We have discussed the plan of the new French government to impose a 75% tax on the top earners in the country, a move that in my view is better politics than economics. Now there is an alleged tort to go with the politics (Thank God). France’s richest man, Bernard Arnault, announced that he was seeking Belgian nationality. The response from the leftist Liberation newspaper was a giant headline superimposed over Arnault’s face reading “Get lost, rich jerk”. Now Arnault is suing for for “public insult” – over the offending headline’s “vulgarity and brutality.”
Arnault is the head of the luxury conglomerate LVMH and denies that he is seeking Belgian citizenship to avoid the new tax by France’s Socialist government. The headline is a take off from a line by by ex-president Nicolas Sarkozy, who told a man who refused to shake his hand “Casse-toi, pov’ con” (“Get lost, you poor idiot”).
Notably, while the earlier blog;drew comparisons between the tax and the French Revolution, the newspaper drew the same analogy in its response to Arnault — saying he is like the “nobles and opulent bourgeois” who resisted and fled the 1789 French Revolution. It is a curious analogy given the disastrous orgy of blood following the Revolution.
Despite the unfortunate analogy and my general agreement that the 75% tax is unwise, I fail to see how this is actionable. In the United States, a “public insult” is protected speech and courts limit tort liability so not to allow civil lawsuits to “chill” free speech. In addition to this, Arnault is a public figure in the midst of a public controversy. This strikes me as something that should be protected as opinion.
To the extent that the newspaper states as fact that he is fleeing taxes (something he denies), there may be factual challenges. However, this also may be covered by opinion as to his motivations. Even other super wealthy French citizens and conservative leaders have denounced the move by Arnault.
While his spokesman have cited the “extreme vulgarity and the violence of the headline,” it seems pretty mild and non-violent on this side of the pond. Of course, the French laws are different on defamation and the United States tends to protect free speech to a greater degree than even its closest allies.
What do you think?
Source: France 24
@Bron: Let me be clear too, that is why we build bridges everywhere they are needed; and those bridges can be used by anybody in the country that happens to need it. The same goes for roads; nobody will ever use every road in the country, yet they can use the roads they need all they want.
Back when the founders were debating the Constitution they rejected paying for canals in New York because the people in Georgia would probably never use them.
I agree with that logic, I am likewise opposed to favoritism, but that is not the logic in play when building 10,000 bridges that virtually everybody will benefit from either directly or indirectly.
I am guessing the amount of money a local shipper would pay in tolls would pale in comparison to the amount of gasoline tax they pay in a year.
Then you have guessed wrong. The average loaded tractor trailer gets 7 mpg on diesel (more when empty or bobtailing), the gasoline tax varies by state but averages about 54c per gallon for federal and state taxes combined, so under 8c per mile. We could expect a private road owner to charge more than government owned toll roads, because the governments charge for sustainability, not profit. So, the Delaware turnpike charges 36c per mile, and some sections of toll roads charge as much as $1.28 per mile. That is what we would expect truckers to be paying in tolls; at least four and probably as high as sixteen times as much as they now pay in federal and state taxes.
unless it is the only game in town.
Which is the point; roads and bridges are natural monopolies, there is usually only ONE ideal place to build a bridge, and usually no way to build a road at all without the power and finances of the government.
that is the beauty of competition, another company could always build a bridge.
Not necessarily, there is the problem of acquiring property to build the bridge, the problem of financing the bridge, and the problem of being able to operate the bridge long enough to drive the competition out of business. In a rules-free system, the first bridge owner will just undercut his new competitor’s price until he drives him under. It isn’t like there is a lot of innovation that can be done with the bridge to make it better to drive over; we can presume the first bridge operator has the natural advantage of being ideally positioned with his bridge; he was there FIRST, after all, and had his pick of sites.
You act as if the chance to compete makes business people stupid. It doesn’t. Localized markets (like that for a bridge, hotel, restaurant, or any personal service, like a barber or car mechanic) are very finite, to the point that there may be enough demand to support one service business but not two; that if two businesses split the demand they will be in a battle to the death, and they might BOTH go bankrupt.
For something like a bridge, it would be business insanity to compete unless cars were routinely backed up for miles. Even if your pockets were deep enough to drive the first guy out of business, he is going to sell his bridge to somebody else and you will have to drive them out of business, and the next guy, and the next guy. When does the profit start? So if you want to be in the toll bridge business, you just BUY that first bridge, or build elsewhere for an entirely different market, and either way, you charge the full toll of $5 to cross the bridge.
It is suicidal business to start up a competition in a market where you have to drive an established competitor out of business to realize a profit, unless you have a compelling feature or advantage that has a plausible chance of doing that. That is extremely unlikely for something as utilitarian as a bridge or road; people do not really care enough to pay extra or take the inconvenient route instead of the convenient one.
