Feeds:
Posts
Comments

Archive for the ‘France’ Category

Remember when Paul Krugman warned that there was a plot against France? He asserted that critics wanted to undermine the great success of France’s social model.

I agreed with Krugman, at least in the limited sense that there is a plot against France. But I explained that the conspiracy to hurt the nation was being led by French politicians.

Simply stated, my view has been that the French political elite have been taxing the nation into stagnation and decline and there is every reason to think that the nation is heading toward a severe self-inflicted fiscal crisis.

But it turns out I may have been too optimistic. Let’s look at some updates from Krugmantopia.

We’ll start with a report from the Financial Times, which captures the nation’s sense of despair.

…if the country’s embattled socialist president was hoping for some respite from what has been a testing year, he can probably think again. … the French economy barely expanded during the second quarter of this year after stagnating in the first. …the result will make it all but impossible to achieve the government’s growth forecast for 2014 of 1 per cent… Bruno Cavalier, chief economist at Oddo & Cie, the Paris-based bank, says one reason is the huge constraint on disposable income posed by France’s tax burden, which has risen from 41 per cent of GDP in 2009 to 45.7 per cent last year – one of the highest in the eurozone.

The government has responded by rearranging the deck chairs on the political Titanic.

French President Francois Hollande dissolved the government on Monday after open feuding among his Cabinet over the country’s stagnant economy. …France has had effectively no economic growth this year, unemployment is hovering around 10 percent and Hollande’s approval ratings are sunk in the teens. …Hollande’s promises to cut taxes and make it easier for businesses to open and operate have stalled, in large part because of the divisions among his Socialist party.

For what it’s worth, Hollande’s commitment to tax cuts and deregulation is about as sincere and genuine as my support for the Florida Gators.

After all, he’s the guy who imposed a new top tax rate of 75 percent (which he said was “patriotic”)

And that’s just the personal income tax. When you add other taxes to the mix, you get a system that is so onerous that more than 8,000 households paid more than 100 percent of their income to the French government!

No wonder successful people are escaping to other nations.

By the way, if you’re wondering why Hollande is appointing new people to his government, it’s because some of his ministers were complaining that so-called austerity was inhibiting Keynesian spending policies that would make government even bigger!

Austerity measures being pursued by France and elsewhere in the euro zone are quashing growth, FrenchEconomy Minister Arnaud Montebourg was quoted saying on Saturday… The outspoken minister, a fierce critic of budget austerity, is known for frequent attacks on big business and the European Commission, which he accuses of strangling economic recovery with its prioritization of deficit reduction. …While not as strident as the comments by Montebourg, French Finance Minister Michel Sapin similarly argued for moderated deficit reduction in an interview published in Italian newspaper La Repubblica. “The euro zone is at risk of getting stuck in a spiral of weak or negative growth. We absolutely must slow down the rate of deficit reduction,” Sapin was quoted as saying.

In other words, the French policy debate is between the far left and the crazy left.

Which is why this dour assessment from across the English Channel probably understates the depth of the problem.

Since Francois Hollande was elected President in 2012, French GDP per capita has fallen. Its economy is expected to grow by just 0.7 per cent this year. …the country now looks set for stagnation – with its unemployment rate entrenched above 10 per cent (and youth unemployment double that). …the problems are obvious. The French government accounts for a massive 57.1 per cent of the economy in state spending and transfers. The tax burden is so high at 57 per cent for French employees (the sum of income, payroll taxes, VAT, and social security contributions as a proportion of the gross employment cost)… The World Economic Forum says that France is near the worst performer on a host of measures: positioned 130 out of 148 countries for its regulatory burden, 134 for the tax rates on profits, 135 on cooperation in labour-employer relations, and 144 on hiring and firing practices. …No wonder investors have voted with their wallets. FDI into France is estimated to have fallen by 95 per cent in the last decade.

Wow. No wonder the French people are so glum about the economy, as reported by the EU Observer.

…in France, the eurozone’s second biggest economy, eight percent felt the country’s economy was good. …Only 34 percent feel the jobs crisis has peaked compared with 60 percent who are bracing themselves for a darker economic future.

Which raises a good question. If the French people are so pessimistic about the future, why do they keep electing socialists?!?

Particularly when they tell pollsters they support smaller government!

Last but not least, we have a story from the New York Times about the mind-boggling regulation and protectionism that , mostly because it illustrates the pervasive statism that is strangling France.

