“Jean-Emile Rosenblum, a 34-year-old e-commerce businessman, is quitting France,” the Bloomberg news service reports. “With President Francois Hollande's government readying a vote this month on its first annual budget law that seeks to raise 24.4 billion euros ($31.7 billion) in additional taxes, some of France's entrepreneurs and wealthy are heading for the door. Hollande's hitting businesses and individuals with at least a dozen new measures, including a 75 percent levy on income of more than 1 million euros, to narrow the budget gap.”
The French government continues to deny any exodus, but the evidence is piling up.
“Rosenblum — who says he's leaving France with his wife and two little children this month to open a new business in a country he won't disclose — is among people fleeing a slew of levies announced by Hollande since the Socialist president was elected in May,” Bloomberg explains. “The 75 percent millionaire tax was followed by new levies on capital gains, an increased tax on income and wealth, a boost to inheritance charges and an exit tax for entrepreneurs selling their companies. The weight of the levies is prompting a wave of departures, said Philippe Kenel, Geneva-based tax lawyer at Python, Schifferli, Peter & Associates.”
Do any of Hollande's policies sound familiar? President Obama, of course, says we must “ask for the wealthy to pay a little bit more,” just as Hollande says those “with the most (should) show patriotism.” Obama's “fiscal cliff solution” is a proposal to raise taxes by $1.6 trillion.
No one knows what the final number will be, but we can predict its result: capital will be driven out of the U.S. economy.
That's what happens. And there are plenty of places for capital to go.
“U.K. Prime Minister David Cameron promised in June to roll out the 'red carpet' for fleeing French people,” Bloomberg notes. “Unlike France, the U.K. has no wealth tax. Also, while Hollande is creating a new 45 percent income tax for earnings above 150,000 euros a year to add about 700 million euros to the government's coffers, the U.K. cut the 50 percent tax rate for income over 150,000 pounds ($242,500) to 45 percent from April.”
Even the French are citing the Laffer curve now.
“France can hardly compete now with Moscow, New York and other capital cities for elite workers,” one Parisian tax lawyer said. “They are skilled, speak many languages and are mobile. They were sad to leave but they are gone now. France has killed the goose that laid golden eggs.”
Like the Hollande administration, the Obama administration will dismiss any notion of an exodus of capital due to tax hikes; America, it will say, remains the best place in the world to live.
That's true, of course. But capital can leave, even as capitalists stay. Wealth and earnings can be moved off-shore, in other countries with less burdensome taxes. That's what will happen, to a greater or lesser degree. History and current events demonstrate this beyond all doubt.