Taxing the 1 Percent, With a French Accent - Pacific Standard

Taxing the 1 Percent, With a French Accent

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The question Lindsey McCormack posed around the filing deadline for U.S. income taxes last year was, “How high can you tax the rich before they decide to pack up and move somewhere cheaper?”

For Gérard Depardieu, the answer is 85 percent. That’s what the actor says he’s paid the French government over his working life, and the amount that’s spurred him to exit Paris and relocate across the border in tax-friendlier Belgium. For his thrifty pains during a time when France is deeply in the hole, Depardieu has been described as pathetic and unpatriotic by his homeland’s prime minister.

France’s new-ish president, François Hollande, has budgeted a two-year supertax of 75 percent on those making more than a million euros a year (about US$1.32 million at today’s exchange rate). That's leading a trickle of the’s nation’s 1 percent – folks like Louis Vuitton Moet Hennessy CEO Bernard Arnault--to emigrate or at least threaten it. (For the record, Arnault says his decision to seek dual citizenship in Belgium was not driven by tax concerns …)

Tax exiles have existed for years; think of the Beatles' "Taxman" or the Stones' "Exile on Main Street" as their anthems. When McCormack asked her question, for instance,  she was reporting in the context of European soccer stars, who shop their athletic wares with one eye on the field and the other on the spreadsheet.

Depardieu’s unscripted drama also casts a light on the ongoing comedy in the United States, where concerns over the “looming” fiscal cliff – surely our bankruptcy isn’t so extreme as to bar us finding a new Homeric for the cliff – has finally led Republican leaders to consider pushing up tax rates on those making more than a million bucks a year. To compare percentages with Hollande’s cruelest cut, the increased sought by President Obama would send the top rate from 35 percent to 39.6 percent.

Will any of these taxes generate buckets of cash? Possibly not. But they presumably do generate goodwill among those in the lower brackets. As tax historian Joseph J. Thorndikenoted in October:

Hollande has defended the new rate as part of his effort to shrink France's budget deficit. But the new "supertax" is about more than raising money. It is also designed to make a point. "It's symbolic," Hollande has said. "It will show an example."

Indeed, that's the essential nature of very high rates on very rich people. They aren't really about raising money, although they can do that pretty well sometimes. Rather, they are designed to make a political statement about fairness and economic justice.

Sacrebleu!

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