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France’s Hollande Gets Court Approval for 75% Millionaire Tax

58 points by acak 13y ago

hkmurakami 13y ago
Wasn't the head of Louis Vuitton threatening to leave France if this passes? Will be interesting to see if he follows through.
- skrebbel 13y ago
  The really interesting thing will be to see if indeed as a result, the economy will collapse. (people really were making that argument: big-shot CEOs will leave the country and take the businesses with them). While I think this tax is ridiculous, I think those kinds of counter-arguments are even more ridiculous.
  - WalterBright 13y ago
    Tax increases historically have brought in far less revenue than predicted, as people change their behaviors to compensate. For example, when I was in England, people drove around company cars rather than owning them personally. It was explained to me that this was the result of tax rates - the high personal tax rates caused businesses to offer perqs which were not counted as income subject to tax. Hence the company cars.
    - rdl 13y ago
      Wage controls during 1930s/1940s in the US leading to employer-provided health insurance is another great example of unintended consequences.
      - bmmayer1 13y ago
        ...or a terrible example of unintended consequences. Employer-provided health insurance obliterated the individual market which has arguably brought less liquidity and less dependability to insurance, and with it less innovation to the economy as a whole...
  - mcbaby 13y ago
    I disagree that those "counter-arguments are even more ridiculous." Of course, I don't think every CEO will flee the country——they are bogged down by inertia. Some will, but when you have a family, a home, etc, it's a lot harder to do that, even if you want to. I think what these counter-arguments importantly point to is that soon-to-be CEOs, the leaders of up-and-coming successful, young companies—-the future of the French economy--will leave. While it's a gross simplification, it is still interesting to think that 200-300 million is the price tag that the French government is willing to put on it's future generations of CEOs and successful companies, which is disappointing to say the least. And like many others have stated, this may just be for political points. I would bet a large group of this demographic has no problem deferring salary for the next two years (thought it will be interesting to see if the tax is extended).
    - djur 13y ago
      What work does a CEO do that's worth over 1.4 million dollars a year? How many of the French earning that much do you think would prefer to leave France rather than accept a merely enormous salary in lieu of an astronomical one? The wager that Hollande is making is that the value of living and doing business in France is worth the cost being assessed (in the form of tax). I don't think it's apparent yet whether or not he's right.
    - forgottenpaswrd 13y ago
      "I don't think every CEO will flee the country——they are bogged down by inertia. Some will, but when you have a family, a home, etc, it's a lot harder to do that, even if you want to." You are not talking about CEOs. You are talking about normal people. Normal people can't leave the home when the loan is not paid. People who earn millions dollars a year can leave the country and live in Brazil in Winter while taking his private jet like normal people take a car. It is Europe we are talking about. You could live in the UK, Switzerland, Germany, Italy, Spain, Portugal, Turkey or Greece without problems. In fact, most of the CEOs I know do exactly that.
  - ahomescu1 13y ago
    Actually, many cities/regions/countries are suffering because large corporations are shutting down factories/offices in one area/country and moving somewhere else cheaper (for profit reasons, not because of taxes). For examples, look at how many companies have moved their production to Africa/Asia. This tax move only encourages them even more, when governments should move the other way (they should cut taxes and bureaucracy, not increase them). The economy IS collapsing, and companies ARE moving to friendlier countries.
    - mjn 13y ago
      This is a personal tax on individual wealthy people. It should have little to no impact on the economics of where to locate a factory, which is driven by things like environmental regulations, cost of inputs, labor costs, location of suppliers and customers, tax applicable to the factory (or its holding entities), etc. Where the CEO or major stockholders choose to domicile is already quite decoupled from those decisions (as can be seen by the fact when U.S. companies move a factory to Mexico, typically the CEO and major shareholders do not also move to Mexico).
  - smsm42 13y ago
    The economy wouldn't collapse, but the tax income could probably suffer. They don't expect to collect very much out of it even now - see the link above in the comments - it's largely a populist gesture. But the tax-avoiding measures that high-earners would take to avoid it will stay even after the tax will be lowered back (provided it would be as promised), so the next effect may turn out to be even negative. But it would hardly lead economy as large as France's to collapse. As for if it would make the appetite for electing politicians prone to useless populist gestures instead of solving real economic problems - that is harder to predict if it would increase or decrease.
- ThomPete 13y ago
