Thomas Piketty's Failed High Tax On Millionaires In France

Earlier this year, those on the political left were all agog over French economist Thomas Piketty's latest book "Capital in the Twenty-First Century".  In the book, this socialist economist -- that which, in itself, is an oxymoron -- argued that wealth should be stamped out with excessively high taxation.  Taxes as high as 80% on the richest.  This was a belief that had been expressed for years, and a devotee who shares it is the Socialist Party's current President of France, Francois Hollande.

In 2012, Hollande campaigned on the fact that he wanted to institute a 75% tax on those making a million Eurodollars or more as a means of reversing France's growing debt.  In December of 2013, Hollande successfully achieved passage of that tax through the French legislature.  It became retroactively applicable to all of 2013, but it was conditionally term-limited to just two years.  Thus, as of December 31, 2014, the tax died on its own without renewal.  In essence, it was a failure.

Before the tax was implemented, opponents said it would cause a mass exodus of the wealthy.  They also said it would cause the economy to falter.  While there really wasn't a "mass exodus" out of the country, wealthy investors and investments avoided coming to France to establish new businesses.  France also earned an anti-business title.  Also, the promised debt reversing tax revenues never significantly materialized.  And, the economy?  After seeing a spike in the country's GDP in early 2013, it continued to struggle throughout the rest of that year and, again, in 2014:

Then, too, unemployment, after falling in 2013, started rising again last year:

All in all, France's two-year experiment was nothing but a failure and Thomas Piketty's high taxes on the rich was exposed as simply a hate-the-wealthy economic fraud.  And, Hollande? His approval rating has tanked to just 12%.

The bottom line is that a country that punishes its rich with high taxation only limits economic growth and raises unemployment.  This was a lesson well learned in the U.S. when, in 1990 under a Democrat Congress, a luxury tax on expensive boats, planes, cars, jewels and furs was enacted to, basically, backdoor-punish the wealthy. This, under the guise that revenues would increase and the debt would be reduced.  We then slipped into a mini-recession, and over the two next years, the rich flourished while many of the people that made, or sold, or maintained those luxury items lost their jobs. 


References:

Capital in the Twenty-First Century: http://en.wikipedia.org/wiki/Capital_in_the_Twenty-First_Century


Francois Hollande: http://en.wikipedia.org/wiki/Fran%C3%A7ois_Hollande

Hollande's 75% Super-Tax Ends As A Failure: http://www.businessinsider.com/r-france-waves-discreet-goodbye-to-75-percent-super-tax-2014-12

France GDP Growth Rate: http://www.tradingeconomics.com/france/gdp-growth

Hollande popularity plumbs new low in mid-term French poll: http://www.reuters.com/article/2014/11/06/us-france-hollande-idUSKBN0IQ14R20141106

List of socialist states - Wikipedia, the free encyclopedia:  http://en.wikipedia.org/wiki/List_of_socialist_states

Luxury Tax Repeal A Long Time Coming: http://articles.sun-sentinel.com/1992-07-07/business/9202180334_1_luxury-tax-tax-repeal-tax-didn-t

French Toast: Hollande's Piketty-Like Tax-The-Rich-Scheme Fails Miserably.

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.

References:

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/

Thomas Piketty: Another Socialist Solution To Income Inequality

For years, the rock star economist for the political left was Nobel Prize winner Paul Krugman.  His endorsement of taxing wealth and encouraging massive government spending -- as a means of driving the economy -- has been music to the ears of all those who love and worship big government.  Now, the left has found a new leader to follow.  He is a French economist by the name of Thomas Piketty.  The recently released English language version of his book -- Capital in the Twenty-First Century -- has every socialist-minded politician and media type going gaga over his proposed solution to income inequality.

Essentially, Piketty believes that capitalism -- and democracy -- is doomed to collapse because it creates an ever increasing disparity between the rich and the poor.   It does this because, over time, capitalism spawns a faster growth rate in the return on capital investment versus any real growth in wages. Thus, the rich, by using their wealth as investment, are able to grow their status much quicker than the majority of citizens.  So, Piketty's solution to this fatal flaw of capitalism is to force the rich out of existence by imposing an 80% tax on incomes above $500,000 and a 50-60% tax on those with incomes between $200,000 and $500,000. This way there will be no rich and our democracy will be saved.

But, then there's this:  What if society is actually able to eliminate all of that rich class? What then?

Well, first of all, all those people who had careers that support  the rich would lose their jobs.  Jobs such as the staff of upscale restauranteurs, landscapers, caterers, housekeepers, expensive fine artists and craftsmen, boat and private airplane builders, and so many others.  Then, too, high taxation of the so-called "rich" will only reduce overall spending. Since our economy is 70% driven by consumer spending, we would be sure to fall into a recession.  Additionally, the $200,000-and-above crowd are givers.  Not necessarily in direct charitable giving, but as the primary supporters of the arts and culture in America. They are a dominant source of non-Pell grant college scholarships and fellowships.  Most private colleges and hospital expansions would not happen if it weren't because of their generosity. Without outside donations, does anyone think that a religious college or university would receive a grant from the federal government? Not with the ALCU jumping in to cite the separation of Church and State.

More importantly, the rich provide an essential economic benefit to society by providing the seed money to promote the development of inventions, new products and new businesses; all of which create new jobs.  Under Piketty's flawed beliefs, the concept of wealth investment would simply cease to exist. And, don't think for one minute that the government, with all that new found money is going to pick up the torch and act as America's new Venture Capitalists.  All it would do is fuel more crony capitalism so that we wind up with endless failed ventures like Solyndra.

The problem I have will people like Piketty is that they never once have a solution that elevates people  out of poverty.  Their answer is to always attack the rich; as if they are somehow the wealth takers and not the wealth creators.  Economists aren't sociologists; but, they should be. Only then would they understand what the real reasons are for income inequality.  Totally missing in most left-wing proposals is the concept of income mobility where 80% of the of the rich, today, are first generation millionaires; and, in as little two generations, much of that wealth (60%) will be gone.  At the same time, nearly 85% of all Americans have wealth greater than their parents.  Studies have also shown that between 86% and 95% of all those who were once living in poverty would shed that condition in as little as 15 years.  The bottom line is that people, whether they be rich or poor, are likely to reverse that status, through their own initiative, in just a few years.  Because of capitalism, poverty is not necessarily a permanent condition.


If Mr. Piketty is so sure of his beliefs, he should implement them in his home country of France and then we'll see what that country looks like in, say, 5 or 10 years.  Lastly, Picketty's book is so hot that 80,000 copies were sold in just two months and it is now back-ordered.  Apparently, it is a must read among all socialist Democrats. At a list price of $39.95, it's pretty pricey.  So, I guess it's Mr. Piketty's goal to get rich before anyone can impose that 80% tax on his rich-guy income.

References:

Thomas Piketty Revives Marx for the 21st Century: http://online.wsj.com/news/articles/SB10001424052702303825604579515452952131592

Piketty's 'Capital': A Hit That Was, Wasn't, Then Was Again How the French tome has rocked the tiny Harvard University Press : http://www.newrepublic.com/article/117498/pikettys-capital-sold-out-harvard-press-scrambling

The Facts About Income Mobility: https://www.youtube.com/watch?feature=player_embedded&v=vDhcqua3_W8

29 Valuable Facts About Millionaires and Billionaires: http://facts.randomhistory.com/millionaires-facts.html