Tax Those Rich Guys and Gals ISSUES & INSIGHTS Last Tango In Paris Posted 7/18/2006 Eurosclerosis: For those seeking an elegant and romantic milieu, France has long been a favorite destination. Recently, however, it's become more of a departure point for a certain class of Frenchmen: millionaires. According to French government data, at least one millionaire on the average leaves France every day. It's not that they're finding other places more charming than their native terroir. No, it's that France punishes its wealthiest with burdensome tax rates that sometimes reach as high as 72%. Many of those leaving aren't just the nouveau riche. Even some old-line families who have guided French business and industry for decades are also saying au revoir. In addition to high income, capital gains, inheritance and social security taxes, the wealthy French are hit with a "solidarity tax." Like the U.S.' alternative minimum tax, the solidarity tax is meant to make sure the wealthy pay their fair share for France's out-of-control welfare state. In some cases that levy can actually exceed a person's income, making it one of the great incentive killers of all time. Of course, the Socialists responsible for these punitive levies say that the wealthy who leave are avoiding their responsibilities. Someone should tell them the French Revolution and its dream of radical economic egalitarianism has been over for more than two centuries. Or didn't that occur to them as they celebrated Bastille Day last week? True equality, unreachable under any conditions, will never be achieved through a redistributionist system. At least some Frenchmen recognize this. "This tendency to take from the rich and give to the poor, which is supposed to solve all the problems in France, is ruining the country," said Alain Marchand, a London-based consultant who helps relocate French business executives, in an interview with the The Washington Post. The Post foreign service reports that Eric Pinchet, who has written a French tax guide, reckons that revenues from the solidarity tax are roughly $2.6 billion a year. That's a trifling amount, especially considering that Pinchet believes the tax has cost France more than $125 billion in capital flight since 1998. An economy grows slowly — or is ruined, as Marchand, who left France himself six years ago, might say — when investment is choked off. To say nothing of the loss of a nation's brightest and hardest-working citizens. Entrepreneur, after all, is a French word. Both the rich and the not-so-rich who are young, skilled and ambitious are leaving for countries where the labor markets are less regulated by the state and taxes not as burdensome. That exodus might help explain why real GDP in France has grown just 1.5% a year on average since 2000 — lagging the rest of Europe. Unless these trends are reversed soon through labor law reform — which was tried and failed this spring — and deep tax cuts, France's economy will continue its steady decline.