  Actor Gerard Depardieu already did. "...He has been an official resident of Néchin, Belgium since 7 December 2012.[13] French prime minister Jean-Marc Ayrault criticised his move.[14] On 15 December 2012, Depardieu publicly stated he was handing back his French passport.[15][16] On 3 January 2013, Russian President Vladimir Putin signed an Executive Order granting Russian citizenship to Depardieu.[17] Depardieu soon returned the favor by attacking Putin's critics.[18]..." http://en.wikipedia.org/wiki/G%C3%A9rard_Depardieu http://en.wikipedia.org/wiki/G%C3%A9rard_Depardieu
w1ntermute 13y ago
It's just sad - they're taking an already bad situation and making it even worse.
- djur 13y ago
  France is doing pretty well as far as Europe goes post-2007. They're recovering faster than the UK, for example.
  - NicoJuicy 13y ago
    Lol, you don't live nearby i suppose? :)
  - Silhouette 13y ago
    They're recovering faster than the UK, for example. By what metric(s)? If you're talking about GDP, Britain is now managing significantly better growth than France and expert predictions seem universally agreed that it will continue to do so next year. As point of curiosity, though not necessarily claiming any causal relationship, the top personal tax rate here in England came down from 50% to 45% earlier this year, after the new 50% rate introduced just before the end of the previous government turned out not to raise as much extra money as predicted. Meanwhile, French GDP growth has stagnated or reversed since mid-2011.
fragsworth 13y ago
Maybe I'm being too cynical, but it says the tax only applies to this year and the next. It seems like there is an easy workaround - don't take your salary until afterwards, and/or pay yourself in advance now. It's just lip service, really, to keep the public happy. The massively wealthy can afford to wait a couple years for tax laws to revert. And they don't mind waiting - the general public, unaware of reality, believes that the rich are paying more than their fair share of taxes. Meanwhile, new tax incentives and loopholes are created all the time, in every country. You won't know about them, but you can be damn sure that the expensive CPAs do.
- deleted 13y ago
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- testrun 13y ago
  The problem is there is no guarantee that it will be only for these two years. It can easily be extended. It will very interesting to see how much extra tax it will bring in and how it effects the decision making of the big French companies in regards to salary incentives.
  - fragsworth 13y ago
    There is a pretty good guarantee - if it lasts longer than two years (which seems unlikely), general corporate profit will pile up until the wealthy stakeholders and top employees get extremely frustrated. Then they can collectively apply pressure to politicians to eventually create a loophole that lets them take their money out tax-free.
  - Ergomane 13y ago
    > It can easily be extended. Indeed. Just like the Netherlands where 2013 saw the introduction of the "one time crisis tax" (eenmalige crisisheffing) which constitutes a 16% tax on wages, including bonus, over EUR 150K. Now, for 2014, the "one time crisis tax" regulation has been prolonged. One time, promise! ("Eenmalige crisisheffing eenmalig verlengd")
- pyalot2 13y ago
throwaway_yy2Di 13y ago
The amazing thing is that for all the globe-spanning political vitriol this has provoked, the amount of revenue involved according to the proponents is only €200-€300 million/year, out of €1.3 trillion/year in tax revenue total: "Hollande says the 75 percent tax he plans to impose would hit about 3,000-3,500 people and raise around 200-300 million euros a year." http://www.reuters.com/article/2012/04/10/us-france-election-policy-idUSBRE83917G20120410 http://www.reuters.com/article/2012/04/10/us-france-election... https://en.wikipedia.org/wiki/Economy_of_France https://en.wikipedia.org/wiki/Economy_of_France
- testrun 13y ago
  You are right, the amount is negligible in relation to total tax receipts. It seems to be more about political point scoring than to fix the economy.
  - hudibras 13y ago
    It was one of Hollande's campaign promises, so of course he's going to try to get it passed into law. That's what politicians do.
- smsm42 13y ago
  The actual revenue probably would be less than that, since politicians tend to underestimate creativity and the lengths the people would go to avoid taxes.
- flexie 13y ago
  Yes. The tax is only on income exceeding EUR 1 million (USD 1.4 million). This means that the people usually associated with high income, such as medical doctors, lawyers, accountants, business owners, CEO's of small and medium sized companies etc. are not affected at all or only for a small part of their income. The tax is going to hurt a few super high earners such as a few soccer stars, a few pop stars, some investment bankers etc. The figures I have seen are more at 1,000 than 3,000. So, it will be harder for PSG to attract the best soccer players of the world, and some CEOs, investment bankers etc. will take wage cuts or move, but apart from that I doubt it's going to have any noticeable effects. It's certainly not going to lead to mass exodus of talents from France.
dangero 13y ago
The US has had higher tax rates than that at times. It's more of a recent thing that the numbers have been well below 50% Historical US upper bracket tax rate: http://s158.photobucket.com/user/OnlyObvious/media/Tax_Rates/TopTaxBracket_TaxRate.jpg.html http://s158.photobucket.com/user/OnlyObvious/media/Tax_Rates...
- WalterBright 13y ago
  Those tax rate charts paint an incomplete picture. Along with those higher tax rates were quite a few tax shelter mechanisms, meaning the effective tax rate was much lower. Reagan traded eliminating the tax shelters for the lower tax rates.
