We have been discussing the tax policies of President Francois Hollande’s Socialist government — a record that I have criticized as ruinous from an economic standpoint. A recent report indicates that for some high-earning families — more than 8,000 — the Hollande policies impose a 100% tax. It is the ultimate “eat the rich” policy. Even for those families facing a 75% rate, it is unclear why they would continue to work in the country. Many are not. France is experiencing a flight of both high earners and companies.
The bizarre 100% tax is the result of a one-off levy last year on 2011 incomes for households with assets of more than 1.3 million euros ($1.67 million). The surcharge was imposed shortly after Hollande took office on a promise to hit the rich with high taxes. The Hollande 75% direct tax was so unfair that the Constitutional Council struck it down. However, this report states that the one-off levy effectively pushed some families to a 100% tax.
The newspaper Les Echos found that nearly 12,000 households paid taxes last year worth more than 75 percent of their 2011 revenues due to the exceptional levy. ($1 = 0.7798 euros).
Putting aside how many families are impacted by taxes above 75%, it is in my view an insane, self-destructive economic policy for France. I just spent an evening with a friend and his parents discussing the situation in France. This is a moderate family politically that has long fished in French waters. My friend is now an American citizen but his parents and family remain in France. They recounted how they had to destroy half of their ships because of taxes. They are seeing other businesses doing the same or simply moving out of France. These a patriotic and proud French people but they are watching their government cannibalize off the economy. The government is getting instant revenue while killing revenue producing businesses. It is like eating the grapes and roots of the vineyards of Bordeaux for food and leaving the fields barren.
As someone who truly loves visiting France, it is disheartening to watch Hollande’s cultural war on the wealthy. I favor higher taxes as part of a comprehensive package of reforms in this country and other countries. However, Hollande’s expressed hatred of the rich resulted in a political success and now an economic disaster. It is also grossly unfair to wealth French who love their country and are not opposed to making sacrifices. Hollande played the class card and told the French that their problems were due to a sinister upper class rather than France’s high labor costs and burgeoning budgets. Even if one dismisses this study and the one-year levy, there are still many thousands of families and businesses who face a government demanding 75 percent tax rates.
These policies however will only lengthen the economic crisis. Indeed, France is already viewed as a hostile country for business and that is likely to continue under Hollande who is fighting the French judges to impose taxes higher than what is viewed as constitutional or fair by the courts.
Source: Reuters
nick,
Poor Naomi always seemed to lose control of her own press.
The recent studies on “alpha male” from a sociological standpoint are being done all over the world with the results showing many similarities.
If you include the keyword sociology in your google search many of them should pop up.
I suspect it just another hint that the alpha male deity trend is losing ground within societies everywhere and accounts for much of the desperation emerging from organized religions around the world.
Two more links.
http://www.washingtonsblog.com/2012/07/why-dont-the-psychopaths-on-wall-street-and-in-d-c-show-remorse-for-their-destructive-actions-and-why-dont-we-stop-them.html
http://www.sociopathworld.com/2012/03/1-in-10-wallstreeters-are-psychopaths.html
Tony C –
Having some trouble posting again, so breaking up the post a bit to see if it helps.
You had spoken in the past about charities in a very negative light. I think you had in mind charities like the United Way. The charities in my mind as deserving are not at all like that. The charities with which I have worked have no paid people at all. Every penny of a donation went directly to people in need. Everyone who worked in it did so as volunteers. Sometimes when you and I write to each other, you have in mind one thing with a particular word (e.g., charity = United Way) and I have something else in mind (e.g., charity = totally volunteer organization). So when I speak of wanting to give to a charity and have it be a tax write-off, I am thinking of organizations I see doing the work getting the money, and I actually meet the people being helped, as opposed to giving it to government where drug addicts get their monthly disability check and blow all $800 on drugs within 3 days and then come to me asking for help with paying their electric bill. When I read about all the waste, the trips, I truly see government as a huge money pit where my money is not appreciated in the least. I never get a thank you. I never see my money do much good. I hate sending thousands of my hard earned dollars to the government every month. Some of my bills I feel like I get a good value, but never my tax bill. Never.
Tony C –
I do not pretend to fully understand the issues enough to make the kind of judgments you make about Microsoft and Wal-Mart. I confess that I scratch my head a little bit about all the animus toward big companies like these. I really can only approach it from my personal experience.
