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
“September 10th is World Suicide Prevention Day. Timely, since our latest podcast is “The Paradox of Suicide.” It focuses on the specter of suicide and how, strangely, it tends to be more prevalent in rich societies than in poor ones.“
Tony c:
this is from Freakonomics:
“One country not mentioned in the podcast is China, where suicide is definitely a cultural problem. Yesterday, China’s Center for Disease Control and Prevention announced that China’s official suicide rate is among the highest in the world. It’s so high, that someone tries to kill themselves every two minutes. Roughly 287,000 people commit suicide each year, out of a population of 1.3 billion. From the AFP:
The disease control centre said suicide is the biggest killer among Chinese aged 15 to 34.
Extreme pressure to perform well at school and to find employment were the main reasons behind the high rate of suicide among China’s youths, media said.
The suicide rate in rural areas is three times higher than in urban centres and accounts for 75 percent of China’s suicide total, it said.
According to the Guangzhou Daily, the number of suicides in China has risen sharply during the reform and open period, when the nation’s economy has boomed.”
tony c:
“The same is true of factory workers in China, they are committing suicide over there by the droves.”
Please provide statistics. I have searched high and low and cannot find the ones which say that workers are killing themselves in droves. How much is a drove anyway?
DavidM: In the first case the person agrees to work for $30 per hour and in the second case the person agrees to work for $12.50 per hour…
No, that is not exploitive. As I said, a wage above the minimum is as good as we can do, really. $12.50, even if he has to pay self-employment tax, is well above that.
I will caution, however, reaching that agreement does not imply reaching any mutual agreement is a fair deal. That agreement is well over the threshold of what we have collectively decided is non-exploitive. Another agreement for him to work for $3 an hour is NOT a fair deal, because we have collectively decided that is exploitive.
I will also point out I am presuming his work environment, tools, and training are safe and sufficient. If a contractor agrees to work for $12.50 and that means he cannot afford to protect himself from carcinogenic chemical exposure, then that is not a fair deal either; that is exploitive.
DavidM: Believe me, I would love to pay all my employees a minimum of $100 per hour, but if their work does not bring in that amount of money, there is no way I can do that, so I pay them less.
That is a straw man, because as hyperbole it doesn’t present the actual situation we are faced with. The question isn’t whether to pay minimum wage or all your money. The question is what is the fair value of their work? How much value does it create for you?
Here is a hyperbolic that actually captures the situation. Say you are in business and your revenue is $1M a year, and your profit is 10%, or $100K. You want to grow your business, but nothing you try works. You meet me, and I show you my previous work, and I say, “You are like this guy in Chicago and this other guy in St. Louis. Give me operational control of this company for six months and I can launch you on a three year plan that will get you to $5M a year, with the same 10% profit.”
Now for this hypothetical, suppose I am serious and you believe I can do this, because I have done it before. You interview my previous clients and they say “hire him.” What is my work worth to you? Should I do it for minimum wage?
I don’t have to work for you, but if I do, you will be operating a business that pays you an average of an extra $400K a year for, say, 25 years. That’s worth about ten million dollars (inflation doesn’t matter; your prices and costs will rise with inflation, your margin will stay the same, and the present value of future profits will still be $500K per year.)
There is obviously some risks, but how much of that ten million are you willing to share with me?
I encourage you to think of the reverse roles: You are the expert and I need the help. How much of that ten million would you deserve for helping me? As the expert, and not having to work at all, at what point do you walk away, and think I am being too greedy to bother helping?
Those prices should be equivalent, by the way: What you would be willing to pay me as an expert, and what you would truly take AS the expert.
That scales to the individual worker. Their work is, in some form or another, putting money in your pocket. More fundamentally, to cover those cases that are not obviously profit centers (like accounting or cleaning) their work saves you from expending your own life hours doing their job, and since your own life hours are a very limited and precious resource, it is worth something to you. The fair split of that value their labor adds is, like splitting that ten million, something that should be determined as though desperation was not an issue. It is instead a partnership, but as the business owner you are weighted with risk that your wage-only employees do not carry (for simplicity I exclude the special cases of commissioned sales people, profit based bonuses, etc).
It is fair for you to take the larger share for shouldering any risks of loss or vagaries of the market, but it is not fair to take a larger share just because the wage earner is in desperate circumstances. The fair split should be determined without desperation as a factor.
To clarify my last post, Tony, the second person complains AFTER he does the work and receives the pay agreed upon when he LATER learns that the first person did the same job and was paid much more.
DavidM: I think we best get there by people having a giving heart and doing the right thing voluntarily.