Alexandre Chartier and Benjamin Gaignault work off Apple computers and have no intention of ever using the DVD player tucked in the corner of their airy office. But French regulations demand that all driving schools have one, so they got one. Mr. Chartier, 28, and his partner, Mr. Gaignault, 25, are trying to break into the driving school business here… But they are not having an easy time. The other driving schools have sued them, saying their innovations break the rules. …their struggle highlights how the myriad rules governing driving schools — and 36 other highly regulated professions — stifle competition and inflate prices in France.

And what are these rules and regulations, other than the bizarre requirement to own a DVD player?

“The system is absurd,” said Mr. Koenig, who was a speechwriter for Christine Lagarde when she was the French finance minister. …he has been campaigning for changes, including calling for an overhaul of the written test, which he says goes far beyond making sure that a person knows the rules of the road. Instead, he said, it seems intended to trip students up with ridiculous questions, such as: If you run headlong into a wall, would you be safer if you were in a tank or in a car? (The answer: a car, because it has air bags.) …Some studies have concluded that the French are probably paying 20 percent more than they should for the services they get from regulated professions, which include notaries, lawyers, bailiffs, ambulance drivers, court clerks, driving instructors and more. …Francis Kramarz, an economist who has studied the French licensing system, says that barriers to getting a license are so high that about one million French people, who should have licenses, have never been able to get them. …Mr. Kramarz said that it often costs 3,000 euros, or about $3,900, to get a license. But others said the average was closer to 1,500 to 2,000 euros.

Gee, isn’t big government wonderful!

The statists say it helps the less fortunate, but it seems the poor are the ones most hurt by regulations that push the cost of getting a license to $2,000 or above.

P.S. In an uncharacteristic expression of mercy, President Hollande has announced that he wants to limit the fiscal burden so that no taxpayer has to surrender more than 80 percent  of their income to the government.

P.P.S. No wonder Obama will never make America as bad as France, regardless of how hard he tries.

P.P.P.S. Here’s the best-ever cartoon about French economic policy, though this cartoon deserves honorable mention.

P.P.P.P.S. Even the establishment, as indicated by stories in Newsweek and the New York Times (as well as The Economist and the BBC), is noticing that the French economy is dismal.

P.P.P.P.P.S. No matter how much I mock France, there are places in Europe with even worse economic policy.

Read Full Post »

If you appreciate the common-sense notion of the Laffer Curve, you’re in for a treat. Today’s column will discuss the revelation that Francois Hollande’s class-warfare tax hikes have not raised nearly as much money as predicted.

And after the recent evidence about the failure of tax hikes in Hungary, Ireland, Detroit, Italy, Portugal, the United Kingdom, and the United States, this news from the BBC probably should be filed in the category of “least surprising story, ever.”

The French government faces a 14bn-euro black hole in its public finances after overestimating tax income for the last financial year. French President Francois Hollande has raised income tax, VAT and corporation tax since he was elected two years ago. The Court of Auditors said receipts from all three taxes amounted to an extra 16bn euros in 2013. That was a little more than half the government’s forecast of 30bn euros of extra tax income.

And why have revenues been sluggish, generating barely half as much money as the politicians wanted? For the simple reason that Hollande and the other greedy politicians in France failed to properly anticipate that higher tax rates on work, saving, investment, and entrepreneurship would discourage productive behavior and thus lead to less taxable income.

…economic growth has been inconsistent and the unemployment rate hit a record high of 11% at the end of 2013. The French economy saw zero growth in the first three months of 2014, compared with 0.2% growth three months earlier. The income tax threshold for France’s wealthiest citizens was raised to 75% last year, prompting some French citizens, including the actor Gerard Depardieu, to leave the country and seek citizenship elsewhere in Europe.

But we do have some good news. A French politician is acknowledging the Laffer Curve!

French Prime Minister Manuel Valls, who was appointed in March following the poor showing of Mr Hollande’s Socialists in municipal elections, appeared to criticise the president’s tax policy by saying that “too much tax kills tax”.

By the way, France’s national auditor also admitted that tax hikes were no longer practical because of the Laffer Curve. Heck, taxes in France are so onerous that even the EU’s Economic Affairs Commissioner came to the conclusion that tax hikes were reducing taxable income.

