The socialist Francois Hollande ran for President of France earlier this year against the increasingly unpopular Nicholas Sarkozy on a campaign of taxing the rich He proposed raising the top tax rate to 75% on income of €1,000,000 or more “out of justice.”
The French said Vive Le France! Viva Hollande!
Hollande got his 75% tax, up from 48%, as well as a 60.5% marginal capital gains tax and a wealth tax of .5% on assets exceeding €800,000. France also has a national sales tax of 19.6%.
The “oppressed” rich responded by adopting the French equivalent of “Vamonos, amigos,” (I would use the French equivalent, but the two weeks of French classes did not take) and voted with their feet. The traditional place of European tax refuge is the Principality of Monaco. Switzerland and Belgium are now enjoying a boom in French émigrés. Belgium offers chocolates, waffles, NATO, and a substantially lower tax rate (53.7%).
French chateaus and high end Paris properties are being dumped on the market.
Bernard Arnault led the exodus. He’s the chief executive officer and primary owner of LVMH Moet Hennessy Louis Vuitton, the luxury goods company. His estimated net worth is $24.1 billion. The leftist French paper, Liberation, said “Get lost, you rich idiot.” Bernard is applying for Belgium citizenship.
Belgium has not only a lower income tax but also neither a capital gains tax on shares or stock nor a wealth tax.
Gerard Depardieu, the great French actor, announced he’s moving to the quaint Belgium village of Nechin across the border from France. About 27% of the village’s population are French émigrés. He’s listed his 20,000 square foot Left Bank town house for $65.4 million.
The France Prime Minister Jean-Marc Ayrault then called Depardieu “rather pathetic” and unpatriotic.
Depardieu responded in an open letter December 16 to the Prime Minister. He stated he paid over €145 million in income taxes over 45 years and has fully paid his 2012 taxes, which came out to a 85% tax rate. He has 80 people working for him in France. He added “I give you back my passport and social security card, which I have never used.”
He was quite explicit: “I’m leaving because you think success, talent and anything different should be punished.”
That sums up the approach of President Obama: “You didn’t make it.”
Aurelie Filippeti, the French Minister of Culture, responded to the departed actor “French Citizenship, it’s an honor.” She added “It is rights and duties, too, among them to be able to pay taxes.”
Senator Joe Biden stated in September 2008 that paying more in taxes is the patriotic thing to do for wealthier Americans. President Obama echoed the Vice President in August 2012 on the patriotic duty to pay taxes.
The French and American leaders call redistribution “patriotism.”
President Obama went even further at the February 2012 National Prayer Breakfast. He stated Jesus Christ would support his tax the rich policy. Merry Christmas to those making over $250,000 in the high cost, high tax Blue States of California, Connecticut, Hawaii, Illinois, Maryland, New Jersey, New York, Pennsylvania, and Taxachusetts.
The new American paradigm under President Obama and Governor Brown is that success should be punished.
Success is failure.
That brings us to California and President Obama. Voters in California just voted in a tax increase to raise the marginal tax rate to 13.3%. That’s just the California marginal tax rate. When you include the federal income tax, it adds up to 57.4%, less some itemized deductions for state income tax subject to the vagaries of the dreaded Alternative Minimum Tax.
We also have to add in the federal social security and Medicare taxes, which will be 3.7% for the self-employed under ObamaCare. The effective marginal tax rate will exceed 60%, not including property taxes and California’s sales tax, which approaches 10% in some cities.
The exodus of wealth creators from California over the past two decades has been well documented. Arizona, Florida, Texas, Utah, and even Nevada are very attractive tax havens to Californians and their corporations.
A couple of examples from New York illustrate the pattern of tax migration. Rush Limbaugh continued to broadcast some EIB shows from New York after moving to Florida. New York enacted a “millionaires tax.” Limbaugh announced he would discontinue all operations in New York, effectively depriving the city and state of his income and that of his employees.
The response of New York’s interim Governor Patterson was “If I knew that would be the result, I’ve would’ve thought about the taxes earlier.”
Driving legitimate business out of the state is not a wise economic policy.
Tom Golisano, founder of Paychex, ran for Governor of New York in 1994, 1998, and 2002 on the Independence Party ticket. The billionaire announced in 2009 that he was moving to Florida to escape New York taxes.
A tax structure in which the government takes from your earnings more than you get to keep is a disincentive to economic growth, and drains both investment capital and discretionary spending from the private center.
Leaving the United States to escape paying taxes is not easy. An exit tax must be paid. An increasing number of Americans though are voting with their feet. 3,805 left in 2011. An estimated 8,000 may leave this year. Famous expatriates this year include Eduardo Saverin, co-founder of Face Book, and Denise Rich, of the infamous Clinton pardon of her ex husband, the fugitive Marc Rich.
Are America or California going the way of France, Spain, Portugal, and Greece?