Here’s a riddle: in what country are the richest 1% paying 41% of all the income taxes and where the richest 5% are paying more than 65%
Another riddle: in what country are capital gains taxed at the same rate as wages and salaries?
Look no further, these two countries are one and the same; and it is neither France, nor Sweden, nor any country with high levels of taxation but
California.
And here’s the thing: the tax rate in question is only 10% there! And even if a candidate to the post of Governor in the next November elections, former Governor Jerry Brown, is proposing to increase these rates, it is only an increase of up to 13% and no further.
Of course, California is not a country in itself; and its public finances are not in better shape than those of European countries; in addition, a significant portion of what is financed by taxation in Europe is covered by private insurance contracts there, which should be added to the compulsory levies, to make useful comparisons. However: California remains the place on the planet where the creation of wealth is the highest, and where all the capital and the entrepreneurs of the world are rushing, looking for funding for their project. And entrepreneurs thus enticed are then paying a lot of taxes: in 2000, when Google was listed on the Stock Market, 8 of its creators paid in California, $1 billion in taxes.
The problem with the French budget is therefore not the structure of the income tax, which is not in itself objectionable: capital gains can be taxed, same for capital revenues from a job; but provided that the rates be not confiscatory. However, in France, they are.
No one ever wants to work or choose to invest in a country that takes from him two-thirds of what he earns through his work or investment. If such rates were to be implemented, France will witness the departure of its entrepreneurs, executives, and centers of corporate management.
Make no mistake: the so-called major «French» companies already no longer have anything French other than the location of their centres of command and their main executives; their major shareholders already are no longer French since a long time. If these executives were to decide now, for tax reasons, to move abroad, they will soon be replaced by foreigners and we would realize that Renault, Danone, Total, and so many others no longer have, for a long time, anything French. And we should not be surprised if their new leaders no longer consider as a priority the preservation of jobs in France.
Taxation therefore could lead to the relocation of companies against which it is supposed to fight. Therefore it is more important to lower these confiscatory rates than to modify the tax structure. And if one wants to strengthen social justice, it is not by taxing those who create wealth that it will be achieved, but by reclaiming it, as in California, at the time of transmission to future generations.
Lowering the tax on earned income and savings; increasing taxation on inheritance; this is the recipe for economic success. This is the exact opposite of what both the left and the right are doing in France, where the elites, more interested in protecting their vested interests than promoting newcomers, are organizing stubbornly the fiscal suicide of the country.