to not be surprised that France's intention to heavily tax the rich will result in less tax intake?(110 Posts)
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.
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.
For example, would certainly have though Richard Branson, and the Duke of Westminster, for example, would pay fair taxes?
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.
The ridiculous things is that Lakshmi Mittal and Roman Abramavich probably pay 30,000 pounds only or thereabout on their world-wide income.
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.
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.
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.
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!
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.
Actually I'm being too polite - "controversial" should read discredited. It's a theoretical concept which did not survive empirical testing.
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.
But people don't just work like numbers. So that wouldn't work.
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.
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.
"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.
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.
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.
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.
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'.
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.
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.
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.
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).
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