Microsoft along with IBM definitely falls into the camp of not having the best product at the time of their rise. Apple/MacIntosh hardware was definitely better, but they closed themselves off from sharing their architecture and it quickly became clear that others who wanted to get in on software development and building computer clones had to do it with Microsoft and IBM. So those looking to get a Personal Computer trended toward the IBM. Marketing also was a part of it. I remember looking at MacIntosh and IBM when the very first PC was introduced, and while I liked MacIntosh looks a little better and its use of a mouse, I felt like there was more software for the IBM and the keyboard was more familiar to me than the mouse. Sounds weird maybe, but that’s why I went with IBM / Microsoft in the beginning. I was interested in writing code and doing my own things, and the Apple environment seemed completely shut off. It certainly is not that way today, but it was back then.
I am aware of the aggressive nature of Gates and Microsoft, especially utilizing the legal profession to position himself, but most of that is from stuff I have read. It is somewhat nebulous to me exactly what the truth is. As far as I can tell, he was never arrested for anything, so I assume he played fair. You obviously have a different take. I can only assume you know things that I do not. Nevertheless, in the long run, I see Microsoft as a positive for society as a whole.
In regards to Wal-Mart, they definitely out compete local businesses. I had to stop selling computer hardware myself because of them. I just could not compete with pricing because when people buy from Wal-Mart, they know they are not getting any service, but when they buy hardware from me, they expect service. They just don’t want to pay the extra money to get it. I just adjusted by letting Wal-Mart sell the item, then advertise services to fix it. I see nothing wrong with Wal-Mart out competing local businesses like myself. Local businesses just need to adjust.
The same kind of thing happened here locally when a Home Depot opened up. A local hardware store that had been here for years just slowly dried up and had to close up shop. Do we blame the Home Depot for that? I can’t see why we should. It is sad to see the owner go through that, but the truth is that Home Depot offered more items at better prices. Even though the local shop was closer to me, there were so many times I went in there and they didn’t have what I needed so I would then go over to the Home Depot who did have it. After awhile you just stop going to the local shop because you know you will get it at the Home Depot.
I know many people who work for Wal-Mart and love it. They don’t see their job as slave labor. I hear that kind of talk from others, so whenever I meet someone who works there I ask them, “how do you like working there? Do they treat you right?” I always hear good reports. I have never met one person who said it was horrible, that they were being treated as slaves, etc. I have heard such reports from people working for some grocery chains. Never for Wal-Mart.
People complain about Wal-Mart overseas purchasing, but the way I see it, such results in great prices for me. If doing business overseas means better pricing for me the consumer, I like it. I would rather pay less for my television, computer, etc. because people in China will work for $2 per hour. As far as I’m concerned, if people are happy to do the work, what is wrong with it? I wish we would abolish the minimum wage and just let everyone in Mexico come up here and enjoy a better life. Maybe we wouldn’t have to ship any jobs overseas if we did that. Nevertheless, if everything is kept as it is, retailers like Wal-Mart still make it where we Americans have a better life. That is just how I see it.
You could be right in some of your assessments, but when I look at it from down here below where the rubber meets the road, I just see it very differently.
By the way, you had spoken in the past about charities in a very negative light. I think you had in mind charities like the United Way. The charities in my mind as deserving are not at all like that. The charities with which I have worked have no paid people at all. Every penny of a donation went directly to people in need. Everyone who worked in it did so as volunteers. Sometimes when you and I write to each other, you have in mind one thing with a particular word (e.g., charity = United Way) and I have something else in mind (e.g., charity = totally volunteer organization). So when I speak of wanting to give to a charity and have it be a tax write-off, I am thinking of organizations I see doing the work getting the money, and I actually meet the people being helped, as opposed to giving it to government where drug addicts get their monthly disability check and blow all $800 on drugs within 3 days and then come to me asking for help with paying their electric bill. When I read about all the waste, the trips, I truly see government as a huge money pit where my money is not appreciated in the least. I never get a thank you. I never see my money do much good. I hate sending thousands of my hard earned dollars to the government every month. Some of my bills I feel like I get a good value, but never my tax bill. Never.
Bron: I agree both of those were wrong. I would have let GM fail. I strongly believe the government should fund research (and as an academic I am not neutral there), but not for-profit companies. I think the condition on all research should be that it becomes public domain property. That is not currently true, university research funded by the government can result in patents and royalties for the researchers and I think that is abhorrent; and I will not personally work on anything that will not be public domain upon publication.
Work almost always results in a gain (in the sense that it produces more value than the calories it consumed). Organizing workers into a creative enterprise may also result in gain, sometimes a lot of it, and that ability to organize deserves compensation, but it does not deserve all the profits, which is what happens with slave labor and subsistence labor.
