I have been a critic of the tax policies of French President Francois Hollande, including his disastrous 75% tax on the rich. The tax, as expected, has resulted in an exodus from the country of many top earners and a reluctance of others to move to France. However, with his poll numbers at a historic low, Hollande is continuing his “eat the rich” campaign. Last week, he announced a desire to impose a 75% tax on companies for salaries above 1 million euros. It is yet another blow to the French economy and will further deter new business for the struggling nation.
Hollande announced that when companies pay the large salaries to top executives “the company will have a contribution to pay that will reach 75%. During these difficult times, can’t those that are at the top make an effort for 2 years? The company will thus become responsible”.
I know how unpopular such salaries are, particularly at a time of economic hardship. However, the salaries are part of a global market for top executives. Imposing such a tax once again makes France a hostile environmental for such businesses, which are badly needed to boost a failing economy. This is imposed on top of other deterrents to new business such as mandatory labor rules making it difficult to fire French workers, guaranteed long vacations, and an array of other taxes. Investors have complained that they do not want to take over failing French businesses due to this environment, including the recent flap over comments by an American businessman.
I happen to think corporate salaries are too high, but I do not believe that government should regulate this part of the market. Moreover, the tax has no connection to social costs or public benefits. It is merely a punitive measure targeting the wealthy.
Politicians always garner support for socking it to the rich through taxes. However, it is an extremely shortsighted strategy. In the U.S., we have seen clear moves out of high tax areas like New York and California. The result is a reduction in tax bases. The fact is that tope earners pay the vast majority of taxes so the loss of such earners has a significant impact on tax revenue. These jurisdictions make themselves economic islands of high tax zones as more and more business is pulled into areas with average or lower tax rates. France is the most extreme example. The earlier 75 percent tax rate is viewed widely as a colossal failure for precisely the reasons raised earlier. Yet, Hollande is still offering up the rich as a popular target even though such taxes will generate little significant revenue. What it will do, however, is magnify the image of France as entirely hostile to high earners and new businesses.
Source: Guardian
bettykath:
the problem for the middle class is taxes. They pay way too much of their income. And most middle class people are part of the group pay the large majority of the taxes in this country.
When you take into account federal, state, property, sales, SS, etc. taxes that is a big chunk of middle class household income.
A senior executive isnt the one taking the money out of the pockets of the middle class.
But you are right that they have each other’s back. When what they should be concerned with is the owners of the company, the shareholders.
and George Soros.
Nick, as no doubt do the Koch brothers.
I suspect Hollande comments here under an alias.
http://en.wikipedia.org/wiki/List_of_countries_by_tax_rates
I don’t know about France, but here, outrageous executive salaries are a matter of the boards for the corporations. These folks sit on each others’ boards and vote each other extravagant salaries, perks and golden parachutes. When it comes tax time, they have so many loop holes that there effective tax is a fraction of what middle income earners pay as a percentage. The result has been a wealth disparity that is moving us to a serfdom.
I think most people moving south after retirement has more to do with the weather than the taxes, although the taxes may be an added reason.
Maybe this is why so many pay so little in taxes and there is such enthusiasm for the wealthy to pay more.
http://en.wikipedia.org/wiki/File:Personal_Household_Income_U.png
Cap executive compensation as indexed to the lowest wage paid by the company.
Problem solved. You can pay your executives as much as you want so long as everyone else’s wages keep pace. It’s a solution that would do a lot to limit the corrosive effects of income disparity.
rafflaw:
there were many more deductions in the 1950’s and very few people made over $400,000.00.
High executive compensation, if memory serves, is a result of Clinton capping executive salaries in the early 90’s.
How much more do they need to pay? The top 10% already pay 71% of all taxes collected by the federal government.
The bottom 50% pay 3% of all the taxes collected. And most of that is probably social security payments which they will get back upon retirement. So 50% of us are basically living at the expense of the other 50% of which 10% are paying 71% of the tax burden. I think what needs to happen is that spending for the sex life of field voles, bridges to nowhere, the arts, sugar subsidies, farm subsidies and other corp subsidies need to be cut before taxes are raised again on the “rich”.
http://blog.heritage.org/2011/10/04/in-pictures-how-much-the-top-earners-already-pay-in-taxes/
While I think that the proposed French tax is too high, the wealthy do need to pay more. What was the highest tax rate in the 1950’s here in the states? I do not recall reading or hearing about an uproar then. When small numbers of citizens are allowed to have their own special tax breaks, that are unavailable to the rest of us, why shouldn’t the playing field be leveled?
