France abandons 75% tax rate

I always love the way these debates become wonderfully polarised – the idea of higher taxes in itself is not inherently bad – but having it in France at this time was bonkers as anyone who could would move abroad (the high earners maybe ?)

That is all, do continue shouting at each other, because neither side is going to listen to one another

I always love the way these debates become wonderfully polarised – the idea of higher taxes in itself is not inherently bad

Polarized, you say?…

😀 if that was the only error I will be surprised ……

Affected / effected I always struggle with

So you are saying that finally someone has some proof that the later curve may actually be real ?

Does that mean Hollande will become a rightwing hero ?

No, he appears to be suggesting that increasing tax rates beyond a certain point will be counter-productive for raising further tax revenue.

That’s not how it reads to me. Whilst I don’t doubt that incresing taxes enough will result in a drop in revenue, Jambalaya seems to be saying that ALL high tax rates (whatever high means) will lower revenue.

People on here have asked for examples of where high tax rates result in less money being collected and here is one, a glaring example of how counterproductive such measures are.

Well, congratulations lefties, here’s your proof

Only an idiot would cite one example as proving a curve. Wouldn’t they?

andyfla – Member

if that was the only error I will be surprised ……

Affected / effected I always struggle with

Sorry, but that wasn’t my point.

Does that mean Hollande will become a rightwing hero ?
Calm down dear. The left idealogy for robbing the rich in order to save an economy, is getting a proper kicking. Enjoy it.

No, he appears to be suggesting that increasing tax rates beyond a certain point will be counter-productive for raising further tax revenue. A discussion commonly expressed through the well know ‘Laffer curve’ – something that we’ve been told for years by the STW lefties is unproven fantasy – in fact I recall one of the usual suspects on here stating “The laffer curve is a theory only given credence by the right wing. there is no proof of it and many reputable economists deny its existence.

Well, congratulations lefties, here’s your proof

It’s got nothing to do with left or right, and all to do with ‘value’, perceived or otherwise.

If people believe that they get ‘value’ from their taxes then they are happy to pay (whatever the rate is). if they don’t believe that they get ‘value’, then they aren’t happy to pay.

The actually percentage is irrelevant really, and the Scandic countries show this on the high-tax side. For the low-tax side go to really 5h1t places, and there they begrudge paying anything.

Personally for somewhere with our culture/approach and social protection you need to keep direct taxes at maximum of just below 50%.

Consequently we have many people who try and evade taxes, and succeed.

Only an idiot would cite one example as proving a curve. Wouldn’t they?

Easy Tiger, don’t get your knickers in a twist cos your belief system is being undermined. Only an idiot would try to follow France’s example, in principle, now.
Fear not, it will happen.

Easy Tiger, don’t get your knickers in a twist cos your belief system is being undermined.

a) It isn’t
b) I’m trying to prompt rational analysis and discourage confirmation bias.

I just want to know if there is a laffer curve and what its values might be. Cos if we knew it, we could optimise tax revenue really well.

Only an idiot would try to follow France’s example, in principle, now.

What example is that? Should we not raise taxes at all? Should we just avoid raising to 75%?

Molgrips, feeding the troll, will only make him hungrier !

What example is that? Should we not raise taxes at all? Should we just avoid raising to 75%?

Oh, and now we’re, alltogether, going to derive the actual optimum % of tax, to 4 decimal places.

kimbers – Member
Molgrips, feeding the troll, will only make him hungrier !

See what I mean, this ^^ is the logic we have to work with on here. Apparently, feeding something, will, erm, make it hungry.
Wow.

Edit:
It’s the left, trapped in the paradigm that when things get fiscally tight, “It’s ok, we’ll up the taxes”. This is the default view of the left. It is though, inherently incorrect to do this without also looking at expenditure. Which, AGAIN, the left are idealogically opposed to doing anything which might be seen as a cut. However, as we are seeing in France, they are slowly realizing that they will be forced to look long and hard at what they spend their Euros on.

Sorry, but that wasn’t my point.

Sorry Solo I obviously did miss your point 😳
What I was trying to get at was we seem to degenerate here (much as our politicians do) into my way is right yours is wrong shouting at each other without listening to what others are saying.

So the right will say higher taxes are always bad – sighting the fact that France has just given them up the 75% one.

The left will say that they are a good thing and this was particular one was only ever going to be a temporary tax, so it hasn’t failed.

I just get really frustrated generally with peoples refusal to listen to others and occasionally go – Ok higher taxes may not be a bad thing all the time, but in this case it was bloody awfully thought through as it was far to high ?

Maybe ? or are we all far to afraid of showing some ability to think and not just spout our own political ideology – just as our politicians must always keep toeing the party line and can never say that an idea that someone else came up with was a good one

Do carry on ….

I just want to know if there is a laffer curve and what its values might be. Cos if we knew it, we could optimise tax revenue really well.

Molgrips read Br’s very sensible post above yours.

Its not that simple its about value as well as tax. For example, even if you were taxed at 20% if it all went into a couple of peoples pockets you’d probably not want to pay it.

If people believe that they get ‘value’ from their taxes then they are happy to pay

And people’s perception is malleable, and heavily controlled by the media.

