Taxing the Rich: Americans Have It Good, Compared to the French
With all of the chatter about class warfare and tax rates likely going up next month for high earners, it's important to remember that wealthy taxpayers in some countries have it worse.
America's rich will, for the most part, not be applauding when they see the top rate on qualified distributions jump from 15 percent this year to potentially as high as 43.4 percent in 2013.
Perhaps they should be glad that new rates will be so low: France is boosting the top tax rate on its wealthiest residents from 48 percent to a rate as high as 75 percent -- and inducing many business owners and celebrities to bid their home country adieu in the process.
Departure of Depardieu
Iconic French actor Gerard Depardieu has become the latest to surrender his French passport and social security benefits, choosing to move to a bordering town in Belgium that's attracting many of France's wealthiest expatriates.
It seems like something drawn from the pages of an Ayn Rand novel. There's an exodus by some -- though clearly not all -- of the country's most financially productive citizens. Revenue-hungry France thought that taxing the rich would be an easy fix to its problems. Instead, it may go from collecting 48 percent of earnings from some of them to zero percent.
If France wants class warfare, the rich can afford to move out if they don't want to be richly taxed.
Pardon My French
Come 2013, a 75 percent tax will be applied to those earning more than $1.3 million a year. President Francois Hollande is also raising the taxes that the well-to-do pay on capital gains and on household wealth.
He's prolific. He's a tastemaker. The French government's strategy is to call him out as a traitor, but it may backfire. While France's prime minister is calling him "pathetic" for leaving, Depardieu is fighting back.
"I'm leaving because you think success, creation, talent and anything different should be punished," Depardieu wrote over the weekend in France's Le Journal du Dimanche, claiming that he has paid roughly $192 million in taxes over the past 45 years, employing 80 people in his businesses.
It's a Taxing Dilemma
Who is right here?
Class warfare played a major part in the U.S. presidential election last month, and it seemed like a smart tactical move at the time. Pitting 98 percent of the country against the wealthiest 2 percent made mathematical sense at the polls.
However, what happens if America's wealthiest citizens get fed up?
The highest tax rates in this country are a far cry from France's soon-to-arrive 75 percent, and wouldn't even approach France's old rate under the most far-fetched scenarios coming out of Washington today. But picking on a class that's an important contributor to a country's bottom line can prove to be a risky strategy.
Proponents of raising tax rates only on the wealthy may rightfully feel that they are the ones that can afford to contribute the most, but there's never a shortage of countries open to taking in the world's wealthiest citizens.