We have often discussed tax policy on this blog. I am in the minority here on tax policies, particularly the high rate imposed in various countries for top earners. I am admittedly more inclined to a Chicago-school view of such high tax rates than many on this blog. This story caught my eye for obvious reasons. The French government is reporting a 20 percent increase in one year of high earners in leaving the country. We have previously discussed how such taxes produce emigration by rational actors from markets. French President Francois Hollande ran on a pledge to soak the rich in tax increases, a popular political platform but a disastrous economic plan. The result has been predictable. The French economy is in terrible condition and thousands of French families are leaving the country for England, the United States, and other countries. Now, Hollande’s government has announced that it will rescind the tax increase. Hollande and his socialist allies refused to accept the obvious impact of such a tax and now, a few years later, it will remove the tax after losing a huge amount of high earner tax dollars.
The tax applied to all families with assets of more than €800,000 (£630,000). I have French friends who have told me about the devastating impact of the Hollande tax plans. One friend’s family decided to sell off most of their fishing boats because they could not handle the tax burden and make any profit. They let go most of their workers who joined the unemployment lines — adding another cost to such short-sighted policies. Another friend wanted to take his family back to France but decided that he could not because he could not start a business in the country. The business had customers and a market niche but the taxes would not allow him to make any serious profit.
Their stories are reflected in the new reports. Almost half a million French nationals now live in London alone — more than France’s sixth largest city. The number of expats leaving France has been increasing by two percent a year. The 20 percent of high-earners however is particularly harmful for the country, which is chasing away the very earners needed to invest in new businesses, hire new people, and pay most of the taxes.
Manuel Carlos Valls Galfetti, the Prime Minister of France, said that the tax will be rescinded in January. In the meantime, an amazing 85 percent of French voters now oppose Hollande serving a second term.
Source: Independent
As long as governments fight each other to provide the lowest tax rate for the “job creators” and the obscenely rich this type of thing will happen. There was nothing wrong with the tax rate.
sera wrote: “There was nothing wrong with the tax rate.”
Huh? There was nothing wrong with taking 100% of a family’s income to pay taxes?
http://www.forbes.com/sites/robertwood/2013/05/21/french-tax-soars-over-100/
Bringing this thread back to France and in this instance Hollande and to a certain extent Piketty. Both avowed socialists by the way, their rivalry isn’t over socialist ideology, its over the extent of it, again we find the basic truisms at play, that imposing stifling taxation has consequences. The march to democratic socialism (the social market economy) sees a ‘never shrinking government’ until govt spending reaches about 50% of GDP and frankly that’s where things really start to unravel, and France is well beyond that point. Taxes are a necessary evil, but they shouldn’t, in the aggregate, be more than half…..”You sow what you reap” turns into “I sow, you reap” and the problem is that people DO balk at the latter.
Well, Paul, my point wasn’t necessarily to debate whether regulatory taxes should be relied on as a revenue stream for purposes of permanently funding the government. I was simply making the point that taxes imposed will have a discouraging effect on whatever activity is taxed. I feel liberals tend to forget this when it simply doesn’t suit their political purposes. If you tax cigarettes, people smoke less, when you tax carbon, people will engage in less carbon producing activities, when you tax income, people will engage in less income generating activity, when you tax investments, people invest less…..its simply the nature of a tax, but
Randyjet….yes, you can negotiate a $1.00 per year or whatever “contract” and satisfy the Anti-Deficiency Act…maybe (very dubious under the fair exchange of effort feature) . Most of the time was was special circumstances for very influential people, and not for ordinary working stiffs who actually knew what to do within the system. None-the-less, you must negotiate a “contract” and execute it. I was hardly that important, and I was unwilling to do so, anyway, simple as that…I worked for 40+ years and saw no reason why I couldn’t share that knowledge with those coming up behind me.
And I am still contributing to this very day…and it is goll-dang silly how much trouble you must go to hide honest work. Might that not give you an idea of what’s wrong with the Us Government?
Taxes are a necessary evil. Carbon taxes, cigarette taxes. How do they work? They work like any other tax, it discourages the behavior by reducing the marginal utility/benefit of the activity/thing taxed. That doesn’t magically not happen because you’re taxing investment income or ordinary income.
Free NYC Pics – both carbon taxes and cigarette taxes are known as ‘sin’ taxes. The problem is that as people sin less, less money comes in the door. So if you raise the tax on cigarettes to fund something, some people will stop smoking because you have priced them out of the market. They are not longer sinning, or they will smoke less, or will buy their cigarettes on the Indian reservation where their are no taxes, thus screwing you out of your hard earned tax money. Suddenly, you don’t have the money you need to run your program. Now what do you do?
ps
Some of what you said is true, but, as usual, you failed to respond to the points I raised.
Generally speaking the end of the war was a large bump in the economic road which was weathered and continued on to the longest economic boom in American history due to our steel exports and the terrible conditions of Europe in particular.
