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Manuel Carlos Valls Galfetti, the Prime Minister of France, said that the tax will be rescinded in January.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
Jim,
I never get tired of reading that parable. 🙂
I am still in favor of a flat tax. Not sure what it should be but very simple. Say 10%. If you make 10,000, you pay $1,000. If you make 10,000,000, you pay $1,000,000. No deductions, No loop holes. Under this plan, the rich pay more, and everyone pays something because everyone is benefiting from government services.
Jim, That parable bears repeating often.
Gary T, Here they have evidence right in front of their faces and they still can’t see the fallacy of taxing the rich. Precambrian Rabbit sounds like they want to have the govt. to not only be able to steal as much property as they want but to also not allow you to move. God, envy and jealousy of the rich really run deep on the left.
Posted it before but it seems quite appropriate again.
Suppose that every day, ten men go out for beer and the bill for all ten comes to $100. If they paid their bill the way we pay our taxes, it would go something like this:
The first four men (the poorest) would pay nothing.
The fifth would pay $1.
The sixth would pay $3.
The seventh would pay $7.
The eighth would pay $12.
The ninth would pay $18.
The tenth man (the richest) would pay $59.
So, that’s what they decided to do. The ten men drank in the bar every day and seemed quite happy with the arrangement, until one day, the owner threw them a curve. ‘Since you are all such good customers, he said, ‘I’m going to reduce the cost of your daily beer by $20. Drinks for the ten now cost just $80.
The group still wanted to pay their bill the way we pay our taxes so the first four men were unaffected. They would still drink for free. What happens to the other six men – the paying customers? How could they divide the $20 windfall so that everyone would get his ‘fair share?’ They realized that $20 divided by six is $3.33. But if they subtracted that from everybody’s share, then the fifth man and the sixth man would each end up being paid to drink his beer. So, the bar owner suggested that it would be fair to reduce each man’s bill by roughly the same amount, and he proceeded to work out the amounts each should pay.
And so:
The fifth man, like the first four, now paid nothing (100% savings).
The sixth now paid $2 instead of $3 (33% savings).
The seventh now pay $5 instead of $7 (28% savings).
The eighth now paid $9 instead of $12 (25% savings).
The ninth now paid $14 instead of $18 (22% savings).
The tenth now paid $49 instead of $59 (16% savings).
Each of the six was better off than before. And the first four continued to drink for free. But once outside the restaurant, the men began to compare their savings.
‘I only got a dollar out of the $20,’ declared the sixth man. He pointed to the tenth man, ‘But he got $10!’
‘Yeah, that’s right,’ exclaimed the fifth man. ‘I only saved a dollar, too. It’s unfair that he got ten times more than I!’
‘That’s true!!’ shouted the seventh man. ‘Why should he get $10 back when I got only two? The wealthy get all the breaks!’
‘Wait a minute,’ yelled the first four men in unison. ‘We didn’t get anything at all. The system exploits the poor!’
The nine men surrounded the tenth and beat him up.
The next night the tenth man didn’t show up for drinks, so the nine sat down and had beers without him. But when it came time to pay the bill, they discovered something important.
They didn’t have enough money between all of them for even half of the bill!
And that, boys and girls, journalists and college professors, is how our tax system works. The people who pay the highest taxes get the most benefit from a tax reduction. Tax them too much, attack them for being wealthy, and they just may not show up anymore. In fact, they might start drinking overseas where the atmosphere is somewhat friendlier.
How is it not a violation of the equal protection clause to confiscate the property of citizens at disparate rates? Should the government be able to determine what percentage of property different classes of society get to keep? Should the government be able to decide how much freedom or liberty different classes of society should possess? Should the government be able to decide what lives are important to protect? Should it cost more to be a wealthy citizen of this country? Isn’t a progressive tax structure simply a de facto bill of attainder with the unstated charge of unfair wealth?
I have to laugh at the apologists for the wealthy and cite all kinds of “constitutional reasons” that we should not treat them differently. Of course, when I was young, men of my age could not vote, yet were drafted because they were young and fit to kill and die. It was and still is considered unpatriotic by most of the defenders of the wealthy if the rational actors left for Canada. They had NO problem with the government taking away the most important thing these young men possessed, THEIR LIFE! I think that those draft dodgers like W Bush and Cheney should have paid say 20 million dollars in compensation to the government for being spared.
y’just don’t get it do ya.