Apparently, feeding something, will, erm, make it hungry.
Wow.

Isn’t that IDS stance on benefits ?

What I was trying to get at was we seem to degenerate here (much as our politicians do) into my way is right yours is wrong shouting at each other without listening to what others are saying.
You’re correct there.

So the right will say higher taxes are always bad – sighting the fact that France has just given them up the 75% one.
Higher taxes, possibly. But its the expenditure, the right do seem to have at least a vague idea that there must be a limit to how much you’re raising in taxes. Therefore you have to think carefully about how you spend that revenue.

Ok higher taxes may not be a bad thing all the time
Imo, high rates of tax are always wrong, when I work Monday to Friday and only get to have Friday’s money to myself? That aint right.

And people’s perception is malleable, and heavily controlled by the media.
In the absence of what….

Imo, high rates of tax are always wrong, when I work Monday to Friday and only get to have Friday’s money to myself? That aint right

But solo you are talking about an 80% flat tax there, even the French income tax is progressive

I call homme de paille

There are quite a number of things acting on Laffer at the moment.

One of them is the vastly increased disclosure requirements in France for wealth held in offshore trust structures for the benefit of French residents – avoidance behaviour is getting much harder without straying into outright criminality. That means that , for a given value of “e” in the equation that generates the Laffer curve, more people will emigrate than was previously the case. A proportion of people who wanted to stay in Paris and be in technical legal compliance while paying little tax will have left for London rather than indulge in criminal evasion. If the London option wasn’t as easy and non-criminal avoidance wasn’t being simultaneously tightened up you might see a less pronounced effect on the curve – i.e. the value of “e” would be lower.

The main stray factor in Laffer is producing a defensible value for “e” anyway. That is what makes its predictive power for determining optimal rates so sketchy.

(I’m a tax guy not an economist. Actual economists, please forgive any gibberish that has crept in there)

The left idealogy for robbing the rich in order to save an economy, is getting a proper kicking. Enjoy it.

Meanwhile, in Greece, the opposite approach is working out ever so well. Not.

I work Monday to Friday and only get to have Friday’s money to myself? That aint right.

There’s no absolute right. If you were taxed at 80% you’d expect a great benefit to society. What’s right is that you get a good standard of living proportional to your work, and those less fortunate do not get screwed over. Progressive tax reflects the fact that there is a minimum comfortable cost of living.

Jamby, why do I get the impression that you are literally erect and throbbing with excitement as you type that?

Most excellent post @kimbers ! To use a sports analogy it was such an open goal I felt obliged to kick the ball into it as hard as my meagre skills allow.

75% was just plain stupid financially, great political soundbite and helped Hollande get elected so he’s happy. However 50% is a very important level psychologically as was proven last time around, add the NI and it’s 52% so more than half and at that point you most definitely get a change in behaviour. The top rate now is 47% (45+2) so we are close to that point. The top earners typically have the most geographical flexibility, the most ability to change the way they are compensated. We can’t all be Phillip Green and pay our wives a £1 billion offshore to avoid £300m in tax but people will change their behaviour.

If you look at the maths of going from, say, 45% to 50% to actually collect less you only need 1 in 10 to relocate (thus losing all their tax revenue) and this is without factoring in the economic impact of less VAT and less money in the economy as it’s now in the governments pocket. With incremental changes you will get people maxing out their tax allowances, eg at 50% you do max pension at 40% you pay the tax and take the cash. These affects mean you always collect less than you thought if you just assume nobody changes their behaviour.

There’s no absolute right. If you were taxed at 80% you’d expect a great benefit to society. What’s right is that you get a good standard of living proportional to your work, and those less fortunate do not get screwed over. Progressive tax reflects the fact that there is a minimum comfortable cost of living.

And who decides? This is fundamentally flawed thinking, it implies that there ought to be a ceiling on pay but not achievement, why should that be the case?

There’s nothing special about the laffer curve – it’s just a graph that explains a basic concept ie price elasticity in the context of tax revenue. It’s neither RW or LW, it just is.

There is lots of work on the point at which revenue begins to fall as the tax rate increases. The last time I was going to link to this, we ended up with a ban, so I won’t bother again. Suffice to say it is well below 75%. Most economists point to a range and funnily enough guess where the debate in the UK is?

Hollande as a RW hero? Well he is now implementing policies that are more RW that the RWers and vice versa. So perhaps, yes!!

Either way political stances are largely irrelevant. Across Europe there is a basic policy mix – tight fiscal policy (negative), unorthodox loose monetary policy and supply-side reforms. The problem? Monetary policy is not working because the banking system is still buggered and supply side policies take time. On top of that, Europe is constrained by an unworkable currency regime.

BD – good for you mentioning e. It is all about the e and it’s a bugger to measure!

This is fundamentally flawed thinking, it implies that there ought to be a ceiling on pay

No it doesn’t. A ceiling on pay would be a 100% tax band. I’m not advocating that, nor am I advocating an 80% or even 75% tax band.

And who decides?

Who decides on what?

This is fundamentally flawed thinking, it implies that there ought to be a ceiling on pay but not achievement, why should that be the case?

