For those that don’t know, France recently had an election and voted for the most socialist guy on the ballot. The guy who’s promising to raise taxes on the rich and increase the transfer payments to the poor. The result? The rich are leaving… in droves.
France’s high earners feel increasingly unwelcome in a country now led by a man who has admitted: “I don’t like the rich.” So where are they looking? London. It comes as no surprise – while Hollande prepares to raise taxes, over here David Cameron is cutting the 50pc tax rate for income above £150,000 to 45pc. “I have already worked in London and lived in South Kensington,” said one French banker who expects to return to the UK over the next three months. “The question is how much of Hollande’s rhetoric will materialise into policy.”
Few are keen to find out. Private equity firms and American banks in Paris have already begun making arrangements for their top executives to set up office in London, amid widespread concern about changes to the French income tax regime.
This story is told over and over again in the European press, particularly earlier this week (I realize I’m late to the story.) But the U.S. press is just getting to the story; mostly in the business press. Neither the Chicago Tribune nor the sun-Times has not written a single word about it.
While it can be shown that the rich are generally willing to pay their fair share, i.e. remain in places with high taxes, it is only when they feel that the quality of life issues make paying the high taxes worthwhile. There can be no doubt that ever higher and higher taxes will drive the wealthy away; the Laffer Curve is real.
The net result of this is that higher taxes impose a disproportionate burden on the middle class and the poor. States like Illinois need to move to a more progressive tax structure; however they must do so very carefully in order to assure that the rich are not incentivized to relocate to Indiana.