If you Tax the Rich in France at Confiscatory Tax Rates they will Leave France

Posted by PITHOCRATES - December 15th, 2012

Week in Review

Rich people won’t leave the country if we raise tax rates.  Governments everywhere say this.  For they will believe that people with the ability to create wealth will just sit idly by while the government takes it away.  So believed the French socialist president.  François Gérard Georges Nicolas Hollande.  Who said he would tax millionaires at 75%.  And by golly he’s going to do it.  But it turns out those who can create wealth are none too keen on paying 75% of everything they earn over a million to the government.  And they’re saying so.  Not so much in words.  But with their feet (see Gerard Depardieu moves to tiny tax haven in Belgium just 800 YARDS from border where a third of people are French citizens dodging Hollande’s high taxes by Ian Sparks posted 12/10/2012 on the Daily Mail).

French film star Gerard Depardieu has moved into his new ‘tax exile’ mansion in Belgium – just 800 yards from the border with France.

The 64-year-old actor’s lavish home in the village of Nechin – on a street known as Millionaire’s Row – is less than two minutes drive from the French town of Roubaix.

Depardieu is the latest wealthy Frenchman fleeing a looming new tax of 75 per cent on all earnings over one million euros – about £850,000…

France’s economy minister Pierre Moscovici hit out this week at repeated warnings in the world’s media that France’s richest people were fleeing overseas.

He told a conference of business leaders in Paris: ‘I am troubled to read in the papers that the exile has begun, and that companies are fleeing…

His comments also came after Laurence Parisot – head of MEDEF, the French equivalent of the UK’s Confederation of British Industry – warned last month that left-wing economic policies risked turning France into ‘the poor man of Europe’.

She said: ‘Large foreign investors are shunning France altogether. It’s becoming really dramatic.

Now before you say the rich are a bunch of evil unpatriotic people who put their greed before the welfare of their nation answer me this.  Did you buy a lotto ticket for that recent half billion dollar jackpot?  If so, why?  Did you want that half billion?  Or did you want to win it so you could give it to the government to help the welfare of the nation?  Don’t answer that for it’s a stupid question.  People buy lotto tickets because they want to be rich.  So they will support raising taxes on the evil rich right up until the day they win a big lotto jackpot and become one of the evil rich.

Let’s look at what winning that jackpot would be like if the U.S. had a top marginal tax rate of 75% for all earnings over a million dollars.  Based on the 2011 tax rates for married filed jointly, and adding the 75% rate to the top of those tax rates, how much of a half billion dollar jackpot do you think you would be able to keep?  After paying your federal income tax of $374,818,212 you’d have only $125,181,789 left.  That’s still a lot of money.  But how many of you would be satisfied with winning $500,000,000 while only being able to keep $125,181,789?  Not many I’m guessing.  Most probably would say that’s not fair.  Which is what people like Gerard Depardieu are saying in France.  And why they are moving to Belgium.

Being a rich, greedy bastard is a sliding scale.  If you earn $35,000 annually anyone earning more who doesn’t vote to increase tax rates on the rich is a rich, greedy bastard.  Should you win a $500 million lotto jackpot the rich, greedy bastard line moves up.  And only applies to people earning more that $500 million.  So you can keep what is yours.

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Upward Mobility

Posted by PITHOCRATES - December 6th, 2012

Politics 101

When Old Enough not to Violate Child-Labor Laws we worked After School at the Local Hardware Store or Supermarket

Once upon a time one of our first jobs was delivering newspapers.  We used to call these people paperboys.  Then girls said they wanted to earn money, too.  We called them papergirls.  Boys and girls would fill up a bag full of newspapers slung on their bike and start peddling through the neighborhood.  Raising a little spending money while they still were in school.  They didn’t make much.  They couldn’t keep doing this as a career and raise a family.  But they made a lot of money for a 14-year old kid.

