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: The beauty is they don’t see it as work.
Then logically they do not see it as hard work, do they? So by your previous statement, why should we reward them for something they regard as play, or a hobby?
Most people, including me, that make good money do not think of what they are doing as “hard work.” And most people I know that think their work is hard are not being very well “rewarded.”
Nick: I don’t want to live in a country where the govt. says, “That’s it..stop growing.”
I don’t want to live in a country where a few billionaires or CEO’s of mega-banks and mega-companies can convince politicians to totally betray the best interests of their constituents by writing a check to their PAC (which, as Steven Colbert detailed, can just end up in the politician’s pocket, tax free).
Unfortunately, it may be an either-or situation; either live with a corrupt government that squanders your tax money and gives it away to their billionaire friends to make ever more billions, and gives them a pass on breaking the law because they are too big to fail and too big to prosecute, OR set a limit that would have zero effect on 99.99% of the populace, including you and me, and would cause actual hardship for exactly 0% of the populace.
davidm: I was not overpaid in the least. I have solved problems that have saved companies millions of dollars; I have invented solutions that made companies millions; one even went public on the strength of my work. I found an alternate solution to a patent that saved a company. Why should these companies get all that money, when it was my brain that solved their problems, built their solutions, rescued their projects and provided the creative force behind their patents? All they provided was the venue and capital, my particular talent was the key ingredient. I was highly paid for the same reason a sports star is highly paid; without the talent their stadium is just a place to sit and twiddle their thumbs. Whatever they paid me, they got back twenty fold, sometimes a hundred fold.
You have missed the point; what I am able to do is a function of genetic good luck on my part, it is not hard work at all. It is work to force yourself to obsess on a problem for six hours in a day, but it isn’t hard in any sense. The solutions I find are not in the textbook, and as far as I know there is no method to be taught to just invent something new or see a new angle of attack; it is not something I was taught. It is not really a function of “working hard,” if it were the janitor would find it before me, that guy is working his ass off while I sit in a chair for 90 minutes with my eyes closed, wandering through the forest in my head.
YES, I have limited my own income in order to help others. I currently earn less than 1/3 what I was earning as a consultant, because at 45 I voluntarily (with my wife’s encouragement) retired to research at a university when the opportunity presented itself (by luck, a chance meeting). My research (as part of a team) benefits hundreds of thousands of other researchers in dozens of scientific fields; and I believe it indirectly helps others immeasurably. I am not overpaid here, either, I earn the median salary of my fellow professors, which is in fact what I asked to receive when asked my pay requirement. Unlike my corporate life, my problem solutions are now available to anybody free of charge, instead of lining the pockets of sociopaths.
I do level the playing field in my own life of those around me; that is primarily my mother, siblings and their children. I keep them out of jail and ensure they have good representation, which happens more frequently than I wish (primarily drug related). I spent over $50K getting my sister’s murderer prosecuted (by a reluctant DA) and sentenced to life. I have paid tuition and education for several, and I have invested in their business ideas (and provided free consulting).
For the most part, whatever my wife and I leave behind will go in trust to the care of an autistic child, not of my blood but in my extended family. His care and education is primarily provided by his mother and paid for by his father. But I will write a check whenever my help is requested; this year that has been once for $5000.
Tony C –
Certainly you make good points about how some people are in a sense lucky and are given better opportunity than others, but that does not paint the whole picture of the economics of society. You mentioned that you keep your mother and your siblings and their children out of jail, primarily for drug related problems. Surely then you must recognize that some individuals develop irresponsible behavior because of the choices they make. In essence, we must help those individuals in the best way we can, but sometimes the line between helping and enabling can be difficult to distinguish. Based on what you have said, I feel certain you have dealt with this question in your own life. So what kind of “share the wealth” idea do you embrace? It is pretty clear that you think some people make way too much money, and you think some corporations are making way too much money. In your perspective, would monetary fairness mean everyone makes the same amount of money, even those who are rule breakers and irresponsible? Or do you envision a society where there is disparity in wealth, with some being very wealthy, some wealthy, some middle class, and some poor? Is that kind of society fair in your eyes? I am trying to get the big picture of the economic system that you envision as right and fair. Do you consider yourself a socialist or communist, or are you a moderated capitalist, or something else entirely?
Tony,
You are doing yeoman’s work in trying to explain compassion and empathy to people who rarely have experienced it. More importantly you are debunking the hard work myth that pervades this country. The problem is that narcissism reigns supreme in some, while the logic of a society that gives all a fair chance escapes them.