After WWII, it became much more necessary for the family unit to have two workers. Both Husband and wife had to get jobs. Women didn’t want to stop working, so After WWII, it became much more necessary for the family unit to have two workers. Both Husband and wife had to get jobs – because it took two paychecks to sustain the greed-driven materialism and inflation that ensued.
bill mcwilliams – the two income family was not an immediate result of the war, it came much further down the road. Women stopped working so men could have their jobs back, etc.
dust bunny,
For answers to your questions about a Wealth Tax, start by studying how it works in those countries that already have a wealth tax. You might also find insight from Prof. Ravi Batra, of SMU, who wrote a book with a detailed plan for a fair wealth tax.
PCS.
The U.S. enjoyed the great advantage of being the largest manufacturing country in the world after WW2, because we and our allies did such an effective job in destroying industries elsewhere.
After WW2, our economy grew rapidly and we had a large, thriving middle class that included blue collar workers, and the rich paid more of their share in taxes, as did corporations.
I realize you probably know all of this.
bill mcwilliams – what we had was a lot of members of the armed services who came home with a lot of money to spend and an economy that switched from a war economy to a regular economy. Plus the GI Bill kicked in, etc. And yes, I did know all of that.
I also know that we were at a financial disadvantage 30 years later when the relatively new heavy industries of Germany and Japan were competing against our old industries who had not retooled since WWII or before.
Davidm: 16 years is not “soon”. The Great Crash was only solved by WWII and the expenditures on war products. This is why you have the Military Industrial Complex.
Beldar, give my best to Prymaat and Connie please.
If WWII was a fix, why didn’t WWI that came in 1917 help protect the economy?
There is an argument that Prohibition which lasted from 1919 to 1933 was the reason for the 16th Amendment establishing the federal income tax. Up to that time, some 30% to 40% of the federal government’s income came from tax on alcohol. The Prohibitionists knew they could never accomplish prohibition unless another revenue stream was established. Therefore, first the income tax, then Prohibition. Ultimately that led into the Great Depression in 1929 with Prohibition being lifted in 1933, which resulted in new revenue for the federal government from taxing alcohol.
http://www.theledger.com/article/20111003/NEWS/110035001/1326?p=1&tc=pg
Beldar – the Great Crash was solved by the Post-War spending starting in 1946. We were still in a Depression in 1945. I realize you are from another planet but good research material is available here.
Nice Beldar! 😉
Beldar, That comment is funny.
In recent months I have been admitting that I am from Planet Remulak and have dropped my cover story that “We are from France”. The Hollande guy is a disgrace.
SMH – I agree with Paul on this one. Historically, rulers taxed the populace to become rich. Then it became more about running the country and not benefitting a ruler. Taxes were not used to help the poor until very recently in human history.
Our country passed the Sixteenth Constitutional Amendment allowing federal income tax in 1913. The Great Depression soon followed (1929-1939). Coincidence?
The original purpose of taxes was what!? To take from the rich for the benefit of the middle class and the poor to “obtain their vision of the american dream”? Now you have me shaking my head. Wow!
Historically, as best I remember, the idea of taxation was to take from the poor to give to the rich.
amazing especially since the original purpose of taxes were put into place for the rich not the middle class or working poor it was there to help the middle class and working poor obtain their vision of the american dream and thru out the centuries was slowly turned around on the middle class and working poor to make them slaves to the rich. instead of helping them. but then you would have to read the original form of tax codes to understand and realize that. and when the rich realized they couldnt raise taxes anymore they found a different way to keep you out of their loop by raising prices on everything and taxing everythingg ever nwonder why the heck you’re paying a 1.50 excise tax on a tree in west bullblechit? ask the rich ask them about those fines and penalties also
slohrss29, True enough. I believed that the term, “Too big to fail” is not as bad as “Too big to not let fail”. Banks are just acting like the rich in France. They play with a set of rules. I never villainize them unless there were real laws that were broken not just emotions. As far as banks buying politicians, well that isn’t the banks fault either. The politicians should stop selling their crack to them.
What really pissed me off of the auto industry deal (I won’t buy a GM or Chrysler anymore) was that Ford, who didn’t take taxpayers property, sat with them in DC. What the hell? It just shows how they are all in it together, crony capitalism. Henry Ford would have loved to have seen GM and Chrysler on their knees begging and would have put add after add out telling the American public that Ford was the only one not in your pockets. Henry must be spinning in his grave.
Jim, I like to point out the double-edged sword of government. Some people seem to think the government should handle everything. Some think government should be totally out of the picture. I just like to point out the “banksters” have actually been enabled by government policies. If we were on a level playing field and the government did not rob us to give to them, those banks would have been wiped out by the process of capitalism. Economic disaster? I don’t think so, possibly a short-term scramble, but not the precedent that if you wipe out your company, you can count on bestest Uncle Sam to offer up taxpayer cash when you spend yourself short. And don’t forget the car industry either… Where would GM be today without a government allowance?
It’s weird how many of the “have not’s” let their resentment of the rich consume them. If you hate these people so much why let them affect you? Are you happy? If so who cares what anyone else is doing. I hate Nancy Pelosi and Lois Lerner, but at the end of the day, I don’t let them determine my happiness. The old saying, money doesn’t buy you happiness would seem to apply here. If worrying about “Wallstreet Banksters” makes you vile, then you are the one with the issue. Let it go, you will feel better.