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
Tony C:
your burger story was interesting. There is a historical analogy but it doesnt favor your take. Standard Oil emerged from 100’s if not thousands of small refiners of kerosene for home lighting by lowering the cost of production to pennies per gallon. The smaller companies could not compete and either went out of business or sold to Standard Oil.
So I would say that if you have numerous burger joints, the public is paying too much for a burger. A larger company can produce beef, have a production facility, trucks for shipping, etc., at every point they can trim costs and the end result is a less expensive burger. There is no middle man to pay and so the savings can go to the public.
I guess you will now claim this will lead to a burger monopoly? Not hardly, since the burger is competing with chicken sandwiches, hot dogs, gyros and other hand held food, the burger master must compete with alternatives. If it wants to stay viable it has to offer a better product at a cheaper price.
The more choices the better, the elephant is just as necessary to the African ecosystem as is the pygmy shrew. Probably more important in many respects.
Mike S:
I will endeavor to try harder.
However I have seen in the past that when one of you is losing an argument, the others jump in and say the other person is stupid or his argument sucks or he is illogical, etc., etc., and so forth.
I will give you the benefit of the doubt and accept your criticism in the spirit of bonhomie and good will which you no doubt intended.
how much revenue is hollande actually getting in euro billion terms.article does not state can others state. hollande could be making a mistake.
Excuse me if I can’t muster a tear for our corporate overlords, where ever they might reside:
“Web of Tax Shelters Saved Apple Billions, Inquiry Finds” May 20, 2013
“WASHINGTON— Even as Apple became the nation’s most profitable technology company, it avoided billions in taxes in the United States and around the world through a web of subsidiaries so complex it spanned continents and surprised experts, a Congressional investigation has found.
Some of these subsidiaries had no employees and were largely run by top officials from the company’s headquarters in Cupertino, Calif., according to Congressional investigators. But by officially locating them in places like Ireland, Apple was able to, in effect, make them stateless – exempt from taxes, record-keeping laws and the need for the subsidiaries to even file tax returns anywhere in the world.”
http://www.nytimes.com/2013/05/21/business/apple-avoided-billions-in-taxes-congressional-panel-says.html?hp&_r=0
tony c:
“Our taxes get the roads at cost, tolls have to be higher than cost. Ergo, more money out of your pocket.”
How do you know you are getting it for cost? You cannot know how much waste and fraud are involved in the interstate highway program.
Bron,
I really believe that you are far more intelligent than exhibited in your arguments on this thread. Tony is quite frankly making mincemeat out of you and in the process is providing a good amount of education for all, it is sad that you are playing dumb to his cogent arguments.
tony c:
I thought the law was to protect individual men from bad actors, you are saying it is to be used to coerce them, to make them behave in ways that are accepptable to a small group of people who rule us. I guess the recent IRS scandal would prove your point.
When Disney wants to own “The Day of the Dead” and start charging people for using it or prevent the same it’s time to do something to reign their power. When you can only own a working phone or game console if you don’t try to add software of your choice to it it’s time to ‘jailbreak’ the consumer. If you have to fear that pollen from genetically altered seed will blow into your field and contaminate your crop and you could then be successively sued into bankruptcy by Monsanto if you try to save your own seeds it’s time to break the stranglehold Monsanto has. If a 100% tax rate will do it in the spirit of Tony’s rationale, then I’m for trying it and watching what happens.
As was mentioned above though, these corporations and the people that own them have no allegiance to any nation and already move their corporations and themselves to any place that will give them a good tax deal. There needs to be a global solution, lots of luck with that.
I am pretty unique. I have worked for the Federal govt. and County govt. I have worked for small businesses, medium sized and a major corporation. For the last 28 years of my career I ran my own small business. When I say, “I want to be left alone,” I was speaking specifically of stupid and expensive bureaucratic rules and regulations all government entities from local to Federal love to put on small businesses. The IRS likes to pick on small biz because they don’t have the resources to fight back. I am not a libertarian nut. I understand the services govt provides[albeit grossly inefficiently] and I am willing to pay taxes for it. There’s simply too much govt. It needs a drastic diet. That means feeding it less of our money.
“I think I’m pretty unique”
Yes it is quite obvious that you think so. You give yourself far more credit than you deserve based on written performance.
Bron: As far as leaving the house less? What is that about?
Economies are built on transactions and turnover of inventory. The more it costs you to leave the house, the less often you leave it, the less often you engage in the transactions that build the economy. A higher cost of transportation reduces the economy.
Bron: someone is paying for them, which you dont seem to understand.
That is a little illiterate of you; I said we all pay, so we get the service at cost. What you don’t seem to understand is that right now nobody makes a profit by providing roads, and if somebody started making a profit above and beyond the cost of maintenance, we would have to pay more in tolls than we currently pay in taxes! Our taxes get the roads at cost, tolls have to be higher than cost. Ergo, more money out of your pocket.