If fuel taxes are dedicated to road building and maintenance, and are not used to fund other parts of the government, there is no plausible scenario in which for-profit tolls would cost less than fuel taxes.
On a broader note, if you believe that competition will drive profits down, then you have to answer the obvious question: Why aren’t profit margins ZERO? How can owners make millions or billions of dollars? How do some people earn thirty million a year, year after year? Why isn’t somebody competing against them to take half that market and money, surely somebody would be happy to earn fifteen million a year. Right?
This is the missing element in your economic chemistry, and why your equations never balance. Profits are NOT zero. You CANNOT always build another bridge. Proctor and Gamble earned $19 billion dollars last year, a profit margin of 13%. Surely, some investors out there would like some of that sugar, so why doesn’t somebody “build another bridge,” meaning spend $200B to build another PG and compete with them?
That is what it would cost, about the average of their market cap and enterprise value, $200B. So why isn’t it done already? It is not done because competing in that way would be financial suicide. If you want to be in that business and you have $200B, instead of competing you just start buying up PG, until you control it. Typically 10 million shares are traded on PG in a day, so you could buy, at current pricing, a controlling share of PG in well under a year, just by purchasing what people want to sell.
Competition creates losses for sellers; otherwise it would not be good for consumers. When demand is real but low, competition bankrupts sellers by pitting them in a war of attrition; and smart business people recognize and avoid such wars. They will either acquire the business (often the cheaper alternative to competing) or they will cede the field and look for greener pastures. But if they cede the field, the existing owner has a natural monopoly and will charge as much as he can to maximize his profit; and that is what would happen with a toll road or a toll bridge.
By operating such systems at the cost of sustainability, the government provides a common good at a lower price than the for-profit model, by definition: The cost of sustainability is the same for both.
no, I am not for anarchy but I am for limited government and our Constitution is a pretty good document to that end.
It limits the collective will as well as the government’s power.
tony c:
That is not what the general welfare clause means. The Constitution is about the limitation on the power of government and the protection of individual rights.
tony c:
“The same bridge, built with $X of tax money, only costs those users $X, because then the bridge is free, and what shippers must add on to their goods to cover the cost of crossing the bridge is $0.”
Lets be clear, bridges cost money and people who drive all over the US will pay for that bridge instead of just the people who use the bridge.
Back when the founders were debating the Constitution they rejected paying for canals in New York because the people in Georgia would probably never use them. The bridge to nowhere is a good example of this.
I am guessing the amount of money a local shipper would pay in tolls would pale in comparison to the amount of gasoline tax they pay in a year.
A toll bridge, run privately still must charge a reasonable toll unless it is the only game in town. But then that is the beauty of competition, another company could always build a bridge.
@Bron: The Constitution was not written to “require” any work by the Government except, perhaps, by implication (e.g. for a quaint and outdated example, you cannot search without a warrant, implies you have to do the work of getting one).
The Constitution defines procedures and protocols, but besides that just restricts what the government can do, to states and citizens. Besides that, it is all open ground, the Government was presumed by the founders to have the right to set taxes and tariffs and to act in the general welfare, which would include collecting taxes to construct infrastructure like roads and bridges, provide universal health care, unemployment pay, retirement programs and public education.
Show us something in the Constitution that is explicitly “required” of the government and is not a permission, restraint, or procedure (like how to impeach, or pass a new law). I do not have time to re-read it, but I am interested in what you find.
Until you do that, I presume you are just calling for the abolition of all government, or you want a new Constitution that prohibits all of the “common welfare” functions of the government. Either way you have a dictatorial wish, because the vast majority of people reject the prospect of anarchy, and a super-majority believes government can be a positive force for the common welfare.
@Bron: There is no functional difference between a bridge built with tax money and one built with private money; a bridge is a bridge. There is no functional difference between the work of building a bridge with tax money and the work of building a bridge with private money, either.
The difference is in the ultimate cost of the bridge to the users of that bridge. A bridge built with $X of private money, for the purpose of profit, must return more than $X to the owner, it must return $X + $Y. Which means the users of the bridge paid $X + $Y to the owner. Typically, for a long term project like a bridge, $Y will be many times $X.
The same bridge, built with $X of tax money, only costs those users $X, because then the bridge is free, and what shippers must add on to their goods to cover the cost of crossing the bridge is $0. The bridge then returns to its “owners,” the taxpayers, savings on the products that cross the bridge.
There does not need to be any profit to the government, it should never be out to make profit. What the government should be doing is creating an infrastructure with tax money that makes it EASIER for private companies and individuals to earn their profit.
tony c:
if we only took care of the Constitutionally required work of government, we would only need about 25% of our current budget.