  - kamaal 13y ago
    >>eliminating the tax shelters for the lower tax rates. I think the something is better than nothing argument already shows a sign of defeat. Cheating and evasion of taxes is the same as over taxing, because please note when X set of people don't pay taxes, you have to recover the loss from Y set of people by taxing them a little extra. If the X had payed at the first place, the original tax rate would have been lower, and every one would have to pay less.
    - WalterBright 13y ago
      Tax shelters are legal means of avoiding taxes. They are neither cheating nor evasion.
      - jessaustin 13y ago
        "Evasion" has a fairly specific meaning in this context, so you're right on that. However, the processes that create and maintain many tax shelters, at least in USA, is hideous and corrupt, so I think it really ought to be considered "cheating".
- midas007 13y ago
  Warren Buffet paid nearly nothing because of retained earnings. But his family apparently lives modestly, so it doesn't make sense to pay oneself more than necessary.
clyfe 13y ago
https://www.youtube.com/watch?v=Wi-D24oCa10 https://www.youtube.com/watch?v=Wi-D24oCa10 https://www.youtube.com/watch?v=MRpEV2tmYz4 https://www.youtube.com/watch?v=MRpEV2tmYz4 https://www.youtube.com/watch?v=91mLpMqjZsE https://www.youtube.com/watch?v=91mLpMqjZsE
epa 13y ago
So the owner/CEO's lawyers form a holding company in Switzerland which gets paid management fees from the French company to hide it from 'salaries'. The owner pays the personal taxes on the income at lower Swiss rates and transfers it back to France. Taxing it at the corporation level is the wrong move unfortunately. Hopefully they have a better definition of what 'remuneration' means.
- gamblor956 13y ago
  You've just described a textbook tax evasion scheme. For it to work (and not be an illegal tax evasion scheme), at a minimum, the money would have to stay out of France. Consequently, the most common scenario is simply for the individual to relocate to another country.
  - spikels 13y ago
    It just needs to stay out for two years... :) Those who play these games call it "tax avoidance" or simply "tax planning" when it is done legally.
    - gamblor956 13y ago
      What was described isn't tax avoidance, it's tax evasion. The form of the substance may appear kosher, but the nature of the transaction is evasion, since it ultimately has the effect of a salary and not a management fee. Tax is one of those areas of law where the "spirit of the law" actually has meaning. For example, in nearly all of the convictions for the loss-harvesting tax shelters, the form of the underlying structures was legally sound under tax law--but the nature of the transactions was not and resembled tax evasion schemes. SCOTUS upheld these convictions. The same is generally true of various other similar tax shelter convictions in England and France.
  - epa 13y ago
    Unfortunately because it is not taxed at the personal level, it does not need to stay out of the country and makes it very easy to bring back in the country. This may also depend on the financial institutions and regulation over reporting of large wires, but there are still ways around it. My point was that they can get around these laws so easily due to it being taxed at the corp level and still argue its not avoidance.
forgingahead 13y ago
Will Smith weighs in: http://www.youtube.com/watch?v=8TwwEGjoRMo http://www.youtube.com/watch?v=8TwwEGjoRMo
smsm42 13y ago
I think it is an interesting thing. I think it would do no good for France, but for the rest of us it would provide an interesting test regarding the question of if "soaking the rich" is going to make anything better. With rates like 75% one hardly can argue they didn't go far enough. And even if it says it's two years, in two years either the fallacy of it would be obvious and would allow them to quietly roll it back and claim the victory, or it could be claimed a huge success and continued further, so limited term is not a big problem if we see it as an experiment.
- mjn 13y ago
  > With rates like 75% one hardly can argue they didn't go far enough. In Scandinavia, we tried top marginal rates ~100% for a decade or two. :) Actually didn't work too badly, but the political mood changed, and rates were gradually lowered, now to a mere 60%. Some good effects of the cuts, some bad effects.
  - gaius 13y ago
    Jante tax, eh?
    - mjn 13y ago
      Nah, just social democracy. The "Law of Jante" is a parody of conservative small-town Denmark of ~1900 (a rough American analogue is Main Street by Sinclair Lewis), while social democracy is roughly the opposite, managing the rapidly urbanizing Denmark of 1930s-1980s and using the increasing economic strength to build a well-working, prosperous country. The kinds of people the Law of Jante parodies don't vote for the left-wing parties; they're more like American small-town conservatives who're suspicious of book-larnin' and PhDs and big-city lawyers and instead extol small-town and rural values. They would definitely not vote for raising taxes to pay for a metro system or a university, or anything of that sort. Church taxes though, they'd support. Social democracy is sort of the opposite, being generally pro-technology, pro-education, pro-urban-planning, and pro-infrastructure (some of the main things they put taxes towards).
chrismealy 13y ago
Rich creeps leaving is a feature, not a bug.
- wyager 13y ago
  Yeah, those rich people are inherently so creepy!
  - Crito 13y ago
