Big Brother’s MoneyBy J. Bradley JansenJuly 12, 2001A 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 ondollar 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 beembedded in money for security applications [“Money tracking by micro chip,” byJohn Leyden, The Register, April 7, 2001]. The chip was designed to help stopcounterfeiting of currency notes. Hitachi set up a joint venture on July 1, 2001called Mew Solutions and dubbed the product the Mew chip.The Richmond Fed senior vice president explained that the carry tax idea is an oldKeynesian one but was abandoned due to the lack of technology. He was excitedthat 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'regoing to tax somebody because they decide to be frugal and hold a couple ofdollars is economic planning at its worst." He introduced H.R.3399 in the lastCongress to stop the Federal Reserve official's plan to impose the "carry tax" oncurrency notes. The "Currency 'Carry Tax' Prohibition Act of 1999," would haveprohibited the Secretary of the Treasury and the Board of Governors of the FederalReserve System from including any information storage capability on the currencyof the United States or imposing any fee or penalty on any person for the holdingby 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 andirrelevant should reconsider in light of recent government proposals and the newtechnologies 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 propertytaxes on space satellites.Los Angeles County Assessor Rick Auerbach said that they are going to continuetheir court appeal after the California State Board of Equalization ruled againstthem. Just because the General Motors unit Hughes Electronics Corp. is based inLos 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 multilateralorganizations dealing with tax issues. The Organization for Economic Cooperationand Development is trying to thwart what it calls “harmful tax practices.” TheOECD thinks that low tax rates or businessmen considering the tax implications oftheir decisions as “harmful” practices. Their sister organization the FinancialAction Task force might want to consider hiring Mr. Goodfriend or his compatriotsat Hitachi: the FATF is waging a global You’re your Customer campaign to be ableto track financial transactions.A recent United Nations report of the High Level Panel on Financing forDevelopment to the General Assembly recommends the creation of an InternationalTax Organization (ITO). The ITO would "sponsor a mechanism for multilateralsharing of tax information, like that already in place with OECD, so as to curbthe scope for evasion of taxes on investment income earned abroad."The European Union Commission’s EP Civil Liberties Committee just approved a
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