Then I think you are delusional. You propose a system guaranteed to fail, and want us to adopt it because it sounds warm and fuzzy to you. As a scientist, I am only interested in solutions that have some plausible chance of succeeding in the real world, replete with its sociopaths, psychopaths, brutal bullies, exploiters, con men, frauds, thieves, schemers, drug addicts, terminally greedy, cowards, apathetics and outright killers.
I understand the mechanics of business too, I ran a division of a public company for three years. I have been partners in over a dozen, and run three of them successfully.
DavidM: Is this fair or not fair, that I pay two different people different amounts for the same work? I think it is fair. What do you think?
I think it depends on why the person taking the lesser amount is willing to take it. If we continue along these lines I will conclude you are too dense to realize the issue is situational, because desperation is situational. Is he agreeing to work for $3 an hour because he is starving and his kids are starving? Then by demanding he work for $25 for eight hours, you are presenting him with a “your money or your life” proposition; you are exploiting his desperation.
Since in this hypothetical you are going to hire somebody anyway (you were willing to pay $60), the choice before us is not “No money or $25.” And that generalizes to the greater picture; employers need workers to do things and cannot continue business if those things are not done; so other than the one percent spent on niceties (like fresh flowers in the lobby or free coffee in the waiting area), work creates a value for the owner, and is a cost (of time and effort and calories) for the worker.
If the worker is desperate, you can get their work for almost nothing over their cost, but that is an imbalanced and unfair exchange, because it hikes up the value you receive by presenting them with a choice they wouldn’t take if they weren’t desperate. Again, like the hospital: You wouldn’t normally spend $20K a night to stay anywhere, but if your life truly depends on it, then yes, because the remainder of your life is worth more to you than $20K. But that $20K a night is exploitive of your existential desperation, it is not fair. The hospital is figuratively holding a gun to your head and saying “pay up or die,” it is Corleone’s “offer you can’t refuse.”
You do the same if you exploit the janitor’s desperation to feed his children. You are going to get your office cleaned even if you have to do it yourself, so the choice isn’t “no work” or “work for $25,” the choice is either do it yourself and get it for free, or pay somebody a living wage to do it for you. Since it is difficult to legislate the morality of not exploiting desperation, we instead legislated a minimum wage which we think (or used to think) should prevent most cases of exploitation of desperation.
Tony C –
The second scenario about fairness is two hours work from both parties. Same work, different pay. Nobody is desparate. By the way, this is a real world example from my experience.
In the first case the person agrees to work for $30 per hour and in the second case the person agrees to work for $12.50 per hour. Both the worker and the employer agree to the work and pay. So the question is, do you consider it fair? If the second person complains that he did the same work as the first person but received less than half the wages of the first person, does he have a legitimate gripe that it is not fair to him? Did the businessman exploit him?
DavidM: thought you did not believe in economic equality. You do not expect everyone to have the same economic status, right?
Are you being purposely dim? Some skills are worth more than others. I would wager the skills of, say, Al Pacino are worth more than yours or mine. Do you think that makes Al Pacino’s life more valuable than ours? If you do, I feel pity for you.
Unequal economic status does strip the poorer person of their basic human rights, one of which I consider a right to be free from exploitation due to their desperation.
As for my cars, I own three, and used to own four. Mine, my wife’s, my mother’s, and for six years or so, my daughter’s. The answer is no, I feel no obligation to give somebody a car, but I do feel an obligation to support via taxation reasonably rapid public transportation. If that is present then people can live without a car. I worked my way through the last two years of high school on a three speed Schwinn, I got to school, work, the grocery store and laundromat just fine, and I could take a bus for longer trips if I needed it. For most people, a car is not a life necessity; and even if they need one for their job, they are earning enough to buy something used.
davidm: How do you think they would feel if we told them and got them to understand the statement, “From now on we will operate by American OSHA rules. We will not expose you to toxic materials or carcinogens without proper protection, we will not expose you to unsafe equipment without training, we will not force you to work more than 40 hours a week. We will not keep you captive. You will get work breaks as defined by American law. In the spirit of the American minimum wage, we will pay enough to ensure your standard of living here is comparable to that of an American earning minimum wage. You will receive your own pay to do with as you see fit.”
I can counter your negative hyperbolic hypothetical with a positive hyperbolic hypothetical. In yours, the girl returns to the farm and is free. In mine, she becomes an independent adult.
This is what is wrong with the situation, David. America has laws to protect workers, because left to their own devices a century ago or so, the big American industrialists abused workers and exploited them. Overseas venues allow modern big industrialists to circumvent the laws the majority of Americans believe have to exist, and re-engage in turn of the century exploitation and slavery.
