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| France's leaders are calling actor Gerard Depardieu "unpatriotic" and "pathetic." You see, Depardieu is leaving France. He's leaving because of the new French tax laws. French President François Hollande is trying to push through a 75% income tax, plus a higher "wealth" tax, higher capital gains taxes, higher inheritance taxes, and a tax on selling your business, among other taxes. Depardieu has had enough… He said he paid 85% of his income in taxes last year. He says he's paid 145 million euros in taxes to France over his career (roughly $190 million). So he's moving to Belgium to avoid taxes. France's Prime Minister called this move "pathetic really." He continued: "Paying taxes is an act of patriotism and we're asking the rich to make a special effort here for the country." At what level is tax no longer an "act of patriotism"? This question doesn't just apply to France… European countries are just a few years ahead of the U.S. in terms of becoming more socialist, with an insatiable demand for more of your income to pay for ever-growing government programs. Depardieu took offense at being called "pathetic." Based on that, he offered to surrender his French passport. Belgium's finance minister said he welcomes Depardieu and "any other French citizens." And Russia's President Vladimir Putin offered Depardieu citizenship. Other successful French citizens are leaving, too. For example, the founder of Moet Hennessy Louis Vuitton is also applying for citizenship in Belgium. Even worse, not only are talented people leaving France, but you can't get talented people into France to work. "We can't bring high-level managers to France," Eric Chaney, an economist at French insurer AXA, told Bloomberg news. "They work in an international market. And the market price for those salaries is well above 1 million euros." So major French companies are looking to hire senior managers in London or Amsterdam instead of Paris, Chaney explained. France will miss out on all their taxes. By raising tax rates so high, instead of getting more in taxes, France will get no taxes from these guys. Again, at what level is tax no longer an "act of patriotism?" At what level does it become an "act of confiscation" by the government? And when that point is reached, when is it time to give up on your country? I don't know what the right level is. It appears that Depardieu has found the level for himself… and that's 85% of his income. What do you think is the right level? How much of your income should the government be allowed to take? Is Depardieu a traitor? Or is he courageous? With ever-increasing budget deficits in the U.S., and no real political will (on either side of the aisle) to dramatically cut entitlements, it's a safe bet that higher and higher tax rates are coming in the U.S. It's time to start thinking about how "patriotic" you want to be. Good investing, Steve |
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Let me give you the factual basis for why the simple solution to the deficit problem does not require 75% tax rates on anybody. Look here at the table entitled "History of Government Debt, Revenue and Expenditures as a fraction of GDP"…
ReplyDeletehttp://www.deptofnumbers.com/misc/debt-revenue-and-expenditures-as-a-fraction-of-gdp/
Here are the salient things to note:
1. The federal budget was in surplus or very slight deficit every year from 1947 to 1980.
2. Beginning with Reagan (due to recession, tax cuts, and excessive military spending), the gap between revenue and spending as percentage of GDP began running around 4% every year.
3. The one time since then that we had budget surpluses was when revenue was increased to around 20% and spending was cut back to around 19%, and that was done without anybody paying 75% in taxes.
4. Then George W. Bush arrived and cut revenue back to the 16-17% level with his two big tax cuts, and increased spending above 20% with his unfunded wars, Medicare part-D, etc. spending binge.
5. The national debt was already exploding in those years even before Wall Street arrived to blow up the global economy with their derivative scams. We are now slowly recovering from the greatest recession since 1929. You blame Obama. I blame Wall Street. As I said the other day, the Recovery Act was really Obama's only big discretionary policy (about $1 trillion in tax cuts and stimulus), and the rest of the $6 trillion has been for mandatory spending that would have been paid if John McCain or Conservative Tom had been president since 2009.
Anyway, this is my explanation for my suggestion that the solution is balancing the budget again at 20% revenue/spending. If they had just allowed the Bush tax cuts to expire and do all the mandatory spending cuts in the sequester, that would get us very close to my target over the next decade.
--David
David, go back to your source. Budget surpluses were rare even going back to 1948.
DeleteMedicare D was done bipartisan with Kennedy.
Obama spend money on lots of other things than the Recovery Act. Now taxes on everyone are going up!
"Newly reached fiscal cliff agreement has made it possible for US banks and other large cross-border companies to retain a key tax break covering billions of dollars in foreign income. Multinationals would be allowed after extension of the so-called “subpart F exception for active financing income” to defer paying US taxes on certain financial business deals performed outside the US. The U.S. law imposes tax on that income only when companies brought back to the United States.
