The vastly unsuccessful French hate tax has driven scores of highly productive French professionals and entrepreneurs into financial diaspora. As things look right now, the French government can be happy of the 75-percent marginal income tax bracket does not lead to a net loss of revenue.
You would expect politicians in other countries to pay close attention to what the French are doing – and learn. However, since the advocates of hate taxes on high-income earners are socialists almost by definition, it would be illogical to expect them to take a logical look at the consequences of hate-taxing the rich. To them, the confiscatory principle behind the tax is an ideological motivator that has nothing to do with economic results.
There is, however, a large segment of people in the middle of the political spectrum who are not ideologically married to hate taxes, who are open to economic arguments but who may be swayed in favor of such taxes just because they are concerned about the government’s budget. Those people are the make-or-breakers of already highly taxed economies: on the one hand, a hate tax will break the back of the last segment of productive citizens; on the other hand, avoiding the hate tax opens for reforms that can actually improve an economy and put it back on its right track again.
Unfortunately, it seems as though the French hate tax initiative could have planted the seed of a global trend. South Africa is considering following in the French footsteps, and there are now voices in Britain in favor of similar policies. From the Daily Express:
Calvin Coolidge, the far-sighted American President of the 1920s, once said that “collecting more taxes than is absolutely necessary is legalised robbery.” Tragically, his wise words appear to have been lost on our political class, whose members spend much of their time dreaming up new ways to grab our cash. As the appetite of the state machine becomes ever more ravenous, so the tax system grows ever more oppressive. Now the Liberal Democrats want to expand the scope of this confiscatory regime even further.
The British Liberal Democrat party has long claimed that its reason to exist is that British politics needs a strong middle-of-the-road party, a compromise between conservative Tories and social-democrat Labor. That has changed over time, of course, as the Tories have drifted in toward the middle and the Liberal Democrats have become an increasingly clone-like copy of the main stream of the Labor party.
Nevertheless, it is noteworthy that this is the party that now proposes a hate tax. It verifies the theory that there is a critical mass in the center of politics that can be swayed by socialists into supporting anti-rich taxation, typically in the name of fiscal responsibility.
QED, as the Daily Express reports:
A plan drawn up by the party’s Federal Policy Committee proposes a wide-ranging new so-called “wealth tax”, targeted at anyone with assets estimated to be worth more than £2 million in total. The sum would include not just property but all possessions, including shares, paintings, jewellery, cars, and furniture, on which the owners have probably already paid tax.
Imagine the bureaucracy needed to assess the values of all these various kinds of property. Of course, the Liberal Democrats have already thought of this, as they suggest that “tax inspectors would be given unprecedented new powers to go into homes and check the valuations of personal effects.” So much for personal integrity, something European liberals typically claim to be staunch supporters of.
Daily Express again:
This is not the first time the Lib Dems, always eager to differentiate themselves from the Tories, have demanded an attack on the affluent. The party has long been wedded to the idea of a “mansion tax”, focused on houses worth more than £2million, while last autumn the Deputy Prime Minister [Liberal Democrat] Nick Clegg urged the introduction of “an emergency wealth tax on Britain’s richest” as part of the “economic war” against the deficit.
Just wait for that term to make it Stateside. It almost sounds like the campaign slogan of an Andrew Cuomo or a Martin O’Malley running for the Democrat ticket in 2016. Especially Governor O’Malley would be ready to validate virtually any tax policy under the guise of a “war against the deficit”. During his tenure as chief executive of Maryland, O’Malley has raised a tax on average every ten weeks.
Back to Britain, where the Daily Express makes a formidable point about hate taxes:
Enthusiasts for this sort of aggressive taxation like to pretend that only the very richest will be hit. But the lesson from history is that, once a new tax is established, ever larger numbers are sucked within its destructive embrace. That is certainly true of the upper rate of income tax. Only 30 years ago, just 3 per cent of taxpayers fell into this category. Now, through the cynical process of failing to raise thresholds in line with inflation, more than 15 per cent of earners are upper rate taxpayers. Soon, more than five million people, including ordinary middle- class people, will be paying income tax at 40 per cent. The same is true of so many other taxes, such as inheritance duties, which were once aimed at the only the wealthiest but now catch huge swathes of the population in their net.
Americans should take note and remember the Alternative Minimum Tax. The problems caused by the AMT will be absolutely nothing compared to what a “war on the deficit” and its hate-the-rich taxes would do to our economy.
The Daily Express concludes, aptly:
If state control and hatred of the rich really worked, then North Korea would be the most prosperous nation on earth, not a land of misery.
This is a very important point – there is no better place in the world to study the contrast between statism and capitalism than on the Korean peninsula. We should not have to go to such extremes to explain why statism does not work, but on the other hand, if friends of freedom do not take the incrementalist strategy of the left seriously, the only question remaining to answer is how small the difference will be between our society and North Korea before the left is satisfied.
That, in turn, is like asking an American liberal or a European social democrat: when is government big enough? So far I have not heard even a shred of an answer to that question. What I do hear, though, is a cacophony of new ideas for how to expand government, ideas that are produced increasingly by mainstream “moderates” in European as well as American politics.
The fact that hate taxes on the “rich” are back in vogue, despite their abysmal failure in the ’70s, is a testament to how uninterested in reality statists are. It is also a testament to the seductive power of socialist rhetoric, in particular in bad economic times. It is easy to tell someone who is just out of school and has no opportunities on the job market that “the rich took the money you never had and ran with it”. If wrapped in slick rhetoric and sold with the right kind of ad campaign, this kind of hateful politics can easily win the day.
It is the responsibility of every friend of liberty to fight the growth of government, to resist the advancement of hate taxes – and to offer a credible, reliable and realistic path to limited government.