The 75% wealth tax point was only a minor point in an article that expressed many many other points and anecdotes, and whose greater argument was that the entrepreneurial climate in France was poor. The fact that your argument focuses on this minor point in order to dismiss the whole point is rather telling about what consent is being manufactured here...
There is quite some bullshit in this article, because the current government has not changed any law about creating a company (so we are exactly in the same state as before). Moreover it's merrily intermixing entrepreneurs problems with banking problems. And there is a little detail here: banking salaries are higher in London than in Paris and bankers are driven by money, so they emigrate massively in the pursuit of money. This has strictly no link to entrepreneurship, starting companies, or creating value from nothing, but hey, there is a complaint train, let's take it.
And you can see the intermix quite a few times (got his wealth in finance, he worked in finance, the google references), Place de la Madeleine, is exactly who Fleur Pellerin is not trying to help, this are different people doing different things. And if for anything, bankers are part of the problems entrepreneurs have.
So here is a nice little piece of context that was not in the article: here in France it's an election day today, and yesterday and today, political propaganda are forbidden in the country. The journalist is based in Paris, and has been for years, so she probably knew that nobody could answer to the article.
because the current government has not changed any law about creating a company
You don't necessarily have to change any law for the weight of decades of laws and regulations to finally catch up with the previous decent momentum of the private sector -- especially in a global market where the actions of other countries negatively impacts your lack of adjustments. Add to that a generally poor global economy, and new businesses will flee an anti-business climate.
Moreover it's merrily intermixing entrepreneurs problems with banking problems.
This is a big problem with current envy-driven politics surrounding wealth.
A lot of people don't like seeing bankers with big bonuses after they trashed the economy for everyone else. They're suspicious of old money children who have inherited a fortune but seem to have contributed little of value themselves. They're envious of highly paid sporting or artistic celebrities who get more salary in a week than most of us make in a year.
And so they support punitive rates of tax for those who earn noticeably more than they do, not necessarily based on any rational economic argument, but more because they feel it's "fair" for the "rich to contribute more" or some such argument.
Unfortunately, what that usually does in practice is hit highly qualified professionals or modestly successful entrepreneurs. It hits the doctors who spent years training, then more years working long hours for little money as juniors, and who finally made it to more senior positions where they are literally in a position to save lives with their greater experience but earn a fair bit of money. It hits the top public servants: the veteran judges, the experienced military commanders, the senior civil servants, basically the kind of people who keep government actually working despite the whims of successive political administrations. It hits the lucky entrepreneurs, the ones who made it after maybe putting their lives on hold for years and investing their savings to build a real business that creates value and maybe jobs for other people. All of these people are the kind of people we really need in society to keep everything working, and usually they are people who have reached those positions not through good fortune or family connections but through a lot of hard work over a long period of time.
However, the people these punitive taxes don't hit are the ones that the popular moneylust craves, because the super-rich are the people who have the flexibility to move their assets and/or themselves around to avoid high-tax environments. Absent serious international co-operation to overcome the naturally competitive tax environment that today's globalised society creates, these people will continue to be super-rich no matter what.
I like to think that if the people supporting these high rates of tax for those with some above average level of wealth realised who they were really targeting, we'd have a different attitude to taxation today. As it is, I fear the politics of envy will continue to trump rational economic policy for the foreseeable future, and unfortunately the people who actually did earn their wealth will be the ones who suffer most for it.
This is not a taxation by envy, this is Adam Smith "ability to pay" theory, it's the guy who rules UK who invented it, it can't be wrong, on an authority ground! Man! Adam Smith!
You have to understand that absolute tax rate is just not meaningful, you can't say it's high or low, you need a reference. The real question is: where does the money go?
In France it's easy the accounting is public: it goes mainly into retirement and medicines. (yeah, technically it's not taxes, but it's still money the State takes, it's bigger than actual taxes and the debt incurred there is carried by the State General Budget anyways). And then the discussion goes, are the pensions fair in France (and the system where one generation pays for the previous one), what about medicine prices? etc.