Mike Spindell –
Some of us think meeting social needs through government takes away the ability and opportunity of the individual to give through compassion and empathy. Government takes the fruit of our labors by force. My monthly tax bill is my highest bill, larger than my mortgage and other debts combined. I have to pay it or go to jail. That really isn’t giving out of compassion and empathy. In contrast, when I see people in need, and offer them a place to live, help them find a job, give money to them so they can meet their needs and obligations, that is true compassion and empathy.
So when government takes more and more from me, I have less to provide for the needs of my own family, and I have less to give to others out of compassion and empathy. When I see government wasting my money in ways that I would never do, that frustrates me even more, that they take away from me and my ability to be compassionate towards others in meaningful ways.
It really is a different social and political philosophy and I think dialogue between us would help us reach better solutions rather than just slinging ad hominem epithets at one another for sport. There is no doubt in my mind that government needs to be there as a safety net for individuals in society. My questions revolve around how big government needs to be and what the best balance is. As I was saying to Gene H, on one end is fascism which many of us find very troublesome and broken, and on the other end is a form of individualism that doesn’t work either unless everybody were saints, and we know that is not the case.
nick:
It’s a simple as physics. Clipping a bird’s wings and asking it to fly is as good a definition of insanity as I can think of, but tweaking its beak a little to remind him who controls the sky has my full support.
I don’t care how much talent you have, if you want to be a great athlete you have to work. The beauty is they don’t see it as work. I LOVED what I did. I made good money but that was not my motivation. I expanded for a decade but in the mid 90’s I said, for the sake of my family and health, “basta.” However, I don’t want to live in a country where the govt. says, “That’s it..stop growing.” Doesn’t that sound ludicrous to you. One should have the freedom to grow or not. “There is no freedom w/o choice.”
Trying to control human nature didn’t work for Communists because it’s simply not possible. But, I love quixotic people..I really do. Give it a shot.
tony c:
that is just wrong.
Nick: I never said life was fair. What I have said is that as humans we can make life more fair, by prohibiting the behaviors we find highly likely to lead to unfair outcomes, and by prohibiting the behaviors we know a priori are unfair, like exploitation of unlucky circumstances, like coercion, or its equivalent, a pretense of “choice” like “Sign this document or I will let you bleed out.”
You say, “I want a country that rewards hard work.” Why does it have to be hard, specifically? The highest paying jobs in this country are not hard at all, I have “earned” my wife’s entire month’s pay for sitting in three meetings and speaking off the top of my head, and telling people what to do for the next meeting. I am “rewarded” in businesses where I am a financial partner for doing literally zero work at all, unless you count attending a dinner for board members “work.”
If you really want to reward hard work exclusively, then I suggest you limit profits to much less than a million a month, so the people at the tops of these pyramids cannot live without engaging in actual work.
I have worked at the bottom of the pyramid (dishwasher, janitor, farm laborer, manual laborer), and I have worked closely with many people at the top of the pyramid; if you think their work is harder in any sense than scrubbing toilets for a living you are delusional.
The best paid work is not difficult, even my own. I claimed I was genetically lucky. I was not speaking of good looks, but of a mental knack for solving difficult problems, which is an ability I have had since I was a child. I did not work for it, any more than Brad Pitt worked for his good looks or a major league shortstop worked for their hyper-peripheral vision (a retinal mutation most of them have). As it turns out, I am like the shortstop or Brad Pitt in the sense that something I was born with, while not unique, is worth a lot of money in the real world.
That is what the world rewards, not hard work. Results. Sometimes results take practice and hard work to produce, but not always. People buy my time because of the way I think, and they can’t think like me. They don’t care how much effort it takes, or took. On my part, next to none.
The rich are seldom working for their income, and the richer they are the less they work. Warren Buffett may attend the office every day; but he doesn’t get paid for that: He says himself that once data is organized the way he wants it (which can be done by others) that he can tell within minutes whether he is interested in a company or not. Then he makes a decision to spend a few billion, and makes a few billion off of that: He isn’t being rewarded for “hard work,” he is being rewarded for an instinct and the way he thinks. I doubt it is “hard” for him in the least.
As it stands right now, I would “earn” more money if I slipped into a coma than some people earn working eight hours a day behind a counter. It is hard to imagine how my income is a reward for “hard work,” when even the money generating that income was not a reward for hard work. The hardest working people in the country are actually rewarded the least for their work, which is mind-numbing physical exertion, because for one reason or another they have not found anything else they can do which is in demand. That is bad luck, circumstantial or genetic.