The choice, as was proven in America, is not exploitation or nothing, as your post implies. That is only true if you worship the dollar over all else, and believe that profits are sacrosanct no matter how they are achieved. If you think that, you are of an essentially criminal mind; that is how criminals think, that it makes no difference who is hurt in their quest for profit, either directly or indirectly.
The truth is that if rules are imposed from outside the system (government for example) and the rules apply to everybody then they do not create a competitive disadvantage, or advantage, for anybody.
Minimum wage has to be a law, not a choice, because without it, those paying their employees more have a higher cost of goods and cannot compete on price with somebody that pays their employees less. For most goods, the #1 dimension of product value is price, so without a minimum wage, treating employees fairly becomes a business disadvantage, and businesses (like the garment district in NYC) become effective sociopaths: Regardless of the mentality of the owners, if they do not behave sociopathically and virtually enslave owners, they will go out of business. Those that cannot bring themselves to behave that way choose to shut down or go bankrupt, but either way, their share of the market gets absorbed by owners that ARE willing, and their now-unemployed workers become the prey of owners that will treat them incrementally more sociopathically.
That is the ratchet, it tightens every time an owner with some inkling of a conscience declines to participate in the abuse any further, until the inevitable result: None of them are left, all that is left is owners with the mindset of slavers.
So how do we fix that ratchet? We pass laws on how badly you can treat workers, and every time the sociopaths find a new way to exploit them we outlaw that too. So we set a limit on how little workers can get paid that applies to ALL the owners, we prohibit endangerment, overwork, sexual demands, salary kickbacks to managers, unsafe equipment, demands for working without breaks, the use of toxic or carcinogenic materials without informed consent and protective gear, the employment of children, and on and on. Minimum wage and OSHA laws are the government protecting the weak from the strong. Owners are expected to pass it on to the consumer, and if the higher price reduces the demand for the product or the profit of the owner we don’t care: Lives are more important than money.
Allowing multinationals to exploit workers overseas undoes those laws, it makes the USA workers uncompetitive against sociopaths and criminals because we (collectively) have a conscience and morals.
I am an atheist, but I have a conscience and morals, there are lines I will not cross. Not because I fear supernatural punishment, but because I despise and hate those that DO cross those lines, I consider them weak and cowardly and cruel and selfish, and I do not want to live my life despising and hating myself.
You are a religionist; are you less committed than an atheist to the inherent value and dignity of human kind? Is a system that punishes compassion and morality with bankruptcy and encourages a slaver mindset of seeing workers (and their very lives) as expendable resources a good system in your mind?
Tony C –
I am not a religionist. I think the more appropriate term is theist if you want to contrast my worldview with your atheistic worldview.
We have the same goal of human dignity, we just disagree about how to get there. I think we best get there by people having a giving heart and doing the right thing voluntarily. I think people should give from their abundance voluntarily and so we focus on teaching them that this is the right thing to do. You think we should use government to force others to give from their abundance. I think government should provide some regulation when people are too extreme in their selfish behavior, but I do not think government has the ability or resources to force the right result. Ultimately it must come voluntarily from people who have a giving heart.
I have always paid my employees more than minimum wage, but there have been times when I have wished that I could pay people less than minimum wage. I am talking about people living on the street who will always be jobless because they are basically broken and dysfunctional for a variety of reasons. If I was allowed to pay them less than minimum wage, I would give them shelter and teach them the value of work. I would be able to slowly give them raises as they improved productivity. This would lead to their own sense of dignity and self worth so that eventually they could earn a good living wage on their own. The minimum wage has handicapped me working with the poor because I have to work with them without paying them anything. Some individuals I have housed for two years, teaching them basics that everybody else takes for granted, until they were finally able to hold a minimum wage job.
In my opinion, the minimum wage has caused unemployment and homelessness. How does that help with human dignity? I even think that a Biblical form of slavery or indentured servitude would be better than allowing them to wonder our city streets fending for themselves while everyone turns their back toward them. You want to abolish slavery completely and create a high minimum wage, ignorant of all the social problems this has caused.
My comment about shutting down the business was not meant to be a hyperbole. I said it because I understand the mechanics of business. Believe me, I would love to pay all my employees a minimum of $100 per hour, but if their work does not bring in that amount of money, there is no way I can do that, so I pay them less. If Wal-Mart paid their employees $25 per hour, they could not exist. Nobody would be able to afford their product. You cannot disassociate their business model from what has made them successful.
Blouise: I didn’t get what she thinks is going on. One of my business acquaintances does focus groups for product reviews, basically as his full time job. He says that in almost every group, within an hour somebody in the group emerges as the “leader.” Meaning, on film you can see people, after a question, glancing over to see the “leader” react, they let the “leader” respond first, and unlike the statistics on the earlier questions, where answers are diverse, answers start coalescing around the leaders.