    "Creepy" lost all meaning quite some time ago. It is now a generic contentless insult, like "butthead" or "tool".
mindcrime 13y ago
It would serve the French right if every single man, woman or child with an ounce of creativity and/or any entrepreneurial ambition at all, just got up and left. Of course, the idea of a bunch of Frenchmen going all "Galt's Gulch" is a bit amusing, but hey...
- djur 13y ago
  And yet they don't. It's as if perhaps there is some value to the people, culture, and values of France that justifies the cost of doing business there rather than in the fetid, lawless gulches of objectivist fantasy.
  - gfodor 13y ago
    Or perhaps when one lives in the country of their friends and family, one needs to be pushed quite far by the state before abandoning the people they love in order to keep majority of what they earn.
  - mindcrime 13y ago
    It's a bit soon to say that, eh? This law just passed. And, as the other commentator says, connections to friends and family also weigh into the decision. And since people are not actually totally rational, utility-maximizing, spock-like agents, sometimes they choose things based on those "soft" factors. Which is totally fine. But if the State pushes far enough, and hard enough, people will eventually lash out and strike back in one form or another. I think the historical record shows that quite clearly. No "objectivist fantasy" (whatever that is) needed.
superuser 13y ago
Obama must be jealous.
bmmayer1 13y ago
"The problem with Socialism is that you eventually run out of other people's money" - Margaret Thatcher. I wonder who the French will tax next...
- coldtea 13y ago
  As if Thatcher should be quoted on economic matters. Not to mention that exactly the same is the problem with capitalism -- you run out of "other people's money" and you get an overproduction crisis.
  - Houshalter 13y ago
    There is no such thing as "overproduction". Having produced everything people want should be the goal.
    - coldtea 13y ago
      >Having produced everything people want should be the goal. In socialism, if that thing existed, maybe. In capitalism you don't produce what "people want". You produce what you can SELL. When you cannot sell what you have produced (e.g because people cannot afford to buy it anymore), and you have tons of investments in factories, production capacity and materials being underutilized, you have "overproduction". http://en.wikipedia.org/wiki/Overproduction http://en.wikipedia.org/wiki/Overproduction
      - Houshalter 13y ago
        It's not really overproduction so much as wrongly predicting what future demand would be. What sells and what people want are highly correlated, which is what capitalism relies on. Yes it's not perfectly correlated and maybe there is a better system, for the most part it works.
hudibras 13y ago
The "tell" for this article is that there's no comparison with the current tax policy in France. The top tax bracket in France is 41% right now. Hollande's proposal raises this to 50%--an extra 9 euros out of every 100 earned over a million. Also, I certainly hope that people here understand how marginal tax rates work...
- djur 13y ago
  In my experience, even very intelligent people frequently don't know how marginal tax rates work. It's astonishing. American political discourse is generally based on the implied assumption that tax rates are not marginal.
  - deleted 13y ago
    [deleted]
tn13 13y ago
Tax should be the harvest of economic growth and not other way round. If government has to earn more through taxes it should ideally achieve it by increasing overall income of the people rather than screwing those who are earning more. This move for example would make total sense had France done something significant to increase the total number of millionaires in the country or helped several people to get into that millionaire bracket.
spullara 13y ago
One of the interesting things never pointed out in these threads is that though the income tax in the US was very high in the mid-20th century, capital gains taxes were low — which affect the rich much more heavily than income taxes. The "robber barons" made all their money on the increasing value of the stock in their companies, not an income they drew from them. http://en.wikipedia.org/wiki/Capital_gains_tax_in_the_United_States http://en.wikipedia.org/wiki/Capital_gains_tax_in_the_United... Even this France law apparently only affects "wages" — not sure what that means in France but in the US it wouldn't cover long-term capital gains. BTW, when did millionaire start to mean someone that makes over a million dollars a year rather than has that in assets?
- hudibras 13y ago
  > BTW, when did millionaire start to mean someone that makes over a million dollars a year rather than has that in assets? Around 2010. I remember this coming up when a new tax bracket was briefly proposed in the U.S. http://themonkeycage.org/2010/12/05/the_shifting_meaning_of_millio/ http://themonkeycage.org/2010/12/05/the_shifting_meaning_of_...
bitops 13y ago
It's interesting to consider that tax rates historically have been all over the place. In the United States, for example, the tax rate has been as high as 91% for the top bracket. http://en.wikipedia.org/wiki/Income_tax_in_the_United_States#History_of_top_rates http://en.wikipedia.org/wiki/Income_tax_in_the_United_States...
gaius 13y ago
On behalf of London, merci m'sieur!
pyalot2 13y ago
Here's the new tax: Income above EUR 1 million, tax is paid by the company, amount is capped to 5% of the companies earnings. Congratulations Mr. Hollande, you just created a fabulous tax loophole to get corporate tax down to 5%. Keep up the good work.

