For 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
Blouise,
I don’t think you’ve gone dark side, but rather realize the value loading of language as applied to numbers. “Millionaire” has a cultural relevance that is belied by the modern economic relevance of the word. Using that number as a “cutoff” between rich and poor is economically inaccurate. Today a millionaire is mostly likely well off, but hardly wealthy. This does nothing in common parlance to negate that perceived value of the word. Psychologically too there is a predisposition to find base-10 round numbers most satisfying. The difference between 750k and 1m is not the difference between starvation and bounty, but 1m is going to be perceived as a much more significant number. Such a threshold set at 750k is probably an easier sell because of this.
Gene, thanks for the video.
People making 250k per year are comfortable. Those making 500k per year are probably just a bit more comfortable. I don’t object to people EARNING lots of money through their labor. I have lots of objections to people earning lots of money thru fraudulent banking practices, vulture capitalism and the like. I have no problem with the highest tax rates not starting until 1M on wages and salaries. Capital gains should be treated as ordinary income at the least. I’d like to see capital gains taxed at the highest rates, and don’t tell me all those rich folks won’t invest if they have to pay higher taxes on their profits. The biggest tax loophole for the wealthy, previously called coupon clippers before it all became electronic, is the lack of tax on financial transactions, e.g. stock and bond purchases.
“Capital gains should be treated as ordinary income at the least. I’d like to see capital gains taxed at the highest rates, and don’t tell me all those rich folks won’t invest if they have to pay higher taxes on their profits. The biggest tax loophole for the wealthy, previously called coupon clippers before it all became electronic, is the lack of tax on financial transactions, e.g. stock and bond purchases.”
Bettykath,
I totally agree with you on this. In my opinion the higher taxes could be cut off at even $1,000,000 providing they get rid of Capital Gains and also tax financial transactions. I would add that S.S. would be forever solvent if they got rid of the income cut off limit.
re Blousie: “I think 750K is more realistic than 500K … I know several people who would be approaching the 500K mark within the next year or two and these folk are comfortable but certainly not rich or anywhere close to wealthy. ”
Are you referring to income or net worth?
If income, I think they need to downsize to where their income is more ‘comfortable’, and they can sock away some 😉
If net worth, you’ve got a point.
http://www.youtube.com/watch?v=Nd4VkBcG2PQ%5Byoutube http://www.youtube.com/watch?v=Nd4VkBcG2PQ&w=420&h=315%5D
I Know I know!!!!!
keep the tax rate, dump the loopholes and ensure equal treatment in goods, services and adequate protection for the populace from their evil harmful doings and other incursions into the safety of the general welfare…
But … just in case my friends on the left think I have gone over to the dark side … I continue to adamantly support strict gun legislation and organized labor of any sort.
“And what Blouise said. Senator a l’Orange is particularly delicious even though the meat by itself is generally inedible.” (Gene)
Here in Ohio we have been referring to him as jerky for years.
Never forget his roots were stabilized by the tobacco industry for decades (he was the guy who passed out tobacco money to the congressional boys in the band).
nick,
I think 750K is more realistic than 500K … I know several people who would be approaching the 500K mark within the next year or two and these folk are comfortable but certainly not rich or anywhere close to wealthy. If we want a long range solution that x’s out those drama queens in D.C. from dressing up in their phony lawmaker costumes and further screwing our economy with their stage presence for a few years … then 750K is the base line I’d set.
http://www.youtube.com/watch?v=uOwhrCkMiKA
And what Blouise said. Senator a l’Orange is particularly delicious even though the meat by itself is generally inedible.
Blouise, You are a happy and funny warrior. I am greatly encouraged by the women here having the lady balls to come up w/ income levels for taxes instead of just spouting blind ideaology.
The only thing I can say with certainty in the economic situation here in the U.S. is that the current elected federal politicians will fail to take the necessary steps to put the country on the right path to long term economic prosperity. The situation is for reasons our professor indicates.
There are too many corrupt influences in the federal government, on one side there are those who had made backroom deals for buisinesses/individuals as some commenters have mentioned but it is also that politicians believe there are many citizens who want bread and circuses provided by the government and that this has to be allocated to secure re-elections.