Don't believe the complaint of the wealthy, they still have a better life than the rest of the population, the only difference is that their friends are journalists. Doctors in France have a better life than street workers. And the thinking than a banker is more important and deserve more money than the garbage man is more alive than ever (also only one of them is literally protecting us from the plague, and only one of them can say: "it me or the chaos in 3 days").
Nobody has been punished by taxes here, the wealthy are perfectly happy to come to Paris through a tax-funded airport, through a taxpayer maintained highway, or through a tunnel that was used to fuck over middle class people.
We have gated communities, we give truckloads of money to big corps, and some of the biggest fortunes in the world are here, we're not very different.
One difference is that the average people here don't think that they are temporarily embarrassed millionnaires, they know that only a very few people get out of their birth class. And they are conservative (and that drive me crazy).
I think the real problem is that we should enjoy the safety net for doing innovation, not mess with the taxes or what some special interests in the UK and US are saying.
Then we should have higher social mobility in the US than in France right? But it doesn't seem to be the case (look for "Country comparison"):
https://en.wikipedia.org/wiki/Social_mobility
Note also that the northern Europe countries are much better than either France or the US. Not really low taxation countries either.
I'm curious as to what you think of the first century of the US, where income taxes were 0% and tens of millions of people rose from poverty into the middle class.
Also, 85% of American millionaires are self made (see "The Millionaire Next Door").
So you select one country, over a carefully selected period of time, you select one parameter amongst hundreds to explain one other. I'm not very good at US history, but slavery, an almost infinite amount of natural resources comes to mind, more that the tax system. While during this time European countries were still wasting resources in wars, throne successions and a mostly feudal system.
If I give you another country that pushed people out of poverty into middle class with heavy taxes (Germany after the war for example), then I win at telling the taxes are not the primordial criterion?
Or maybe we cut the crap and we look at global data, statistics and economic theory instead of looking at one datapoint and make it an example.
Millionnaires are a very small population, they are statistically irrelevant at the people level. Having a very few millionnaires, all of them self made, doesn't influence the social mobility. Otherwise, a few winners at the lottery in a very poor country (imagine the winners being more numerous than the war profiteers) would be enough to claim that it's a country where there is social mobility. You're just looking at the statistics of an infinitely small population.
edit: and I probably forgot to throw some Chinese railroad workers in there.
Is it really careful cherry picking to pick one of the largest countries in the world over a 100 year timespan that had 0% income taxes?
It's a tough case to make that slavery in the US, 1800-1865, transformed tens of millions from poverty into the middle class. The southern states failed to industrialize, which is arguably one of the causes of the Civil War and one of the reasons they lost. The industrialization and rapid economic growth happened in the free states. There are innumerable books on this, but I suggest Bruce Cabot's "The Civil War" which discusses the two economies.
You might want to compare it with what happened in South America over the same time period.
This is a big problem with current envy-driven politics surrounding wealth.
This is not envy driven. Not wanting bonuses for bankers who were bailed out by public money has to do with bonus-driven bad decisions being a fundamental cause of the crash that cost everyone else trillions of dollars in wealth, economic growth, unemployment benefits and bailouts. Look up "moral hazard", and note that they are up to the same shenanigans that got us into this mess.
Furthermore, if the banks are, effectively, government guaranteed, then bankers should be paid as government employees. Greater pay is for greater skill and risk, their risk is borne by everyone but themselves and as for skill... So it is only proper (and not "envy") for the taxpayers to get those bonuses.
..old money children who have inherited a fortune but seem to have contributed little of value themselves
This is also a huge economic and social problem, no need to invoke "envy". The moneyed elites have started to decouple themselves from the rest of the world. I went to a prep school in Michigan where this was quite apparent, and scary. There was also a recent study that warned that this decoupling of the elites from everyone else could lead to (or contribute heavily to) the collapse of civilization [1]. For an artistic rendition, see "Elysium". What's so scary about that film is not the dystopian outlook, but rather how real a lot of it already feels.
They're envious of highly paid sporting or artistic celebrities who get more salary in a week than most of us make in a year.
