to not be surprised that France's intention to heavily tax the rich will result in less tax intake?

(110 Posts)
Orwellian Tue 29-Jan-13 10:06:56

It obvious to everyone except Hollande that if you inflict a punitive tax on the rich (75%) then they will simply leave the country and take their wealth with them.

It has never worked to inflict punitive taxes on the rich as they will simply vote with their feet and now France is suffering due to this stupid policy.

I do agree that all sectors of society need to pay their way but in most countries income tax banding means that the rich will already being more since a salary of say, £90000 taxed at 40% will pay more tax than a salary of £50000 taxed at 40%. Unearned wealth is another matter but those paying tax (via payroll taxes on a salary) already pay more.

Sallyingforth Tue 29-Jan-13 10:14:28

What's your alternative then to raise more money?

PessaryPam Tue 29-Jan-13 10:17:56

Government spend less money Sally.

Exactly what pessary says, there is a huge amount of waste in national government and local government expenditure.

In the UK alone the cost of these government 'think tanks' (that tell people what most of the populace already bloody know) and quangos, ridiculous frivolities such as potted plants and such like all need to be cut instead of slashing away at valued community services.

Alibabaandthe40nappies Tue 29-Jan-13 10:59:00

Sally - incentives for businesses to increase profits and wages so that the tax take goes up across the board without the percentages needing to increase.

And cutting government waste.

TheFallenNinja Tue 29-Jan-13 11:01:36

75% does seem extreme? I'd pack my bags for sure.

One one hand higher tax for higher earners on the other hand punish success.

You have a finite working life at what point do you say that's it, I'm earning enough now?

Mumsyblouse Tue 29-Jan-13 11:04:52

I think there's a mental tax barrier above which it hardly seems worth working or at least staying where you are, and I think that's between 40-50%. Anything over that (and even in very state heavy countries such as Sweden and Finland, I don't think they pay more than that). If you get to keep less than half what you earn, then that seems unfair.

Andro Tue 29-Jan-13 11:55:13

The result of punitive taxation is entirely predictable - you ca only increase taxes so far before the tax take starts to fall.

socharlotte Tue 29-Jan-13 11:59:25

Orwelliqn-no it isn't obvious or even proven that that is the case.Rich people of course like to put that 'tale' about

Harriet35 Tue 29-Jan-13 12:00:11

Hollande is an idiot. The French are idiots for voting him in.

I agree that he government is very wasteful and some of the PFI contracts etc have been poorly negotiated as well.

Laffer Curve


You have complained on other threads about the amount of tax you and your DH pay. Where is your pain threshold?

socharlotte Tue 29-Jan-13 12:24:14

Well no one likes paying tax do they?

TheCalvert Tue 29-Jan-13 12:33:38


It's not nice paying tax, but its necessary to fund the less well off in our country. I know plenty of people well into 6 (and some 7 figure) earners who don't shirk their tax obligations. What you have said is as generalistic as me saying everyone who claims benefits are lazy. Obviously not true!

It cuts both ways.

Alibabaandthe40nappies Tue 29-Jan-13 12:34:05

socharlotte - if you are complaining about how much tax you pay, surely that shows that the levels in the UK were reaching that point at 50% where people think 'hang on is it worth earning more'. When you consider that NI is also being paid as well now that the cap has been reduced.

When we compare UK tax rates to other countries - do other countries have an NI equivalent? Because if they don't then really we should be lumping the two in together to look at our rates, in which case anyone paying HRT or the 45p band is paying well over 50% of their earnings to the state. Which is a ludicrous situation.

bemybebe Tue 29-Jan-13 12:36:02

The situation when on one hand Hollande sets 75% top rate pushing virtually everyone with v high income out of the country is stupid. One just needs to move into Belgium to qualify in dramatic drop in tax paid with virtually identical standard of living. I personally know a lot of people who have done exactly that. It is very easy to move from country to country inside the EU when tax rates are so different, especially when the standard of living, language and culture of the countries are close (France/Belgium, the Netherlands/Belgium). I have no doubt this policy will be reversed, but the damage is already done.

Then you have the UK where the tax rates are not low, but neither they are super high. However, currently non-doms pay no more than 35K (I recall) in tax on world-wide income. So many of the super rich from across the world settle here, but pay their national income tax (in Russia it is 13% flat). Incidentally, a lot of these super rich are not the "wealth creators" but corrupt civil servants from Russia, families of mafia rulers and war lords. They obtained their vast fortunes from stealing from their people of their countries, yet they are welcome here because the UK authorities can find no legal means of stopping them as this cannot be proved in the court of law.