58 points by acak 13y ago

Wasn't the head of Louis Vuitton threatening to leave France if this passes? Will be interesting to see if he follows through.

skrebbel 13y ago
The really interesting thing will be to see if indeed as a result, the economy will collapse. (people really were making that argument: big-shot CEOs will leave the country and take the businesses with them). While I think this tax is ridiculous, I think those kinds of counter-arguments are even more ridiculous.
- WalterBright 13y ago
  Tax increases historically have brought in far less revenue than predicted, as people change their behaviors to compensate. For example, when I was in England, people drove around company cars rather than owning them personally. It was explained to me that this was the result of tax rates - the high personal tax rates caused businesses to offer perqs which were not counted as income subject to tax. Hence the company cars.
  - rdl 13y ago
    Wage controls during 1930s/1940s in the US leading to employer-provided health insurance is another great example of unintended consequences.
    - bmmayer1 13y ago
      ...or a terrible example of unintended consequences. Employer-provided health insurance obliterated the individual market which has arguably brought less liquidity and less dependability to insurance, and with it less innovation to the economy as a whole...
- mcbaby 13y ago
  I disagree that those "counter-arguments are even more ridiculous." Of course, I don't think every CEO will flee the country——they are bogged down by inertia. Some will, but when you have a family, a home, etc, it's a lot harder to do that, even if you want to. I think what these counter-arguments importantly point to is that soon-to-be CEOs, the leaders of up-and-coming successful, young companies—-the future of the French economy--will leave. While it's a gross simplification, it is still interesting to think that 200-300 million is the price tag that the French government is willing to put on it's future generations of CEOs and successful companies, which is disappointing to say the least. And like many others have stated, this may just be for political points. I would bet a large group of this demographic has no problem deferring salary for the next two years (thought it will be interesting to see if the tax is extended).
  - djur 13y ago
    What work does a CEO do that's worth over 1.4 million dollars a year? How many of the French earning that much do you think would prefer to leave France rather than accept a merely enormous salary in lieu of an astronomical one? The wager that Hollande is making is that the value of living and doing business in France is worth the cost being assessed (in the form of tax). I don't think it's apparent yet whether or not he's right.
  - forgottenpaswrd 13y ago
    "I don't think every CEO will flee the country——they are bogged down by inertia. Some will, but when you have a family, a home, etc, it's a lot harder to do that, even if you want to." You are not talking about CEOs. You are talking about normal people. Normal people can't leave the home when the loan is not paid. People who earn millions dollars a year can leave the country and live in Brazil in Winter while taking his private jet like normal people take a car. It is Europe we are talking about. You could live in the UK, Switzerland, Germany, Italy, Spain, Portugal, Turkey or Greece without problems. In fact, most of the CEOs I know do exactly that.
- ahomescu1 13y ago
  Actually, many cities/regions/countries are suffering because large corporations are shutting down factories/offices in one area/country and moving somewhere else cheaper (for profit reasons, not because of taxes). For examples, look at how many companies have moved their production to Africa/Asia. This tax move only encourages them even more, when governments should move the other way (they should cut taxes and bureaucracy, not increase them). The economy IS collapsing, and companies ARE moving to friendlier countries.
  - mjn 13y ago
    This is a personal tax on individual wealthy people. It should have little to no impact on the economics of where to locate a factory, which is driven by things like environmental regulations, cost of inputs, labor costs, location of suppliers and customers, tax applicable to the factory (or its holding entities), etc. Where the CEO or major stockholders choose to domicile is already quite decoupled from those decisions (as can be seen by the fact when U.S. companies move a factory to Mexico, typically the CEO and major shareholders do not also move to Mexico).
- smsm42 13y ago
  The economy wouldn't collapse, but the tax income could probably suffer. They don't expect to collect very much out of it even now - see the link above in the comments - it's largely a populist gesture. But the tax-avoiding measures that high-earners would take to avoid it will stay even after the tax will be lowered back (provided it would be as promised), so the next effect may turn out to be even negative. But it would hardly lead economy as large as France's to collapse. As for if it would make the appetite for electing politicians prone to useless populist gestures instead of solving real economic problems - that is harder to predict if it would increase or decrease.
ThomPete 13y ago
Actor Gerard Depardieu already did. "...He has been an official resident of Néchin, Belgium since 7 December 2012.[13] French prime minister Jean-Marc Ayrault criticised his move.[14] On 15 December 2012, Depardieu publicly stated he was handing back his French passport.[15][16] On 3 January 2013, Russian President Vladimir Putin signed an Executive Order granting Russian citizenship to Depardieu.[17] Depardieu soon returned the favor by attacking Putin's critics.[18]..." http://en.wikipedia.org/wiki/G%C3%A9rard_Depardieu http://en.wikipedia.org/wiki/G%C3%A9rard_Depardieu

w1ntermute 13y ago

It's just sad - they're taking an already bad situation and making it even worse.