What would be fair, to me, is for the lucky to share their luck with the unlucky; to use their excess rewards to provide the resources that ensure bad luck is not compounded by bad nutrition, bad teaching, poor safety and poor health, so each person gets to reach their potential. There will always be a spectrum of ability and the luckiest will be on one end, and be rewarded the most for the abilities in highest demand, from singing to business acumen to neurosurgery. We cannot remove the role of luck in those rewards, but we can remove circumstantial bad luck. Bad genetic luck, being born autistic or disabled or of below average intelligence or academic ability is one thing; it should not be compounded and punished by lucky fools that think those born into bad luck deserve to be punished for not working hard enough.
Tony C –
It sounds like you feel that you are overpaid in your occupation. Do you ever limit your own income to make sure you are not overpaid, or do you just want to limit the income of others? How do you level the playing field in your own life and circumstances so that your good luck can benefit others around you?
tony, Nobody ever told me life was fair. I have worked to help that unfairness all my life, from a Vista volunteer to volunteer work my entire life. My old Uncle Charlie, who came to this country a pauper and worked his way through college said, “The harder you work, the luckier you get,” many times. I want a country that rewards hard work, as I want a country that is fair. The former and the latter are not mutually exclusive.
Bron: that profit you denigrate is owned by pension funds and average people with IRA’s.
Those things would not be necessary if government would do its job with retirement funds, which it fails to do because megabuck corporations engage in corrupting government so they can pay less in taxes, which forces the inferior alternative solutions of pension funds and IRAs that can fail the retiree.
Bron: Our government is corrupt, and engages in war at the behest of Exxon and others, because they pay the campaign bills. As Bush Sr. said on camera when Kuwait was invaded by Iraq, “this is about oil.”
So was Iraq, so is much of the trouble in the Middle East, so is the BP disaster in the Gulf. It has been about oil profits since OPEC flexed it muscles in the 70’s.
Nick: I provided alternative explanations to “only viable,” if you disagree with that, I suggest examining the alternatives. As a point of logic, something barely viable can survive indefinitely, that is what “viable” means, it does better than break even.
I did not inherit a nickel either, and I began working at 16 to support myself and rent a room in a location that let me attend the public high school of my choice. My wife and I were married for twenty years before she inherited some from her mother passing away; the majority of which (the value of her mother’s house) she signed over to her brother, the rest of which she just contributed to the trust for our grandson.
I am not sure what the point of this duel is; your hardships or mine do not inform the debate; my past suffering would not justify my infliction of the same upon others. If anything, I think the opposite. I think those hardships have wasted a lot of talent, I have seen that, and I don’t think people should have to be as genetically or circumstantially lucky as I have been in order to survive those hardships. I think that is unfair, I have left behind people I know should have been architects, engineers, inventors, lawyers, teachers and professors and doctors, and were thwarted by poverty. I think that is wrong, I think it is a waste and inefficiency in the social machine, I think all those people could have been happy and contributed to the happiness of others, and that is lost.
You are right, we have different philosophies. I put fairness above profits. I do not think that excludes profits, there are many routes to fair profit without deception or exploitation. Business is not a zero-sum game; work, skill and creativity are the inputs. Nobody has to lose in order for you to win. Exploitive and deceptive business operates on the zero-sum theory, that the only way to make money is to basically coerce work or money out of somebody weaker, or in dire straits or desperate circumstances. That is what I believe in prohibiting, by force if necessary.
I don’t believe in large government or small government, what I want is a government large enough to minimize the unfairness, without adding to it.
Blouise, Power does not always corrupt. You were brought up right, girl.
tony c:
that profit you denigrate is owned by pension funds and average people with IRA’s.
It was also a nice touch to bring in lobbying and war. Last time I looked, it was the federal government which sends young people to war. We even vote for and elect the b*strds which do that to our children, wives, husbands.
We tolerate it, we encourage it by keeping the same people in office for 30 years. And then we blame Exxon and Mobil for our failings? How convenient a foil for our failings.
Gene H:
There are many people much smarter than I, who think like I do. I do respect your intelligence but I simply disagree with you.
How do you know your logic isnt based on a false premise? How do you know you even have the requisite intellectual tools [I dont mean brains, you certainly have those] to examine your premises?
You see destruction, I see destruction, we agree on some of the causes and disagree on others. Just because you think X and I think Y does not mean I am using flawed logic to come to my conclusion.
What do you think engineering is? It is 5 years of varying degrees of mathematics which teaches you how to solve problems of various kinds. Almost every class I took involved solving real world problems using a frame work of principles and conceptual knowledge to reach a conclusion.
From what I can tell about the law, you start with a conclusion and you make the case based on whatever it is which will sound reasonable and persuade a jury or a judge that your client is innocent or guilty depending on which side of the aisle you operate. The actual guilt or innocence is of no concern.
