How big a tax increase? How about a 75% tax rate on income of more than 1 million euros a year?
France’s socialist government announced a big one-off increase in wealth taxes on Wednesday, by far the biggest single element in a €7.2bn package of new levies aimed at meeting this year’s budget deficit target that also included surcharges on banks and energy companies.
The supplementary 2012 budget, required to ensure the government hits its deficit target of 4.5 per cent of gross domestic product this year, was weighted overwhelmingly towards taxes on the rich and big companies as ministers said planned spending cuts would mainly take effect from next year.
An extra €2.3bn will be raised by an exceptional tax charge on all those with net wealth of more than €1.3m.
Citing an “an extremely difficult financial and economic situation”, Pierre Moscovici, the finance minister, said: “The wealthiest households and the big companies will be asked to contribute. In 2012 and 2013, the effort will be particularly large.”
Further tax increases for next year, when the government is expected to have to find €33bn in savings to bring the deficit down to 3 per cent of GDP, will be spelt out in the autumn. They will include President Francois Hollande’s election pledge of a 75 per cent marginal rate on annual incomes of more than €1m – and permanent increases in wealth taxes.
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This year, including the wealth tax and a smaller increase in inheritance and gift taxes, the better-off will carry a comfortable majority of the additional €3.4bn to be raised from households.
Taxes on business will raise €2.9bn, including a €550m surcharge each on petroleum stocks held by energy companies and on banks. Other hits included an expected 3 per cent tax on company dividends and an increase in the taxation of bonuses and stock options.
Predictably, the rich aren’t going to take the massive increases lying down. In fact, many of them are going to walk:
“I’m very happy in Paris. My wife and I love Paris. We came here by choice. But I’m reconsidering our situation given the changes in the pipeline,” says Roger, who declined to be identified by his real name.
More than the 75 per cent rate, it is a move to higher wealth and inheritance taxes that worries him – and what he perceives as a cultural hostility to the rich. “The anti-wealth rhetoric is just not encouraging. I’d rather be in a country where I don’t have to deal with that,” he says.
It is not just expatriates who are concerned. Henri de Castries, head of Axa, the insurer, is one of France’s most respected business leaders. “I’ve listened to Mr Hollande. He wants to see more growth and lower employment. He wants to see business prospering. We want to see that, too,” he says. “The question is how to achieve these goals? There is no example, in modern economic history, of a country that has succeeded in reducing its deficits by bringing taxes to a confiscatory level. On the contrary, it leads to a decline in activity, and an increase in the deficits.”
Expecting a socialist to listen to economic logic is a waste of time. The expected revenue will not be realized as people either find a way to avoid the tax, or leave. The increase in taxes will also stifle business activity as companies see no upside to increasing revenue when so much of it is going to be confiscated by the government.
A second Obama term will probably look a lot like this; socking it to the wealthy, or near wealthy to pay for Obamacare’s expected massive increase in spending, as well as other social welfare redistributionist schemes. It’s not going to work in France. It’s not going to work here. And we will probably end up with larger deficits and more debt — the legacy of liberal Democratic policies that demonize the successful and create a culture of dependence for the rest of us.
Mass exodus of investor cash from France. Good news for The City and the London realty market. Cameron should call Hollande and thank him for the stimulus.
London’s finance sector has already benefitted buckoo from Sarbanes-Oxley regulations in the US. Companies who would have gone to New York opted for staying on the other side of the pond.
Dodd-Frank and the highest corporate taxes in the world will keep the IPO money in London, the Middle East, and Hong Kong.
I had an interesting conversation on a related topic last night. One attendee at a party (a Republican) was arguing that Obama’s credentials (Harvard Law) means he must be very intelligent. When asked why is Obama enacting so many policies that have failed around the world, he suggested that Obama is acting on a set of beliefs in common with socialists. My counter argument is that since those polices have failed repeatedly, Obama must be incapable of learning from reality and therefore isn’t intelligent. He may be book smart (and evidence of that isn’t readily apparent) but anyone who can’t learn isn’t intelligent and most certainly isn’t wise. He reads well from a Teleprompter (with little indication of who wrote the words on the Teleprompter) but beyond that, the man just doesn’t seem very bright. However, his narcissism makes him believe he’s the smartest guy in any room. Instead of hiring people with real world experience for his cabinet and advisors, he hires academics who are smart on theory (especially socialist theory, it seems) but dumb on reality.
First rate leaders hire first rate staff. They know there are limits to their own knowledge and want the best people working for them. Second rate leaders hire third rate staff because they want to look smart by comparison.
Those who did not attend top-tier law schools vastly overrate the intellect of those who did.
“The wealthiest households and the big companies will be asked to contribute.”
Asked to contribute? Such delicate phrasing, when what they mean is “mugged by the government.”
Another example of european “sophistication”that is, national suicide through welfare statism.
New headline
“Massive movement of rich people out of France, to include their money”
“Rich people no loss to France, muslims moving in to replace them”
“Massive increase of welfare expenditures, no explanation forthcoming”
“Rapes of French women on rise, no explanation in sight says police chief”