Essentially the US Government needs to behave more like state legislatures in states that have a constitutional mandate to balance the budget yearly. The best that fed pols have offered is a situation where the public debt is lessened as measured as a percentage against the GDP of the nation. It is rare that one hears they are going to talk about eliminating the debt. No wonder, when you hear so often “debts don’t matter” often said by those who want more spending programs for their particular constituencies.
I have said it before. The greatest threat to the freedom and liberty of the American citizen is congress and the presidency. It is not a foreign enemy, criminals, or anyone else. They have the power to strip us of our freedom and they are currently doing so in small steps. I now believe that they are also the greatest economic threat as well.
“Those making $250,000 a year and more pay for the vast majority of tax revenues in this country”
Well, Duh! They make most of the money – why shouldn’t they pay most of the tax. What, exactly, kind of tax system do you propose. Does it really make any sense to have a tax system in which those who make most of the money pay less than most of the tax?
“and their demonization by many commentators is unfair and counterproductive.”
What demonization is that?
In some quarters I hear much criticism of those who claim to want to reduce deficits, but who seem more intent on reducing the size of government and removing the social safety net that has developed over the past 100 years.
But demonization of the wealthy simply because they are smart enough, creative enough, and lucky enough to make money???? References please.
Blouise 1, December 30, 2012 at 12:42 pm
…
I’m not in favor of eating the wealthy or politicians as I am wholeheartedly against food poisoning. The French, however, have spent centuries developing lovely sauces to disguise the awful taste of spoiled food.
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By “pig out” I think you would mean “out with the pigs!” 😉
(Toll Roads etc.) Ohio has a marvelous toll road historically maintained by an independent arm of the government … The Ohio Turnpike Commission. So Kasich wanted to “leverage” the turnpike’s value by leasing the toll road to a private operator in exchange for up-front cash but wiser heads decided not to give his corporate buddies such a lovely prize and the plan now is to restructure a bit with a bond package that would provide money for other infrastructure improvements but keep the turnpike as is.
(Taxes) I support 500K as opposed to 250k and a small increase to taxes above the 500k mark (though I would prefer 750K) … it is how those taxes are spent that most concerns me.
To that end I would propose that the funds gained be limited to spending at home and that we take a serious look at the compensation paid to lawmakers.
By that last I mean … politics is the art of compromise … failure to produce good art should result in less compensation. All this drama queen stuff has to stop. This fiscal cliff nonsense adversely impacted retail sales this year and negatively affected other areas of business. This loss was across the board and touched every wage/profit earner in one way or another. Those losses were completely unnecessary and can be blamed entirely on the lawmakers in D.C.
I’m not in favor of eating the wealthy or politicians as I am wholeheartedly against food poisoning. The French, however, have spent centuries developing lovely sauces to disguise the awful taste of spoiled food.
I’ve not read the book so I’ll withhold judgement on it until I do.
A book review from Daily Kos today:
“The Betrayal of the American Dream
By Donald L. Barlett and James B. Steele
PublicAffairs: New York
289 pages
Before beginning Donald Barlett and James Steele’s The Betrayal of the American Dream, put away any implements with which you might be tempted to harm yourself. This is grim, grim stuff. Some of the grimmest stuff possible: an unvarnished picture of the place of middle- and working-class people in our economy, with a glimpse of the political and economic forces putting the squeeze on that place.
Much of the material in the book will be familiar if you follow progressive media—if you’re a regular reader of Daily Kos or Paul Krugman or a watcher of Chris Hayes or any number of others—but having so much of that information compiled in one relentless, compulsively readable volume is … a lot. Imagine reading a year’s worth of class war-themed blog posts or magazine articles or newspaper columns—the big-picture ones filled with numbers and facts and the history of tax and regulatory policy, mostly, seeded with a few affecting individual stories bringing home how brutally the numbers and facts and policies hit actual people. Only whereas you get a break between the short pieces, time to catch your breath and decide when to go back for more, The Betrayal of the American Dream just keeps gathering steam.
