August 9, 2012
All political leaders have a very upleasant habit in common: to refer to patriotism of taxpayers when it comes to increase taxes. The French Minister of Finance Pierre Moscovici in a recent interview with Le Monde has defended the decision of his government to raise the highest level of taxation to 75%. He justified that the intention is not to punish rich people but to urge their patriotism. In other words, it is given a chance for rich to make an exceptional contribution towards the resolution of France’s financial problems.
France and its President François Hollande are taking a risky and bold decision by raising taxation for rich in much higher rates comparing to what France’s neighbours are doing. Britain might seem to be ready for hosting French people who are definitely unwilling to pay such a high tax by giving them the chance to transfer their businesses abroad. Yet in both cases, Britain and France, as well as around the globe, there is a growing trend against rich people now that more and more low-and-middle class taxpayers are suffering from austerity mesures as debt crisis intensifies Even in Britain the tax rate is 45%, in the US 35%, but still this percentage cannot explain an overwhelming fact: that during the last thirty years the percentage of public wealth destined to the 1% of the most rich people has been tripled from 8% in 1970 to 24% in 2007.
In plain numbers, the income incurring from such a tax might contribute to a fraction of 33 billion euros, a relatively low number comparing to the almost 85% of France’s GDP debt. Nonetheless, despite such predictions and the criticism mainly stemming from US media groups, the move of Hollande is fairly symbolic and encompasses the increasing grievances of millions of taxpayers globally, and especially in Europe, that see rich people that have been in great part ignorant to the suffering of their compatriots by tax-evading, to possibly pay what they own according to their annual income.
Influential voices from the US are stressing out the fact that after this mesure being implemented, many French millionaires will possibly migrate to the States as the market and the econony are not that regulated as in France and businesses can blossom. Although we need to admit the liberal character of the US economic foundations, we also need to remind ourselves that the global crisis was first introduced in the US and afterwards spread all over the world. The housing and insurance bubble has its roots in the US and its contagious character had a spillover effect in Europe, with first victims being Iceland and Ireland, both economies extremely vulnerable to the US toxic bank assets that intially put Europe into this unprecedented deadlock.
All things considered, I tend to believe that global public debt will never be vanquished or even adequately controlled as it primarly gives the motive for money to distribute. Nonetheless, I equally consider that President Hollande’s decision to raise tax to those who can sustain it might be proven to be the first chapter in a new era of global financial regulation. Not a state-led financial system in the stereotypes of Keynes, but a newly-shaped public intervention mechanism to global transactions and fair trading and financing.
And as of the analysts and pundits who continue to ignore for their own sake the wrongdoings of a badly-shaped financial system, there is an old saying proclaiming that “those who created the problem are not the very ones that can solve it”.Dimitris Rapidis