Reuters is reporting today that France’s Constitutional Council has rejected French President Francois Hollande’s planned 75 percent tax on people with an annual income above 1 million euros ($1.32 million). The tax was due to take effect in 2013.
The article reports:
Prime Minister Jean-Marc Ayrault said the government would redraft the upper tax rate proposal to answer the Council’s concerns and resubmit it in a new budget law, meaning Saturday’s decision could only amount to a temporary political blow.
While the tax plan was largely symbolic and would only have affected a few thousand people, it has infuriated high earners in France, prompting some such as actor Gerard Depardieu to flee abroad. The message it sent also shocked entrepreneurs and foreign investors, who accuse Hollande of being anti-business.
The article explains, “The Constitutional Council is a politically independent body that rules on whether laws, elections and referenda are constitutional.”
Raising taxes does not mean increased revenue. The Laffer Curve (google it for more information) shows the relationship between the rate at which people are taxed and the amount of revenue collected. In July, I posted an article (rightwinggranny.com) about the consequences of raising taxes on millionaires in Maryland.
The article at rightwinggranny.com explained the results of that tax increase:
Maryland Governor Martin O’Malley pushed through a millionaires tax that went into effect in 2007 and expired in 2010. Yesterday CNBC reported that during that time Maryland lost approximately $1.7 billion in lost tax revenues. The tax imposed a rate of 6.25 percent on incomes of more than $1 million a year. Approximately 31,000 residents left the state during the time the tax was in effect.
People who make the kind of money we are talking about have the brains (or the accountants) and the mobility to avoid confiscatory taxation. Increasing taxes on millionaires simply sends them in search of new and better tax shelters for their wealth.
There is a worldwide spending problem. That is what we need to face, and that is what we need to deal with. Even if you confiscated all the money in the world from the ‘wealthy,’ you would still have countries operating with budget deficits. How many times when you or your spouse have received a significant raise has the money just seemed to disappear and you were left wondering how you survived on your previous salary? The other thing to remember is that in the United States, a budget cut is not a budget cut–it simply means slowing the rate of increase. Thus, if your department budget was $100 this year and expected to be $120 next year, if you increased your budget to $110 next year, that would be considered a budget ‘cut.’ That is why spending in Washington never actually decreases.
Taxing ‘the rich’ doesn’t work–decreasing spending does. It’s time we held Congress’ feet to the fire on that fact.