Though here’s the most surprising thing that’s ever been said about the Laffer Curve.

…taxation may be so high as to defeat its object… given sufficient time to gather the fruits, a reduction of taxation will run a better chance than an increase of balancing the budget.

And I bet you’ll never guess who wrote those words. For the answer, go to the 6:37 mark of the video embedded in this post.

P.S. Just in case you’re not convinced by the aforementioned anecdotes, there is lots of empirical evidence for the Laffer Curve.

  • Such as this study by economists from the University of Chicago and Federal Reserve.
  • Or this study by the IMF, which not only acknowledges the Laffer Curve, but even suggests that the turbo-charged version exists.
  • Or this European Central Bank study showing substantial Laffer-Curve effects.
  • Or this research from the American Enterprise Institute about the Laffer Curve for the corporate income tax.

P.P.S. For other examples of the Laffer Curve in France, click here and here.

P.P.P.S. To read about taxpayers escaping France, click here and here.

P.P.P.P.S. On a completely different subject, here’s the most persuasive political ad for 2014.

I realize the ad doesn’t include much-needed promises by the candidate to rein in the burden of government, but I’m a bit biased. And in a very admirable way, so is Jack Kingston.

Read Full Post »

While I mostly focus on bad government policy in the United States, I also think we can learn lessons from what’s happening in other nations.

In some cases, I share positive stories, such as the success of privatized Social Security in Australia, nationwide school choice in Sweden, and genuine spending cuts in the Baltic nations.

In most cases, though, I’m pointing out bad policy.

Some topics deserve special treatment, such as the ongoing horror story of government-run healthcare in the United Kingdom.

In other cases, though, I share one-off stories about government incompetence and stupidity.

*Such as taxpayer-financed friends for mass murderers in Norway.

*Financing a giant “Burger Boy” in the United Kingdom.

*Promoting welfare tourism in the European Union.

*Spending $30 to collect $1 of tax in Germany.

*Regulation of coffee enemas in Japan.

Today, we’re going to share more stories of feckless behavior by foreign politicians and bureaucrats.

From Canada, we learn that the government of Manitoba is micro-managing daycare lunches in such bizarre ways that a family was fined because “grains” weren’t included in their kids’ meals.

Kristin Barkiw of Rossburn, Manitoba, Canada brought two of her children home from Little Cub’s Den daycare when she saw that her kids were sent home with a note. …the message told the mom she had failed to provide a nutritionally balanced lunch for her children, 5-year-old Logan and 3-year-old Natalie.  Not only that, Kristin was fined $10, $5 per child, for missing grains in their lunch of leftover roast beef, carrots, potatoes, an orange and milk. Further, the note said that the daycare staff gave Logan and Natalie Ritz crackers to fulfill the nutritional requirement of grains, which some see as a less than nutritious option. The nutritional regulation for daycare lunches is actually law in the province. The Manitoba government’s Early Learning and Child Care lunch regulations state that daycare programs must ensure children are given a lunch with a meat, a grain, a milk product and two servings of fruit and vegetables and any missing food groups must be supplemented by the care provider.

Heaven forbid that parents actually be in charge of what their kids eat!

You won’t be surprised to learn that France is on the list. It appears the government’s rail system is staffed by numbskulls.

France’s SNCF rail company has ordered 2,000 trains for an expanded regional network that are too wide for many station platforms, entailing costly repairs, the national rail operator said on Tuesday. A spokesman for the RFF national rail operator confirmed the error, first reported by satirical weekly Canard Enchaine in its Wednesday edition. …Construction work has already begun to displace equipment and widen hundreds of train platforms to accommodate the new trains, but hundreds more remain to be fixed, he added. …The RFF only gave the dimensions of platforms built less than 30 years ago, but most of France’s 1,200 platforms were built more than 50 years ago. Repair work has already cost 80 million euros ($110 million).

I guess I’m not surprised by that story since the French once built an aircraft carrier with a flight deck that was too small.

In Sweden, a novelty tourist hotel made of ice will have to install fire alarms.

The Ice Hotel, which is rebuilt every year in northern Sweden out of enormous chunks of ice from the Torne River in Jukkasjärvi, Kiruna, will this year come equipped with fire alarms – and the irony isn’t lost on the staff. “We were a little surprised when we found out,” hotel spokeswoman Beatrice Karlsson told The Local. …While it might sound crazy that a building made of water needs to be equipped with fire alarms, the fact that the hotel is built from scratch every year means it needs to abide by the rules that apply to every new building, rules set by the National Housing Board (Boverket).