When these kids grew old enough to get a job without violating child-labor laws they went to work after school at the local hardware store or bagged groceries at the supermarket.  Or worked at McDonald’s, Burger King, Wendy’s, Dairy Queen, Baskin Robbins, Big Boy, etc.  During the summer they flocked to vacation areas and worked in the tourist economy.  Anxious to earn money to put gas into their cars.  Or go to the mall.  Again, they weren’t making big bucks.  Nothing that they could raise a family on.  But they earned more than delivering papers.  And were able to buy the things that were important to them.

Once we graduated high school some got jobs at factories.  Some went into the skilled trades.  While some went on to college.  Working as waitresses to pay their way.  Pressing clothes at a dry cleaner.  Working as a short order cook.  Or working their summers in construction.  As well as working some odd jobs on campus between classes.  Saving every penny to pay for their books.  Room and board.  Even their tuition.  While still finding time to study.  These kids worked very hard between their studies and their jobs.  Using their earnings to pay their bills.  While leaving them less spending money to have fun with than those paperboys and papergirls had.  Who weren’t paying for books, room & board and tuition.

The American Dream is Being Free to Work Hard and Sacrifice to make a Better Life

These jobs we worked during our high school and college years were entry level jobs for the unskilled.  Which is why they didn’t pay much.  To reflect that skill level.  But they gave us job experience.  And a little spending money.  Which was fine during those years because our spending needs were modest.  Besides, these jobs weren’t our careers.  They were just stopping points on our career paths.  Where we learned some important job skills (be on time, work hard, how to work with other people, that the customer is always right, etc.) that helped us in our next jobs.  And we moved from job to job.  Gaining skills.  And income.  Until we could afford to raise a family.

Many started college after working for awhile.  Or returned to college.  Taking a couple of classes at night after work.  To gain additional skills to advance in the company.  Or to gain the skills to make a career change.  So they could earn more money.  To afford more things in life.  Like a better home.  In a better neighborhood with better schools for their children.  Living the American Dream.  Having whatever they want simply by working extra hard to have it.  Which they could if they chose to put in the effort to increase their value in the market place.  Which has always been the way to achieve our goals.  Working hard and sacrificing to make a better life.  Which is what brings others to our shores.  To be free to live the American Dream.

Immigrants coming to this country often took menial jobs.  Such as sweeping the floor in a factory.  Saving every penny.  Improving their language skills.  If they needed to increase their language skills.  Working hard.  And when they acquired some skills they moved up.  Earning enough to bring their wives over from the old country.  Who also started working a menial job upon their arrival.  To help earn enough money to buy a house to raise a family in.  The husband’s hard work took him further up in the company.  Or he set off on his own.  Going into business for himself.  Working even longer hours to provide for his family.  Living out the American Dream.  Working hard so their children can have a better life.

In the US People can go from being Poor to Middle Class to the 1% back to Middle Class and even back to Poor

Sara Blakely tried to be a lawyer but couldn’t pass the LSAT law exam.  She spent some time as a ride greeter at Disney World.  After that she tried selling fax machines door-to-door.  Seeing a lot of doors slammed in her face.  Not exactly the life she dreamed of.  And if that wasn’t bad enough there was something else that bothered her.  The way she looked in white pants from behind.  And set out to do something about it.  Starting with $5,000 Sara Blakely created Spanx.  A company selling slimming bodywear that she invented.  And about a decade later Spanx is now worth $1 billion.  Pleasing some 6 million women.  Who helped her give some $20 million to charity.

Currently in America there is a war on the rich and successful.  Those on the Left are attacking those with money.  Those who have worked hard and have earned wealth.  Claiming that they got their wealth unfairly.  And aren’t paying their fair share in taxes.  That contemptible 1%.  Those people they rile up the masses to hate.  As if this 1% is a monolithic permanent upper class.  As if every millionaire today has always been a millionaire.  As if none of them ever failed the LSAT law exam.  Worked as a greeter at Disney World.  Or sold fax machines door-to-door.