ReplyDeleteGeneral Electric Company (NYSE:GE) and U.S. banks including Bank of America, The Bank of New York Mellon Corporation (NYSE:BK), Citigroup and JPMorgan Chase have teamed up to shape the Active Financing Working Group, to lobby for extending the exemption in recent years. The Center for Responsive Politics said that lobbying firm Elmendorf Ryan has been paid $1.03m since 2009 by the group to campaign for the tax break to be renewed. The Senate Joint Tax Committee predicts extending the exemption will cost the US Treasury some $9.4bn in lost revenue this year."
http://www.gaininggreen.com/u-s-banks-retain-active-financing-exception-citigroup-nysec-and-bank-of-america-nysebac-hit-highs/122394/
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This is one example of many tax give-aways in the "fiscal cliff" deal that CBO calculates will add a net $3.9 trillion to the deficit over 10 years. These tax extenders (corporate welfare to Wall Street) offset 72% of the increases in revenue coming from NOT extending the payroll tax cuts to ordinary working people and the working poor.
--David
Agree, however, we should lower corporate taxes to 10% rather than the highest in the world taxes if we want the companies to pay taxes stateside.
ReplyDeleteIt will NOT happen as our hacks in Washington are bought and sold by corporate interests daily. Need to do term limits. 8 years and out!
"David, go back to your source. Budget surpluses were rare even going back to 1948."
ReplyDeleteOn the contrary, from 1947 to Q4 of 1966, we were in budget surplus 76% of the quarters, and even the 18 deficit quarters were all quite small. By contrast, since 1980, we have been deficit every year except 1998-2001. The facts I gave you are accurate.
"Medicare D was done bipartisan with Kennedy."
I am referring to Medicare the prescription drug benefit enacted as part of the Medicare Modernization Act of 2003 (MMA) and went into effect on January 1, 2006. It was unfunded spending and will cost about $1 trillion over 10 years.
"Obama spend money on lots of other things than the Recovery Act."
Obama has had $1.44 trillion in discretionary policy spending. Thus, 75% of his $6 trillion is mandatory spending. 11% was for things other than The Recovery Act. This all contrasts to George W. Bush who racked up $5 trillion in discretionary unfunded spending with his wars, tax cuts, Medicare-D, etc.
You wrote..."Now taxes on everyone are going up!"
No, they are going down -- WAY down. Good Lord, how many times do I need to go over this? CBO has crunched all the numbers on the "deficit cliff" deal, and they calculate that -- over the next 10 years compared to baseline -- it is a $3.9 trillion TAX CUT! TAX CUT! And that adds $3.9 trillion to the deficit, because there are no spending cuts in the deal.
Statement from CBO...
"Like all of CBO’s cost estimates, our estimate for this legislation shows the effects of the legislation relative to current law at the time we did the estimate. Relative to the laws in place at the end of 2012, we estimate that this legislation will reduce revenues and increase spending by a total of nearly $4.0 trillion over the 2013-2022 period."
http://www.cbo.gov/publication/43835
Hopefully, we will not need to keep going over this again.
--David
How can the 2% increase in FICA, not be an increase, the increase in Medicare premiums, and ObamaCare premium increases on devices. All of which are being paid by EVERYONE. After the review that the CBO did on ObamaCare and said first that it would be neutral, then $500 million and now 1.5 billion. I have NO confidence on their numbers.
Delete"Agree, however, we should lower corporate taxes to 10% rather than the highest in the world taxes if we want the companies to pay taxes stateside."
ReplyDeleteWell, "highest in the world" is the statutory tax rate, which none of them actually pays. The operative statistic is effective tax rate, not statutory tax rate...
http://www.decisionsonevidence.com/2012/02/effective-corporate-tax-rate-at-historic-low-levels-12-6/
The politicians talk about eliminating tax expenditures (i.e., corporate socialism) to increase revenue. I'll believe it when I see.
--David
Statutory rate for many small businesses are 34% for all money.
ReplyDeleteAdditionally, it did not take many dollars to get to the 34% for all income. See following:
http://www.smbiz.com/sbrl001.html
More examples of why the U.S. statutory corporate tax rate is a joke…
ReplyDeletehttp://www.cbsnews.com/8301-505144_162-36945095/top-25-corporate-tax-dodgers/
And for international comparisons, here is how our government revenue (all sources total) as percentage of GDP compares to other OECD countries…
http://stats.oecd.org/Index.aspx?QueryId=21699
For the last year in which full data is available (2010), only Chile and Luxembourg were lower than the United States -- despite our so-called "highest corporate tax rate in the world."
--David
Yes, but the point is that they don't actually pay 34% in taxes. Their effective tax rate is what they actually pay after taking their tax credits and deductions.