I don’t know how many people contributing to this have read Piketty, but his stuff on the explosive growth in top earnings in the last few decades is interesting. Essentially, some places (chiefly UK and USA) dismantled their very high top marginal rates, other countries did not do so. While salaries rose astronomically in the US and UK (and not in countries that still had high marginal rates), there was no measurable difference in productivity growth between the two different scenarios.

Another related anecdote – working on a big corporate reorganisation of a £3billion corporate group, I was struck by how much time was being spent negotiating senior executives’ packages, and asked the consultant from a Big 4 practice what proportion of board time in big companies was typically spent working out how much to pay the board. Her answer was “about 50%”.

That may have been flippant, I’m not sure. Piketty’s point is that if an executive gets 20% of every additional pound of salary that he negotiates for, he is unlikely to bother, and a company that knows that 80% of what it pays above a certain level is tax is unlikely to go any higher. If the executive can get 50% of each additional pound, he’ll try harder to convince the company that it is worth them paying it. There is no particular evidence that this is the case.

🙂

Who decides what’s right regarding standard of living proportional to work? You’re in a minefield of subjective opinion and enforced “fairness”. I completely agree that the poorest in society should have a safety net and that adequate provision is made for pensions through NI I belive we should contribute to society. I do not believe that it’s for you, me or anyone else to decide that, above a certain threshold, taxes should be punative as it would (and has previously) created artifical pay ceilings and allowed those in the know to avoid paying their dues.

It’s easy to create a scenario where a person, through luck, judgement or hardwork does exceptionally well. The idea of any of their earnings being taxed north of the current 45% seems unfair as they will make a much larger contribution anyway. Didn’t we do this last week.

the explosive growth in top earnings in the last few decades

But those high wages still pay lots more in tax, even if the percentage is no higher than someone on £40k…?

Who decides what’s right regarding standard of living proportional to work?

Well quite, this is a good question. As a society we have to look at what’s acceptable, and we have been doing this for 150 years.

I do not believe that it’s for you, me or anyone else to decide that above a certain threshold taxes should be punative

Who’s talking about being punitive? If you get a £100k payrise, and you are taxed 50% on it, why is that punishment? You’ve just made an extra £50k FFS, what’s to complain about?

Because It’s not for you to decide that 50k is enough, do you really not see that?

Simple maths – A person earns 250k and pays 10% tax = 25k tax paid
A person earns 25k and pays 10% tax = 2.5k tax paid.

One is paying 10 times more than the other, seems really simple to me.

Who says it’s not for me?

Someone has to decide tax thresholds, otherwise how can you have tax?

Look – the country needs a certain amount to run. You can take it from poor people or from rich people. Stands to reason that you should take more from rich people, and given the economics of daily life I think you could take proportionally more. Instead of robbing the rich, think of it as not robbing the poor, and it makes much more sense.

seems really simple to me.

Yes, that is simple, but it’s not as fair as a progressive system, because as mentioned the cost of living is not proportional to your income. So your simple maths is too simple.

Simple isn’t necessarily good – I could say that eveyrone pays £50 – that’s the simplest, but it’s not workable.

And that’s what your vote is for, happily tax increases are political suicide.

If you get a £100k payrise, and you are taxed 50% on it, why is that punishment? You’ve just made an extra £50k FFS

but you have to look at what the effort was that had to be put in to get the 100k bonus.

If tax rates are high you might decide that it wasn’t worth the effort/stress/shortening of life expectancy that working hard entails.

Rich people whining about more tax is people with a comfortable life whining about how it’s not even more comfortable. Whilst other people are suffering.

Sickening.

There are much simpler models mol as we discussed before! Simplicity can be very good.

There are plenty of sound arguments why taking higher propositions from higher earners is neither morally or legally better – they just are not the current collective wisdom.

If tax rates are high you might decide that it wasn’t worth the effort/stress/shortening of life expectancy that working hard entails.

As if salary is proportional to effort and stress! Are you actually from Earth?

Yes, sounds as if TG is from earth. Google income and substitution effects mol. It’s a perfectly valid point.

Simplicity can be very good.

Yeah, it can also be bad. So..?

There are plenty of sound arguments why taking higher propositions from higher earners is neither morally or legally better

Yeah I keep asking for you to share them with the group but you never do..

I’m not a wealth-hater, all I want to do is make sure the lower and middle incom brakcets are well looked after, and public services are good. If a flat rate tax can do that, then great. Let’s have it.

As if salary is proportional to effort and stress! Are you actually from Earth?

Of course I am – I earn a decent salary but I have also spent a lot of my own time and money either keeping my skills up to date or learning new skills.

Or I could sit on my backside and complain that my employer never provides any training or assuming that I can learn everything I need to know on the job.

I got a bonus last year and a paid holiday this, but only after working sh1t loads of hours over last summer and losing a lot of fitness and getting a lot more grey hairs.

I got decent bonuses at banks I worked for, but also caught the 1.05am train home on more occasions than I would like.

There are plenty of sound arguments why taking higher propositions from higher earners is neither morally or legally better

Go on then.