Somehow everyone is so focused on bankers, but it is super rich non-doms and their families who I believe cause a lot more damage to this country.

GrimmaTheNome Tue 29-Jan-13 12:48:51

>What's your alternative then to raise more money?

Governments should aim to create the conditions under which industries which make something that people - locally and globally - need. Thus creating real wealth and jobs.

Manufacturing industries, high-tech (software, pharms etc etc), agriculture, infrastructure. Real stuff.

Orwellian Tue 29-Jan-13 13:58:03

Sallyingforth - What's your alternative then to raise more money?

That's not the point. Even if there is no alternative if the rich can still move with their wealth then there is still no gain and probably an expensive policy to implement (probably costs more than the tax it actually brings in). It is simply an envy tax rather than a logical tax.

drwitch Tue 29-Jan-13 14:02:25

am loving the lack of concrete evidence on this thread
btw the 75% tax rate is a marginal not an average one

trice Tue 29-Jan-13 14:09:09

Would a society without the super rich not be more healthy? Even if everyone else carries on with the same level of income? It is a point I have heard discussed, perhaps France can provide a trial?

somebloke123 Tue 29-Jan-13 14:17:35

When Nigel Lawson was chancellor he abolished the top 60% income tax rate (nasty tories boo hiss) so it just became 40%, the proportion of tax paid by those who had been at 60% increased significantly.

Lostonthemoors Tue 29-Jan-13 14:18:03

They won't leave

maisiejoe123 Tue 29-Jan-13 14:22:56

I beg to differ. People will leave..... Why on earth would they stay?

My DH and I are both higher rate tax payers. If the tax goes up much more we will seriously think of leaving.

Lostonthemoors Tue 29-Jan-13 14:27:19

Because many people are very tied to home:

Their house
Children's schools

adeucalione Tue 29-Jan-13 14:34:01

They're already leaving lostonthemoors, estimated figures for people looking to relocate are up 4-500% and there have been a number of high profile cases.

Rich people are unlikely to still live in their home town, near their family and friends - they can buy a nice house and send their children to nice schools anywhere.

Lostonthemoors Tue 29-Jan-13 14:37:38

What is the pay threshold where the tax kicks in?

Yes I can imagine jet set leaving.

But not the tier below them.

adeucalione Tue 29-Jan-13 14:42:50

It's not just the jet set though, it's entrepreneurs and people who have built successful businesses, people like Bernard Arnault (said to be the richest man in Europe).

The top 1% of earners in the UK pay 30% of all tax income, so, assuming that it is a similar situation in France, you really don't want them to leave.

cantspel Tue 29-Jan-13 14:43:37

If people will leave france then they will also leave the uk if we also increased taxation.
The rich and their money can go anywhere and dont have the same ties as your average working person.

adeucalione Tue 29-Jan-13 14:43:55

This article from Reuters says it kicks in at 800,000 euros.

Startail Tue 29-Jan-13 14:45:30

Taking 50% or more of someone's money is somehow disrespectful.

It says "You are too rich!",

I think that demeans them as a person and rubs off in them not feeling society respects how they earn that money.

A business person, actor, or a sportsperson may realise what they are paid is silly, but they still want their skills to be appreciated.

They may give a great deal to charity or they may not, but they still feel it should be their choice not the governments.

adeucalione Tue 29-Jan-13 14:50:07

If expanding a business, with all the risk that that entails, was likely to take someone over the 800,000 threshold, I wonder how many people would think twice now.

socharlotte Tue 29-Jan-13 14:51:04

They don't take 50% of their money.They take 50% of incomes over a certain threshold

People cannot just upsticks and move their life abroad so easily.Also by moving abroad you do not necessarily avoid tax on income earned in the UK

adeucalione Tue 29-Jan-13 14:55:57

You might be right socharlotte, and it will be interesting to see where this policy leads France over the coming years - maybe to a socialist utopia, maybe not. We need to reconvene in 5 years!

AmberSocks Tue 29-Jan-13 15:16:28

my dh is a high earner,if that happened here we would leave for sure.we are already planning to in 2 years.

its not fair,you work hard to achieve something then get penalised for it.

plus high earners put the most into the pot,but probably take the least out of it.

for example,my husband pays more tax than most people earn in a year,or even several years,and thats without all the people he employs too.

yet we have never used hospitals,doctors,nurseries or schools and dont recieve any benefits at all.

