Friday, December 26, 2014

Condolences to Piketty, Saez, and the 250 French Economists Who Endorsed Francois Hollande for President and his 75% Tax Rate on the Super Rich

In 2012, 250 French economists endorsed Francois Hollande for President, especially his proposal to impose a 75% marginal tax rate on the earnings of French residents that exceeded one million euros, an increase of 30 percentage points over the top rate of 45%.  Once in office, Hollande promptly imposed the tax.

Two years later, Hollande is letting the 75% top rate expire on December 31, 2014, which takes it back 45%.

Piketty, Saez, and their colleagues must have had a "Blue Christmas."

The imposition of a 75% marginal tax rate on the super rich had no impact on reducing inequality.  It collected only 420 million euros over two years, amounting to 0.005% of France's October 2014 deficit of 87 billion euros.  Indeed, it is likely that lost investment reduced the incomes of low- and middle-income French households more than 420 million euros.  France's appeal as a home for high-income earners was damaged along with its competitiveness for international senior managers.

It will be a very long time before another leftist French government, or a government of any stripe in Europe, puts Piketty into practice.

Professors Piketty and Saez should have been aware of the famous quote:  "Be careful what you wish for. You just might get it."

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