Cyprus austerity tax

Cyprus announced last night they were going to tax bank deposits by (around) ten percent.

People are outraged that the government can come along and just 'take their money'. I can understand why. But is it rational?

Firstly, there is a name for that thing when the government comes along and takes your money. It is not robbery, it is taxation. Robbery is when private individuals do it. There are people that pretend all taxation is robbery. For them this is no different to any other tax.

Normally governments tax us when we get money (income tax) or when we spend money (sales tax/VAT). They rarely tax our wealth (although land tax is an example).

Given that the return to labour from economic activity has been decreasing while the return to capital rising, why shouldn't wealth, as opposed to income be taxed? Put another way, workers have been getting an ever smaller slice of the pie, savers an ever bigger one. Should we then tax workers and spare savers?

In the final analysis Cypriot banks are in such a state they cannot survive without state subsidy. That subsidy comes at great expense. Should savers really have all their money preserved? Should benefits be cut just so people with savings can receive a subsidy from the state?

All over Europe we are implementing economic austerity. We are cutting benefits, and the root cause is a bankrupt financial system. The poorest in society are paying for the mistakes of the richest. And now bank depositors think they have a special case to plead? Someone, somewhere has to pay for this bailout, as major beneficiaries, shouldn't they be close to the front of the queue?

Finally, consider this. Cyprus has acted as a tax haven and a hub for money laundering. This way teh Cypriot government gets to  tap wealthy as well as corrupt foreigners.

This move may look bad, it easily could be the least worst option available. If we aren't to let banks go under, I can't think of anything better.