The same forces that want to suck all your earnings from you “for society”, want to send you off to war to sacrifice your life “for society”.
Two sides to the very same coin, the only difference is that you object to one side and not the other. It is the same coin nonetheless.
Randyjet:
OMG, what sheer, raw socialist presumptive mentality.
You think that people would be proud to work their asses off for ‘society’, toil hard, not be with their families, not have time for their recreations and hobbies, for $1 a year?
What kind of human psychology course did you go graduate from?
The Socialist School of Economic Science for Bees, Wasps and Ants (and maybe mole rats)?
Or perhaps the Kim Jong-il University for the Advancement of Society?
Do you have any sense that people are not worker bees, who get fundamental satisfaction from working for the hive at the expense of any individual return?
People are not socialist ants however much you would wish them the be in your magical view of people, government and society.
People are individuals who work for themselves and for their families, not the State, and not for some grand goal of “sharing” their wealth with everyone else.
If you want to muffle all creative drive, inspiration and enthusiasm of the people who WOULD contribute to society, just tell them that everything they will work for will be taken from them and given to everyone else.
And that is exactly the lesson we would learn if you had were king for a day, and what have directly learned from France’s failed fiasco.
I have to laugh @ those who actually think the problem is that other countries have too low a tax. That is the mindset that the Democratic party is hammering into the brains of people here in the US. Read up on Hollande. He is a morally bankrupt, buffoon, who pandered to the union rats of France. The message to all socialists is simple. “Sooner or later you run out of other people’s money.”
BTW…my two posts, one on budget and the other on Congressional voting go to w\the reason I think we have these lopsided concepts…I believe a full vote on everything would bring more balance. I know from experience in putting my part of the Executive Budget together that that is time wasted under the CR conditions…. in other words, CR’s provide for little or no planning out further than 60 or so days. It is crazy.
Another thing that bugs me, partially because I don’t the answer why, and partially because it seems insane. So anyone who tell me the naswers, please do.
What gives the Senate Majority Leader the power to bottleneck all bills and be the only one to let a bill go to the floor for an up-down vote?
Does the same apply to the Speaker of the House?
Why?
It seems to my feeble mind that if all bills were give a vote there’d be more participation from both parties and independents alike…and more in line with the states true interests. Why can bills be just bottlenecked and killed by one person?
Would what I ask be too much Democracy?
Jeesh, I can’t say so much fast enough to express my amusement and disgust at the idiocy of those in power who entrenched in magical thinking.
A big fat I told you so, comes to mind.
If anything proves the Chicago school of economic thought, this would be a perfect textbook case to point to.
It was done on such a grand scale with nothing else to blame when it failed miserably, and reality forced itself upon the top-down socialist planners. Such total stupidity and idiocy. They think that money will just magically appear in their economic system, just because they want it to.
The emotional maturity of a 12 year old child is what would produce this kind of policy. In fact, when I was 12 years old, this is what I thought would be a perfect method of governance, and I put together a whole plan based upon how the government would control everything and force the people into prosperity.
Of course I only had a the knowledge and experience of a twelve year old.
Here we are talking about grown adults with years of political and (one would hope) economic experience.
It is what happens when people in power seem to think that that power extends to telekinesis, or the power of god, and just because they want something to be a certain way, it will just magically happen.
It doesn’t and it won’t. But other people will suffer for the presumptuous haughty, and condescending government policies they will impose.
When in the past 6 years has the USA ever had a normal annual budget passed before 01 Oct of the fiscal year?
Answer: It has not had one…just continuing resolutions.
That is how egregious cuts occur as periodically the players sit down and haggle and re-haggle a month or two at a time. You couldn’t run a lemonade stand that way.
It is one thing when taxes are being spent well but another when they are not:
(Mega Infrastructure Bill To Make Jobs? – 2). Meanwhile the Ebola vaccine project was shut down a while back because of budget cuts.
The squeals of the wealthy paying taxes are more like the whines of children not being able to grab every candy bar off the checkout isle racks.
