Two years ago, France's socialist President Francois Hollande increased his country's Value Added Tax (VAT) on consumer purchases; upped the corporate tax rate; and, imposed a 75% income tax on euro-millionaires. All of this was supposed to increase revenues by 30 billion euros per year.
However, the score card is in and roughly half of that 30 billion was actually achieved.
This was all too predictable and is a perfect example of why the "tax-the-rich" French economist, Thomas Piketty, is wrong.
The French consumer, faced with higher VAT taxes, simply cannot afford to buy as many new things as they otherwise would, and, as a result, business profits fell and so did tax revenues. That's just human nature and, something that socialists (or Democrats in our country) never seem to add into the equation when planning to raise taxes. Nor do they understand that, corporations, faced with increased taxes on themselves, are more inclined to raise prices which, in turn, further lowers consumer activity and again results in lowered taxable business incomes. Lastly, that 75% tax on the rich only caused some of them to leave France; thus, again reducing tax revenues.
The simple fact is that Hollande's tax strategy is hurting France. Unemployment recently hit a record high of 11%; although its coming down now. We, in the U.S., didn't even see that level of unemployment when we were at the height of our Great Recession. Their economy is stagnant, with the last 2 quarters either being at barely measurable or at dead zero. And, the rich, who pay a hefty amount in taxes, are continuing to leave along with their valuable talent and their equally valuable taxable income.
Thomas Piketty: Capital in the Twenty-First Century: http://en.wikipedia.org/wiki/Capital_in_the_Twenty-First_Century
France in 14bn-euro tax black hole: http://www.bbc.com/news/business-27602312
French unemployment at record high: http://www.bbc.com/news/business-25922231
France GDP Growth Rate: http://www.tradingeconomics.com/france/gdp-growth
France's Reckoning: Rich, Young Flee Welfare State: http://www.cbn.com/cbnnews/world/2014/February/Frances-Reckoning-Rich-Young-Flee-Welfare-State/