I don’t know if the genders of leaders gets equally split, but I definitely think some form of alpha exist in human sociality. Perhaps it isn’t always an aggressive male, but I do think people tend to gravitate toward calm and confident certainty, or something like that.
David 2575: “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.”
****
A friend of mine worked for Sam’s Club. They had “secret shoppers”. If Sam’s does I’m betting WM does. You never knew who you were talking to if a customer started talking to you. Bad-mouthing the company to strangers (that report back to management) is not a good idea for a worker-bee. Sams treated my friend badly. Just sayn’.
DavidM: As far as I’m concerned, if people are happy to do the work, what is wrong with it?
What makes you think they are “happy” to do the work?
You seem like a very shallow thinking, callous and uncaring person to me. If somebody is starving, they may be “happy” to get a cup of rice, but their relief at not going hungry is hardly fair compensation for the value they create by their work, and the people that pay them as little as possible to work are exploiting their desperation. You say you would be outraged to have to pay $20K a night to receive life-saving care in my hospital. Why? aren’t you happy to still be alive? Shouldn’t your happiness at being alive defuse your outrage at being financially exploited?
This is precisely the same, these people are being exploited for profit, they are working to create value and because they have no power, they get nothing but subsistence for a day. It is unfair.
Fairness is not defined as just something you agree to because you have little or no choice. What they agree to do, and you assume makes them “happy,” they agree to do out of existential desperation; they have no viable, survivable alternative but to agree. The same could have been said for the slaves in the South. They agreed to work because the alternative was beatings or even death, and they were trapped in a brutal system.
The same is true of factory workers in China, they are committing suicide over there by the droves.
Tony C wrote: “What makes you think they are “happy” to do the work?”
Because they voluntarily show up on time and do the work. The people I have talked with appreciate the paycheck, as small as it is. Some see their job as a stepping stone to something better, but many just like interacting with the people there and say they enjoy the work.
Tony C wrote: “they agree to do out of existential desperation;”
Even if that is the case, and I am certain it is not always the case, it is still better than the alternative of no job. I am amazed that you cannot see this.
It is very strange to me that you bring up the word fairness. I thought you did not believe in economic equality. You do not expect everyone to have the same economic status, right?
Let’s talk about fairness.
How many cars do you own? More than one? Why don’t you give one to your neighbor who does not have any? Wouldn’t that be fair, for you both to have one car each?
Suppose I hire someone to do some cleaning at my office and we agree that I will pay them $60. Later, I hire someone else and we agree for them to do the same work for $25, so that’s what we do. Is this fair or not fair, that I pay two different people different amounts for the same work? I think it is fair. What do you think?
DavidM: I know many people who work for Wal-Mart and love it. They don’t see their job as slave labor.
Then you don’t know the people in China that produce their goods. There are entire towns dedicated to producing goods for Walmart, using female employees they recruited from farms. The factory owners do not pay the women, they mail their pay to their fathers (or if deceased, their eldest brother). The women are required to live in dorms attached to the factory, like military barracks. A matron blows a whistle at 6 AM, after washup they are moved to the factory floor; sewing machines, stuffing stations, etc. They eat breakfast, lunch and dinner served at their stations; five minutes. They have scheduled bathroom breaks. They work fifteen hours and march back to the dorm, where they can read and write letters to their family. If they become sick or injured the company has no liability, and has put workers on the street with broken limbs and their belongs beside them.
This isn’t a cultural difference in work between us and China, this is just slavery, and the products they are making are for Walmart, so we can get those $2 shirts. In the states, what you and I hear from Walmart employees, which include four members of my large family, differ enormously.
As for Gates, there are many members of crime families that have never been arrested, too. Do you automatically assume they play fairly? I’ve watched what Gates has done for decades, I do not need some authority figure to tell me whether he has wronged people and cheated people and played unfairly.
Tony C – I suspect you are right about Gates, but I just don’t have facts to make the assertions as strongly as you do.
As for Walmart, your comments would lead me to think, okay, let’s shut the whole thing down. How do you think these workers would feel if you walked in there and told them, “no more jobs here, we are shutting this place down because it is exploiting you workers.” I think they would be upset, wouldn’t they? How do you see it?
Blouise, I’ll read up and give you my thoughts.
mike s.
interesting links. the most fascinating was reading the posts from people who thought they were psychos. Although it sounded more like they wanted to be. Wall St.: where wannabe psychos live and work.
The whole fuking world is going insane.
make that 3 and I give up
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. (membership is down across the board)
somebody fix wordpress please … 2 posts have simply disappeared.
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. (membership is down across the board)
(If this post shows up more than once … blame WordPress)