Again, there are good economic arguments for this being a problem. Pay way in excess of the ability to consume creates a huge overhang in liquidity with which people start to gamble in the international financial casino, creating instability[1] See also "Giant Pool of Money"[2]
And so they support punitive rates of tax for those who earn noticeably more than they do
The rates are not punitive. They are stabilizing. Where this rate starts is a good question to which I don't have a good answer.
Unfortunately, what that usually does in practice is hit highly qualified professionals or modestly successful entrepreneurs
Not according to any statistics I have seen. References?
However, the people these punitive taxes don't hit are the ones that the popular moneylust craves, because the super-rich are the people who have the flexibility to move their assets and/or themselves around to avoid high-tax environments. Absent serious international co-operation to overcome the naturally competitive tax environment that today's globalised society creates, these people will continue to be super-rich no matter what
So should we not do this because it is wrong or because it won't work? It seems it can't work if we don't start somewhere. Certainly finance has globalized, so it seems it is time for enforcement to catch up. This seems to start happening, see the crackdown on Switzerland as a tax-haven/money-laundering center.
Looking at the replies to my previous post, I'm guessing my choice of words had connotations for some readers that I didn't intend. My point was merely that a lot of the people arguing for high tax rates for above average earners today seem to be doing so in the belief that they will be collecting more money from the super-rich, whom they regard for whatever reason as being legitimate targets. However, the reality is that it's usually not the bankers with million pound/dollar bonuses or the pop stars flying to their concert on a private jet who are ever going to be paying those rates, because they all have sufficient mobility to escape the high tax rates by moving their assets and/or themselves elsewhere. So, I think it's more likely to be those who are significantly wealthier than average but not super-rich who get hit by these rates, and many of those people are self-made and the lucky ones.
For example, while I'm not an expert on French taxation, I know that in the UK right now there is considerable debate about a 40% marginal tax rate for those earning above the higher rate threshold, because that threshold has been steadily reduced in real terms to the point where unlike the situation when that rate was first introduced, today quite a few people working full time in ordinary professional jobs would get caught in that bracket. (For context, with the latest tax bands and income levels, well over 4M taxpayers will be caught in that bracket, from a total population approaching 64M.)
Then there's a marginal 60% rate for a while when you hit £100k, which is certainly a very nice salary to be earning, but at a little over three times the national average it's hardly super-rich. It does cover the senior positions in some professional and executive management roles, but it also catches the entrepreneur who takes a couple of years of very low salary (forfeiting their ability to take more salary at lower marginal tax rates, of course) and then makes good on their business and is able to draw a larger salary the next year.
If you're interested in what people in different relatively well-paid professions really earn, you might find this helpful; it looks like being a doctor or a pilot is a promising option if you don't fancy the management path:
In short, I believe a lot of people don't think much of the super-rich, and they would be happy to see them get dinged for more tax. Sometimes there is some objective justification for this, but if anyone reading this thinks there's really no envy involved, I've got a nice second hand car to sell them. In any case, a lot of the people keen on the higher tax rates probably don't realise who is really going to wind up paying them, and how little effect they really have on the super-rich.
> This is a big problem with current envy-driven politics surrounding wealth.
It seems like most of the envy is more perceived by the ultra-rich (or wannabes) than actually exists...
> I like to think that if the people supporting these high rates of tax for those with some above average level of wealth realised who they were really targeting, we'd have a different attitude to taxation today.
You realize the 75% tax rate is on year income exceeding one million euro, right? One million euro is 34x the average salary in France, which means that anybody hit by that tax makes more money in less than two years than the majority of their countrymen will earn in their entire lives.
I make way more than an average salary where I live and I don't really have any problem paying higher tax rates. Sure, I work harder than lots of people who work 9-5 jobs, but I don't work any harder than friends I have who work two jobs. There is no question, in my mind, that people who work harder and take risks should reap greater potential rewards... the real question we need to answer is how much higher those rewards should be.
It's time to stop pretending that the doctor who spent years training, working as an intern, etc did it in a vacuum. It was tax francs that built the hospitals, that created the institutions that taught them and made them the best of the best. The entrepreneur sells a product shipped on roads built with taxes, over an electric grid built with taxes and might very well bill people using letters sent by mail... well, you get the idea. Not to mention the employees they hire, who were educated with what? Was it taxes? You betcha.