I know we are an extreme case and tax pays for more than that but its point i have to make..

cantspel Tue 29-Jan-13 15:21:47

If Bernard Arnault and his multi millon pound fortune finds it so easy to leave france then i dont see how any other rich person is going to struggle with it.

GrimmaTheNome Tue 29-Jan-13 15:36:13

Amber - I'm sure DH and I put in more than we take out...that's fine because one of the things we do get out is being able to live in a pretty much civilized society.

However, punitive taxation doesn't appear to work well in practice. People leave, or find avoidance schemes. Whichever way you argue the ethics, pragmatically I reckon Hollande has overstepped the mark.

Cantbelieveitsnotbutter Tue 29-Jan-13 15:36:40

Isn't there a country that dropped their tax / vat rate to some ridiculously low rate and ended up with more money then when it was higher. As there was no need for cash in hand jobs and everything was declared.

PetiteRaleuse Tue 29-Jan-13 15:46:25

The problem with Hollande and too many members of his party is that they want to take from the rich.

They also seem to want to stop people from being successful - I haven't yet read the full details of what they are planning for small business owners but very many small business owners are very unhappy (and were already still angry because of the 35hour week implemented by the socialists in the late 90s).

Hell would have to freeze over before I would vote for the Tories in the UK, but the French socialists have a tendancy to go too far in the other direction, creating vote winning policies which don't add up to much practically pr economically.

CelticPromise Tue 29-Jan-13 15:48:06

Startail I don't get your point. Why is it disrespectful to tax someone who plays football more than 50% over a threshold any more than it is disrespectful to pay someone useful like a nurse less than the footballer earns in a week?

Society has got the values all wrong. And too many people think they are rich because they are deserving and special rather than lucky! I'll be interested to see how it pans out in France, but I find it really depressing and selfish that people would rather leave than pay.

Lostonthemoors Tue 29-Jan-13 15:54:46

Amber, I expect you use roads, street lighting and museums though? Tax pays for everything the government does of course!

IndridCold Tue 29-Jan-13 16:04:41

I am old enough to remember 1974 when the government put the top rate income tax rate up to 83%. If you then took into account tax on investment income this gave a top marginal income tax rate of 98%!

A lot of high profile names left the UK - people like Michael Caine and Mick Jagger because of it.

I think that Hollande has been politically motivated by this, and I think that it has backfired on him - especially in the case of Gerard Depardieu, who is more working class (and more popular) than Hollande grin.

cantspel Tue 29-Jan-13 16:11:38

Gerard Depardieu has had a lot of stick by the french socialists over his choice to leave France. They have publicly stated he is shirking his patriotic responsibilities.

I love GD and wish he had choosen to come to the uk

PetiteRaleuse Tue 29-Jan-13 16:15:04

Gérard Depardieu was pretty much supported in his decision to leave by most French people until he went and brown nosed Putin. That was very very bizarre behaviour, and within days he has lost masses of respect in France.

mrsshackleton Tue 29-Jan-13 16:16:12

France is screwed. London is full of talented French people who'll never go back.

cantspel Tue 29-Jan-13 16:25:12

PetiteRaleuse GD announced his discion to give up his french passport after the socialist party had a pop at him and criticised his discion to move abroad. And i for one dont blame him

cantspel Tue 29-Jan-13 16:30:40

His open letter sent after Prime Minister Jean-Marc Ayrault who called the actor’s action “pathetic.”

“I’m leaving because you think success, creation, talent and anything different should be punished. I am sending you back my passport and social security, which I have never used.”

If you read any reports on the London property market, the £1m-£3m section (rather than the Russian/Arab type £10-£50m section) is currently being driven higher in a large part by higher by wealthy French families moving over here since Hollande was elected - so it is happening, not just conjecture.

*Taking 50% or more of someone's money is somehow disrespectful.

It says "You are too rich!"*

That doesn't make any sense to me. Why 50%? Is 49% disrespectful? How about 45% or 40%?

The reality is that the gov needs money to run (whether they could do it on less is a different issue) and someone has to pay it, poor or rich. Regardless how you set it up someone is going to think it unfair. Flat rate tax benefits some and penalises others, sales only tax ditto.

