Dateline: Kuala Lumpur, Malaysia
“People have lost confidence. That is not something you can restore overnight.”
Such are the words of French tax lawyer Jean-Philippe Delsol, commenting on the French governments’ decision to roll back it’s 75% “super” income tax on those earning 1 million euros and up each year.
The move is French President’s François Hollande white flag that his desire to soak the rich did not pan out.
All in all, the French government brought in barely 400 million euros over the last two years since the tax was enacted – a paltry sum compared to a nearly nine-figure budget gap.
Even the socialists of France have now admitted that vindictive “tax the rich” policies not only don’t inspire confidence in the economy, but don’t put any significant dent in the massive spending problem government has built up over decades of wonton disregard for fiscal sanity.
Heck, France was recently crowing that it will be within the European Union’s guidelines for budget deficits by 2017. That’s right; even with a tax-the-rich policy and 75% income tax rates, the politicians are still running deficits 50% higher than is even allowed under EU rules.
This, of course, proves two key points:
1. The European Union, much like the United States, is a terribly mismanaged economic disaster waiting to happen as countries don’t even have to abide by the very rules they set up in the first place.
2. That even naked socialists in past-its-prime Europe have conceded that high taxes on the evil rich aren’t good for morale.
There’s no denying that the French government brought in a few bucks soaking its highest income earners. Anyone who grossed more than 1 million euros paid practically all of that upper income in taxes to the government.
The question no one in the media is addressing, however, is how much did they lose thanks to no one wanting to move to France?
You see, socialists love to point to places that enact sky high taxes and say “look at all the millionaires who are still there!”
They could care less about whether taking 75% of someone’s paycheck is the right thing to do. They only care if they can get away with it.
And in the case of France, there certainly were some high earners who simply stayed and took the medicine.
However, it is a poorly kept secret in France that many executives kept their salaries intentionally low and negotiated deals with their companies to make up any “lost” pay after two years when the tax was to be re-evaluated.
And companies seeking executives have reported that recruiting top talent to France has been tricky when other countries in Europe and elsewhere have had much more lenient tax policies.
The bottom line is that the government has learned the hard way that even if it can squeeze a little revenue out of the easiest targets, it will always be defeated by the power of the free market.
And it will only shoot itself in the foot.
France, of course, is not the only country making it impossible for businesses.
Countries like the United States and Japan have made legal immigration next to impossible for high-talent workers. For all of the trouble they have hiring engineers and other high-level staffers, I’m amazed some big tech company hasn’t packed up their operations and moved to Chile.
Or anywhere else where companies are free to bring in talent and aren’t constantly being threatened with having tax breaks taken away.
And while dozens and dozens of countries around the world have lowered corporate income tax in just the last few years, some are raising them.
The biggest culprit, of course, is the Land of the Free.
The US government is so intent on wringing every penny it can out of citizens and business that it has added hundreds of new taxes in recent years.
That’s on top of thousands of pages of regulations that require teams of lawyers to keep businesses in compliance.
While US businesses are requesting a tax holiday to repatriate their overseas income to their American home base, many in the US would prefer to use force to make international companies bring all of their profits back to be taxed on American soil.
Quite simply, US politicians and “low information voters” are acting a heck of a lot more socialist than the French… who practically invented modern socialism.
Do you suspect that American politicians will learn from France’s admitted mistake and stop driving away business?
I for one highly doubt it. Heck, even the ultra-liberals at the Daily Kos want to eliminate the corporate income tax, but even they will be disappointed.
As much as a basket case as western Europe is, politicians there realize they are part of a union that connects them in many ways, but also pits them against each other.
Ireland realized this when they adopted their low 12.5% corporate tax rate and ushered in the Celtic Tiger era. Countries from the Czech Republic to Bulgaria to Lithuania similarly adopted low flat taxes on individuals and businesses.
When France announced the 75% supertax, David Cameron announced that London would roll out the red carpet.
Across the pond, Texas Governor Rick Perry’s efforts to poach California businesses and bring them to the Lone Star State left people in a state of shock. The idea of competing by offering low taxes has become a very un-American ideal.
While Europe treats its residents like milk cows subject to high taxes, anyone is free to leave anytime they want. Businesses have frequently moved to other parts of Europe to avail themselves of tax breaks.
If you’re expecting the United States to wave its white flag anytime soon, don’t hold your breath. There is a weak proposal circulating around Washington to end the practice of citizenship-based taxation for US citizens, but I highly doubt it will get enacted, even with the spineless Republicans in charge.
I’ll keep you updated.
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