Really, there’s nothing for the book to do but keep gathering steam, though, since while the problems come through loud and clear, the solutions are not nearly as well developed. That’s a common problem for a book like this, and with good reason: if it was obvious how to fix things, we’d probably be making more progress toward doing so. But The Betrayal of the American Dream suffers from the lack of solutions more than most, because it actively undermines the hope that solutions are possible. Barlett and Steele are correct to emphasize the degree to which the rich and powerful (corporations and people) operate by a different set of rules than the rest of us, writing, for instance, that:
Because they conduct business around the world and move money in and out of tax havens and other countries to secure the lowest possible rate, many [U.S. multinational corporations] stash their cash offshore rather than bring it home, where they would be obliged to pay taxes on it.
They will bring it back only if Washington will agree to a tax holiday. […] If you want to understand the differences between you and the ruling class, try that ploy with the IRS someday. Just tell them if they don’t lower your tax rate you are going to move your money to another country.
It’s important to be clear that the existence of two sets of rules is part of the problem. And it’s important to be clear, as Barlett and Steele are, that Republicans are not the only problem, that Democratic politicians are complicit in many of the policies that perpetuate and solidify this system. (Even if at times it feels a bit unfair that they emphasize the participation of Democrats while taking for granted that Republicans are acting to the detriment of the working and middle classes.) But the grim tone, the lack of proposed solutions, the lack of any indication that there are forces fighting the expansion of this system, make you feel as hopeless as you feel angry after reading it. The Betrayal of the American Dream would benefit from providing even a little more perspective on ways to fight, on people and movements that are fighting, on leverage points. The final chapter offers some policy ideas, but it would be helpful to hear more about those throughout.
Nonetheless, the book is packed with important information and examples of the damage wrought by policies that allow companies to, for instance, avoid taxes, profit from sending jobs overseas, and strip workers of their pensions. And it does the important work of making clear just how badly the deck is stacked against the 99 percent. In the final analysis, if you’re the sort of person who responds to an overwhelming dose of that knowledge by becoming too depressed to fight, avoid The Betrayal of the American Dream. But if getting mad primes you to fight, by all means, read this.”
Justice Holmes 1, December 30, 2012 at 11:34 am
The largest retail corporation in the US by earnings is Walmart.
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That is a good example:
(The Homeland: Big Brother Plutonomy). Again, whether we are talking taxes or good rich guy or bad rich guy, the nature of the structure is paramount for coherence (economy or plutonomy?).
Equal opportunity does not exist in a plutonomy is the reason I advance this notion of defining the context first.
Like doctors, one should diagnose the patient before prescribing the treatment.
MikeS, It must be tough for you to eat the rich since they’re so fatty. Do you cook them low and slow in a smoker? And, is there any sense of humor on Pompous Mountain? At least you can look forward to the end of the Jet’s season today. That’s gotta help. The world loves a strong and happy warrior, like the great Chief Lonewolf.
“MikeS, It must be tough for you to eat the rich since they’re so fatty.”
Nick,
Some of my closest friends are and have been very rich, especially when compared to me and that’s always been true. And yes I would let them marry my daughters. The difference is they are people of compassion, who understand their good fortune, rather than despise those without it.
On the other hand this is quite typical of your repartee. You seem incapable and/or unwilling to respond directly to any issue, rather you use specious anecdotes, unfunny jokes and lofty derision. The funniest part of your game is how often you accuse others of pomposity and fatuousness, which are the same qualities you constantly exhibit. I’m not saying you are a bad person, you’re probably a good one. Nevertheless, you widely over estimate your own capabilities while denigrating others through leaden sarcasm.
Bill Moyer interviews two investigative journalists / authors about the plutocracy:
It is interesting how many British performers took up French residences to avoid British taxation on their new found wealth. I’m sure if the law had been upheld they would have moved to the Cayman’s, Monaco, Dubai or some other clime catering to the super wealthy. As F.Scott Fitzgerald wrote in “The Great Gatsby” “The rich are different from the rest of us….” and he had it right. They much prefer the unwashed masses suffer ad they remain to live unfettered by any responsibility to anyone, but for themselves the pursuit of their own personal pleasures.