Back in July, when news of what we dubbed the French "Fairness Doctrine" first emerged, i.e., the new socialist government's intent to tax the evil millionaires at a 75% tax rate, we had two observations: i) that "we are rotating our secular long thesis away from Belgian caterers and into tax offshoring advisors, now that nobody in the 1% will pay any taxes ever again" and, somewhat contradicting the above, ii) that "The good news is that with the entire world set to adopt 100%+ taxes on "wealthy" individuals as defined arbitrarily by Ph.Ds, there will be no place to hide." Well, the US promptly followed France into a lite-version of the Fairness Doctrine, which proved us half right, yet one place that has refused to increase its tax rate for the poor or rich, keeping it at the flat 13% for individuals is Russia, which explains why following last week's news that Russia had granted famous French expat millionaire Gerard Depardieu citizenship, the actor best known as Obelix and Rasputin, eagerly rushed to accept his new red passport in Sochi following a bearhug from none other than Vladimir Putin.
And with there being a first fully vetted case study showing that in a world in which not everyone is ready to tax the rich at the same time, the cracks in the French proposal (which in a broke world is inevitable, it is just early: sooner or later a tax on all financial assets everywhere will be imposed, but just not yet) are starting to be visible. Sure enough, minutes ago in a radio interview on France Inter, French Finance Minister Pierre Moscovici said that any measure replacing the 75% income tax (that was deemed unconstitutional by the way) will be "exceptional and temporary", like the original, and not be imposed to "punish those who have succeeded." Just like the Greek ELA program was temporary? Or like the Fed's monetization of Treasurys is exceptional? Or like the immediate response by Depardieu claiming, objectively, that the tax is precisely to punish those who have succeeded?
All those are open questions for the Monsieur FinMin, who also reaffirmed France’s 0.8% growth target for the year (good luck with that), and that temporary nationalization of failed businesses remains a tool for the government to use in only special circumstances, not when the failure is due to isses in the industry (here he is obviously envisioning Peugeot which the government had to bail out recently, as well as the possible nationalization of various Arcelor Mittal assets in the country).
Alas, at this point no self-respecting enterprise will believe a word France's socialist leadership utters, which means that the government will have no choice but to grow (sub-efficient) government jobs on its own, with or without the assistance of the SNB and other various central banks who have been buying French sovereign bonds in recent months.
Finally, confirming that the days of the 75% tax are over is a report in the FT which notes that "France hints at lowering the 75% tax rate", although the trade off is that instead of limiting the surtax to just 2 years, it would be extended for the full 5 years of Hollande's term. Here's to hoping nobody can do simple math in France.
France’s socialist government has hinted that a replacement for its controversial 75 per cent income tax bracket, struck down late last month by the country’s constitutional council, may be at a lower rate but imposed for the rest of its five-year mandate, not just two years as previously proposed.
Jérôme Cahuzac, France’s budget minister, said on Sunday: “I find it a little ridiculous that for tax reasons, this man has gone into exile so far to the east.”
Mr Cahuzac reiterated in a television interview that the government would formulate a replacement for the 75 per cent measure, which was intended to “incite a bit more prudence and decency in a very rare number of leaders”, in order to reduce pay gaps between workers and executives.
He said “part of the parameters” being considered was to run a newly adapted supertax for the rest of Mr Hollande’s term, rather than limit it to two years. But he hinted that the rate would be lower than 75 per cent, pointing out that the constitutional council had indicated that a total tax burden above that level, including other levies, “could be judged as a confiscatory rate” by the council.
There is more good news from the socialists: "He added that the government would not impose any further new taxes after this year. “Tax stability from now is the policy of the government,” he said." What is probably most amusing is that he said the last with a straight face.
And even more good news is that the country which can't afford to spend more cash on social programs will do just that, by "investing" €2 billion into "state-backed job creation schemes in a bid to meet Hollande's bold promise to reverse a trend of fast-rising unemployment by the end of this year."
Well, since the US borrowed the millionaire supertax idea from the French, perhaps France can grab a hint or two from the BLS on how to get its unemployment under control: just hire a few million 60 year old part-time greeters for the local Wal-Mart stores, and watch your unemployment rate collapse to near zero. After all, unlike in the US, France does not have a central bank that is now incentivized to show a weaker employment picture for the coming year...