Yep: France goes for the gold with a 75 percent income tax on high earners
posted at 4:41 pm on September 28, 2012 by Erika Johnsen
Earlier this week, we learned that the number of unemployed people living and looking for work in France rose above three million people for the first time in over a decade, amounting to an unemployment rate of over 10 percent — a reality that isn’t going to get any help from their continuing zero percent economic growth of the past nine months. So, it’s really encouraging that they’re looking for competitive, belt-tightening, wealth-creating solutions like… wait, what? From the WSJ:
President François Hollande, in his first budget since being elected five months ago, has pledged to balance public accounts by the end of his mandate in 2017 and given himself two years to turn around the French economy.
According to documents presented at the weekly cabinet meeting Friday, the government aims to lift revenue from household income taxes by 23% next year, while revenue from business taxation is expected to rise almost 30%. …
The budget increased the top marginal income-tax rate to 45% from 41%, and detailed plans for a special tax on incomes above €1 million ($1.29 million) a year, with 1,500 individuals paying an overall rate of 75%. They will pay on average €140,000 more in taxes next year, the government said.
The biggest new tax-take from business will come from limiting the deduction of financial charges from a company’s taxable income. … Limiting the possible deduction to 85% of a company’s financial charges will increase tax intake by €4 billion in 2013, the finance ministry said.
So, I guess you’re not really planning on addressing your two main problems — a hugely bloated national budget with too much public spending, and a stagnant economy with high unemployment — er, at all? You’re just going to tax the hell out of any individual or business audacious enough to be successful at providing a useful product/service, instead of even trying to slim down public expenditures? …I see. Interesting strategy you’ve got there, France.
As I wondered a couple of weeks ago when the Socialists were dithering over this idea in creating a budget plan, it looks like they are moving to shut down at least some of the tax loopholes currently in place that would in reality allow the wealthiest earners to keep a greater share of their wealth (for instance, they’re planning on reducing the tax deductability of interest payments); with an actual effective rate on income of 75 percent, I wouldn’t bet on many millionaires sticking around for too long.
“We’re getting a lot of calls from high earners who are asking whether they should get out of France,” said Mr. Grandil, a partner at Altexis, which specializes in tax matters for corporations and the wealthy. “Even young, dynamic people pulling in 200,000 euros are wondering whether to remain in a country where making money is not considered a good thing.”
Let’s play careful attention to what happens here, folks (heh, any predictions?). While it may not be quite as extreme, this is essentially the same idea as what President Obama is most actively proposing on the campaign trail these days. Hiking taxes on the wealthy (or on anyone, for that matter) is not going to create jobs, and it’s not even going to come close to funding all the government spending you want to keep up, let alone pay down the deficit (more public and/or deficit spending do not help to create productive jobs either, by the way). Even on a smaller scale, upping taxes is going to slow down growth, deter job creators, and hurt small businesses — hardly a winning game plan.