But the 1% is not a permanent monolithic upper class.  As people like Sara Blakely prove.  And the others like her who have worked hard.  Starting with little more than an idea.  And a few years of savings.  We call it upward mobility.  Those in the 1% were likely at different income levels throughout their lives.  Starting out poor.  Working their way up to middle class.  And the lucky few like Sara Blakely breaking into the 1%.  Who earned every dime she has.  And just as people can work hard to rise up to the 1% they can just as easily fall from the 1%.  For there are no monolithic classes in the United States.  Anyone can succeed here.  And anyone can fail.  So here people can go from being poor to middle class to the 1% back to middle class and even back to poor.  Because in America you can live the American Dream.  Where you’re free to do anything you want to try.  You can work hard to succeed.  And you can fail trying.  But the key is this.  Here you can try.  Which is a lot more than people in many parts of the world can ever hope to do.

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The Occupy Wall Street Protesters don’t want Fairness, They want Privilege

Posted by PITHOCRATES - October 9th, 2011

People who hate Capitalism hate America

Those on the Left keep trying to paint these Wall Street protesters as the Left’s version of the Tea Party.  Only better because they are standing up to corporate greed.  But when you step back and look at the broader picture you see some interesting things.  For one, our enemies abroad hate the Tea Party.  And love these Wall Street protestors (see Iran calls Wall Street protests ‘American Spring’ posted 10/9/2011 on The Associated Press).

An Iranian military commander said Sunday that the protests spreading from New York’s Wall Street to other U.S. cities are the beginning of an “American Spring,” likening them to the uprisings that toppled Arab autocrats in the Middle East.

Gen. Masoud Jazayeri of Iran’s Revolutionary Guard said the protests against corporate greed and the gap between rich and poor are a revolution in the making that will topple what he called the Western capitalist system.

So the Occupy Wall Street people have the support of Nancy Pelosi, Hugo Chavez and this guy.  This Iranian general.  Who hates America.  And would love nothing better than to see its collapse.  There’s a lesson here.  People who hate capitalism hate America.

What strange bedfellows.  Pelosi.  Chavez.  And this Iranian general.

Class Warfare Works because Gullible People are Fed with Misinformation to Produce a Withering, Festering Hate

But they don’t see that.  These Occupy Wall Street people.  All they keep hearing is how the rich are screwing them.  And business owners are getting rich by underpaying them.  Because many of them think gross sales are also net profits.  They’re not.  And have no idea of what it costs to run a business (see Small Business, Occupy Wall Street Is Aimed at You! by T. Scott Gross posted 10/9/2011 on Forbes).

Small business owners, this protest is about money—yours. And if you want to bring a semblance of sanity to the discussion, you had better start showing the money…

So I say you had better show them the money. Gather your employees. Take a handful of coins that add up to a dollar. Swipe away your cost of goods. Take out payroll and then payroll taxes. Follow with utilities, cost of capital, training, advertising, maintenance, insurance, and the rest until you have accounted for all the overhead, leaving those few lonesome pennies of profit that you have risked everything to make.

Been there.  Done that.  The problem is they won’t believe you.  Because they’ve been so brainwashed to believe you are lying when it comes to the money.  Say all you want but someone is telling them, “Sure, they say that, but look at the car your boss drives.  The house your boss lives in.  Are they better than yours?  You bet they are.  And you know why?  Because they’re screwing you.  That’s why.”

This is why class warfare works so well.  You have people who don’t know any better.  Being fed with misinformation to produce a withering, festering hate.  Which is how people like Nancy Pelosi, Hugo Chavez and this Iranian general rise to power.  By exploiting the gullible masses.

The Obama Administration wants us to Hate People Making $250,000 or More

This kind of hate makes it easy to tax the rich.  Which is a very popular sentiment these days.  Because everyone hates the rich.  Especially those who don’t make the rich cut (see Democrats aim to tax the rich — but who are they? by Kathleen Hennessey posted 10/8/2011 on the Los Angeles Times).

