Give me your money – Roger Jardine

Change Starts Now leader Roger Jardine is the latest politician who thinks taking more money from South Africans and giving it to the government is a great idea.

Jardine announced his Reconstruction and Growth Fund (ReGrow) idea as part of his Change Starts Now party’s manifesto launch in Soweto on Monday.

The party said it would table its ReGrow fund plan in Parliament to address the country’s challenges. It includes increasing GDP growth to above 2.5% and resolving infrastructure and logistics problems.

It will, of course, cost a lot of money. Jardine said they want to raise R500 billion to fund immediate social protection interventions.

He also shared his idea for getting this money. It includes taxing the rich, grabbing more of companies’ profits, and taking retirement fund money.

Daily Maverick summarised Jardine’s plan to fund his R500 billion Reconstruction and Growth Fund and grow the economy –

• A wealth tax of 1.5% a year for three years.
• Corporate income tax increase of 4.2 percentage points for three years.
• Tax increase for top earners from 45% to 49.5%.
• A 1%-a-year charge on retirement funds for three years.

Change Starts Now’s plans received mixed reactions. While some welcomed a fresh face promising to solve the country’s problems, others opposed higher taxes.

The reality is that South Africans are already overtaxed. The country has some of the world’s highest taxes, and taxpayers have little to show for the money the government takes.

More importantly, it is also not a lack of tax revenue causing South Africa’s problems. It is an inefficient and corrupt government. Raising taxes will not change this one iota.

Calls for taking more money from taxpayers and giving it to an ineffective and corrupt government are, therefore, misguided.

Growing the economy

Even if the government, with Jardine as president, miraculously became corruption-free and effective, it is still a bad idea to raise taxes.

Efficient Group chief economist Dawie Roodt said a strong economy has three pillars – private property rights, free trade, and sound money.

The government is responsible for protecting property rights and ensuring the country has a trusted currency. This does not cost much money.

The third pillar – free trade – is even easier. People must be allowed to buy and sell goods and services, including labour, without impediment.

The state’s role is to facilitate free trade. Simply put, the government must get out of the way and allow the private sector to do its thing.

Any tax increases friction and puts a strain on free trading. Increased taxes, therefore, hurt free trade and should be avoided.

Another consideration is who is better suited to spend money efficiently – the government or the private sector.

The government is a terrible capital allocator. It has repeatedly shown how wasteful it is with other people’s money.

Billionaire Elon Musk, who has built some of the world’s most impressive companies, said giving a government more money makes no sense.

It does not make sense to move capital allocation away from people who have demonstrated great skill in capital allocation – like businesses – and give it to an entity that has demonstrated very poor skill in capital allocation – the government.

South Africa’s government, state institutions, and state-owned enterprises have a long track record of destroying wealth instead of creating it.

To call for higher taxes to move more money from people and businesses to the government is, therefore, a terrible idea.

World-renowned economist Thomas Sowell, who has often criticised the view that the government knows better how to spend money than its citizens, summed it up well.

“The assumption that spending more of taxpayer’s money will make things better has survived all kinds of evidence that it has made things worse,” Sowell said.