Liberté,Egalité, Fraternité: French Court Strikes Down 75 Percent Tax on Rich

libertyFor months, I have criticized the tax policies of France’s Socialist President Francois Hollande, particularly the confiscatory 75 percent tax rate for the wealthiest French. In addition to being in my view unfair, it is extremely bad economic policy. France’s Constitutional Council now appears to agree — at least on the equitable side. On Saturday, the Council rejected a 75 percent upper income tax rate on annual income above 1 million euros ($1.32 million) as an unfair treatment of different households. Popular figures like French actor Gerard Depardieu have opposed the tax and even left the country. The French experience should get some in the United States to dial down on our own over-heated rhetoric on economic policy. (Yes, I will now vent a bit on economic policy).

The court appears to have taken the second guarantee of Liberté, égalité, fraternité as extending to taxes.

Undeterred, Prime Minister Jean-Marc Ayrault said the government would redraft the upper tax rate proposal to address some of the equitable issues. It is not clear how these changes would suffice to answer the Council if the rate remained at 75 percent.

French officials have said that the loss of the controversial tax would not materially impact their deficit reduction plan. The tax rate was in my view a uniquely bad policy. In the end, it only applied to a few thousand people and could be circumvented, but the tax sent a hostile message to the top earners in the country. England has recently reduced its tax rate after top earners began to flee the country.

This “eat the rich” hostility is unfair and often ignores the substantial contributions of many wealthy family not just to the vast majority of tax revenue but to charitable and philanthropic enterprises. Some cities like New York continue to raise their taxes despite evidence that wealthy citizens are responding to the taxes by leaving the city. The same rhetoric is evident on the corporate tax rate which is too high in the U.S. The Canadians have lowered their tax rate because they are not idiots. With the rate so high in the U.S., Canada is draining our economy of businesses which respond as rational actors to one of the lowest rates in the world (and leave one of the highest). While Obama admitted during the campaign that our rate was too high, his administration has done little to rectify it in past years. However, it is the rhetoric that amazes me as smart people like John Stewart slam the proposals to lower the rate. Once again there is this rage that is blind to basic economic realities. Once again, I am not against increasing taxes. Yet, this is just stupid. Why do we think these businesses will stay in the U.S.? We are running our economic policies on soundbites and emotive appeals. As with the French tax rate, we think that these businesses are somehow a captive audience. We sit between Mexico and Canada and we are doing everything that we could do to increase that “giant sucking sound” to the South and the North as businesses leave the U.S. We are already a consumer economy and that trend will only worsen until we stop treating economics as part of a class war against the wealthy.

I am also critical of President Obama’s long campaign to raise taxes on people earning $250,000 and more as “the wealthiest” members of our economy. While I support increasing taxes, the rhetoric against top earners in this country has often outstripped reality. Those making $250,000 a year and more pay for the vast majority of tax revenues in this country and their demonization by many commentators is unfair and counterproductive. Nancy Pelosi has proposed a tax for those making $1 million and more in a compromise. In the end, I believe we have to raise taxes and can do it without negative economic consequences. However, Obama and Congress continues to spend wildly, including sending billions abroad to Iraq, Afghanistan, Israel, and other countries. My concern is that increasing revenues will take pressure off politicians to cut back on such expenditures as well as pork barrel projects.

Recently, in our return from Chicago on the holiday, my family was caught on the latest toll road off of I-66 in Washington. This thing is unbelievable. Not only does this road entrap drivers but you cannot get off of it for miles. While we have an EZ Pass, friends and family members have been nailed with an automatic ticket even if they have multiple passengers in the HOV lane (you also must have an EZ Pass). I cannot imagine why state and federal officials are not being tarred and feathered over this absurd project (I may have been particularly on edge after sitting for an hour at that vortex of hell known as Breezewood maintained by our politicians and government officials) It is also the latest example of handing over a core government function to a private contractor. We are sending billions to Iraq and Israel but we cannot simply pay for a highway outside of our Capital. Instead, average citizens are clipped for tolls and tickets.

Likewise, in Chicago, a contractor was given a 75 year exclusive contract for parking meters in a corrupt deal under the Daley Administration. The result is that Chicagoans are now in the gripes of a company that has made parking the most expensive in the nation: soon to be $6.50 an hour. These are regressive hidden taxes that are rarely discussed as our country burns hundreds of billions on foreign wars and military loans as well as other inviolate expenditures. It is doubtful that any of that will change as we increase revenues this year.