djur 13y ago
France is doing pretty well as far as Europe goes post-2007. They're recovering faster than the UK, for example.
- NicoJuicy 13y ago
  Lol, you don't live nearby i suppose? :)
- Silhouette 13y ago
  They're recovering faster than the UK, for example. By what metric(s)? If you're talking about GDP, Britain is now managing significantly better growth than France and expert predictions seem universally agreed that it will continue to do so next year. As point of curiosity, though not necessarily claiming any causal relationship, the top personal tax rate here in England came down from 50% to 45% earlier this year, after the new 50% rate introduced just before the end of the previous government turned out not to raise as much extra money as predicted. Meanwhile, French GDP growth has stagnated or reversed since mid-2011.

fragsworth 13y ago

Maybe I'm being too cynical, but it says the tax only applies to this year and the next. It seems like there is an easy workaround - don't take your salary until afterwards, and/or pay yourself in advance now. It's just lip service, really, to keep the public happy. The massively wealthy can afford to wait a couple years for tax laws to revert. And they don't mind waiting - the general public, unaware of reality, believes that the rich are paying more than their fair share of taxes. Meanwhile, new tax incentives and loopholes are created all the time, in every country. You won't know about them, but you can be damn sure that the expensive CPAs do.

deleted 13y ago
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testrun 13y ago
The problem is there is no guarantee that it will be only for these two years. It can easily be extended. It will very interesting to see how much extra tax it will bring in and how it effects the decision making of the big French companies in regards to salary incentives.
- fragsworth 13y ago
  There is a pretty good guarantee - if it lasts longer than two years (which seems unlikely), general corporate profit will pile up until the wealthy stakeholders and top employees get extremely frustrated. Then they can collectively apply pressure to politicians to eventually create a loophole that lets them take their money out tax-free.
- Ergomane 13y ago
  > It can easily be extended. Indeed. Just like the Netherlands where 2013 saw the introduction of the "one time crisis tax" (eenmalige crisisheffing) which constitutes a 16% tax on wages, including bonus, over EUR 150K. Now, for 2014, the "one time crisis tax" regulation has been prolonged. One time, promise! ("Eenmalige crisisheffing eenmalig verlengd")
pyalot2 13y ago

throwaway_yy2Di 13y ago

The amazing thing is that for all the globe-spanning political vitriol this has provoked, the amount of revenue involved according to the proponents is only €200-€300 million/year, out of €1.3 trillion/year in tax revenue total: "Hollande says the 75 percent tax he plans to impose would hit about 3,000-3,500 people and raise around 200-300 million euros a year." http://www.reuters.com/article/2012/04/10/us-france-election-policy-idUSBRE83917G20120410 http://www.reuters.com/article/2012/04/10/us-france-election... https://en.wikipedia.org/wiki/Economy_of_France https://en.wikipedia.org/wiki/Economy_of_France

testrun 13y ago
You are right, the amount is negligible in relation to total tax receipts. It seems to be more about political point scoring than to fix the economy.
- hudibras 13y ago
  It was one of Hollande's campaign promises, so of course he's going to try to get it passed into law. That's what politicians do.
smsm42 13y ago
The actual revenue probably would be less than that, since politicians tend to underestimate creativity and the lengths the people would go to avoid taxes.
flexie 13y ago
Yes. The tax is only on income exceeding EUR 1 million (USD 1.4 million). This means that the people usually associated with high income, such as medical doctors, lawyers, accountants, business owners, CEO's of small and medium sized companies etc. are not affected at all or only for a small part of their income. The tax is going to hurt a few super high earners such as a few soccer stars, a few pop stars, some investment bankers etc. The figures I have seen are more at 1,000 than 3,000. So, it will be harder for PSG to attract the best soccer players of the world, and some CEOs, investment bankers etc. will take wage cuts or move, but apart from that I doubt it's going to have any noticeable effects. It's certainly not going to lead to mass exodus of talents from France.

dangero 13y ago

The US has had higher tax rates than that at times. It's more of a recent thing that the numbers have been well below 50% Historical US upper bracket tax rate: http://s158.photobucket.com/user/OnlyObvious/media/Tax_Rates/TopTaxBracket_TaxRate.jpg.html http://s158.photobucket.com/user/OnlyObvious/media/Tax_Rates...