If I had to pick a prize from today’s list, this might win the prize. It’s a stunning display of government in action. Though probably not as bad as the time it took a local government in the U.S. two days to notice a dead body in a community swimming pool.

And from Germany, we have a story about massive cost overruns incurred by a pan-European bureaucracy that supposedly helps encourage fiscal discipline.

“Do as we say, not as we do”

It was meant to cost £420m of European taxpayers’ money but the bill for the new headquarters of the European Central Bank (ECB) has more than doubled to £960m and could rise even further. The bank is the key enforcer of austerity measures in the troubled eurozone nations, but appears to be having trouble keeping its own finances in order. The 45-storey glass and steel building, made up of two joined towers, will be more than 600ft tall when it is finished. But it has already been under construction for a decade and is three years behind schedule.

Of course, it goes without saying that cost overruns and delays are par for the course with government.

Just in case anyone thinks I’m picking on foreigners, here’s a story that makes me ashamed to be American. Or, to be more precise, it makes me ashamed that we have some of the world’s most pathetic bureaucrats.

Honors Night at Cole Middle School is no more. Parents got an email from Principal Alexis Meyer over the weekend saying some members of the school community “have long expressed concerns related to the exclusive nature of Honors Night.” The email goes on to say students will be recognized in other ways. …Parents and students are not happy with the change. “How else are they suppose to learn coping skills, not just based on success, but relative failure, it might not be failure, but understand what it takes to achieve high levels,” said parent Joe Kosloski. …“That made me wanna work harder and a lot of other people work harder, so just the fact you can’t work towards it anymore then there is no goal,” said 8th grade student Kaitlyn Kosloski. Changes are also being made to the middle school’s sports awards.

You read correctly. They also won’t recognize athletic success.

I guess everyone gets a participation medal.

Except, of course, we still single out kids who commit horrible crimes in school. Such as having toy army men, eating a pop tart the wrong way, building a motion detector for a school science experiment, or countless other “offenses” that trigger anti-gun lunacy by brainless bureaucrats.

The moral of these stories, both from America and around the world, it that government is not the answer. Unless, of course, you’ve asked a really strange question.

Read Full Post »

Greetings from Obamaland!

Actually, that’s wrong in two respects. First, I’m actually in France. And even though I’ve joked that Obama wants to make America like France, technical accuracy requires me to admit that my real location is Paris, France Road Showwhere I participated earlier today in the latest stop on the Free Market Road Show.

Second, I used the “Obamaland” joke when writing a few days ago about my visit to Greece. So I should probably not over-utilize any literary crutch.

With those caveats out of the way, allow me to wax poetic about troubles in the land of wine, cheese, and 35-hour work weeks.

Actually, I won’t wax at all. Let’s look at what a former Frenchwoman has to say.

Veronique de Rugy of Mercatus, a native of France who escaped to the United States, has a column looking at the turmoil and angst in her home country.

…another European Union member is quietly slipping into economic despair. After years of fiscal mismanagement, France is in a bad, bad place. …France spends more of its GDP on government-57 percent-than any other country in the Eurozone. The country’s unemployment rate is at a 16-year high of 11 percent, and a startling number of richer and younger French people are leaving for more hospitable economic environments abroad. …Since the creation of the Eurozone in 1999, France has only managed a 0.8 percent annual growth rate.

The statists in France seem to think the right way of dealing with this crisis is to double down on statism.

…the French government’s response to anemic growth and higher unemployment has been to tack toward less economic freedom, not more. …President Francois Hollande of the Socialist Party has refused to trim France’s social-welfare spending-the highest of all developed economies-and has chosen instead to chip away at the country’s huge deficit by raising taxes.

Hollande’s statism doesn’t seem to be earning him any friends.

Hollande’s commitment to big government hasn’t won him any friends. The French rank him as the least popular president of the Fifth Republic, and young people are voting with their feet. According to the data from French consulates in London and Edinburgh, the number of French people living in London is probably somewhere between 300,000 and 400,000. That’s more than the number of French people living in Bordeaux, Nantes, or Strasbourg.

I know one reason they’re running away.