A road is a fairly simple layering mechanism (drainage, cohesion, weather resistance) that is not going to be much improved by innovation. Which means any benefit to be gained by competitive efficiency could be obtained more easily by making the maintenance and building operations accomplished by actually competitive bidding processes.
Making roads tolls won’t help, it will make them cost MORE, and it will worsen the economy by restricting usage and mobility, for workers and for businesses.
Bron: He isnt talking about murder, he is talking about taxes.
The argument is the same, that is the point of using the extreme you can understand.
But I will put it another way. We can see a law as a form of coercion; we want to coerce some behavior or punish some behavior. We do that when we think behavior is necessary to achieve fairness, or must be prohibited to achieve fairness, respectively. AND when we believe some people cannot be trusted to behave fairly, and have to be threatened with punishment in order to behave.
Whether it is a law to prohibit murder, or a law to coerce tax payments so we can investigate and apprehend and prosecute and imprison murderers, the reason for the tax law is that we do not trust people to voluntarily chip in their fair share every day, if they are allowed to pick and choose. The same goes for the other taxes we levy, we don’t trust people to voluntarily chip in their fair share for the military, for the police, for roads or for anything else.
tony c:
the debate is about how much is needed to fund government and how to do it.
You just think you have the right idea, well I think I have the right idea. And I certainly havent seen any deep thinking on your part to prove me wrong.
I will give you this though, I do agree that we do need some taxes. The amount and how to collect them is open for discussion. The history of the tax system over the last humdred years has been about our tax system granting favors and not about raising revenue for the workings of government but for the purpose of building power.
tony c:
and the cost of those items should be in the price I pay for them at the point of sale, if indeed, I want to buy them.
They dont use them for free, someone is paying for them, which you dont seem to understand. That someone is us. I can go round and round if you like, gas taxes pay some of the costs which are accounted for in the cost of what I buy. So I am still subsidizing those companies with my tax dollars.
As far as leaving the house less? What is that about? I pay now everytime I leave the house in the form of gas taxes, much of which doesnt stay local.
If you want to ship things as cheaply as possible end the gas tax and the income tax and make all the interstate highway a toll system and allow competing roads.
We are no where near maximizing our choices.
Nick: We don’t want help from the govt. We just “want to be left alone.”
No you don’t, you want a free ride. Free protection from criminals, free mail delivery, free courts to enforce your contracts, free protection by the military, free everything.
You want to live in a safe, free house in a civilized neighborhood without paying any rent. If you really wanted to just be left alone, you could accomplish that easily in a dozen spots in this world; even a few in this country: You can buy bare untaxed land, become a self-sustaining subsistence farmer and chicken rancher on five acres with a well, and remain self-protected without income, paying zero taxes.
That isn’t what you want, though, you want to run a business, and use all the resources of the country, and be easily accessible and safe for your customers, all without paying a dime.
You just think you are entitled to a free ride, and we won’t give it to you, so you pout instead and call us a big meanie. As far as I can tell, that is the level of this debate.
Bron: The seeds of the refutation is in your own argument; which is that it depends on how you look at it, and you are very intent on looking at it in the most shallow analysis possible.
Virtually everything you buy was shipped on Interstate Highway system or some public road. Because those roads are maintained for free, Exxon, Walmart, McDonald’s, your grocer all use them for free and do not attempt to pass on the cost of any tolls or fees to you. Your road use is not just what you personally drive, it is your fair share of every mile driven on behalf of you, which includes both the products you consume, and the miles driven by the military and police that do not have to charge you even more tax to pay for tolls and toll roads.
The people that serve you at businesses usually drove to get there (or were driven). If they had to pay tolls, they would (on average) demand higher pay to cover that and maintain their current standard of living. Their businesses would pass that higher cost of labor on to you; and you would pay for those tolls. The tolls paid by your grocer would be passed on to you.
Do you benefit from a stronger economy? It would be a weaker economy if you had to pay tolls every time you left the house, because that means you would leave the house less, and not travel as far.
As it stands now, roads are not free, but they are as close to a non-profit as we can get; we get roads for very nearly the cost of the roads, and there is very little profit involved. By doing that we enable mobility instead of retard it; higher mobility means a larger pool of employees, customers, and suppliers for businesses, and a larger pool of employers, shops, and selection of products and services for consumers.
I am no fan of Exxon, but we should help everybody ship everything as cheaply as possible, at as close to cost as we can, whether what they ship is themselves for work or play, or their products. That maximizes choice in our economy.
nick:
you rapscallion, you. You vicar of vituperation, you duke of denigration, you. 🙂
The way money is this is not the end of it. it will only go up from here to infinity and beyond.
tony c:
I posted a quote from Frederic Bastiat, who I think is pretty good. You can take it or leave it as you see fit.
He isnt talking about murder, he is talking about taxes. Personally, I think if you are going to pay taxes you ought to get something for them. Taxes really dont benefit the middle class and above. We pay far more than we get in services.