So the professor feels that people should – since they are rational – be more attracted to money than flag?, ‘how such taxes produce emigration by rational actors from markets.’ It’s the same old story. The wealthy enjoy and demand the protections government offers them through the military protection, travel and street security, airport security and control for their private jets, government contracts for their businesses (only if they aren’t old generational money that no longer works), government connections, tax subsidies, tax loopholes not offered the lowly, low interest rates, fed largess, etc. And they have to pay taxes for that level of service! How dare government tax the mega wealthy!
Professor, I’ll be looking forward to the next war that involves anyone that earns more than $100,000 a year. Maybe the wealthy will go into battle carrying the flags of the Euro currency, or the dollar bill or maybe the yen flag? No, it will be the poor and middle class that will fight the wars to protect their country. And many of those wars will be wars of choice, demanded by the wealthy, for natural resources so the wealthy can find more means of extracting cash from the citizenry. And hopefully the working class and poor can have their government benefits cut so the wealthy can enjoy a lower tax rate. It seems only fair,
But I guess these wealthy have a quandary. What country will they move to next if they raise taxes at their current location? Professor, it’s not easy to have any real sympathy or compassion for those who would abandon their country in search of a better payoff in Lowtaxistan….
Rather than implementing the secret free trade agreements with Europe and Asia, maybe the US administration should be focusing on secret equal tax agreements between countries, at levels where poverty can be reduced as well as reducing obscene inheritance. Or maybe the tax equalization plan could be part of the free trade agreements. Maybe it is. They are so secret, we don’t know.
The US income tax rate under Eisenhower for the top earners was 93%, yet the US did not lose those top earners. In fact, what it did was to ensure that the top executives did not get outrageous salaries and loot companies for themselves. Of course, there were not too many other places for those folks to go back then in post WWII world. Plus the fact that most of the top earners had a sense of social duty and patriotism in the aftermath of the war. The rich were proud of the fact that many of them worked in government at the salary of $1/yr. If the US could build a prosperous and successful nation with the top tax rate at 93% on income, it should be possible to do so now in far less straightened circumstances.
When your premier actor leaves the country to go to Russia you have to know you made a bad decision. They are lucky they have only lost 10% I am sure selling those tony houses is not easy. I am not sure if Johnny Depp decided to just get a new girl friend or leave, too.
Maybe the tax rate on the rich introduced by Hollande really was too high or perhaps it is the fact that other nations set their tax rates too low in order to attract business and this results in a tax rate race to the bottom as nations compete to attract high wealth taxpayers from other nations.
However in the US the tax rates on the rich are far too low and the terms of trade between the wealthy and other sections of society far too tilted in favour of the wealthy. It is far to easy for the wealthy to hold on to their money and to increase it, they do not need to be good businessmen, they do not need to be competent money managers, they just need to employ lawyers and accountants who know where all the loop holes and tax breaks created by government as favours to the rich owners of the government are to be found.
The result that the monetary gravitation of the black hole of accumulating great wealth disrupts small concentrations of money as the accretion disc of a active galactic black hole disrupts planets, gas clouds and stars as they spiral down the drain to event horizon doom. The result of this trend continuing will end up with the rich owning everything and the non rich having to rent everything from the rich.
There is a reason why strongly progressive tax rates on income and capital are necessary. The progressiveness of the rates needs to be set after analysis of the distribution curves of income and capital to target the extreme tips of the distributions. At any stage their needs to be a wealth level at which taxes make hanging on to wealth a chore and increasing it difficult. For individuals of great but lesser great wealth below that critical level taxes should not be painful. People who have millions, tens of millions, hundreds of millions and even lesser numbers of billions should not be the target.
This flight by various French citizens was as predictable as it now is costly. I read somewhere the unemployment rate in France is approaching ten percent. The cascading failures that have resulted from the French Government’s attempt at attacking a certain element of society backfired.
France was becoming a nation that was effectively unfriendly toward businesses, imposing high costs in terms of regulation and labor laws. The tax strategy of the Hollande Administration further accelerated that problem.
As the poll numbers shown here demonstrate, France’s experiment with draconian tax policies have now failed.
Professor Turley, this is totally like the problem of cities and states competing with one another to buy the favors of corporations with tax holidays and other perks, most notably and most outrageously with government funding of sports stadiums. We the People need to pass some anti-competitive legislation that prevents the kind of relocations of taxpayers seeking the best tax-shelters they can find. This sounds like an issue where our Fearless Leader can apply his mantra of “the fierce urgency of now!!!”. And pigs will fly, too.