Taxes, mandates, and regulations make everything so expensive that a McChicken sandwich at McDonald’s, which costs only $1 in the United States,McD France costs about three times as much in Europe based on current exchange rates (as you can see from the pictures I snapped in the metro).

Anyhow, the people of France seem to understand that’s something’s amiss.

Hundreds of thousands of them are escaping as fast as they can. Even the New York Times can’t help but notice!

And in recent local elections, President Hollande’s party took a bath.

Here’s some of what the New York Times reported about recent local elections.

French voters dealt a blow to the government of François Hollande on Sunday, rejecting left-leaning candidates for local office in at least 155 cities while embracing more conservative politicians…the Socialists lost former strongholds like Toulouse and Limoges, as well as many smaller towns. …Economic troubles cast a long shadow over the elections, as Mr. Hollande’s efforts to reverse the trend showed few results… Overall unemployment in France at the end of 2013 was about 11 percent.

Doesn’t sound like the socialists are doing so well. So does this mean Hollande may get tossed out of office in a few years?

Perhaps, but the real question is whether that would make a difference. It seems that the so-called right-wing politicians in France (and elsewhere in Europe) are so squishy and statist that they make Republicans look like paragons of principle.

Here’s some more of what Veronique wrote in her Reason article about Hollande’s predecessor.

…data compiled by tax-watchdog groups and the media in 2012 show that during Sarkozy’s rule, from 2007 to 2012, taxpayers were subjected to 205 separate increases, including excise taxes on televisions, tobacco, and diet sodas, multiple increases in capital taxation, and a wealth-tax hike. Sarkozy is also responsible for increasing the top marginal income tax rate from 40 to 41 percent in 2010, and again to 45 percent in 2012.

In other words, Paul Krugman is right that there’s a plot against France.

But he’s wrong to imply that folks like me are in the cabal. The real threat to France is French politicians.

P.S. The best April Fool’s humor I saw was this “story” sent by a friend in the Bahamas. Sounds like it could have been written by John Stossel.

In an absolutely astounding announcement today, Janet Yellen made a stern and heartfelt apology for 100 years of asset bubbles, depressions, recessions, panics, banking crises, and all-around inflation caused by the Federal Reserve.

Flanked on both sides by former Fed Chairmen Ben Bernanke, Alan Greenspan, and Paul Volker, Ms. Yellen stated emotionally, “As grand wizards of the financial system, we must accept full responsibility for the consequences that our decisions have had on the lives of ordinary people around the world…”

“Frankly,” Ms. Yellen continued, “I can’t believe in this day and age that total control of the money supply is awarded to a tiny handful of unelected central bankers. It is a most undemocratic system and should be abolished immediately.”

If you like Federal Reserve humor, allow me to call your attention to this video from the Fed Chairman’s childhood, this special Fed toilet paper, Ben Bernanke’s hacked Facebook page, the Bernanke-who-stole-Christmas image, a t-shirt celebrating the Fed Chairman, and the famous “Ben Bernank” video.

Read Full Post »

Back in the 1980s and 1990s, there was a widespread consensus that high tax rates were economically misguided. Many Democrats, for instance, supported the 1986 Tax Reform Act that lowered the top tax rate from 50 percent to 28 percent (albeit offset by increased double taxation and more punitive depreciation rules).

And even in the 1990s, many on the left at least paid lip service to the notion that lower tax rates were better for prosperity than higher tax rates. Perhaps that’s because the overwhelming evidence of lower tax rates on the rich leading to higher revenue was fresh in their minds.

The modern left, however, seems completely fixated on class-warfare tax policy. Some of them want higher tax rates even if the government doesn’t collect more revenue!

I’ve already shared a bunch of data and evidence on the importance of low tax rates.

A review of the academic evidence by the Tax Foundation found overwhelming support for the notion that lower tax rates are good for growth.

An economist from Cornell found lower tax rates boost GDP.

Other economists found lower tax rates boost job creation, savings, and output.

Even economists at the Paris-based OECD have determined that high tax rates undermine economic performance.

Today, we’re going to augment this list with some fresh and powerful evidence.

Lots of new evidence. So grab a cup of coffee.

The New York Times, for instance, is noticing that high taxes drive away productive people. At least in France.

Here are some excerpts from a remarkable story.