France could always do like the U.S. If you are a U.S. citizen then you have to declare earnings and are liable even if you are abroad. Even if you denounce your citizenship you are still liable for a while. You may be able to write off some or all of the money you earned elsewhere if you pay taxes there.

So Gerald Depardieu would have to denounce his French citizenship.

PetiteRaleuse Tue 29-Jan-13 16:43:32

I don't blame him for leaving France, but it is the fact he has taken Russian nationality and gone on about what a great democratic leader Putin is which has shocked so many French people. They were supportive of him after his open letter. Now he is ridiculed.

I hope France isn't screwed. Am pretty shocked at how gleeful the British press and very many Brits are when things go wrong in France. It's very sad.

Kenobi Tue 29-Jan-13 16:49:39

I can't remember where I read this, but apparently the way to net the most tax is not to add tax onto the super-rich, but to place a uniform £30% tax on absolutely every wage earner, regardless of wage. Because of course there are far more people on middle incomes than the very rich.

Can't imagine that going down well anywhere, but goes to show that taxing the super rich is not about money but politics, which is of course the case in France.

AmberSocks Tue 29-Jan-13 16:50:19


did you read my post?I said i know it pays for other things too.

Branleuse Tue 29-Jan-13 16:52:57

its 75% on anything over a million, not on the whole lot.
they got rid of depardieu though so money well spent

somebloke123 Tue 29-Jan-13 16:57:33

kenobi There is already such a tax rate on most people as the 20%standard rate is supplemented bu 1-% NI. The latter is just a tax thrown into the same pot - it isn't invested anywhere ring-fenced.

somebloke123 Tue 29-Jan-13 16:57:54

Sorry I meant 10% NI of course.

CoteDAzur Tue 29-Jan-13 16:59:39

socharlotte - re "it isn't obvious or even proven that that is the case.Rich people of course like to put that 'tale' about"

I don't think there are records of how many people of which income bracket leave a country when its tax rate is cranked up to such ridiculous levels as 75%, but there is ample data to show beyond any doubt that such tax rates decrease a country's overall tax income.

This is because the ones who stay then make the effort to put together tax-efficient corporate structures which, coupled with a bit of creative (but legal) accounting, makes sure their effective tax rate is far lower.

One damning consequence of such crazy tax rates is that the above mentioned corporate structures are then left in place - even if tax rates decrease back to 40%, you will see high-income people paying much less than 40%.

JoanByers Tue 29-Jan-13 17:05:25

Why would you work for one quarter of your wage? It's clearly not worthwhile.

FreckledLeopard Tue 29-Jan-13 17:11:33

It's utterly ridiculous. Hollande is killing the country and god knows what will happen when far less tax comes in and the government spending becomes utterly unsustainable.

I personally think tax in the UK is too high and would welcome lower taxes and a great ethos of self-sufficiency and far less government spending.

"Why would you work for one quarter of your wage? It's clearly not worthwhile."

You wouldn't get taxed 75% on your whole wage.

JoanByers Tue 29-Jan-13 19:47:27

Exactly, so you would already have a substantial income and no need for the extra money. If you were a lawyer, say, you would decline cases rather than work for such a low rate.

FrequentFlyerRandomDent Tue 29-Jan-13 19:56:23


I thought that the French Constitutional Court rejected Hollande's plans as they were presented because it would create anomalies/unfairness in taxation when taxing a single person vs. a couple.

Hollande is still pretty keen but he needs to go back to the drawing board.

Incidentally, this means the the recent change in CB in UK would have been rejected by the same court for the same reason.

Lueji Tue 29-Jan-13 20:15:40

Taxing the very rich has little effect on tax income for the state, actually, as only a very small percentage of the population has such riches.
But, conversely, if they leave, it has little effect too.

Increasing taxes on the very rich is a measure to please the masses only.

PessaryPam Tue 29-Jan-13 20:35:08

Lostonthemoors we are leaving. I am sure we are 2 of many, and this is from the UK where the French are going as a haven.

somebloke123 Wed 30-Jan-13 10:03:01


Well I'm not sure about that. I remember reading that the top 1% of income tax payers account for about a third of the total income tax take, and the top 10% account for almost half.

So these ultra rich people are important. Also they have the ability to move their riches overseas and out of the reach of HMRC.

Being not too hard on the rich might, paradoxically, be the best way of extracting the maximum tax revenue from them.

