Wednesday, July 18, 2012

Taxes Drive Out French Wealth, and Tax Revenues (Update)

The Daily Telegraph reports, as if this actually would be news, that the upper-income French are fleeing the country in anticipation of the newly elected French President François Hollande’s spike in income tax for the rich, defined as any French citizen with income of over €1 million (that would be about £780,000, or $1,230,000), taking the rate from 45% to 75%.  The reaction to this confiscatory tax by Marine Le Pen of the National Front, in typical Gallic fashion, was "Why not 100%?"  (I am uncertain to what extent, like here in the US, French 'personal income' also means income for small business endeavors.)

Monsieur le Président (Everywhere but in America, red is associated with Socialists and Communists.  The Press in the US decided that red should be associated with Republicans, because to associate it with Democrats was too obvious a connection.)

M Hollande, a dedicated member of the French Socialist Party (and only the second Socialist President of France, after François Mitterrand), made the severe tax rate increase a major plank of the party in the last elections, in contrast to Nicholas Sarkozy’s echo of Winston Churchill’s promise of "blood, toil, tears and sweat" in regards to trying to get the French economy under control.  Apparently the French electorate decided to party hard until the very end, maybe hoping for an eventual rescue from Germany, just like the hopes of the other staggering economies of Greece, Spain, Portugal, Italy and Ireland.  (Like the great Margaret Thatcher said, "The problem with Socialism is that eventually you run out of other people’s money.")

The new Committee of Public Safety -- "Choses gratuites!"

The stories that detail the super-rich tax level unfortunately draw little attention to many other aspects of rent-seeking tax revenue, such as an increase of the withholding tax rate, an increase of VAT on many items from 5.5% to 7.0%, a sharp increase in the Death Tax, a 5% corporate tax surcharge on large corporations, and, perhaps in anticipation, an Exit Tax of 31.3% on "any unrealized gains on assets" for those citoyens (residents of six years or more) who move abroad.

More importantly, the income tax increase is not just applied to the upper bracket.  The tax on incomes of €72,000 ($88,450) or more goes from 41% to 45%.

The Telegraph cites reports from the real estate markets (where one would expect to see the initial impact) in Switzerland and the United Kingdom.
Gilles Martin, a Swiss tax consultant, reported the same trend. "Since the socialists came to power in France, I have been deluged with inquiries from rich French people who would rather pay their tax in Switzerland.”….
Inquiries from wealthy French for London homes worth more than five million pounds soared by 30 per cent in the first three months of this year, UK estate agency statistics showed. 
The French commentariat is particularly dérangé at British Prime Minister David Cameron for his welcoming comments (perhaps spurred by an earlier added French tax on British rental properties) to French firms and citizens who are seeking shelter.
I think it's wrong to have a completely uncompetitive top rate of tax.  If the French go ahead with a 75 per cent top rate of tax we will roll out the red carpet and welcome more French businesses to Britain and they can pay tax in Britain and pay for our health service and schools and everything else.
Perhaps PM Cameron is taking a French version of Governor Scott Walker of Wisconsin on the news of even higher taxes in neighboring Illinois: “Nous sommes ouverts pour les enterprise!”

Unfortunately, the United States is unable to presently take advantage of the outbound flow of French revenue, seeing as how Obama is a spiritual brother to M Hollande.  Perhaps a new President Romney will open our shores to the possibility for French business to re-locate here, with lower corporate taxes (currently the highest in the world) to encourage business development.  And we would do well to finally move on the idea of a Silver Card (instead of green) for retirees who wish to settle (and spend their retirement funds) in the US.

Update: Found on Real Clear Politics, the reaction of actor Will Smith during an interview on French television on the subject, when he realises that sentiment has come up against reality.  Yes, it’s in French, but you can hear Mr Smith’s comments through the translation.

Will Smith: I have no issue with paying taxes and whatever needs to be done for my country to grow.  I believe very firmly that my ability to sit here – I’m a black man who didn't go to college, yet I get to travel around the world and sell my movies, and I believe very firmly that America is the only place on Earth that I could exist.  So I will pay anything that I need to pay to keep my country growing. . . .
Interviewer: Do you know how much in France you would have to pay on earnings above one million euros?  Not 30%.  75%. 
Smith: 75?!  Yeah, that's different, that's different.  Yeah, 75.  Well, you know, God bless America.

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