I am not opposed to this because overall it seems to work out.
The law is based on the opinions of many judges, it isnt based on formal principles [not many anyway] which have been vetted by hundreds of years of scientific inquiry. A beam can be designed in many different ways but every single one of them are based in theory which has been proven by experiments to work in reality.
The law is whatever a judge or group of judges says it is on a particular day based on what they think other men on a particular day mean. There isnt much logic in that.
The founders tried to imbue our law with principles, 1 main one; the individual is the basis of our society and has a right to exist for his own sake and 3 subordinate ones; the right to Life, Liberty and the Pursuit of Happiness.
That is what I start with as my operational premises for government and economics. And it is what leads me to my conclusions. If you disagree with that, it is your right.
How many formal, real science courses have you had? I literally have an entire degrees worth of science and math. And I had the added benefit of not learning bad habits from far left academics. As most of my engineering professors were conservative or true liberals.
I am certainly willing to be shown where I am factually wrong, in fact I welcome it. But just saying I am wrong doesnt make it so. Nor does showing me an opinion masquerading as a fact make it so either.
“Metaphorically speaking again, the fact that the mayor doesn’t get stopped for speeding or ticketed for illegal parking or running a red light irritates me too, but that exception is not a reason to scrap traffic laws or the police force. ” (Tony C.)
I’m going to take issue with the “metaphorically speaking” based on my own experience. My father was a top exec in a company that offered its services to its top-echelon employees for free. He was quite adamant with us, his children, that these services were not to be taken advantage of, so if we used the services pass a certain dollar amount, we paid the difference out of our own pockets.
One day, after I’d accepted an appointment with the city government, I was stopped for speeding (48mph in a 35mph zone). The officer took my info then went back to his car. He returned with my license, told me I had exceeded the speed limit by 12 miles, and he was going to give me a warning ticket. A warning ticket?! I asked him why and he responded that is what his Lieutenant told him to do. I asked him how much trouble he would be in if I demanded a regular ticket rather than a warning. He told me he had no idea but would ask. He went back to his car and then returned to tell me that his Lieutenant told him that the matter was now up to his discretion. I asked him what he would do if I were just a citizen clocked at 12 miles over the speed limit with no valid excuse/reason.
He gave me the ticket, I paid the fine and was very careful not to speed again for fear of putting another officer in such an awkward position.
I have zero tolerance for anyone who takes advantage of perks which, admittedly, makes me somewhat difficult to work with.
(By “fairly short run” I intended to mean with a fairly short time, the benefits I see would be felt in the short, medium and long term).
Bron: So I would say that if you have numerous burger joints, the public is paying too much for a burger.
The trick of that sentence is the qualifier “too much.” The public would probably be paying a little more for a burger, but why do you get to decide that “more” is “too much?”
Is that just always the case with you, a lower price is better no matter what the social, political, or incidental costs of that lower price?
I do not deny there are economies of scale; but giant companies have drawbacks that small companies do not. It is giant companies that can afford lobbyists, that can afford to drop a few million in a campaign coffer just to shave a corrupt point off their tax rate, it is giant companies like Exxon and Standard Oil that have manipulated American foreign policy over oil and gotten soldiers killed for their bottom line, and suppress any competition on the energy front that would threaten their profits. It is giant companies like Microsoft that have engaged in “competition by lawsuit” against small startups, that threatened their customers (like Dell) with being cut off completely if they accepted free product from a Microsoft competitor. It is giant companies like GE, Goldman Sachs, Bank of America that control trillions of dollars and can slip and cause a worldwide depression.
Yeah, you might pay more for a burger, but it isn’t going to be twice as much. McDonald’s doesn’t base its burger price on its cost of goods and economies of scale, it bases its burger price on what the market will bear, and what it takes to maximize their market share (i.e. drive competitors out of business).
Economies of scale mostly increase profits, because the selling price remains determined by the market, so a lower cost of goods just increases the profit margin.
But, compared to a standalone restaurant McDonald’s cost of revenue is about 60%, versus a more standard 80%. Only half that 20% is passed on to the consumer; the other half goes to McDonald’s profit. So presumably, the actual price difference is on the order of a 10% discount in burger price.
I do not think the social ills of giant corporations are worth a 10% off coupon on my burger, fries and soda. Or cars, or carrots, or anything else; and in the fairly short run I think we would be better off if McDonalds was replaced by around 500 burger chains worth $150M each, earning about $12M a year. There would be some turnover and greater opportunities for competitors, there would be far less sociopathic lobbying to prevent regulations on food safety, their would be more choice for consumers and potential employees, and competition would be more heavily based on pleasing consumers with quality and recipe innovation instead of who has the best robots for turning potatoes into frozen fries.