RedToothBrush Wed 30-Jan-13 10:14:43


Far better to put political pressure on places like The Netherlands to close up their loopholes in tax so that tax throughout Europe is more consistant. More or less flat rate tax across Europe with a much higher threshold at which you start paying tax would be better for all.

Trouble is this would put a lot of accountants out of business.

It seems grossly unfair - it hardly affects the super wealthy - those with inherited money or properties - yet it a tax on hard workers especially those like depardieu who have come from nothing and absolutely rely on their annual income.

slhilly Wed 30-Jan-13 10:28:41

The top 1% of income tax payers do indeed account for about a third of the total income tax take in this country. But this tax, if applied in the UK, would not affect most of those ~150,000 people. It would affect more like the top 0.1% because it applies above 1m euros a year. And many people who earn at that level already take extensive steps to avoid their tax obligations. And get all self-righteous about it, the pricks.

The scale of avoidance and evasion in the world is staggering and utterly disheartening. I hope that if I ever were lucky enough to earn more than £1m a year, I would remember my enormous good fortune at never ever having to worry about food, household bills or care costs, and not begrudge paying a high marginal tax rate to help fund that for everyone else.

slhilly Wed 30-Jan-13 10:31:56

If you earn €1m per annum and have done for many years, as is the case of Depardieu, then you really don't have to worry about ever earning money again. You might want to continue to earn, but you could obviously retire immediately. As for Depardieu, he has in my view chosen to become a propagandist for a vile autocrat who has is alleged to have stolen huge amounts from Russia. That is truly disgusting behaviour.

Yes, his Russian adventure is terrible - and I don't know much about the French system, however I find it tiresome in the uk, when politicians from the left with the security of family wealth - eg clegg - want to raise income tax.

CelticPromise Wed 30-Jan-13 10:43:13

But family wealth came from someone's income, somewhere! Nobody needs more than £1m a year. Those who are earning these amounts are the parents of those who ' have the security of family wealth'.

But nobody 'needs' two or three properties or 10s of millions in the bank. How then is it fairer to raise more and more money on annual income and not everything a person is materially worth?

Alibabaandthe40nappies Wed 30-Jan-13 11:53:53

Asset tax is morally wrong. They will have been bought with taxed income, and tax paid on interest and gains. To then tax the actual value of the asset amounts to robbery, IMO.

Well I don't believe in it either, but I think heavily taxing annual income is not 'fair' either.

Alibabaandthe40nappies Wed 30-Jan-13 12:29:34

I agree.

CelticPromise Wed 30-Jan-13 12:32:25

I suppose the way it works now the income is taxed, then the asset is taxed when it is passed on through IHT.

cuillereasoupe Wed 30-Jan-13 12:50:57

Gérard Depardieu was pretty much supported in his decision to leave by most French people

What evidence have you got for that petiteraleuse? Everyone I know thought it was disgraceful coming from someone who spent decades getting every penny he could from the statut d'intermittent, even though he didn't really need it.

cuillereasoupe Wed 30-Jan-13 12:55:42

I would remember my enormous good fortune at never ever having to worry about food, household bills or care costs, and not begrudge paying a high marginal tax rate to help fund that for everyone else.

I quite agree. It's shocking that only two British billionaires pay tax commensurate with their income: James Dyson and J.K. Rowling.

adeucalione Wed 30-Jan-13 14:02:54

How do you know that cuillereasoupe?

adeucalione Wed 30-Jan-13 14:04:54

For example, would certainly have though Richard Branson, and the Duke of Westminster, for example, would pay fair taxes?

adeucalione Wed 30-Jan-13 14:10:51

I've just had a look at the Rich List - we've only got 32 billionaires apparently, and this includes people who are not British but are based here (such as Lakshmi Mittal and Roman Abramavich). You could tax them til they squeaked and it wouldn't make much difference.

bemybebe Wed 30-Jan-13 15:43:10

The ridiculous things is that Lakshmi Mittal and Roman Abramavich probably pay 30,000 pounds only or thereabout on their world-wide income.

cuillereasoupe Wed 30-Jan-13 15:54:17

Among the 54 billionaires resident in 2006 (the most up-to-date figures) a total of £14.7m was paid in tax. Mr Dyson alone paid £9m of that.

slhilly Wed 30-Jan-13 20:57:04

adeucalione, why would you think Richard Branson pays fair taxes? Virgin has an opaque company structure. In 2011, there was a London to Geneva move - would have brought down the tax bill. And he spent a night in jail on suspicion of tax evasion.