ReplyDelete--David
Take a look at the following link--it shows that many companies pay more than 34%! http://www.forbes.com/sites/christopherhelman/2012/04/16/which-megacorps-pay-megataxes/
ReplyDeleteAdditionally, when I was referring to 75% as the French top rate, it was a look into the future and where our rates MUST go to get control of the budget.
What are you talking about? That Forbes list is a list of the HIGHEST corporate tax payers in the country, and even on this list, you are wrong in saying "many" are over 34%. Nearly all of them in their slide show are under 34%. And remember, these are the largest corporate payers. My point is that nearly no corporation in the U.S. actually pays 35% effective rate.
ReplyDeleteAs for Exxon-Mobil, when they say effective "income tax" of 42%, they must be combining federal and state income tax (and possibly even throwing in local property taxes, gasoline taxes and payroll taxes) to get it up to 42%. If they are going to compare this number to the 35% statutory rate for federal income tax, then they are comparing apples to oranges. I know for a fact that Exxon-Mobil's FEDERAL effective income tax rate for 2008-10 was 17.6%.
"Additionally, when I was referring to 75% as the French top rate, it was a look into the future and where our rates MUST go to get control of the budget."
Not true. We had budget surplus 1998-2001 with the top rate at 39.6%. Those pre-Bush tax rates were generating revenue as percentage of GDP at around 20%. When the economy recovers, spending can go down as a function of less spent on public assistance to the unemployed. Add in the sequester due in March, 2013 and savings from ACA, and we could get spending down to 20% or less within a few years.
--David
"How can the 2% increase in FICA, not be an increase, the increase in Medicare premiums, and ObamaCare premium increases on devices."
ReplyDeleteYou seem to think CBO is unaware of these things. They are included in the calculation. They are quite small in fiscal impact compared to extending the Bush tax cuts, the doc fix, the alternative minimum tax, and all the extensions of tax credits and subsidies to corporations all of which were set to expire January 1, 2013. Simple mathematics: you subtract the taxes that are going up from the taxes that are going down and the net difference over the next 10 years is $3.9 trillion reduction in federal revenue.
--David
CBO is out to lunch--if they think that 2% on all wage earners s small! The $500 million doc fix is small potatoes, the alternative minimum tax effects mostly middle class wage earners.
ReplyDeleteI simply do not believe the CBO anymore.
Extending the Bush tax cuts for 99.9% of tax payers absolutely dwarfs everything else in the law. Here is the breakdown on each title of the law. The negative numbers are how much revenue the government gains/loses (in billions) compared to baseline...
ReplyDeleteTitle I ‐ General Extensions ‐3,575,062 (i.e., Bush tax cuts)
Title II ‐ Individual Tax Extenders ‐12,016
Title III ‐ Business Tax Extenders ‐45,923
Title IV ‐ Energy Tax Extenders ‐18,146
Title V ‐ Unemployment Compensation 158
Title IX ‐ Budget Provisions 12,186
Total Changes in Revenues ‐3,638,803
After doing a bit more research into it, I found that the 2% increase in revenue from expiration of the Payroll Tax Holiday will yield about $95 billion for 2013. Since neither Republicans nor Democrats have any interest in extending it (because it would undermine funding for Social Security long-term), CBO did NOT include it in the analysis. If we were to consider it permanent, it would lower the cost of the fiscal cliff deal by maybe $1 trillion over 10 years, but leave us with a larger problem with Social Security.
--David
Meanwhile, can you believe this?
ReplyDeletehttp://www.usatoday.com/story/money/business/2013/01/08/aig-lawsuit-federal-government-bailout/1817543/
The got a $182 billion bailout from the government that saved their butt from bankruptcy. So now they joined this Wall Street lawsuit. Wall Street greed is absolutely bottomless, and that means it is just a matter of time before they fleece us again.
--David (OWS)
Taxpayers (even if they profit in the end) should not be bailing out companies of any size!
ReplyDeleteAIG(the insurance side) was very stable and that part was sold off to help pay back the government. it was the swaps that did the damage to the whole enterprise. This is mis-managment based on not understanding the risk and lack of supervision of the swaps department. Regardless, it should have been allowed to fail, regardless to the damage it would have done to the economy.
I have said it many times, when an enterprise is "too big to fail", it removed the governor over the CEO, the Board and the government. Any action can be taken, as a bad decision will not devastate the company. It leads to poor performance.
Much as what we have seen in Washington. There is NO accountability on Congress. Don't pass a budget--no problem. Don't control spending--no problem. Allow the President to do whatever he wants, no problem. Incompetency and abuse of office should be charges brought against every Senator and Representative, now in office and all of those who have been there for 20 or more years.