France’s President Francois Hollande is quietly letting his nation’s 75% tax rate on high incomes expire as the year ends. The measure raised very little revenue, but aptly expressed the envy and hatred for the rich that animates many on the left. In fact, Hollande campaigned on the measure to punish the successful. Hannah Murphy and Mark John of Reuters write:
Hollande first floated the 75-percent super-tax on earnings over 1 million euros ($1.2 million) a year in his 2012 campaign to oust his conservative rival Nicolas Sarkozy. It fired up left-wing voters and helped him unseat the incumbent.
But in practice, it raised very little money:
The Finance Ministry estimates the proceeds from the tax amounted to 260 million euros in its first year and 160 million in the second. That’s broadly in line with expectations, but tiny compared with a budget deficit which had reached 84.7 billion euros by the end of October.
This calculus does not consider the lost revenue from high income people who left France to avoid the tax, nor does it consider the companies and individuals that did not locate economic activity in France, to avoid the penalty. Those numbers are almost impossible to discover, and certainly the socialist government has no interest in publicizing the costs of its policy. But the fact that Hollande is not acting to extend the tax, which was authorized for two years only, speaks volumes. Hollande and France’s tax collectors discovered that the country suffered under high taxes so much that unemployment soared, and consequently:
Hollande and his government have since sought to relieve business of around 40 billion euros of taxes and other charges, as unemployment at over 10 percent drives home the urgent need to attract investment to the sickly French economy.
Faced with the responsibility of running his government, Hollande has come to his senses. The problem with punishing the rich is that rich people have alternatives for employing their capital and their talents. And, even though the left hates to admit it, outside of a relative handful of people who inherited their wealth, most rich people actually created value that others would voluntarily pay for. So when you punish value-creation, you get less value, that is, less wealth in your political system.
The same calculus works for companies. Punish them, and they will find a happier home.
In 2008, then-candidate Barack Obama averred that even if they did not raise extra revenue, he “would look at raising the capital gains tax for purposes of fairness.” This sentiment is self-defeating. Yet the left refuses to learn it. Do not look for anyone on the democratic Party to take note of France’s failed experiment in punitive taxation.