learning Mandarin is a must?

    Strongly helpful and worth it, yes. A must, no.

    I’m doing my best to wait until translation and smartphone technology can instantaneously translate my English into Mandarin for me. We’re just a few years away from this, and I’m worried if I spend the next 3-5 years learning Mandarin, which is a hard language for Westerners to learn, by the time I get somewhat understandable the translation tech will suddenly be viable, therby rending my time as (somewhat) wasted.

    I do think it’s SUPER helpful yes, but I know of Westerners who live full-time in China for 10+ years and have never learned it. They learn the basics and use translators for the rest.

  6. And let’s not forget that in the west the incentive to work gets less and less as taxes go up and up. Why should I bust my ass to pay the welfare check or SNAP benefits to some lazy bum who doesn’t want to get out of bed and find a job? More and more people are reaching the conclusion that extra work invites extra tax. In the end, it’s just not worth it to put in extra effort to make extra money if big government just takes it away.

    A nation will function very well as long as everyone feels that everyone else is pulling their fair share. But there is a tipping point where if you feel like the next guy is getting something for nothing (via social benefits), while you are getting none of that benefit, that the whole thing starts to fall apart. Obama was that tipping point for the USA.

  7. Sorry mate I don’t understand how this article works – China has a progressive tax rate up to 45% on income tax, and a reasonably high 25% on corporate income – as well as various land taxes and agricultural taxes.

    http://www.worldwide-tax.com/china/china_tax.asp

    Am I missing something here? Are you referring to the HK tax of 15% for business conducted inside HK and 0% outside HK?

    Lach

  8. China corporate tax rate: 25%
    US corporate rate: 35%

    China top personal tax: 45%
    US top personal tax: 53% (because you have to add state + federal income taxes; China doesn’t have states)

    China payroll tax: ZERO
    US payroll tax: 20%! (state, federal, local)

    China property tax: ZERO
    US property tax: shitloads, depending on the state.

    And on and on.

    Data here:
    https://en.wikipedia.org/wiki/List_of_countries_by_tax_rates

    We Americans pay FAR more in grand total taxes than the Chinese. It isn’t even close.

    Yeah, China has high taxes. We’re higher. We’re among the highest in the world.

  9. And let’s not forget that in the west the incentive to work gets less and less as taxes go up and up.

    Via food stamps, subsidized housing, government healthcare, and various other programs, it’s now possible to live a lifestyle equivalent to about $40,000 a year, for free, courtesy of the government, without working at all, provided you’re patient enough to make all the phone calls and deal with all the paperwork required.

    Forty fucking thousand dollars a year to do nothing, paid for by hard working people like you and me. I realize the Scandinavians like concepts like this, and if they want to do it, that’s fine for them. But in the US?

    And it’s going to get worse.

  10. Scandinavians are no example, Sweden is imploding due to low IQ refugees and mass censorship. Swedes are already leaving en masse to other countries. Norways entire pension system is based an on oil fund: https://en.wikipedia.org/wiki/Government_Pension_Fund_of_Norway

    Which is hitting some rocks now and Norway is using that money for things outside of its scope. Denmark is rolling back on socialism and moving towards the right-wing of the spectrum.

    As for non-scandinavian countries, in 2015 2 million refugees entered Germany, what the media didn’t tell you is that 1 million Germans left Germany in 2015. Due to high taxes in Germany and low wages, all younger Germans go to work in other countries and usually never come back. Merkel’s party CDC is scoring at an all time low, unfortunately the Germans didn’t learn a thing, because the socialist party is taking in all the new votes.

    Austria and the rest of the countries in that region are moving right wing. France is trying to move right wing with Marine Le Penn, as is Holland with Geert Wilders. UK tried to move right wing but Boris Johnson bailed, and now they’re in a mess.. Too many muslims there already affecting the parliament.

    Well that’s Europe for you, socialism and fascism never works. Only libertarianism.

  11. Caleb, what’s your take on Elon Musk’s effort to go to Mars? No taxes up there and no one will bother. Yes yes, it’s not something that you can do (and won’t be able to pull off any time soon.) But it’s an interesting concept.