I am constantly amazed about how much slack we're willing to cut rich people cf poor people. I would be stunned if Branson paid a tax rate of 50% on the millions he earns each year.

Additionally: the Rich List is incomplete. 32 billionaires paying 50% tax on income would amount to several billion extra pounds per annum, esp if the convenient flexibility of choosing whether to treat new wealth as income or capital gains were shut down.

You might want to look at this report and the charts, in particular. If you're tempted to dismiss it as special pleading by a special interest group, take a look at who put it together: James Henry, McKinsey's former chief economist. That means he's (a) right at the top of his field and (b) very comfortable indeed with corporates, money-making etc - both with the technicalities of how and the ideas that it happens. It's not exactly the profile of someone who wears lentil sandals.

adeucalione Thu 31-Jan-13 08:44:30

I didn't like the link to the Independent, because they don't mention their source and I can't take statistics seriously if they're plucked from thin air.

However, I googled and found that the research was allegedly carried out by Grant Thornton (tax advisory service) and was commissioned by the Sunday Times after HMRC refused their FOI request for the information - I only say allegedly because this fact is repeated by various blogs and socialist websites but I couldn't find anything on either the Sunday Times or Grant Thornton website, although it was in 2007 I think so may just have disappeared.

What I don't understand is how Grant Thornton would have access to records that are private (personal taxes, not company accounts) and the information does appear to be based on what the 32 billionaires could have paid (had they taken advantage of every loophole available to them) and admits that they have no way of knowing whether these avoidance schemes were utilised or not.

slhilly - I dunno, just plucked his name off the list because I recognised it but I'll read your links now.

adeucalione Thu 31-Jan-13 08:52:05

No, I'm not clever or patient enough to wade through that document - but I did just google Richard Branson and find that he has a conviction for tax evasion dating back to the 70s, so will concede that that was definitely a poor choice!

TarkaTheOtter Thu 31-Jan-13 09:01:53

I think beyond a level/degree level economics the laffer curve is actually quite controversial. If I recall correctly there is not a lot of empirical evidence to support it. I'd be interested if anyone could provide any evidence of it in action.

TarkaTheOtter Thu 31-Jan-13 09:20:08

Actually I'm being too polite - "controversial" should read discredited. It's a theoretical concept which did not survive empirical testing.

somebloke123 Thu 31-Jan-13 10:35:38

TarkaThe Otter

You can prove it almost mathematically.

Take the two extreme positions.

First, suppose income is taxed at 0%. Total tax take for the government is zero, obviously.

Now suppose income is taxed at 100%. Total tax take for the government is again zero, equally obviously. People aren't going to do work where every penny they earn is handed over to the tax man.

There must be a point as the tax rate gets higher and higher where the total tax take stops going up and starts to decrease.

CelticPromise Thu 31-Jan-13 10:50:42

But people don't just work like numbers. So that wouldn't work.

somebloke123 Thu 31-Jan-13 11:01:04

But it does work. When Nigel Lawson abolished the top rate of tax (then 60%) the tax take from the top earners actually went up, not down.

CoteDAzur Thu 31-Jan-13 11:08:30

Tarka - I studied optimal tax rate and Laffer Curve at MBA level and looked into US data that clearly shows tax revenues decreased when tax rates were raised above a certain level.

Laffer Curve isn't necessarily symmetrical nor even single-peaked, but there is no doubt either theoretically or empirically that you can only squeeze taxpayers so much and above a certain level they will either just not work or come up with creative ways to present their accounting - i.e. evade taxes.

CoteDAzur Thu 31-Jan-13 11:26:40

"But nobody 'needs' two or three properties"

It is not a "need" thing. It is a "want" thing. People work for things they want. If they are not allowed to have those things, then they will not work as hard - simple as that.

This has been the point of contention between capitalist economic theory and communist economic theory, and the latter lost. "To each according to need" just doesn't work in real life, because not everyone likes everything in the same way - To you it might look like I need a bike because I don't have one, but maybe I don't care to have one but would want several more books instead. To you it might look like I don't need a second house but maybe that is all I work for, to house my elderly parents.

Read up on Utility Function and you will see what I mean.

adeucalione Thu 31-Jan-13 11:38:13

Tarka - who discredited it? you?