WalterBright 13y ago
Those tax rate charts paint an incomplete picture. Along with those higher tax rates were quite a few tax shelter mechanisms, meaning the effective tax rate was much lower. Reagan traded eliminating the tax shelters for the lower tax rates.
- kamaal 13y ago
  >>eliminating the tax shelters for the lower tax rates. I think the something is better than nothing argument already shows a sign of defeat. Cheating and evasion of taxes is the same as over taxing, because please note when X set of people don't pay taxes, you have to recover the loss from Y set of people by taxing them a little extra. If the X had payed at the first place, the original tax rate would have been lower, and every one would have to pay less.
  - WalterBright 13y ago
    Tax shelters are legal means of avoiding taxes. They are neither cheating nor evasion.
    - jessaustin 13y ago
      "Evasion" has a fairly specific meaning in this context, so you're right on that. However, the processes that create and maintain many tax shelters, at least in USA, is hideous and corrupt, so I think it really ought to be considered "cheating".
midas007 13y ago
Warren Buffet paid nearly nothing because of retained earnings. But his family apparently lives modestly, so it doesn't make sense to pay oneself more than necessary.

clyfe 13y ago

https://www.youtube.com/watch?v=Wi-D24oCa10 https://www.youtube.com/watch?v=Wi-D24oCa10 https://www.youtube.com/watch?v=MRpEV2tmYz4 https://www.youtube.com/watch?v=MRpEV2tmYz4 https://www.youtube.com/watch?v=91mLpMqjZsE https://www.youtube.com/watch?v=91mLpMqjZsE

epa 13y ago

So the owner/CEO's lawyers form a holding company in Switzerland which gets paid management fees from the French company to hide it from 'salaries'. The owner pays the personal taxes on the income at lower Swiss rates and transfers it back to France. Taxing it at the corporation level is the wrong move unfortunately. Hopefully they have a better definition of what 'remuneration' means.

gamblor956 13y ago
You've just described a textbook tax evasion scheme. For it to work (and not be an illegal tax evasion scheme), at a minimum, the money would have to stay out of France. Consequently, the most common scenario is simply for the individual to relocate to another country.
- spikels 13y ago
  It just needs to stay out for two years... :) Those who play these games call it "tax avoidance" or simply "tax planning" when it is done legally.
  - gamblor956 13y ago
    What was described isn't tax avoidance, it's tax evasion. The form of the substance may appear kosher, but the nature of the transaction is evasion, since it ultimately has the effect of a salary and not a management fee. Tax is one of those areas of law where the "spirit of the law" actually has meaning. For example, in nearly all of the convictions for the loss-harvesting tax shelters, the form of the underlying structures was legally sound under tax law--but the nature of the transactions was not and resembled tax evasion schemes. SCOTUS upheld these convictions. The same is generally true of various other similar tax shelter convictions in England and France.
- epa 13y ago
  Unfortunately because it is not taxed at the personal level, it does not need to stay out of the country and makes it very easy to bring back in the country. This may also depend on the financial institutions and regulation over reporting of large wires, but there are still ways around it. My point was that they can get around these laws so easily due to it being taxed at the corp level and still argue its not avoidance.

forgingahead 13y ago

Will Smith weighs in: http://www.youtube.com/watch?v=8TwwEGjoRMo http://www.youtube.com/watch?v=8TwwEGjoRMo

smsm42 13y ago

I think it is an interesting thing. I think it would do no good for France, but for the rest of us it would provide an interesting test regarding the question of if "soaking the rich" is going to make anything better. With rates like 75% one hardly can argue they didn't go far enough. And even if it says it's two years, in two years either the fallacy of it would be obvious and would allow them to quietly roll it back and claim the victory, or it could be claimed a huge success and continued further, so limited term is not a big problem if we see it as an experiment.

mjn 13y ago
> With rates like 75% one hardly can argue they didn't go far enough. In Scandinavia, we tried top marginal rates ~100% for a decade or two. :) Actually didn't work too badly, but the political mood changed, and rates were gradually lowered, now to a mere 60%. Some good effects of the cuts, some bad effects.
- gaius 13y ago
  Jante tax, eh?
  - mjn 13y ago
    Nah, just social democracy. The "Law of Jante" is a parody of conservative small-town Denmark of ~1900 (a rough American analogue is Main Street by Sinclair Lewis), while social democracy is roughly the opposite, managing the rapidly urbanizing Denmark of 1930s-1980s and using the increasing economic strength to build a well-working, prosperous country. The kinds of people the Law of Jante parodies don't vote for the left-wing parties; they're more like American small-town conservatives who're suspicious of book-larnin' and PhDs and big-city lawyers and instead extol small-town and rural values. They would definitely not vote for raising taxes to pay for a metro system or a university, or anything of that sort. Church taxes though, they'd support. Social democracy is sort of the opposite, being generally pro-technology, pro-education, pro-urban-planning, and pro-infrastructure (some of the main things they put taxes towards).

chrismealy 13y ago

Rich creeps leaving is a feature, not a bug.