Of course burgers was a specific for illustrating a principle which I think applies equally to banking, oil, farming, entertainment, defense contractors and across the business board. Most economies of scale are achieved long before a corporation gets to the $150M dollar enterprise value; and I would rather have a large population of them, dozens to hundreds of independent companies (prohibited from collusion), as opposed to a monotone culture of one to three companies with an iron grip on 90% of the market.
tony, If my business was “only viable” why did it continue for 28 years, and why do I spend winters on the beach in San Diego and travel extensively? My wife was a Federal employee, and our parents were middle class. I’ve never inherited a nickle. My wife inherited 10k. Unlike some, I take people @ their word even though, based on my investigative skills, I see some red flags. So, when someone says they have been successful and state anecdotes describing them, I take them @ their word. It’s the honorable thing to do absent any proof to the otherwise. We simply have a fundamental difference in the philosophy of governance. I can live w/ that. Others cannot. C’est la vie. I have seen a bit more civility from you. Being an optimist, not a curmudgeon, I will take it as a positive w/ hope it continues.
Bron,
It has been pointed out numerous times in the past that your arguments don’t fail because you’re the one making them. They fail because they are – especially in the case of economics – based on faulty premises. They may have varying degrees of internal logic, but logic predicated on bad premises is still bad logic. Rand possesses a degree of internal logic as do some of her acolytes like von Mises and Greenspan, but her (and their) faulty premises lead to wrong and/or irrelevant conclusions.
If you don’t like having your use of bad logic pointed out, get better logic.
Logic and empirical facts are king in critical thinking and objective scientific analysis. You are entitled to your own opinion like everyone else, but like everyone else, you are not entitled to your own facts. And we come full circle to faulty premises.
Nick: Everybody is unique at some level of detail; but your career path is not unique. I am the counter-example. I was in the military, after that (and the college it paid for) I contracted with the federal govt (DoD on developing weapons systems), and an intelligence agency (on a listening device). I contracted for a county government in the development of a prison system. I have owned my own consulting business for over 30 years. I have also been a partner in several startups, more than a dozen. Only a quarter of them succeeded, but that was enough to be an overall success, and to keep placing the bets.
Which I continue to do; I flew to Chicago this weekend to look at yet another, which I will most likely pursue with two former partners in a previous success.
Haven’t I done what you have done? I’ve run my books, been audited, and had to pay. But it was legitimate; I phucked up trying to do too many things at once. So I learned my lesson and moved on. I phucked up again in a later business (in a different way, but with the IRS), and again, I paid the bill and fines, made sure that gear wouldn’t come loose again, and I moved on again.
I will agree that there are many stupid regulations and some outright corruptions; but those inefficiencies are not reason to scrap the machine (metaphorically speaking), the machine gets work done and keeps people safe even if it is imperfect.
The vast majority of regulations are in there for a reason; because without them selfish greedy people refuse to do the right thing and pay their fair share. I presume, if you resent all those regulations we have to obey as employers and in providing service to citizens, one of two things:
1) Your sense of what is “fair” is far beneath the concept shared by the majority of citizens,
2) Your business was barely viable, so after your business expenses you were disappointed with the profit picture, and you thought if only it weren’t for the govt and regulations and the IRS, you would be flush.
Or perhaps you are just overwhelmed by greed, or too dim to see the exploitation the regulation is aimed at preventing, or maybe you are smart enough to figure that out but just have zero regard for the well being of anybody but yourself.
I admit I get incensed when the mega wealthy get away with zero taxes and I have to pick up their tab, but that is an irritation and I recognize it as such. Metaphorically speaking again, the fact that the mayor doesn’t get stopped for speeding or ticketed for illegal parking or running a red light irritates me too, but that exception is not a reason to scrap traffic laws or the police force. Although I would like a zero-evil system, there isn’t one on the table, and the least-evil system contains some “privilege loopholes” and deference to elites that I truly wish did not exist.
The history of virtually every regulation begins with somebody engaged in screwing somebody else (even endangering their lives and health) for profit; and the regulation was devised to stop that previously-legal evil. Child labor laws, sexual harassment laws, minimum wage laws, social security and Medicare, OSHA, union protections, work hour restrictions, the FDA, the FAA, the EPA, and on and on and on. We have those laws because some people adamantly refused to play fair without a threat of punishment. The only way they knew to make a profit was to coerce somebody with less power, deceive people, lie, engage in subterfuge, pollute and sacrifice the lives of others to Almighty Profit.
Maybe you are one of them, I don’t know.