For every article that blithely refers to it as discredited, there's another that says it's the best thing since sliced bread, but most agree that tax cuts for the rich paid for themselves when Reagan reduced the top rate from 70% to 28% (although not necessarily across all socio economic groups). Unpalatable perhaps, but true - fair taxes for the rich mean that they save themselves the cost of a fancy accountant and pay what they owe.

Alibabaandthe40nappies Thu 31-Jan-13 11:40:20

But nobody 'needs' two or three properties or 10s of millions in the bank.

You cannot start taxing people on the basis of need.
If we use that premise then any benefit claimant who spends money on cigarettes, alcohol, anything other than the most basic clothes and food doesn't 'need' the amount of money they have and therefore their benefit could be reduced.

Obviously this would be totally unpalatable.

Astelia Thu 31-Jan-13 11:47:53

There are two tax rates where the government collects nothing- 0% and 100%. In between that the government has to be very careful not to frighten away its cash cows as the highly paid put a huge amount of money into the country coffers.

So YANBU OP, France is going to lose a lot of money doing this. I just hope those leaving France move to the UK to spend their money and pay their (much lower) tax.

niceguy2 Thu 31-Jan-13 11:48:19

I think most people who think that taxing the rich until the pips squeak 'cos they dont need it' miss a very important point.

And that a lot of these 'rich' people do not actually have billions sat in some swiss bank account. Most of the time these super-rich are merely so on paper only. Their riches are often for example based on the shares they own. And as we all know, share prices can go down as well as up.

If you look at their actual income it's probably only a tiny fraction of their overall 'riches'.

Can I just point out when I said: "nobody 'needs' two or three properties or 10s of millions in the bank." This was my (unclear) response to 'nobody needs more than £1 million a year."

I agree with Cote and Alibaba. I certainly don't want some bureaucrat - telling me exactly what they think my family 'need'.

niceguy2 Thu 31-Jan-13 11:54:10

using the 'nobody needs' argument, nobody NEEDS two TV's.....nobody NEEDS a car (we can walk or use public transport). Nobody NEEDS to go on holiday.

It's a ridiculous argument and one which has no place in a free society. I don't want someone else telling me what I need or don't need.

slhilly Fri 01-Feb-13 13:13:27

niceguy2, what does it matter that rich people hold their wealth in a variety of asset classes of which cash is only a small component? The volatility of those other asset classes (property, shares, bonds, financial instruments, jewellery, art etc) is sometimes less than cash and sometimes greater. They are obviously less liquid than cash too. But you are kidding yourself if you think that the average billionaire doesn't have enough liquidity to buy a house on the Bishop's Avenue in cash.

The fact that income may be much lower than net wealth is self-evident: it's only the poor where this is not the case, as they have no chance of accumulating a capital cushion. It doesn't mean that the rich would be unable to pay higher taxes, or that they are not "really" rich.

niceguy2 Fri 01-Feb-13 13:30:53

Slhilly. my point is that I think a lot of people simply think that these billionaires have it all sat in the bank and the government can just wave a legislative magic wand and magic away our financial problems.

And I am trying to point out that this is not the case. That often we say people are millionaires/billionaires because of their assets. Often assets they cannot easily liquidate. So you wouldn't get anywhere near the tax revenues that people think the rich should pay.

slhilly Fri 01-Feb-13 14:10:38

I think you are conflating at least three things:
1. can illiquid assets be taxed?
2. do the rich own enough wealth to (in theory) solve the country's financial woes if the government were to tax their assets to some (great) degree?
3. what would happen if the government were to try such a thing?

1. Answer is yes. It just takes time for the money to arrive. Example is houses and SDLT. Or the introduction of the new Estate tax by the Asquith government. Obviously, there are moral questions about rates, and there are practical issues of depressing market values by requiring asset sales, but there's no doubt it can be done.

2. Answer is yes. The rich are sitting on hundreds of billions of assets. Enough to make our financial problems as a country go away entirely. See the report I linked to above for a global perspective on this.

3. Who knows. But obviously, the rich have the motivation and means to take steps to minimise their tax liabilities, and the greater the tax level, the greater the incentive. However, the incentive exists anyway, and the opposite problem also exists - there's lots of forum shopping for the lowest tax regime that can be found, all the way down to zero. If global average tax rates were say 7%, and one country offered 5%, many rich folks would be likely to shift domicile to that country to take advantage. For governments, it's like retailers offering discounts, it needs to be done carefully or you end up with no margin (tax take).