Bron: If these companies didnt provide something we consumers wanted, then they wouldnt be in business would they?
What they provide that consumers want is cheap prices. I think it is easy to provide cheap goods if you are willing to engage in effectively slave labor (or literally slave labor), and consumers may not be aware of why their shirts cost $2, or perhaps they are just willfully ignorant. It does not make a difference to me; brutal exploitation of people is wrong even if it is ignored, even if it is non-American, even if the people are in desperate circumstances and “need” the pittance of payment to survive. It is not necessary.
Bron: If these companies didnt provide something we consumers wanted, then they wouldnt be in business would they?
What they provide that consumers want is cheap prices. I think it is easy to provide cheap goods if you are willing to engage in effectively slave labor (or literally slave labor), and consumers may not be aware of why their shirts cost $2, or perhaps they are just willfully ignorant. It does not make a difference to me; brutal exploitation of people is wrong even if it is ignored, even if it is non-American, even if the people are in desperate circumstances and “need” the pittance of payment to survive. It is not necessary.
Work creates value. The work of organizing a lot of workers into a creative enterprise also creates value, sometimes a lot of it, and that deserves to be rewarded, but it does not deserve ALL the reward, which is what happens with slave labor, subsistence labor, and similarly exploitive companies.
tony c:
yep, Like GM and Solyndra.
tony c:
Microsoft and Wal Mart havent done anything, they just provide a product/service consumers love. There is plenty of competition for both, I just bought a couple of sport shirts on the internet [not from Wal Mart], my wife, daughter and son use Apple computers, I use a Dell/windows 7. Maybe some day I will use Linux but probably not since my impression is that it is for people who are really into computers.
If these companies didnt provide something we consumers wanted, then they wouldnt be in business would they? KMart could have competed with Wal Mart, Big Adolph’s Bargain Mart went out of business, Grand Pa Pigeon’s sold to Value City and what about Venture?
There were many Wal Mart like companies, the consumer chose Wal Mart and Target and now there are regional competitors which Wal Mart is competing with as well as companies like Target, Costco, BJ’s. All of this keeps prices low to consumers.
It all amounts to efficient allocation of capital.
Which leads to another point, depressions are good for markets. They reallocate capital to efficient producers and keep the economy from over-heating. Depressions are like the big cats in Africa, they keep the heard healthy and the ecosystem in harmony.
davidm: Maybe I am misreading him.
You are, if I could dictate terms I would prevent any elected official from earning any more than their government salary for life, in any way or any form, as a condition of running for office, effective upon taking their first office. I don’t care if they win the lottery ten years after retirement, they can’t have it. No real estate deals, no lucrative business partnerships, no seven-figure lobbying jobs, no six figure salaries at think tanks, charities, or non-profits that are all just fronts for paying off the politician that dutifully did the bidding of billionaire corporations.
I believe good government can be the answer to many ills. I do not believe we have good government, because I think money has corrupted it.
Tony C wrote: ” if I could dictate terms I would prevent any elected official from earning any more than their government salary for life… I do not believe we have good government, because I think money has corrupted it.”
I agree! I have always wondered why we even pay any politicians. There are plenty of successful people who could serve our government when they retire without receiving any wages whatsoever. It would be just their way to give back to society. The only way to get rid of the corruption is to get rid of the money.
Just look at how much President Obama has started to earn since becoming President. He doesn’t need a salary. When he leaves office, he is going to be making even more money in speeches, writing books, and other activities. Why do we even pay him a salary?
You say limit their pensions. I say, why do we even pay a pension. Let them be public servants for real. The notoriety from serving is enough benefit.
“if I could dictate terms I would prevent any elected official from earning any more than their government salary for life, in any way or any form, as a condition of running for office, effective upon taking their first office.”
Tony,
I agree with your entire comment here as I do with almost everything you’ve written on this thread. I would add to the above though any civil servant above a certain pay grade. We have seen far too many situations of Generals getting big jobs with companies they did business with before retirement and of a swinging door between regulators and the businesses they regulate.
gbk:
My point was Microsoft is now a very large company.
But thank you for providing the information. I agree that Bill Gates did play hardball.
davidm: Maybe I am misreading him.
You are, if I could dictate terms I would prevent any elected official from earning any more than their government salary for life, in any way or any form, as a condition of running for office, effective upon taking their first office. I don’t care if they win the lottery ten years after retirement, they can’t have it. No real estate deals, no lucrative business partnerships, no seven-figure lobbying jobs, no six figure salaries at “think tanks,” charities, or non-profit organizations that are all just fronts for paying off the politician that dutifully did the bidding of billionaire corporations.