I find both the Republican and Democratic parties to be equally mindless on economic policy. We are unlikely, however, to have our courts play much of a role as they have in France. While no one is talking about a ridiculous tax like the 75 percent rate, tax policy in the United States is viewed as a political question to be left to Congress and the White House.

Source: Reuters

80 thoughts on “Liberté,Egalité, Fraternité: French Court Strikes Down 75 Percent Tax on Rich

  1. “But by retracting the Social Security ask, Republicans bought themselves a few more hours to cut a deal.

    “I was really gratified to hear the Republicans have taken their demand for Social Security benefit cuts off the table,” Reid said. “The truth is they should never have been on the table to begin with.”

    If the negotiations fall apart overnight, Reid will introduce a measure on Monday to lock in Bush tax rates on income up to $250,000 per family, and extend emergency unemployment benefits. Republicans would then have to choose whether or not to filibuster that fallback plan. However Sen. John Cornyn (R-TX) — a member of GOP leadership — told reporters Sunday night that the GOP’s decision would depend on whether or not Reid allowed votes on Republican amendments. ” TPM

  2. This crap bores me to death. They already know what they’re going to do and this is theater. Congress is like a bunch of typists in the pool who hear footsteps around the corner and start tapping the keys like crazy to look busy for the boss and if you were to look at their screens two seconds later you’d see:

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  3. If Congress does nothing, taxes will rise in 2013 by an average of $3,446 for U.S. households, according to the nonpartisan Tax Policy Center in Washington.

  4. “Such a threshold set at 750k is probably an easier sell because of this.” (Gene)

    Stop throwing light on my tactics right now!! (You may know I’m all about the easy sell but that is privileged info.)

  5. “Congress is like a bunch of typists in the pool who hear footsteps around the corner and start tapping the keys like crazy to look busy for the boss …” (Malisha)

    That would make a great political cartoon

  6. Rafflaw Contributed:
    in the long run, it may be better for the country to go over the cliff.. It will be hard for most, but it will produce a Congress more willing to actually do things in the best interests of the vast majority of the people. IMO

    In reading the mandatory issues (cuts / Tax increases) that will automagicaly occur if congress and the president do nothing, I think it would be probably the best course of inaction.

    TIme to head over the fiscal cliff like Thelma & Louise.

  7. Justice Holmes,

    “The mega wealthy have done very well under Obama, very well.” Yeah, and they’ve done very well under ever other President too, because it isn’t only about who’s President. The Executive and Legislative compromise on this issue, by the tare of budget. Currently, however, the $250,000 concept of “wealthy” represents two cops working overtime in most major cities, maybe two firemen. The concept of $250 K as a class distinction has issues.

    “the Republicans are masters at class warfare and unfortunately for most of us they have been very successful.” That’s an inversion. One, because the Republicans must be really poor at it as they are still saddled with the “Party of the Rich” stereotype. Two, the Democratic Party is as much the party of the rich as the Republicans today, which Republicans haven’t been able to sell; in this post-industrial nation, entertainment and software, or hardware by way of net and infrastructure, contribute more and support more the Democrats than the Republicans (I can’t think of a group that represents the “filthy” rich more than entertainment; 2 to 10 times more than the median year for a week’s work, and that’s just the “workers”, not the people who draw money from every level of production. Really, you think industrialists are robber barons?) The Democrats have done a better job of selling themselves by class warfare, socio-economic class, through promising people money than have the Republicans, and by playing the difference.

    All of this about both parties is one long, too long, moment of cognitive dissonance as the cake with confirmation bias as frosting.

  8. The ultimate issue though is funny regarding “tax the rich”, because it’s like pissing into the ocean to make it rise. If you want to make a difference at this point in taxing people to help our debt and budget, you have to tax wealth not income. Good luck with that, and be prepared to work to pay for your parents longevity, it would go that deep.

    We need a strong economy combined with caps on entitlements and defense. And Europe and Asia spending their wealth on their own defense (by example, our Navy is about 5 times that of Britain at it’s heyday, as they had a 3:1 versus our 17:1). And, no, you won’t solve it by just cutting our military, even if you cut out our military and send them all home.