President Obama and Democrats in Congress have aligned on a populist, “tax the rich” strategy for the 2012 campaign. Now they have to figure out exactly who that is…

Obama and his fellow Democrats for years have described the wealthy as couples making more than $250,000 and individuals making more than $200,000 — 3% of U.S. households. By shifting away from that number in hopes of benefiting from the sound-bite punch of a millionaires tax, the administration may find it difficult to return to casting the broader net…

Obama’s threshold was based on broad principles, including the desire to leave the middle class untouched by higher taxes while collecting “enough” tax revenue, Bernstein said, although even he quibbles with the president’s cutoff and suggests that a broader tax increase may be needed in the future.

Going in the other direction — aiming for incomes of $1-million-plus — would yield far too little revenue to fund “a recognizable government,” Bernstein said. While the Democrats’ surtax proposal may make sense to pay for a jobs bill, “it’s actually quite important that $1 million does not become the new $250,000 when it comes to the permanent tax base,” he added.

Well, that complicates things.  Who’s rich?  People earning $1 million or more?  Or people making more $250,000 or more?  Who exactly are we to hate?

The Obama administration wants us to hate people making $250,000 or more.  Because there are a lot more of them than millionaires.  So that’s a lot more money they can spend.  But it’s also a lot of people to piss off by raising their taxes.  And with an election year coming up that’s the last thing those up for reelection in Congress want to do.

But if they only settle for $1 million now will that mean it will be harder to hate those making between $250,000 and $1 million later?  Oh me oh my.  Just who to hate?  As you can see this is quite the quandary for the hate monger.

Stimulus is Temporary whereas Tax Cuts and Deregulation are Forever

But there is a bigger issue at play.  You see, the problem with hating those earning between $250,000 and $1 million is that this income range includes our small business owners.  The job creators.  Who tend to not create jobs when things bother them.  Such as people waving their pitchforks at them crying, “Tax!  Tax!  Tax!” (see Poor Sales by Russ Roberts posted 10/9/2011 on Cafe Hayek).

Finally, I would note that while the survey that Invictus cites does indeed list “Poor Sales” as the single most important problem (25% in the September survey (scroll down to “Single Most Important Problem), taxes are listed as the single most important problem by 18% and government regulations and red tape is listed by 19%. So the two combine to 37%. They also happen to be two factors that government can actually control.

The Keynesians look at this and say we need more stimulus.   But if they’re saying this after that $800 billion stimulus in 2009 you can have but one conclusion.  Stimulus doesn’t work.  A big reason for this is that stimulus is temporary.  Like pain.  Whereas tax cuts and deregulation are like pride.  They’re forever.

Sales are complicated.  A lot of things influence people before they depart with their hard-earned money.  And there’s not a lot government can do about that.  But there’s a lot they can do about taxes and regulations.  And they do.  Unfortunately, they always choose to do the wrong thing.

The Occupy Wall Street People are Angry at Capitalism because they weren’t Born into Privilege

There are a few kinds of people in the world.  The informed.  Such as Tea Party People.  Who cite law and tradition in at their Tea Party events.  And the uninformed.  Such as the Occupy Wall Street People.  Who are an angry mob.  Angry at capitalism because they weren’t born into privilege.

And then you have people who love America.  And those who hate America.  Such as Iran.  And Hugo Chavez in Venezuela.  Enemies of freedom.  And democracy.  Who have come out to support the Wall Street protestors.  There’s another lesson here.   Actually, it’s the same lesson as before.  People who hate capitalism hate America.

Here’s a solution to solve their unhappiness.  Let’s ask these protesters which country is better than America.  Whatever nation that is we’ll generously pay for their one way airfare there.  Problem solved.  Everyone happy.

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Obama’s Millionaire Tax won’t Provide Serious Deficit Reduction

Posted by PITHOCRATES - September 18th, 2011

Deficit Reduction is Important Enough to Raise Taxes but not Important Enough to Cut Spending

Hmmm, a Democrat deficit reduction package.  I wonder what that could mean. Spending cuts?  Or tax hikes?  Well liberal Democrats like to tax and spend.  And Barack Obama is a liberal Democrat.  So it must be tax hikes (see Obama to offer his own debt reduction package by Jim Kuhnhenn, Associated Press, posted 9/18/2011 on Yahoo! News).