But in any event a bridge built with tax money is money not used in the private sector.
yes a job is a job but the only way to have a job is for profit to be made. No profits, no jobs both in government and in the private sector.
@Bron: The question was not where the money came from, or the definition of profit, the question was the definition of a “job.” A job does not require profit, no “owner” has to financially benefit at all, it is a job if the worker gets paid for the work, period.
Taxes are not something “taken” from Peter to pay Paul, you are back to defining taxes as robbery instead of the rent expense they actually are. Taxes are the rent on the infrastructure, including the roads, police, courts that enforce contracts and punish crime to minimize it, and including the insurance premiums against various hardships and misfortunes.
A business can survive indefinitely without a penny of profit if it receives enough to pay its workers and break even. That does not redefine whether the people working have a “real job” or not.
there is only so much wealth in the world [maybe someone should tell Benny B], it cannot be used for everything. What is taken from Peter to pay Paul will eventually run out if not replenished. Profit is the replenishment. No profits no bridges or anything else for that matter.
No one is going to take risk for no reward.
the money for the homes does not come from government, i.e. other people’s pockets. Roads and bridges are overhead, they may help facilitate commerce but they do not create wealth in and of themselves.
You rob the home builder to build the roads and bridges.
If you privately paid for roads and bridges and charged a toll, I would agree with you. Then they would generate a profit for the investors.
A not for profit corporation does not rely on tax dollars to sustain itself. It relies on charity and fees for services and goods it does provide at a lower cost, typically at cost or even less.
Definition of ‘Profit’
A financial benefit that is realized when the amount of revenue gained from a business activity exceeds the expenses, costs and taxes needed to sustain the activity. Any profit that is gained goes to the business’s owners, who may or may not decide to spend it on the business.
Read more: http://www.investopedia.com/terms/p/profit.asp#ixzz26kCMZrax
@Bron: As I expected, you redefined “profit” to mean anything you want.
Roads and bridges require perpetual maintenance, inspection, and repairs. Those can be permanent jobs.
However, I reject the entire qualification: I know three homebuilders that have been working for almost forty years, full time. No individual home is a permanent job, in fact it is likely to be no more than three months or so. They would still argue they have permanent jobs. A surgeon has a permanent job even though his individual projects amount to less than a day. A road may take a year to build, but a road builder can certainly have a permanent job.
Still, jobs do not have to be permanent at all, a job is a way to earn money, any way to earn money is better than no way to earn money. I have worked for dozens of companies in my life and did not expect any of those jobs to last forever; I do not expect my current job to last forever.
Permanence really has nothing to do with jobs; in fact a lack of permanence, in my experience, has given me change to which I look forward, it has made me financially conscientious so I earn more than I spend and do not live paycheck to paycheck, and it has provided variety that has been very good for my mental health and comprehensive outlook.
In fact for many lawyers, defending against litigation, or an alleged crime, or suing for breach of contract, their job does nothing but prevent a loss, and even if they prevail their client is going to have the loss of their fees.
Suffering a loss of time and money in order to prevent a larger loss is not “earning a profit,” defining “profit” that way would mean one could earn so much of that kind of “profit” they could go bankrupt, a clear absurdity.
That is not only true for lawyers, of course. Auditors help prevent theft, as do other security personnel. Professional buyers ensure one is not being over-charged for supplies, managers ensure employees are not wasting time or supplies or efforts. And so on; a large number of people with jobs are involved in preventing losses and waste, not in producing profits.
In a hospital, for example, we have a small army dedicated to making sure the equipment is being regularly maintained and is in working order. Not just for our own peace of mind and reliability, but because when lawsuits occur we have to prove that the defibrillator that failed to restart a heart was actually in good working order when it was used.
They are an expense that guards against losses, but that is not the same as earning a profit. What they do is provide an environment in which work can be done. In some non-profit hospitals, nobody is there to earn a profit for an owner, any profits that are earned go to emergency reserves and eventually just reduce costs. But the personnel have “real jobs.”
tony c:
no, the idea of a free market is continual improvement. You go from the bi-plane at Kitty Hawk to the modern passenger jet. That takes profits.
Again some things are necessary for a free society. The things you mention require a very small amount of money to run.
Even the accountant and the janitor are necessary to the proper functioning of a business. Even though they are “overhead” they are still part of a business devoted to profit.
Nothing wrong with roads and bridges but they do not create self sustaining jobs. They take from Peter and give to Paul.
@Bron: Why does a job have to do anything more than pay for itself? What does profit have to do with anything?
Isn’t your entire free market philosophy based upon the idea that competition should drive the profit margin to nearly nothing? Isn’t it based on the concept that if some activity is extremely profitable, it will attract practitioners until the supply meets the demand and the profit is actually minimized? (That does not happen in real life, of course, but that is the standard excuse of those that promote free markets as self-regulating, as you do.)