wyager 13y ago
Yeah, those rich people are inherently so creepy!
- Crito 13y ago
  "Creepy" lost all meaning quite some time ago. It is now a generic contentless insult, like "butthead" or "tool".

mindcrime 13y ago

It would serve the French right if every single man, woman or child with an ounce of creativity and/or any entrepreneurial ambition at all, just got up and left. Of course, the idea of a bunch of Frenchmen going all "Galt's Gulch" is a bit amusing, but hey...

djur 13y ago
And yet they don't. It's as if perhaps there is some value to the people, culture, and values of France that justifies the cost of doing business there rather than in the fetid, lawless gulches of objectivist fantasy.
- gfodor 13y ago
  Or perhaps when one lives in the country of their friends and family, one needs to be pushed quite far by the state before abandoning the people they love in order to keep majority of what they earn.
- mindcrime 13y ago
  It's a bit soon to say that, eh? This law just passed. And, as the other commentator says, connections to friends and family also weigh into the decision. And since people are not actually totally rational, utility-maximizing, spock-like agents, sometimes they choose things based on those "soft" factors. Which is totally fine. But if the State pushes far enough, and hard enough, people will eventually lash out and strike back in one form or another. I think the historical record shows that quite clearly. No "objectivist fantasy" (whatever that is) needed.

superuser 13y ago

Obama must be jealous.

bmmayer1 13y ago

"The problem with Socialism is that you eventually run out of other people's money" - Margaret Thatcher. I wonder who the French will tax next...

coldtea 13y ago
As if Thatcher should be quoted on economic matters. Not to mention that exactly the same is the problem with capitalism -- you run out of "other people's money" and you get an overproduction crisis.
- Houshalter 13y ago
  There is no such thing as "overproduction". Having produced everything people want should be the goal.
  - coldtea 13y ago
    >Having produced everything people want should be the goal. In socialism, if that thing existed, maybe. In capitalism you don't produce what "people want". You produce what you can SELL. When you cannot sell what you have produced (e.g because people cannot afford to buy it anymore), and you have tons of investments in factories, production capacity and materials being underutilized, you have "overproduction". http://en.wikipedia.org/wiki/Overproduction http://en.wikipedia.org/wiki/Overproduction
    - Houshalter 13y ago
      It's not really overproduction so much as wrongly predicting what future demand would be. What sells and what people want are highly correlated, which is what capitalism relies on. Yes it's not perfectly correlated and maybe there is a better system, for the most part it works.

hudibras 13y ago

The "tell" for this article is that there's no comparison with the current tax policy in France. The top tax bracket in France is 41% right now. Hollande's proposal raises this to 50%--an extra 9 euros out of every 100 earned over a million. Also, I certainly hope that people here understand how marginal tax rates work...

djur 13y ago
In my experience, even very intelligent people frequently don't know how marginal tax rates work. It's astonishing. American political discourse is generally based on the implied assumption that tax rates are not marginal.
- deleted 13y ago
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tn13 13y ago

Tax should be the harvest of economic growth and not other way round. If government has to earn more through taxes it should ideally achieve it by increasing overall income of the people rather than screwing those who are earning more. This move for example would make total sense had France done something significant to increase the total number of millionaires in the country or helped several people to get into that millionaire bracket.

spullara 13y ago

One of the interesting things never pointed out in these threads is that though the income tax in the US was very high in the mid-20th century, capital gains taxes were low — which affect the rich much more heavily than income taxes. The "robber barons" made all their money on the increasing value of the stock in their companies, not an income they drew from them. http://en.wikipedia.org/wiki/Capital_gains_tax_in_the_United_States http://en.wikipedia.org/wiki/Capital_gains_tax_in_the_United... Even this France law apparently only affects "wages" — not sure what that means in France but in the US it wouldn't cover long-term capital gains. BTW, when did millionaire start to mean someone that makes over a million dollars a year rather than has that in assets?

hudibras 13y ago
> BTW, when did millionaire start to mean someone that makes over a million dollars a year rather than has that in assets? Around 2010. I remember this coming up when a new tax bracket was briefly proposed in the U.S. http://themonkeycage.org/2010/12/05/the_shifting_meaning_of_millio/ http://themonkeycage.org/2010/12/05/the_shifting_meaning_of_...

bitops 13y ago

It's interesting to consider that tax rates historically have been all over the place. In the United States, for example, the tax rate has been as high as 91% for the top bracket. http://en.wikipedia.org/wiki/Income_tax_in_the_United_States#History_of_top_rates http://en.wikipedia.org/wiki/Income_tax_in_the_United_States...

gaius 13y ago

On behalf of London, merci m'sieur!

pyalot2 13y ago

Here's the new tax: Income above EUR 1 million, tax is paid by the company, amount is capped to 5% of the companies earnings. Congratulations Mr. Hollande, you just created a fabulous tax loophole to get corporate tax down to 5%. Keep up the good work.