Administration officials see the task of attending to deficits as necessary but not necessarily urgent, compared with the need to revive the economy and increase employment.

What do you know about that?  It’s tax hikes.  What a surprise.

Translation?  It’s important enough to raise taxes to cut the deficit.  But not important enough to cut spending.  In other words, it will be government as usual.  More Keynesian ‘stimulus’ spending.  Which is code for rewarding political friends and allies.  With taxpayer money.  And more class warfare.  Blaming the Obama recession on Republican tactics.  Namely, responsible governance.

The White House signaled its approach Saturday by highlighting a proposal in the president’s plan that would set a minimum tax rate for taxpayers earning more than $1 million.

The measure — Obama is going to call it the “Buffett Rule” for billionaire investor Warren Buffett — is designed to prevent millionaires from using tax-avoidance schemes to pay lower rates than middle-income taxpayers. Buffett has complained that he and other wealthy people have been “coddled long enough” and shouldn’t be paying a smaller share of their income in federal taxes than middle-class taxpayers.

Coddled?  You tell me if we’re coddling these people.

Compare the numbers.  A $60,000 middle class salary pays a current top marginal tax rate of 25%.  That’s somewhere around $11,000 in federal income taxes.  One of these coddled ‘Warren Buffet‘ millionaires may earn $40 million on a half billion dollar investment portfolio.  Taxed at 15% that’s a capital gains tax of $6 million dollars.  So one ‘coddled’ millionaire pays the equivalent of 3,636 middle class taxpayers.

If you look at it this way, rationally, without your head up your keister, you can only arrive at one conclusion.  You don’t want to raise tax rates on the wealthy.  You want to breed them.  With tax policy that encourages the making of more Warren Buffet-class millionaires.

For each new ‘coddled’ millionaire that’s another 3,636 middle class people that could receive significant tax relief.  How?  Lower tax rates across the board.  The middle class pay less.  And more millionaires pay more tax dollars.  The ultimate goal of tax policy.  If you’re not a liberal Democrat, that is.  Whose ultimate goal is, of course, class warfare.  So you can advance policy that is detrimental to the economy.  But beneficial to growing government.  And rewards political friends and allies.  With taxpayer money.

Business Owners Understand their Businesses and Fiscal Policy and are Tiring of being Cash Piñatas

If you’re of the older persuasion you’ve no doubt heard these arguments before.  And after hearing them all these years they don’t fool you anymore.  If you ever were in the first place.  Still, it doesn’t stop them from trying (see Sorry, But The Republican Arguments Against A “Millionaire’s Tax” Are Just Preposterous by Henry Blodget posted 9/18/2011 on Business Insider).

The rest of the Republican counter-arguments are just silly, self-serving, or obstructionist. Let’s take them one by one, ending with the one that seems most persuasive to reasonable people.

“Taxes are a form of theft.”  This is just ridiculous. It’s like arguing that paper money is illegal.

Government is a necessary evil.  Government takes money earned by others.  To pay for public goods.  Everyone understands this.  What people don’t understand is the bastardization of the meaning of public goods.

A public good is a thing that an individual can’t buy.  An individual can’t buy an army and navy to protect himself.  Or herself.  A private individual can’t buy a fresh water and sewage system for himself.  Or herself.  These are public goods.  We pay for these things with taxes.  Everyone pays a little to enjoy the benefits of these massive and costly things.

But we can feed ourselves.  Provide for our own retirement.  Pay for our own healthcare.  We can do these things.  It may be harder for some than others.  But it can be done.  So these things are not public goods.  But government today treats them as public goods.  Taxing us far more than they should.  So they can curry favor with voting groups.

So buying votes with tax dollars may be legal in the strictest sense.  But it is closer to theft than legitimate tax policy.  And printing paper money to fund even more of this spending is generational theft.  A millionaire tax just facilitates more government spending for things government shouldn’t be paying for.