There is a very good reason people like Harry Reid can spend a lifetime as a government servant and wind up worth in the neighborhood of ten million dollars. He claims it was “astute investments,” I think he was astute enough to “invest” where he was told by the billionaires that wanted to throw the dog a bone.
I believe good government can be the answer to many ills. I do not believe we have good government, because I think money has corrupted it.
Bron: Yes, I am serious. I actually have only a few problems with Apple, they sell products everybody can pretty much live without. The iPhone is cool, but it isn’t really a life necessity, it is a luxury; like all of Apple’s products and services. They don’t have a monopoly on phone service or phones.
Twenty years is too long to let an exploitive, coercive company exist. Justice someday is going to be “justice never” for many of the people brutalized (physically or financially) by a sociopathic company.
If I extend your philosophy to crime, it is true that all murderer’s will die some day, some way or another, so that should be enough punishment for committing murder: Just let it slide, whatever they gained by murder is temporary, right?
All those benefits you attribute to competition (most of which I agree with), like innovation, pricing, quality, service, and in general better customer satisfaction: It would be nice if that is how business worked, but there are other realms of competition that are far darker: exploitation, coercion, subterfuge and corruption of politics. Most of which work better and are easier than breaking their heads and reducing their profits trying to make their widgets better.
My ideal for regulation is to restrict businesses to competing by product and service competition alone. They will not restrict themselves on their own, those restrictions have to be imposed upon them.
Bron,
Your history is fuzzy. MS didn’t “beat” IBM — IBM contracted with MS to supply the operating system for their then new personal computer — DOS.
MS was starting to lose market share with DOS and pulled a few tricks. One was with a company called Digital Research (originators of the CP/M OS for S100 computer systems). MS designed Windows 3.1 (which ran on top of DOS) to not load if it detected Digital Research’s DOS as the boot environment. Win 3.1 would absolutely refuse to run.
http://www.theregister.co.uk/1999/11/05/how_ms_played_the_incompatibility/
MS at the same time forced the then exploding PC clone makers to license their DOS for their clones or face lawsuits.
MS was very anti-competitive in many ways.
DavidM: In my opinion, Microsoft has engaged in practices I think are criminal or should be, to maintain his monopoly on PC operating systems; which despite a completely free alternative (which I use) remains an effective monopoly. His philanthropy now does not make him less of a billionaire, and perhaps it assuages his conscience, if he has one, or makes him feel like a benevolent king or something, but as far as I can tell he continues to enjoy the undeserved fruits of his dirty tricks business practices.
In my opinion, Wal Mart uses slave labor to make a profit. I believe that is bad. It is not technically a monopoly; but it is large enough to that I doubt any startup could ever compete with it head to head. So at the moment I am lost for a descriptor for that kind of company; it is effectively large enough to steamroll anybody that gets in its way, and like Microsoft to dictate the terms of its contracts with suppliers and employees. Walmart is often a local monopoly when it chooses to open a store; that is why it drives so many main streets out of business.
I believe government should be more involved in regulating all businesses. I believe in fair play and that is not what either Microsoft or Walmart engage in, I think they engage in exploitation and coercion for their profits.
I have been in business successfully several times, and I know it is possible to make a profit without screwing or endangering my employees, abusing the trust of my investors, strong-arming my suppliers, ripping off or violating the trust of my customers or polluting the environment. Whether it is here or overseas.
Tony c:
fishing rods were first pcs of wood, then they were bamboo, then fiberglass, and now they are graphite. And graphite has become stronger since it was first introduced.
Dont you think we are going to find another, better material?
Same for buildings, planes, light bulbs, toilet paper.
Make it better, faster, stronger or die.
how many browsers are there now? Come on. Microsoft couldnt keep them all out of the market even with government getting after them.
“You live in an adolescent fantasy world where the biggest, richest, baddest companies in the world just stand helplessly by while the boy genius wins every move.”
Gates beat IBM and Xerox, Dell beat them too, Branson beat Pan Am, I mean come on, are you serious? And you know what? There is some kid who is 15 or 16 right now, sitting in her basement or garage playing with her buddies who will give Apple a run for their money in 20 years.
Laissez faire will allow her and the thousands of kids just like her to be the innovators of tomorrow.