Besides with progressive taxes, that doctor will always make more, because progressive taxes do not penalize you for earning more. If you're making 100,000€, your after-tax income is ~62,500; if you're making 200,000€, it's ~133,000€.
> usually they are people who have reached those positions not through good fortune or family connections but through a lot of hard work over a long period of time.
You're a little delusional. France has a pretty high level of social mobility because of it's high taxes, not in spite of them. Having access to free higher education is a massive boon to lifting people out of poverty. France has the second highest birth rate in the EU due do a generous social safety net. These things cost money, but they're excellent long-term investments.
People don't exist in a vacuum, economies are wonderfully interconnected things and acting like the people who take risks and succeed are some kind of superheroes who shouldn't give back because of some deranged notion that they "did it themselves" is myopic, dishonest and, to be frank, total bullshit.
You realize the 75% tax rate is on year income exceeding one million euro, right?
Yes, though please note that I was commenting on a general trend of confusing going after bankers with actually catching entrepreneurs, not on the French situation specifically.
One million euro is 34x the average salary in France, which means that anybody hit by that tax makes more money in less than two years than the majority of their countrymen will earn in their entire lives.
By the time you allow for progressive taxation at lower levels, and for the other taxes in the French system, the multiplier for how much money those people are actually keeping is smaller than that. Of course it's still a wide gap, but let's not pretend these people are rich enough to retire after two years on that salary.
People don't exist in a vacuum, economies are wonderfully interconnected things and acting like the people who take risks and succeed are some kind of superheroes who shouldn't give back because of some deranged notion that they "did it themselves" is myopic, dishonest and, to be frank, total bullshit.
I have little interest in debating in detail with someone whose argument boils down to swearing at me and calling me delusional, but please consider this: taking the argument you seem to be making to its logical conclusion, why shouldn't everyone pay 100% taxes and have the state pay for everything, because we're all part of the same system?
<i>Of course it's still a wide gap, but let's not pretend these people are rich enough to retire after two years on that salary.</i>
Of course they're not retiring - someone earning enough to hit that 75% tax rate isn't living like your average mope. Give them five years, though, and they could easily put that money into blue chips, bonds and other low risk investments and support a middle class family with interest.
And while I do see the difference between entrepreneurs and those who live off the margins of financial transactions, I'm not really sure why they should be treated all that differently as far as tax law goes. Kids grow up wanting to be royalty, by college the fantasy is still there, now they're just Business Superheroes, because that's how we treat the rich.
Entrepreneurs aren't magic. We're people who've decided that we either don't like working for a boss or who've looked at the numbers and said, "hey, I think I can make more working on my own than for someone." Should we be in awe of someone who "worked hard" for a few years to get paid a couple million dollars to have a competitor shut their product down? Or amazed by a company who has managed to sell their stockholders on the idea that it doesn't need to be profitable, allowing them to destroy (or disrupt, in SV terms) traditional markets, where others can't compete, because their shareholders actually demand they turn a profit.
Now, are you telling me these Superheroes of Business will look at a progressive tax rate and say, "you know what, if I thought I could make $3 million after 3 years of hard work, I would do it... but since it'll only be $2.7, I guess I'm gonna stick to my day job where I make $150k/year." Because that's the logical conclusion of what you're saying.
<i>why shouldn't everyone pay 100% taxes and have the state pay for everything</i>
Probably because that's not the logical conclusion of the reality I've described, although a lot of American businessmen do think the opposite should be true: all services should be privatized, yada, yada. That's crap, there tons of services that require long term, massive investments that will get shitty ROIs but benefit society and the economy as a whole.
We all know that, we all think people should be rich, I just don't think that income tax has the kind of dampening effect on entrepreneurship people claim it does. I for one would rather pay 50% on my 1.5mil than 25% on 150k, should it come to that.
Now, are you telling me these Superheroes of Business will look at a progressive tax rate and say, "you know what, if I thought I could make $3 million after 3 years of hard work, I would do it... but since it'll only be $2.7, I guess I'm gonna stick to my day job where I make $150k/year." Because that's the logical conclusion of what you're saying.