    Add to this fact that space is a very K-selection environment (you have to really think about how to spend that fuel, water, food, medicine, etc.) Seems like whatever is coming after China — or even during China’s rise — won’t be on this planet.

  12. @Qlue

    You’re forgetting that Germans have been leaving Germany for decades now. It’s one thing if taxes are being used to fill up some emergency fund for future problems — war, famine, pandemic, etc. — but not when it’s being re-distributed to others.

  13. “China corporate tax rate: 25%
    US corporate rate: 35%

    China top personal tax: 45%
    US top personal tax: 53% (because you have to add state + federal income taxes; China doesn’t have states)

    China payroll tax: ZERO
    US payroll tax: 20%! (state, federal, local)

    China property tax: ZERO
    US property tax: shitloads, depending on the state.”

    And if you setup shop — purely an address and nothing more — in a place such as Hong Kong or Singapore, taxes are either very reasonable (Hong Kong has one tax, on land and you pay that through your rent or once a year) or non-existent. You literally do nothing other than work for yourself.

    I used to see the abuse of SNAP and WIC… rips your heart out thinking of how much I paid into the system.

    Caleb, question. If I wanted to write ebooks for the Asian market (although, I think China would be #1), what would you recommend? Is there a China’s version of Amazon? Would I need to translate everything to Mandarin? If you could point me in the right direction on this topic, I’d really appreciate it.

  14. Scandinavians are no example

    That isn’t what I said. I said they like socialism. I didn’t say it was a good idea. Everything you’ve listed I’ve already talked about here in the past. Of course Scandinavia is screwed, just like (or more so) than the rest of Europe.

    Caleb, what’s your take on Elon Musk’s effort to go to Mars?

    It’s very exciting. It will happen in our lifetimes. I’m not sure if the typical, average person can move to Mars in our lifetimes, but humans will certainly get there.

    I’m pessimistic about Western society, but on the tech side of things I’m the opposite; super optimistic.

    Caleb, question. If I wanted to write ebooks for the Asian market (although, I think China would be #1), what would you recommend? Is there a China’s version of Amazon?

    Baidu is the Google of China, Alibaba is the Amazon of China (though opinions will vary).

    Would I need to translate everything to Mandarin?

    Yep, ideally.

  15. Oh, on the topic of taxes. The thing about Westerners is that they often live in their Western bubbles and do what they’re told by the elites. Having said this, paying taxes is viewed on the same plain as brushing your teeth, you have to do it. However, as corrupt Western corporations have now demonstrated, paying taxes turns out to be something that is not as done.

    But if you go outside of the US, very few people pay an income tax or a tax of any kind. I can speak about personal experience in Eastern Europe, no one pays their income taxes. You might live in a mansion and drive a Bugatti, but trust me, on your taxes it says that you made less that $50 that year. People avoid the prospect of paying taxes like the plague. Often, it’s cheaper and more expedient to pay off some bureaucrat and save money for your family than fork over the same amount (if not more) to a building (where your taxes will be stolen anyways.)

    Given what I do know about China, their corruption scandals and how they view family above all, I wouldn’t be surprised if tax avoidance was very high. They most likely derive most of their tax income from duties or taxes on land (too few will honestly declare their income for that year.)

    “Yep, ideally.”

    Hmm… might need to find some good translators on odesk. Caleb, how would you go about translating your books into Mandarin?

  16. “It’s very exciting. It will happen in our lifetimes. I’m not sure if the typical, average person can move to Mars in our lifetimes, but humans will certainly get there.”

    A few thoughts on this.
    1 – The elites sure want to keep their tech coming, even if they permit all sorts of degeneracy and social collapse.
    2 – Well… if nanotech comes along as far as some have predicted, nothing is stopping you from living for much much longer. At that point, yes, even you will be able to go to Mars.

    Caleb, one more question. A ball-park estimate, in your opinion, when will there be sexbots? 5 years from now? 10? Will the next iPhone be a sexbot?

  17. “The Bell Curve, the Chinese guy is smarter (105 v. 100 average IQ for Europeans).”

    IQ is important, but this diffirence is irrelevant. Through trial and error, intelligent risk-taking will yield massive rewards. This is reason #1 why China is developing.

  18. might need to find some good translators on odesk. Caleb, how would you go about translating your books into Mandarin?