Here is a list of the arguments Blodget says are typically made against raising taxes on millionaires.  Which he goes on to repute.  But I think the arguments speak for themselves.

  • Raising taxes on millionaires will kill their ambition and discourage them from working
  • Raising taxes on millionaires will punish successful people for being successful
  • Raising taxes is always a terrible idea–the problem is spending
  • Taxes are a form of theft: The government has no right to take our money away
  • Raising taxes in a weak economy will further weaken the economy

These are all true.  People like to point to that top marginal tax rate of 1950s when the economy was booming.  But no one paid it.  People hid their earnings in tax shelters to avoid that 90% rate.  Contrary to popular belief on the Left, they didn’t whistle a happy tune and pay it.  They fought it.  And won.  It was a joke.

High taxes do influence rich people.  They will redirect their wealth from income producing.  To wealth preservation.  When tax rates are high.  Just like middle class people do with their 401(k)s.  When they approach retirement.

If a small business earns $1+ million a year, and the owner “passes through” all this income and pays taxes on it, Obama’s “millionaire’s tax” will encourage this owner to do the following:

  • Pay him or herself less
  • Hire more people or otherwise reinvest the money in the business (so it won’t be taxed)

These moves, in turn, should do two things:

  • Help create new jobs (which will help the overall economy)
  • Help grow the owner’s business, thus increasing his or her net worth

Yeah, it could work out like that.  Or it could go another way.  The small business owner can look at this tax policy as a sign that government has no intention of cutting their irresponsible spending.  Which means deficits will only continue to grow.  Which means there will be more taxes in the future.  As there will have to be if they don’t cut spending.  And baseline budgeting keeps increasing that spending every year.  Not to mention all those off-budget spending obligations.

Now business owners live in the real world.  They have to pay payroll taxes with every payroll.  And deal with other taxes and regulatory costs on a daily basis.  They don’t have the luxury of sitting back and prognosticating how tax policy should make business owners behave.  Instead, they’re acting ahead of policy.  They’re listening to this debate and preparing for the worst.  Even before tax policy changes.  Because if they don’t it may be too late when it does.

So this kind of talk is already keeping them from hiring new people.  They are deleveraging left and right.  Because they, unlike government, understand their businesses.  And fiscal policy.  They see what they are to government.  Big, fat cash piñatas.  And they’re tired of being whacked.

They Need to Tax Millionaires because They’re Making Spending Commitments no Amount of Taxation can Sustain

A millionaire tax.  That’s where it starts.  But it’s not where it will end.

People need to understand why government ‘needs’ to tax millionaires.  It’s not because they haven’t been paying their fair share.  It’s because of record deficits.  And record debt.  Caused by record spending.  Just look at the numbers.

Adjusted for inflation, Ronald Reagan‘s largest deficit was $442.614 billion.  George W. Bush‘s largest deficit was $462.56 billion.  In Obama’s first year in office his deficit was $1,416 billion.  In his second year it was $1,294 billion.  They project it to be $1,650 billion in 2011.  And one thing we know about Barack Obama is that he’s not going into the history books as a tax cutter.  So these deficits aren’t from tax cuts.  They’re from spending.

Because of baseline budgeting this spending stays on the books.  And it will only grow.  And all those off-budget spending obligations are growing right along with it.  Such as the trillions the government owes to the Medicare and Social Security trust Funds.  And on top of all of that is Obamacare just waiting to add to our fiscal woes.  This is why they ‘need’ to tax millionaires.  Because the government is making spending commitments no amount of taxation can sustain.  So they will start with millionaires.  Work their way through the middle class.  Then they’ll have no choice but to start rationing benefits.  Followed by austerity.  Then the anarchy comes.  Like in Greece.

This is why we should not add a millionaire tax.  It will not address the spending problem.  And will only facilitate more spending.  Delaying the inevitable day of reckoning.  And making it ever more painful.

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