The really interesting thing will be to see if indeed as a result, the economy will collapse. (people really were making that argument: big-shot CEOs will leave the country and take the businesses with them).
While I think this tax is ridiculous, I think those kinds of counter-arguments are even more ridiculous.
Tax increases historically have brought in far less revenue than predicted, as people change their behaviors to compensate. For example, when I was in England, people drove around company cars rather than owning them personally. It was explained to me that this was the result of tax rates - the high personal tax rates caused businesses to offer perqs which were not counted as income subject to tax. Hence the company cars.
...or a terrible example of unintended consequences. Employer-provided health insurance obliterated the individual market which has arguably brought less liquidity and less dependability to insurance, and with it less innovation to the economy as a whole...
I disagree that those "counter-arguments are even more ridiculous." Of course, I don't think every CEO will flee the country——they are bogged down by inertia. Some will, but when you have a family, a home, etc, it's a lot harder to do that, even if you want to. I think what these counter-arguments importantly point to is that soon-to-be CEOs, the leaders of up-and-coming successful, young companies—-the future of the French economy--will leave.
While it's a gross simplification, it is still interesting to think that 200-300 million is the price tag that the French government is willing to put on it's future generations of CEOs and successful companies, which is disappointing to say the least.
And like many others have stated, this may just be for political points. I would bet a large group of this demographic has no problem deferring salary for the next two years (thought it will be interesting to see if the tax is extended).
"I don't think every CEO will flee the country——they are bogged down by inertia. Some will, but when you have a family, a home, etc, it's a lot harder to do that, even if you want to."
You are not talking about CEOs. You are talking about normal people.
Normal people can't leave the home when the loan is not paid. People who earn millions dollars a year can leave the country and live in Brazil in Winter while taking his private jet like normal people take a car.
It is Europe we are talking about. You could live in the UK, Switzerland, Germany, Italy, Spain, Portugal, Turkey or Greece without problems.
What work does a CEO do that's worth over 1.4 million dollars a year? How many of the French earning that much do you think would prefer to leave France rather than accept a merely enormous salary in lieu of an astronomical one?
The wager that Hollande is making is that the value of living and doing business in France is worth the cost being assessed (in the form of tax). I don't think it's apparent yet whether or not he's right.
Actually, many cities/regions/countries are suffering because large corporations are shutting down factories/offices in one area/country and moving somewhere else cheaper (for profit reasons, not because of taxes). For examples, look at how many companies have moved their production to Africa/Asia. This tax move only encourages them even more, when governments should move the other way (they should cut taxes and bureaucracy, not increase them). The economy IS collapsing, and companies ARE moving to friendlier countries.
This is a personal tax on individual wealthy people. It should have little to no impact on the economics of where to locate a factory, which is driven by things like environmental regulations, cost of inputs, labor costs, location of suppliers and customers, tax applicable to the factory (or its holding entities), etc. Where the CEO or major stockholders choose to domicile is already quite decoupled from those decisions (as can be seen by the fact when U.S. companies move a factory to Mexico, typically the CEO and major shareholders do not also move to Mexico).
The economy wouldn't collapse, but the tax income could probably suffer. They don't expect to collect very much out of it even now - see the link above in the comments - it's largely a populist gesture. But the tax-avoiding measures that high-earners would take to avoid it will stay even after the tax will be lowered back (provided it would be as promised), so the next effect may turn out to be even negative. But it would hardly lead economy as large as France's to collapse. As for if it would make the appetite for electing politicians prone to useless populist gestures instead of solving real economic problems - that is harder to predict if it would increase or decrease.
Comments
The really interesting thing will be to see if indeed as a result, the economy will collapse. (people really were making that argument: big-shot CEOs will leave the country and take the businesses with them).
While I think this tax is ridiculous, I think those kinds of counter-arguments are even more ridiculous.
Tax increases historically have brought in far less revenue than predicted, as people change their behaviors to compensate. For example, when I was in England, people drove around company cars rather than owning them personally. It was explained to me that this was the result of tax rates - the high personal tax rates caused businesses to offer perqs which were not counted as income subject to tax. Hence the company cars.
Wage controls during 1930s/1940s in the US leading to employer-provided health insurance is another great example of unintended consequences.
...or a terrible example of unintended consequences. Employer-provided health insurance obliterated the individual market which has arguably brought less liquidity and less dependability to insurance, and with it less innovation to the economy as a whole...
I disagree that those "counter-arguments are even more ridiculous." Of course, I don't think every CEO will flee the country——they are bogged down by inertia. Some will, but when you have a family, a home, etc, it's a lot harder to do that, even if you want to. I think what these counter-arguments importantly point to is that soon-to-be CEOs, the leaders of up-and-coming successful, young companies—-the future of the French economy--will leave.
While it's a gross simplification, it is still interesting to think that 200-300 million is the price tag that the French government is willing to put on it's future generations of CEOs and successful companies, which is disappointing to say the least.
And like many others have stated, this may just be for political points. I would bet a large group of this demographic has no problem deferring salary for the next two years (thought it will be interesting to see if the tax is extended).
"I don't think every CEO will flee the country——they are bogged down by inertia. Some will, but when you have a family, a home, etc, it's a lot harder to do that, even if you want to."
You are not talking about CEOs. You are talking about normal people.
Normal people can't leave the home when the loan is not paid. People who earn millions dollars a year can leave the country and live in Brazil in Winter while taking his private jet like normal people take a car.
It is Europe we are talking about. You could live in the UK, Switzerland, Germany, Italy, Spain, Portugal, Turkey or Greece without problems.
In fact, most of the CEOs I know do exactly that.
What work does a CEO do that's worth over 1.4 million dollars a year? How many of the French earning that much do you think would prefer to leave France rather than accept a merely enormous salary in lieu of an astronomical one?
The wager that Hollande is making is that the value of living and doing business in France is worth the cost being assessed (in the form of tax). I don't think it's apparent yet whether or not he's right.
Actually, many cities/regions/countries are suffering because large corporations are shutting down factories/offices in one area/country and moving somewhere else cheaper (for profit reasons, not because of taxes). For examples, look at how many companies have moved their production to Africa/Asia. This tax move only encourages them even more, when governments should move the other way (they should cut taxes and bureaucracy, not increase them). The economy IS collapsing, and companies ARE moving to friendlier countries.
This is a personal tax on individual wealthy people. It should have little to no impact on the economics of where to locate a factory, which is driven by things like environmental regulations, cost of inputs, labor costs, location of suppliers and customers, tax applicable to the factory (or its holding entities), etc. Where the CEO or major stockholders choose to domicile is already quite decoupled from those decisions (as can be seen by the fact when U.S. companies move a factory to Mexico, typically the CEO and major shareholders do not also move to Mexico).
The economy wouldn't collapse, but the tax income could probably suffer. They don't expect to collect very much out of it even now - see the link above in the comments - it's largely a populist gesture. But the tax-avoiding measures that high-earners would take to avoid it will stay even after the tax will be lowered back (provided it would be as promised), so the next effect may turn out to be even negative. But it would hardly lead economy as large as France's to collapse. As for if it would make the appetite for electing politicians prone to useless populist gestures instead of solving real economic problems - that is harder to predict if it would increase or decrease.