No, I'm telling you that people who are capable of and considering starting a business, several years earlier in their career than the kind of relatively uncommon success story you're talking about where millions of dollars are flying around, are going to look at a progressive tax rate where a high proportion of their earnings if they are really successful are going to get stolen away by the state in taxes and they're going to think twice. Some of them are then going to decide it's not worth it and just stick with being someone's probably relatively well-compensated employee, which is bad for their national economy because usually small businesses drive a substantial proportion of growth. Others are going to move to a more supportive environment and start their business there instead, which is bad for the original economy, though good for the new one.
You're selling lottery tickets where there is no jackpot, and people who understand maths aren't going to play that game. Most people who are capable of starting a successful business (and anyone who professionally invests in young businesses) understand maths.
I for one would rather pay 50% on my 1.5mil than 25% on 150k, should it come to that.
OK, but what about 75% of your 1.5mil? What about 90%, a rate we actually had in the UK for much of the 1950s and 1960s? Or how about 98% on your investment income, again a rate we really had for a while? Still want to invest in a 20% share of a new business that might make a few million in this country, or would you rather invest in a SV start-up, or in energy and natural resource production in a developing economy, or any of the other vastly more profitable opportunities that would then be available to you?
At some point, the numbers become prohibitive. The interesting question is when that happens, not whether it does.
> because the current government has not changed any law about creating a company
Which has nothing to do with my argument. And no relevance whatsoever because the status quo is shitty, and not changing the status quo is bad in of itself.
>The 75% wealth tax point was only a minor point in an article that expressed many many other points and anecdotes, and whose greater argument was that the entrepreneurial climate in France was poor.
Yes, the greater argument was that "the entrepreneurial climate is poor" because they wouldn't get very much sympathy saying "stop taxing the ultrawealthy so much. We don't like it!".
Nonetheless, it's pretty obvious what they thing the 'fix' for this supposedly poor climate of this is when you read stuff like this:
>Some wealthy businesspeople have also been packing their bags.
>While entrepreneurs fret about the difficulties of getting a business off the ground,
>those who have succeeded in doing so say that society stigmatizes financial success.
>The election of President François Hollande, a member of the Socialist Party who
>once declared, “I don’t like the rich,” did little to contradict that impression.
Or this:
>“It is a French cultural characteristic that goes back to almost the revolution and
>Robespierre, where there’s a deep-rooted feeling that you don’t show that you make money,”
>Ms. Segalen, the recruiter, said. “There is this sense that ‘liberté, égalité, fraternité’
>means that what’s yours should be mine. It’s more like, if someone has something I can’t have,
>I’d rather deprive this person from having it than trying to work hard to get it myself.
>That’s a very French state of mind. But it’s a race to the bottom.”
Essentially, this article is emphatically NOT about entrepreneurs, particularly not struggling entrepreneurs. It's basically a good old whinge by the French elite.
It's interesting how your argument insists on collapsing this issue into a black and white issue: it's the elites whining and not in any way about entrepreneurs. And yet the only evidence you provide is one or two quotes where the article talks about the anti-wealth sentiment.
Fun fact: an appreciation of wealth-generation is absolutely necessary and goes hand in hand with encouragement of entrepreneurship. Follow the incentives.
>It's interesting how your argument insists on collapsing this issue into a black and white issue: it's the elites whining and not in any way about entrepreneurs.
Right, because none of the issues presented in the article were actually ABOUT the problems entrepreneurs face.
Did it mention fundraising? No.
Did it mention hiring? No.
Did it mention anything about gaining traction? No.
Did it mention anything about finding a mentor? No.
Did it mention something about how the proles were getting uppity about the rich needing to pay more taxes? Hell yea.
Learn to read between the lines.
>Fun fact: an appreciation of wealth-generation is absolutely necessary and goes hand in hand with encouragement of entrepreneurship. Follow the incentives.
Neither fun nor a fact. My incentive is to be my own boss, not to one day become a billionaire asshole like Eric Schmidt. If I were making a million dollars a year I'd be fine with being taxed at 75%.
