The new Socialist President, Francois Hollande, announced the latest “get rich quick” scheme for France: impose a 75 percent tax on the portion of anyone’s income above a million euros ($1.24 million) a year. Under the guise of Patriotism, Hollande is seeking that the rich “pay extra tax to get the country back on its feet again.” Parliament will consider the initiative next month as a means to improve France’s finances as the Euro crisis rages on in Europe.
Unfortunately, this should come as no surprise to France’s wealthiest. Mr. Hollande has matter-of-factly stated, “I don’t like the rich”, and now he has a measure to put money where his mouth is. As the NYTimes reports:
Taxes are high in France for a reason: they pay for one of Europe’s most generous social welfare systems and a large government. As Mr. Hollande has described it, the tax plan is about “justice,” and “sending out a signal, a message of social cohesion.”
While some support Hollande’s proposal, others are rightly concerned with the Laffer Curve effect; namely, that increasing tax rates beyond a certain point will be counterproductive for raising further tax revenue. Indeed, such a result was seen most recently in England this past spring; as a money-grab measure, the highest tax margins were increased to a 50% tax on the wealthy. I wrote about this last month, when income tax and capital gains revenue receipts were down after the implementation of the controversial measure — and much of England’s leadership was surprised at the result.
Thomas Sowell observed quite aptly: “I have never understood why it is “greed” to want to keep the money you’ve earned, but not greed to want to take somebody else’s money”.
Yes, Hollande’s attitude and tax plan will drive away more businesses and investors from France’s already fledgling economy, because the highest income earners will have had enough. The last time a socialist was elected President in France — Monsieur Francois Mitterrand in the 1980’s — there was some flight of the wealthy from the country. Expect to see the same result if such a crushing and counter-productive piece of legislation passes in September.
In that case, let the capital flight commence to the USA!