Perhaps in the realization that many of the wealthy French, whom have been targeted by the President François Hollande’s “soak the rich” policies, have been exploring overseas refuge, the French government appears to have signaled the softening, if not a subtle backtracking of the proposed repressive taxes on the wealthy.
These mostly through the insertions of many loopholes that essentially enervates the proposed populist statute.
From the CNBC,
News reports in France today say the tax has been tweaked so that it will only effect 1,000 households. And that’s if it passes – which remains a big question.
The French newspapers Les Echos and Le Figaro both say today that the tax being considered would only be levied on income of more than 2 million euros. That’s double the original cut-off.
There may also be other changes. Rather than applying to all income, the tax may only apply to ordinary income from salaries. If investment income or capital gains is excluded, the wealthy French who make their money from investments need not worry.
The tax also makes special provisions for athletes and artists, carves out social security taxes and ... you get the idea. Pretty soon, it’s not anything like a 75 percent tax on million-plus earners.
Considering the precarious state of the French fiscal conditions, it would amount to absurdity for politicians and their imbecilic followers to think that tax increases by in itself would solve the looming risks of a debt crisis. The idea that people will behave like automatons, and fawningly submit to edict, is sheer fantasy.
chart from tradingeconomics.com
Taxes are always political.
They are instruments to what the great French classical liberal Frederic Bastiat called as “Government is the great fiction through which everybody endeavors to live at the expense of everybody else”
Yet people’s subjective take on taxes will mean a change on incentives to save, produce and consume or economic activities, as well as changes, in the approach towards treatment of taxation.
At certain levels, people may find taxes to become an unbearable burden and thus would work to preserve on their savings through circumventing actions, such as the employment of accountants and tax lawyers to exploit on loopholes, seek refuge elsewhere, bribe authorities, influence policies or even incite or join revolutions.
The inherent structural self-contradiction through promises of undeliverable benefits from the limitations of resources the state can generate from taxation, as wonderfully explained by the great Frederic Bastiat [Government, 1848] (bold added)
There is the public on one side, Government on the other, considered as two distinct beings; the latter bound to bestow upon the former, and the former having the right to claim from the latter, all imaginable human benefits. What will be the consequence?
In fact, Government is not maimed, and cannot be so. It has two hands - one to receive and the other to give; in other words, it has a rough hand and a smooth one. The activity of the second necessarily subordinate to the activity of the first. Strictly, Government may take and not restore. This is evident, and may be explained by the porous and absorbing nature of its hands, which always retain a part, and sometimes the whole, of what they touch. But the thing that never was seen, and never will be seen or conceived, is, that Government can restore to the public more than it has taken from it. It is therefore ridiculous for us to appear before it in the humble attitude of beggars. It is radically impossible for it to confer a particular benefit upon any one of the individualities which constitute the community, without inflicting a greater injury upon the community as a whole.
Our requisitions, therefore, place it in a dilemma. If it refuses to grant the requests made to it, it is accused of weakness, ill-will, and incapacity. If it endeavors to grant them, it is obliged to load the people with fresh taxes - to do more harm than good, and to bring upon itself from another quarter the general displeasure.
Thus, the public has two hopes, and Government makes two promises - many benefits and no taxes. Hopes and promises, which, being contradictory, can never be realized.
Mr. Bastiat also shows that unrealizable political promises leads towards unsustainable debt and bankruptcy…
These two promises are for ever clashing with each other; it cannot be otherwise. To live upon credit, which is the same as exhausting the future, is certainly a present means of reconciling them: an attempt is made to do a little good now, at the expense of a great deal of harm in future. But such proceedings call forth the spectre of bankruptcy, which puts an end to credit.
…as well as, the perpetual search for the elusive “something from nothing” elixir by the gullible public on promises made by politicians.
What is to be done then? Why, then, the new Government takes a bold step; it unites all its forces in order to maintain itself; it smothers opinion, has recourse to arbitrary measures, ridicules its former maxims, declares that it is impossible to conduct the administration except at the risk of being unpopular; in short, it proclaims itself governmental. And it is here that other candidates for popularity are waiting for it. They exhibit the same illusion, pass by the same way, obtain the same success, and are soon swallowed up in the same gulf.
Events in France and the Eurozone have simply been upholding Bastiat’s predictions, and mostly importantly, his classical liberal principles.
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