The sociopaths are the people who stifle human liberty, productivity, innovation and quality of life. I am pretty sure there are some in business but my guess is there are many more in Washington, DC making rules and regulation which force business to exist in a sick environment. Maybe the reason you see so many sociopaths or think you do is because normal people are operating in a regulatory environment created by sociopaths.
That would be my guess.
Bron wrote: “I am pretty sure there are some [sociopaths] in business but my guess is there are many more in Washington, DC”
Yes, that is how I tend to look at it. My experience however is somewhat limited, and I will say that the wealthiest people I know… well, I could never be like them. They often do things out of spite towards others and do things without any empathy or concern for the people they step on. I can’t understand it and don’t want to understand it. Nevertheless, it seems to me like Tony C gives the wealthy in government a free pass. Private sector = evil, government sector = doing good things. Maybe I am misreading him.
Two links on sociopaths in business.
http://www.businessinsider.com/wall-street-psychology-and-morality-2012-6
http://www.forbes.com/2010/11/19/sociopath-boss-work-forbes-woman-leadership-office-evil.html
Bron: please give me 4 examples of a company
I am under no obligation to do work for you to correct your obvious ignorance. Do you deny they exist? Do you deny they can cost a startup more than they can afford? If you do you are just ignorant, and should work on your own to correct that deficit now that you know it exists.
The point is what WOULD happen if there were no regulations to prevent it. Pricing beneath cost to drive out a competitor is, I believe, against the law. But the law is a regulation, I presume in response to an actual unfair practice. Without regulation, the practice would return, because it would work: For an established monopoly (even a local one) their cost of goods is likely to be already refined, and better than any startup competitors. For example, the monopoly may own their building outright, having paid off their mortgage years ago; they may have streamlined and roboticized their production, etc. Which means they can sell for their break-even price indefinitely, and that will be lower than the new guy’s break-even price. How long he lasts without earning a profit is immaterial; the monopoly wins. Combine that with something like Microsoft’s practice against Netscape; threatening customers (like Dell) with dire consequences (no product at all) if they so much as shipped a free CD with Netscape’s free software on it. When there are no regulations, the financially strong destroy the financially weak; and there is no such thing as fair play. You live in an adolescent fantasy world where the biggest, richest, baddest companies in the world just stand helplessly by while the boy genius wins every move. That isn’t reality, they are not necessarily the biggest because they have the best possible product, they may be the biggest because they are the most brutally sociopathic players in their arena.
Tony C wrote: “they are not necessarily the biggest because they have the best possible product, they may be the biggest because they are the most brutally sociopathic players in their arena.”
Your use of the phrase “may be” is key.
What is your take on Microsoft? We all know who led it. Bill Gates. He dropped out of school to start Microsoft. He is now focusing on philanthropy, so no longer at the helm, but in the context of what you are talking about, is Bill Gates a “brutal sociopath”?
Also, please comment on the Wal-Mart phenomena. Sam Walton starts from a single store to become the largest retailer and biggest private employer in the world. Quite a success story, isn’t it? Is Wal-Mart a monopoly? Is it good or bad? Should government take it over or get more involved in regulating it?
Bron: That was an illustration of product improvement reaching a point of diminishing returns; not an example of a monopoly.
No, you cannot always improve in business, that is the nature of infinity. There is a minimum weight, a maximum speed, etc.
More specifically, however, as it relates to business, a change has to be noticeable for a consumer to change their product preference; and because consumers are humans and not robots, their perceptions tend to be on the logarithmic scale.
Which means shaving a few pennies off a ten dollar product isn’t going to have any effect on competitive positioning; it just isn’t enough to matter. Shaving a tenth of an ounce off an eight ounce gadget won’t matter, giving your car a top speed three miles per hour faster than your competitor doesn’t sway any buyers, nor does adding a decibel to the stereo output.
In consumer studies, the change required to effect a change in preference is typically closer to 10% to 15%. Now surely, you are mathematically astute enough to realize that you can’t make something 10% better, or cheaper, or lighter forever. There is a point of diminishing returns, and you cannot change the laws of physics.
tony c:
oh, ok. its all myth, except it isnt. There are a bunch of potato chip companies.
http://www.nxtbook.com/sosland/sw/2012_05_01/index.php?startid=19#/20
ruffles cant possibly create a monopoly and neither can anything else unless they are helped by government to force monopoly status.
you can always improve in business, somewhere. make it a little faster, shave a gram off the weight, every product can be improved in some way. It may not be much but if you shave a few pennies off the price, that is what you should do. Unless of course it costs more to do it.
please give me 4 examples of a company putting another out of business with frivolous law suits and predatory parking.