    Upwork. And make sure they give you some examples you can verify with a third party.

    Well… if nanotech comes along as far as some have predicted, nothing is stopping you from living for much much longer. At that point, yes, even you will be able to go to Mars.

    True. But that live forever nanotech stuff is a guess on my part, not a prediction.

    A ball-park estimate, in your opinion, when will there be sexbots? 5 years from now?

    Japan has them right now, but they look weird and cost a bazillion dollars.

    My guess is we’re looking at 20-30 years before we’ll have sexbots that look, sound, and act just like human women, to the point where you can’t tell the difference. However, they’ll be way too expensive for the average person to own (though the average person could rent them for an hour or two at a time). So add another 10 years or so, possibly less, for their price to get down to an affordable level for the average dude.

    Once again, this insane shit is going to happen in our lifetimes. People have no idea what’s coming.

  19. I like your plan except that you can’t buy property in China. If you are a Chinese citizen you can have the property for 99 years.

  20. “Upwork. And make sure they give you some examples you can verify with a third party.”

    Thanks for the advice. eBooks are easy to churn out and it’s not like you’re putting down a factory in a given country.

    “True. But that live forever nanotech stuff is a guess on my part, not a prediction.”

    Oh, I think it’ll happen.

    “Japan has them right now, but they look weird and cost a bazillion dollars.

    My guess is we’re looking at 20-30 years before we’ll have sexbots that look, sound, and act just like human women, to the point where you can’t tell the difference. However, they’ll be way too expensive for the average person to own (though the average person could rent them for an hour or two at a time). So add another 10 years or so, possibly less, for their price to get down to an affordable level for the average dude.

    Once again, this insane shit is going to happen in our lifetimes. People have no idea what’s coming.”

    Heh, If you were to look at the earliest steam locomotives (they weren’t much to look at) and then look at one during the early 1940s, you’d think progress.

    Now, if you were to look at the earliest personal computers (again, not much to look at) and then look at one during 2010, you’d think progress.

    But notice the key difference. How quickly did it take you to advance the steam locomotive when compared to the personal computer? And a PC is much more complicated. The same can be said about tablets.

    When the first sexbot comes out, even if it’s not much, give it a few years and it’ll be amazing. The price will crater along with the improved functionality (which will skyrocket.)

    I hope you’re wrong on yor 20-30 year prediction 🙂

  21. Caleb, I reread your article on taxation, and it does correspond pretty closely with what I think.

    However, a question for you: I know from your writings that you are not a fan of employment. As a method for trading one’s skills for money there are few worse ways you could think of. I do consulting work often for large firms and I see how they work up close and personal. And what I see is that in any firm 20% of the people do 80% of the work and the social, legal structures and design of the firm are mostly the support other 80% lame duck employees. The reason being that the firm is so buried in a wash of transaction costs that the real costs are hidden. Two obvious examples being benefits and the quite dreadful SOX, Dodd Frank and similar laws. This is cascaded by the hiding of consequences, so that managers are rewarded for the size of their budgets and departments rather than that productivity of their charges.

    In an ideal world businesses would pay you for the work you did much as they do me — I bill them monthly for either piece work or hourly work and they pay me directly for that work at an agreed on price. I imagine that is how you work too.

    However, that is a sale. So, were everyone to be paid that way, do you think that I should be obliged to charge my client sales tax on that transaction?

  22. @Fraser Orr

    Well, that’s pretty much modern society. You have/develop something and you trade it for things that others have. Unless we develop the replicators that you see on Star Trek, this will always be the case.

  23. Would love to see how your books fair in China, given the very different culture and different biology (lower sex drive)

  24. @Shubert: this sexbot thing might be more complicated than it sounds. If in 20-30 years or anytime in the future we can program robots to act exactly like humans, it will draw attention to the less and less deniable fact that we too are programmed machines, which will raise the problem of the legal status of robots. Apart from the fact that THEY may themselves ask for human rights, we may very well feel compelled to give them individual (and not “property”) status.
    And if we make sexbots that look 100% human but are behaviorally much less elaborate, it still doesn’t fix the problem because it can ethically be compared to having sex with less-sentient-than-human-animals, ie bestiality.
    There is no objective proof that a human you’re talking to is conscious, you only have direct evidence of YOUR consciousness; therefore we can’t be certain that sexbots are “just a realistic imitation without feelings” and not be hypocritical. Super realistic dolls will come without a problem, but super realistic robots will cause a storm of ethical issues. Don’t count on them too much, unless you intend to seduce them just as you would a woman, and not own them (but then they could be programmed to be low drama, less hypergamous, or whatever).

