Various news organizations have been reporting an exodus of the superrich from France — often buying homes in England or surrounding countries to avoid the expected 75 percent tax rate proposed by the Socialist government of President François Hollande. While the rate would apply only to those making one million euros a year or more, I view it as a mistake. I admit that I tend to have great reservations about heavy tax hikes during economic crisis. We have debated the value and potential harm of such hikes on this blog. However, a 75% rate is in my view insane. As rational actors, top earners are likely to simply leave the country as they are doing. Hollande came into office on a wave of sentiment to soak “Les riches” and Hollande himself proclaimed “I don’t like the rich.” It is a bit too Robespierrean for my tastes as an economic policy.
Only around 30,000 people (out of 65 million) in France would be subject to the greater tax if it is approved. While that may seem to mitigate the concern over its social impact, it would also result in the collection of a small fraction of the needed revenue — even if they stay to be taxed. What is all does, however, is create the impression that France is hostile to top earners — a dangerous image for a like France with a portion of the economy catering to high-value estates and tastes.
Hollande insists that the 75 percent tax is “sending out a signal, a message of social cohesion.” Perhaps, but it also (in my view) sends out a message of economic chaos. The tax is a virtual invitation for the top earners to flee France for England. The result could be a modern remake of the “Tale of Two Cities” with London enjoying an infusion of capital and investment as wealthy French families shift assets away from Paris.
What do you think about a 75 percent tax?
Source: NY Times