If a person pays a large sum to the government he ought to get more than some roads, bridges and wastewater treatment out of the deal. He gets some defense and fire protection but he has private insurance for fire and theft so he can do without, statistically speaking. National defense and courts are a legitimate function of government but those take up less the 25% of revenues and roads and bridges, etc are probably less than 10%. I have seen calculations which show that only 25% of revenues go to legitimate functions of government.
So I would say yes, we are entitled to receive value for value. And it is provable and practical.
How many miles of interstate system are there? How many people of driving age, how much does it cost to maintain the system every year? Divide the cost by the number of drivers and you have an idea of what it is worth. The cost of new roads, the same.
There are 46,726 miles in the system. The budget was $52 billion in fiscal 2010. Number of drivers in the US is 211,000,000. Which equals $246/driver. That seems like a good deal to me[?], I pay 246/year to use the interstate system every year. On average I probably drive 1,000/year on interstate highways which costs me about 0.25 cents per mile. The New Jersey Turnpike is 11.4 cents per mile, the Garden State Parkway is 4.8 cents per mile, the Mass Turnpike is 20 cents per mile.
Objectively speaking, I am being charged too much. So the interstate highway system is a very poor deal in comparison with other toll roads.
I guess it isnt such a good deal after all. In fact I would fair better if all of the highways were toll roads. I imagine most people would as well. But then truckers and salesmen would be the ones paying for the highways and business would foot most of the cost.
Again and again we see our tax system subsidizing business in ways big and small, this is just one example.
Why should I pay to help Exxon and Mobil ship gas across country?
How much of my tax dollars go to subsidies for the rich? And how much of my tax dollars go to people who refuse to work but can?
Bron, If you want to understand all this first take a drink from the grape kool-aid. Then, as you read, sip the red kool-aid. As you and I know, small biz flourishes in this country in spite of large corporations and over regulating govt. It’s jungle warfare, and one of the biggest advantages we have is we can adapt quickly. We don’t want help from the govt. We just “want to be left alone.”
Bron: Do you have a point, or are you just reciting from your holy books?
If you have a point to make, I should think you could make it without quoting somebody else as if their exact words are some kind of magical incantation.
Bastiat’s argument is fundamentally flawed. He says, “Show that [the government function’s] value to James B., by the services which it performs for him, is equal to what it costs him.”
That is not a provable or practical condition. It is the right of the people to collectively and formally decide to create a government office, and it does NOT have to benefit every individual precisely equally. No law does; in particular it does not benefit those that intend to break it. A murderer is not benefited by a law against murder, he may lose his life over it; but we have
the collective right to pass a law against murder anyway, and for the murderer’s taxes to help pay for the enforcement of that law.
How do I prove that the murderer benefits from laws against murder, or the rapist benefits from laws against rape?
The only thing that makes sense there is that “good” laws will “on average” benefit citizens more than they harm them. That is a matter up to the citizens to decide collectively in forming the laws, not something that has to be proven true for every individual, as Bastiat seems to think.
Bron: By internationalization, what I mean is the ability of the American corporation to avoid abiding by what Americans believe is fair practice: Paying a minimum wage, not endangering workers, not sexually or physically abusing workers, not engaging child labor, not engaging in coercive labor, contributing (via tax policy) to health care and retirement of seniors, and so on. We do not let companies as they do in both China and India, have workers inhaling known carcinogens because it costs too much to protect them. We do not let corporations work people 16 hours a day, 7 days a week. We do not let corporations arbitrarily decide a woman is not mature enough to handle her own pay, and mail her pay to her father or husband instead (as is done in some factories in China).
We allow Walmart and Nike and many others to make a profit by reducing their cost of goods to 20% of what it would be if their producers had to work by our laws and workplace rules; and avoid taxes to boot, by claiming to be a foreign based company in country with no income tax (just a “fee” for corporate residency of a million bucks a year or whatever).
The result is that our workplace regulations are meaningless to many large corporations, they shop for the most sociopathic, slave-minded regime they can find, pay a “fee” or bribe an official, and set up there. They are still going to sell to the USA, they are making a profit here, using our infrastructure and stores, our police and our courts and our national defense, their contracts get enforced here, but they are free riders paying nothing for our services.
It is a failing of government and I think regulation could help, but they have bought our politicians to the point that such regulation cannot be passed.
“For instance, I want to agree with a drainer to make a trench in my field for a hundred sous. Just as we have concluded our arrangement the tax gatherer comes, takes my hundred sous, and sends them to the Minister of the Interior; my bargain is at end, but the minister will have another dish added to his table. Upon what ground will you dare to affirm that this official expense helps the national industry? Do you not see, that in this there is only a reversing of satisfaction and labor? A minister has his table better covered, it is true; but it is just as true that an agriculturist has his field worse drained. A Parisian tavern keeper has gained a hundred sous, I grant you; but then you must grant me that a drainer has been prevented from gaining five francs. It all comes to this — that the official and the tavern keeper being satisfied, is that which is seen; the field undrained, and the drainer deprived of his job, is that which is not seen.”