Jobs do not have to produce profits to be real, what makes a job real is if somebody is willing to pay for the work being done. That’s it.
By your definition, police, firemen, soldiers, and court workers do not have “real” jobs, because they do not produce a profit. Neither does anybody that works on the infrastructure side of business, like accountants, secretaries, janitors, supply buyers, or even contract and defense lawyers.
Unless, of course, you are going to redefine “profit” to include everything imaginable and therefore be meaningless….
you assume I dismiss the minority. I dont, in a modern society there must be some sort of safety net but I just dont believe there are 50 million or more people who actually need help. I think many take advantage of the free stuff offered by society and have no conscience nor do they care where the money comes from to support them.
Poverty has been an excuse to grow government as government grows it takes more and more from the private sector. And it just pisses that money away. There are not any real jobs created, those that actually pay for themselves in the form of profits to the owner.
@Bron: What is missing from your entire philosophy is a consideration of extremes, and it is the extremes that cause instability and unfairness. I do not “neglect” anything, for SOME individuals life is happening in a vacuum.
You say “for the majority of us there are family and friends,” but then perforce for a minority of us, there are not. You proceed to dismiss that minority as if they do not exist and do not matter. I do not, because I believe in equality, I do not consider it “good enough” if the majority are served by abandoning a minority to despair, fraud, and desperation.
As for “the freedom to take care of that for ourselves,” the fact is that WE DO NOT. We had that freedom from 1776 to 1930 or so, and we NEVER DID. The idea that we will is a fantasy, it has been tested, it does not happen.
The reason it does not happen is quite simple: The problems one may face in the future are far less to people than the problems they face today. People do not think that far ahead, they spend their money to make their lives more comfortable. They will NEVER change, it is a fantasy to think that some sort of punishment or saddling them with responsibility will MAKE them change, We have watched them live out their lives and end up destitute in age after age, country after country.
You might as well task them with building a ladder to the moon. For a while we had people accepting lower wages in return for pensions provided by governments, but that failed because companies fail. The government is the only entity that CAN provide such pensions with a guarantee, that is the purpose of SS and Medicare.
Your mantra of “personal responsibility” is just adolescent wishful thinking, real people will not take it, even when their life depends upon it. That is just not how the typical human psychology works, it is an anti-reality position, you might as well be wishing for unicorns.
tony c:
the other thing you neglect to mention is that an individual life doesnt happen in a vacuum. For the majority of us there are family and friends who care about us who can help us with navigating when we have a diminished mental or physical capacity. Assuming of course we havent alienated everyone around us by bad behavior.
Tony C:
did you read the article on mutual aid societies? they were run by the members and had a good pay-out. They were not for profit, they were for protecting their members.
It looks like government forced them out of business through regulations. Apparently they had a good track record of providing for their members.
We do not need government to protect us in our old age or to provide our health care, what we need is more freedom to take care of that for ourselves.
Government set the fires and now they tell us they are the only ones who can put them out. Sounds like the mafia to me.
Tony C, once again, thanks for saying it as well as it can be said. 🙂
Any insurance company that earns more profit by finding ways to deny more claims has a fundamental conflict of interest, and a financial motive to engage in sociopathic behavior.
That includes reducing or denying claims it legally should pay in full, using the threat of protracted litigation against their own customers that are, because of the circumstances leading to the claim in the first place, unable to afford such litigation.
Another sociopathic behavior encouraged by the profit motive amounts to fraud, complexifying a contract to the point that typical citizens must rely on (non-binding) verbal assurances of agents as to what will be covered, only to find that their claims are being denied or catastrophically limited when disaster does befall them. Like the woman denied care for her breast cancer (which then killed her) because she failed to report severe teenage acne as a “pre-existing condition,” when the insurance company found that as a teen she received a prescription acne cream from a dermatologist.
This of course does not ONLY apply to health care insurance, it applies to all insurances, car, home, home-repair, property, life, liability. A for-profit insurance company has a natural conflict of interest in paying claims.
That conflict of interest is why we have contingency lawyers, and it is why I have had to pay lawyers, on multiple occasions, to press my case against insurance companies (all of which we won). Although I thank my attorneys for their service, none of that should be necessary. I do not know how much extra cost is built in to the insurance industry because of contingency and litigations, but it is folded into the premiums and the successful denials of deserved coverage, when people cannot find an attorney or afford one.
The problem is less severe when the insured is a property, like a car or house; because the policy holder is usually (statistically speaking) an adult of full capacity, in good health with a job and the mental resources to pursue a claim or involve an attorney. The problem is more severe when capacity is diminished, by age, health, poverty, etc.