
France’s Hollande Gets Court Approval for 75% Millionaire Tax - acak
http://www.bloomberg.com/news/2013-12-29/france-s-hollande-gets-court-approval-for-75-millionaire-tax.html
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throwaway_yy2Di
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...](http://www.reuters.com/article/2012/04/10/us-france-election-
policy-idUSBRE83917G20120410)

[https://en.wikipedia.org/wiki/Economy_of_France](https://en.wikipedia.org/wiki/Economy_of_France)

~~~
flexie
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.

~~~
yitchelle
Don't most sport stars live at (or at least have their residence at) Monaco or
(insert low income tax country here) where the taxes are close to 0%?

~~~
flexie
No. That's only doable if you do individual sports such as boxing, tennis,
golf, where you are free to take residence anywhere, or if you play for Monaco
FC ;-)

~~~
vl
Surprisingly, not always.

American hockey players (or coaches) playing for Vancouver often choose to
live at Point Robers to avoid paying Canadian taxes.

[http://en.wikipedia.org/wiki/Point_Roberts,_Washington](http://en.wikipedia.org/wiki/Point_Roberts,_Washington)

~~~
smsm42
Fascinating place, Point Roberts. I've read a number of people from
surrounding localities go there for cheap goods (Canada has 12% VAT, US does
not). Also, I heard, popular with witness protection since you have to cross
the border control to drive in there (which could be a problem for somebody
who is a felon).

------
spullara
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...](http://en.wikipedia.org/wiki/Capital_gains_tax_in_the_United_States)

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
> 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_...](http://themonkeycage.org/2010/12/05/the_shifting_meaning_of_millio/)

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fragsworth
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.

~~~
testrun
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.

~~~
Ergomane
> 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")

------
dangero
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...](http://s158.photobucket.com/user/OnlyObvious/media/Tax_Rates/TopTaxBracket_TaxRate.jpg.html)

~~~
WalterBright
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
>>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
Tax shelters are legal means of avoiding taxes. They are neither cheating nor
evasion.

~~~
jessaustin
"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".

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smsm42
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
> 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
Jante tax, eh?

~~~
mjn
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).

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mindcrime
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
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
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.

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clyfe
[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)

------
hudibras
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
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.

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

~~~
skrebbel
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.

~~~
mcbaby
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).

~~~
forgottenpaswrd
"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.

------
bmmayer1
"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
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
There is no such thing as "overproduction". Having produced everything people
want should be the goal.

~~~
coldtea
> _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
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.

------
pyalot2
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.

------
epa
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
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.

~~~
epa
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.

~~~
gamblor956
No, you misunderstand. It's not enough to satisfy the "form" required of tax
law--you must also satisfy a test of "substance." France would pierce through
the transaction and treat the "management fee" as a French salary (which, in
substance, it is) and haul the taxpayer off to jail for evading taxes.

------
forgingahead
Will Smith weighs in:
[http://www.youtube.com/watch?v=8TwwEGjoRMo](http://www.youtube.com/watch?v=8TwwEGjoRMo)

------
tn13
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.

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w1ntermute
It's just sad - they're taking an already bad situation and making it even
worse.

~~~
djur
France is doing pretty well as far as Europe goes post-2007. They're
recovering faster than the UK, for example.

~~~
Silhouette
_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.

------
bitops
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...](http://en.wikipedia.org/wiki/Income_tax_in_the_United_States#History_of_top_rates)

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superuser
Obama must be jealous.

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gaius
On behalf of London, merci m'sieur!

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chrismealy
Rich creeps leaving is a feature, not a bug.

~~~
wyager
Yeah, those rich people are inherently so creepy!

~~~
Crito
"Creepy" lost _all_ meaning quite some time ago. It is now a generic
contentless insult, like "butthead" or "tool".