TarkaTheOtter Fri 01-Feb-13 14:15:00

"First, suppose income is taxed at 0%. Total tax take for the government is zero, obviously.
Now suppose income is taxed at 100%. Total tax take for the government is again zero, equally obviously. People aren't going to do work where every penny they earn is handed over to the tax man."

All you have shown with that logic are two discrete points. What happens in between is anyone's guess. Why is it a nice symmetric curve? The peak could quite easily be at 75% or 99%. Or it might not even be a smooth curve at all? It is quite feasible that there is a psychological cliff face above which people think there is no benefit to further work and therefore there could be a vertical component to the "curve".

There is plenty of evidence ( see in particular the work of Krugman) disputing the shape of the laffer curve.

TarkaTheOtter Fri 01-Feb-13 14:24:53

No, not me, I am a microeconomist and haven't studied the laffer curve since before my PhD (if we are comparing letters wink).

Nobel price winning, and professor of economics at Princeton, Paul Krugman has a thing or two to say about it though.
Ps. He also worked for the administration during the Reagan years so I'm guessing he's pretty clued up as to what went down (hint: not budget deficits).

CoteDAzur Fri 01-Feb-13 14:27:58

It is not "anyone's guess". As I said below, the shape doesn't have to be symmetrical or even single-peaked, but there is no doubt whatsoever that tax revenue decreases after a certain point.

There is no single Laffer Curve, to be applied to all countries across all time - i.e. you can't expect its shape to be identical across history and geography. However, its point is undisputed. You can only raise interest rates to a certain degree before your tax revenues start declining.

I am truly sorry if this is against your belief system.

CoteDAzur Fri 01-Feb-13 14:30:14

If you are an economist, would you explain what you meant when you said that Laffer Curve was 'discredited'?

By whom? And when?

slhilly Fri 01-Feb-13 14:39:41

As Krugman says in that article, the Laffer curve focuses on the wrong thing: "the problem with super-high rates isn’t so much that they reduce incentives to work; it’s that they create huge incentives to avoid or evade." But of course many rich folks make significant efforts to avoid or evade even low rates.

TarkaTheOtter Fri 01-Feb-13 14:42:16

"Prize" not "price" obviously.

TarkaTheOtter Fri 01-Feb-13 15:05:18


We are agreeing for the most part - there is little evidence for the inverse u-shaped laffer curve. I also agree that at some point if you raise taxes, tax revenue will fall. I'm just saying that this point might only be 100%. I think it is likely below this but no-one has shown that empirically to a high degree of statistical significance. iUnless you can link to something for me. Therefore aside from 0 tax revenue at 0% and 100% (and you could dispute the latter because there are non-financial rewards to working which you could add to your utility function). We know very little about what happens in between.

In fact, given that there is actually very little variation in the average (as opposed to the marginal) tax rate in any given economy, we will probably never be able to accurately predict most of the interval 0-100.

By discredited I meant a lot of people think it is bollocks. Hth

blondecat Fri 01-Feb-13 15:15:21

Not at all

You forget France also has a Wealth taxi paid on all your assets annually. If your assets value goes up and down eg shares you don't get a refund either

And income tax is levied not on your cash income but on what the state deems to be your income, usually higher.

Poor FIL paid his tax in April. Hollande won the election and in July he got a demand for the same again. confused 75% rate didn't come into this.

If you are asset rich, cash poor you can easily be forced to sell things to pay your taxes. The incentives for tax minimization are huge. As are the penalties. Try dawn raids by armed police.

The very rich of course avoid it.

HannahsSister40 Fri 01-Feb-13 15:19:27

Hollande and his government are a shining example of how socialism does not work.

CoteDAzur Fri 01-Feb-13 22:03:41

Tarka - No, it doesn't look like we are agreeing at all.

"I also agree that at some point if you raise taxes, tax revenue will fall. I'm just saying that this point might only be 100%"

That is a laughable claim. If you have studied any macroeconomy at all (and I suppose you would have to if you are a "microeconomist"), you would have went over the data that shows beyond any doubt that significantly increased taxes result in lower tax revenue. US has ample data supporting this.

In any case, nobody in their right mind would claim that people would continue to dutifully pay their taxes or even work at all if tax rate was 99% hmm

"By discredited I meant a lot of people think it is bollocks. Hth"

No, that doesn't help grin "Discredited" doesn't mean that at all and I don't understand how you can possibly have written a PhD thesis (on economics, no less) if you have such an imprecise grasp of the English language.

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