  9. Cheryl,

    I’ll start with this: ” This time they need to put something in the fix that states that future governments can’t add more loopholes.” You just demonstrated that you don’t understand how any government, let alone ours, works. No legislation extends beyond the next legislature, as any law can be changed. If you want a fix in our system then get working on an Amendment to the Constitution. That is the fix, not anything done by Congress. No law holds past the next year a legislative body meets. Work hard and good luck on an Amendment for a balanced budget which takes debt into account.

    Next: “I think the rich need to “PAY” more. If you look at what they actually pay in taxes compared to what the rate states – there is a difference.”. Again, tax the rich (whatever the hell that means, you mean the two cops making $250 K while married, so every dollar they make over that is cut in half or more?) to solve our problems is like pissing into the ocean to make it rise. It may give you emotional satisfaction, but the tides will still be what they are.

    You would have to tax wealth to make any, meaningful would be a stretch, difference. I’m sure that you believe you should have the right to live anywhere you please, the USA, Mexico, hell NZ, but to confiscate wealth you would have to abrogate that right to those you wish to confiscate their wealth. If you want to take something from me in a way I see as wrong, or harmful, I should bend to your will and stay for your need? Geez, I went Randian there. Extremes call for extreme. Think it through for the sake of G*d, Christ, or the Spaghetti Monster, as to where do your ideas go. You tax income more, people with more income move when they see it as too much; tax wealth, and I’d move just in fear of how far you’d go. I’m not wealthy, but you may think I am. BTW, Britain did this in the Sixties and we got a lot of rock stars and others here because our 90% rate had soooo many loopholes; you could even claim credit card interest as to tax is to promote or destroy.

    You see all this is fraught with issues you aren’t looking at. If I can’t leave because my government wants my income or wealth, why should you be able to leave if your government wants your labor? Some European countries are seeing an exodus of wealthy by their latest need to shore up government spending.

  10. rafflaw,

    If by this “in the long run, it may be better for the country to go over the cliff.. It will be hard for most, but it will produce a Congress more willing to actually do things in the best interests of the vast majority of the people. IMO.”

    If you mean we have to make do with beans and chicken for awhile in order to have aspargus and ribeye later. OK. If it’s like Soviet apartments forever…

  11. Elaine M.,

    “But America has long suffered from an under-investment in infrastructure (look at the condition of our highways and bridges, our railroads and airports), in basic research, and in education at all levels.” Our infrastructure is old, the major building being done in 20-30 years ago but starting in the 50s. If it weren’t for the destruction of Europe in the 40s, I could claim our much longer Depression in the 30s as a factorOTOH, Sky Harbor in Phoenix is being modernized year after year, as are other airports. It’s piecemeal, with all the dissatisfaction when you look at the bad piece.

    We are the third most populace nation and 3rd in land area so infrastructure is a problem by land area compared to most industrialized countries. We also suffer the most destructive weather of any country which every season destroys infrastructure. The USA is Tornado Alley and Hurricane Coast, with only the Carribbean Islands being hurt worse by hurricanes. We are also Pacific Rim earthquake territory, though we’ve been lucky overall. All of this is a cost on us that many industrialized nations don’t see except rarely (yeah, Japan pays like us). We accept this as normal, but Europe never experiences what we do every year, nor Asia. All of Europe gets 1/4 the tornadoes, with fewer F3-5. The cost of NA weather is actually very high (the US records about 1000 tornadoes per year, and the next is Canada at 100, goes way down from there). We accept it as normal and rebuild every year. Weather isn’t the sole cause of degrading infrastructure, but we forget our cost to maintain infrastructure because of weather.

    Education, we fall in the low middle to low of industrialized nations, but some of those nations that score higher use techniques we deplore and won’t adopt by justification of critical thinking and creativity. Others use a tiered system we don’t, where children are separated into Tech, Vocational, and Academic much earlier than we would accept. We can muddle on with our system or start looking to those that do better. Get me buy in with the NEA. I’ve had teachers in the last 5 years tell me “look-say” is the only way to teach reading, rather than “look-say” with phonetics, as if one is exclusive of the other.

    In basic research? There you are wrong. Fifty of the top one hundred Universities in the world are American, and much of that ranking is because of basic, middle, and high level research reflected into what is taught. If you’re a graduate student in technology or science, you’re better off in America than Europe or Asia. We are still predominate in that and Naval tonnage.

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