  25. @Gil Galad

    I think you’re going off on a tangent. Yes, what you say is possible. However, giving a robot human-level intelligence is still a very tricky problem (but not impossible.)

    My personal take on this is that it will cause tectonic shifts in the dating market and society, the likes of which has never been seen before (even moreso than when women were given the right to vote.) I’m more interested in this than anything else.

  26. Back to China.

    China still needs a way to control its pollution and despite the draconian federal laws that have emerged in the West, it’s still a freer place to do business (as well as legal disputes.) I’m curious how the Chinese will solve this.

  27. @Shubert: well I was only commenting on “we might have sexbots that look, sound, and act just like human women, to the point where you can’t tell the difference” (now that i’m re-reading, I realize you were quoting CJ. My bad.). My point was that that won’t come without consequences, because a perfect appearance of humanity forces the question of whether they actually should be treated as human. “giving a robot human-level intelligence is still a very tricky problem”, yes, but a problem that might be indistinguishable from giving one the appearance of it, so we won’t solve one problem without the other. As I stated above, you think I’m human only because I give the appearance of it.

  28. @Gil Galad

    You make good points, but you’re going off on more of a philosophical tangent (admittedly, I’m not the best when it comes to staying on topic either.)

    But yes, if robots begin to look and act very human, this will be a massive philosophical and ethical dilemma. Will the robots believe in a God? Will they want to live with us? Or go full Matrix and enslave humans?

    Personally, if the robots ever did gain Matrix-style super-human intelligence, they would just leave us. I mean, what would you rather do to best preserve yourself? Go to war or get the hell out of dodge? If these machines are genuinely intelligent, they would see through our erratic emotions and realize that dealing with some of us a waste of time (and blast off into the Milky Way and beyond.)

  29. So, were everyone to be paid that way, do you think that I should be obliged to charge my client sales tax on that transaction?

    I don’t understand the question. I get your point about government overhead in business, but I have no idea why it would be justified to charge a sales tax in your scenario.

  30. @Caleb
    >, but I have no idea why it would be justified to charge a sales tax in your scenario.

    Because I am selling something — namely my services. Or do you think sales tax only applies to the sale of physical goods at retail? For example, what about real estate of new properties? What about IPOs (not stocks since generally speaking sales tax only applies on first sales.)

    When I was a consultant in the UK my company was obliged to charge VAT on my services, if that data point is relevant.

  31. Because I am selling something — namely my services. Or do you think sales tax only applies to the sale of physical goods at retail? For example, what about real estate of new properties? What about IPOs (not stocks since generally speaking sales tax only applies on first sales.)

    Ah, I see. My opinion is that sales taxes should only apply to product (something that is manufactured) or a good (something that is pulled from the earth, like fruits) and should not apply to intangibles, such as services or a non-solid piece of IP (like an ebook or share of stock). But that’s not a strong opinion, and I could be convinced otherwise if I heard a good opposing argument.

  32. @Caleb

    Taxes on consumption are a far lesser evil than on property and triply less evil on production (income, dividends, etc.) I’ll take a tax hike on food (would probably work wonders on obesity in this country) and other things over seeing a smaller paycheck.

  33. Remember Caleb. The US may have less economic freedoms, but still has relative political freedom. If the Chinese government doesn’t like your book for “political sensitivities”, your book won’t be accessible to Chinese consumers. If you move to Shanghai and continue writing this blog, the government can shut it down as they see fit. So proceed with caution

  34. 2% Rule. The odds of the Chinese government actually taking an interest in my book is only if it sells a million copies or something like that, and by then I won’t care if they shut it down because my money will have been made, and my other services the book sells (coaching, ebooks, SMIC program, etc) will be churning out plenty of money from the Chinese market. Same with the blog. So don’t worry about little ol’ me. 🙂

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