Low tax rates for the 1% Investor class and the 25 to 30% of the upper managerial/coordinator class, if which Mr. Turley is undoubtedly a member, have worked so well in the United States! Stock profits are up! Health care industrial complex profits, and stocks, are up! Not to mention that the derivatives market is making a comeback!
All we need is a little more austerity to get these free spending Social Security and Medicare recipients, not to mention those profligate Head Start children and their EBT card waving moms, and we’ll get this country back on track!
JT is showing some of his right-leaning libertarian side with this post, but he hedges his statement with qualifiers like [although]
“I happen to think corporate salaries are too high, but I do not believe that government should regulate this part of the market.”
Government has no business being in business. Let the corps live and die with no harm or help from the govt.
Politicians of both the right and the left are intellectually bankrupt; the economies of Europe and North America are headed for trouble and the politicians don’t know what to do – so they apply more of the old failed policies.
Unfortunately, there are no good choices left; we have to decide between bad and worse. Politicians are typically not able to make those choices.
How does one say in French, “Slow and incremental is better than herky jerky”?
I like a good mix of posts. Just got done reading the Rafferty post you put up yesterday.
Call me a cynic, but you really need to get your head around your regulated sensibilities. What’s up with this quote?
“I do not think government should regulate this part of the market”.
I say so do you have a short list of segments of the market that need regulating in the global market?
No need to decentralize I guess? That may or may not have been highly sarcastic.
And just as a side note, have you been taking a sober look at any capital concentration graphs say in the last fifty years or so? No historical quandaries about that? Just saying…
I guess I will re-float most of the paragraph that stood out for me in this post.
“However, the salaries are part of a global market for top executives. Imposing such a tax once again makes France a hostile environmental for such businesses, which are badly needed to boost a failing economy. This is imposed on top of other deterrents to new business such as mandatory labor rules making it difficult to fire French workers, guaranteed long vacations, and an array of other taxes. Investors have complained that they do not want to take over failing French businesses due to this environment, including the recent flap over comments by an American businessman.”
Life is good. Keep mixing it up and moving it along. I enjoy and appreciate your efforts as well as your guest bloggers.
Please keep on keeping the regulations to the bare essentials here at Turley Land.
If we are all in this global deal together we might as well enjoy the ride.
To each according to their inheritance and barring that may their abilities shine through and never be penalized.
Animal Farm.
Humpy:
wasnt it 1984?
Vote with your feet and leave France.
“Four legs good, two legs baaaad.”
Today is classic book day. What book was that phrase from? Inquiring dogs want to know.
New Yorkers flee NY as soon as they retire to avoid real estate taxes. They emigrate like bugs to areas where they have a cousin or sister who has already fled. Then they make a dumb move on the housing choice such as buying in a flood plain right next to a creek that dumps into the sound and the house is not elevated. After the flood they move to higher ground. The taxes are way the heck cheaper than NY or Newark and they can boat all year long. Like the Lemming they have gone south with the winter and made one or two choices but basically are better off. They still went in dumb, come out dumb too, but two generations after Ellis Island they finally escaped NYC. All the smart ones left for points west the first day they got off the Island on the way in from Marseille or Sicily. In Europe you will see a similar phenomena. The Frog will leave France and go South to Greece or god forbid to America. This wont save Greece from going under because they still have the siesta. In the long run the Frog Territory will have to leave the Euro due to their own version of economic ruin and the Greeks will go for their own. Germany, The Netherlands, and a few others will remain. When you go there to travel it will be the Drachma in Greece and you will get a lot of them for a dollar. If a rich Frog comes through Ellis Island and lands in a neighborhood near you, warn him about the flood plains. Those guys are as dumb as New Yorkers.
Somebody has to pay for the spoils of the government and corporation…. Not every company is as lucky as Halliburton…. When you have the US Armed forces as back up…
Where is the balance….
Apparently, this guy is saying what needs to be said…. A kinda of reverse Marie Antoinette…..