A year earlier, Mr. Santacruz, who has two degrees in finance, was living in Paris near the Place de la Madeleine, working in a boutique finance firm. He had taken that job after his attempt to start a business in Marseille foundered under a pile of government regulations and a seemingly endless parade of taxes. The episode left him wary of starting any new projects in France. Yet he still hungered to be his own boss. He decided that he would try again. Just not in his own country.

What pushed him over the edge? Taxes, taxes, and more taxes.

…he returned to France to work with a friend’s father to open dental clinics in Marseille. “But the French administration turned it into a herculean effort,” he said. A one-month wait for a license turned into three months, then six. They tried simplifying the corporate structure but were stymied by regulatory hurdles. Hiring was delayed, partly because of social taxes that companies pay on salaries. In France, the share of nonwage costs for employers to fund unemployment benefits, education, health care and pensions is more than 33 percent. In Britain, it is around 20 percent. “Every week, more tax letters would come,” Mr. Santacruz recalled.

Monsieur Santacruz has lots of company.

…France has been losing talented citizens to other countries for decades, but the current exodus of entrepreneurs and young people is happening at a moment when France can ill afford it. The nation has had low-to-stagnant economic growth for the last five years and a generally climbing unemployment rate — now about 11 percent — and analysts warn that it risks sliding into economic sclerosis. …This month, the Chamber of Commerce and Industry of Paris, which represents 800,000 businesses, published a report saying that French executives were more worried than ever that “unemployment and moroseness are pushing young people to leave” the country, bleeding France of energetic workers. As the Pew Research Center put it last year, “no European country is becoming more dispirited and disillusioned faster than France.”

But it’s not just young entrepreneurs. It’s also those who already have achieved some level of success.

Some wealthy businesspeople have also been packing their bags. While entrepreneurs fret about the difficulties of getting a business off the ground, those who have succeeded in doing so say that society stigmatizes financial success. …Hand-wringing articles in French newspapers — including a three-page spread in Le Monde, have examined the implications of “les exilés.” …around 1.6 million of France’s 63 million citizens live outside the country. That is not a huge share, but it is up 60 percent from 2000, according to the Ministry of Foreign Affairs. Thousands are heading to Hong Kong, Mexico City, New York, Shanghai and other cities. About 50,000 French nationals live in Silicon Valley alone. But for the most part, they have fled across the English Channel, just a two-hour Eurostar ride from Paris. Around 350,000 French nationals are now rooted in Britain, about the same population as Nice, France’s fifth-largest city. …Diane Segalen, an executive recruiter for many of France’s biggest companies who recently moved most of her practice, Segalen & Associés, to London from Paris, says the competitiveness gap is easy to see just by reading the newspapers. “In Britain, you read about all the deals going on here,” Ms. Segalen said. “In the French papers, you read about taxes, more taxes, economic problems and the state’s involvement in everything.”

Let’s now check out another story, this time from the pages of the UK-based Daily Mail. We have some more news from France, where another successful French entrepreneur is escaping Monsieur Hollande’s 75 percent tax rate.

François-Henri Pinault, France’s third richest man, is relocating his family to London.  Pinault, the chief executive of Kering, a luxury goods group, has an estimated fortune of £9 billion.  The capital has recently become a popular destination for wealthy French, who are seeking to avoid a 75 per cent supertax introduced by increasingly unpopular Socialist President François Hollande. …It has been claimed that London has become the sixth largest ‘French city’ in the world, with more than 300,000 French people living there.

But it’s not just England. Other high-income French citizens, such as Gerard Depardieu and Bernard Arnault, are escaping to Belgium (which is an absurdly statist nation, but at least doesn’t impose a capital gains tax).

But let’s get back to the story. The billionaire’s actress wife, perhaps having learned from all the opprobrium heaped on Phil Mickelson when he said he might leave California after voters foolishly voted for a class-warfare tax hike, is pretending that taxes are not a motivating factor.

But despite the recent exodus of millionaires from France, Ms Hayek insisted that her family were moving to London for career reasons and not for tax purposes.  …Speaking about the move in an interview with The Times Magazine, the actress said: ‘I want to clarify, it’s not for tax purposes. We are still paying taxes here in France.  ‘We think that London has a lot more to offer than just a better tax situation.

And if you believe that, I have a bridge in Brooklyn that I’m willing to sell for a very good price.

Speaking of New York bridges, let’s go to the other side of Manhattan and cross into New Jersey.

It seems that class-warfare tax policy isn’t working any better in the Garden State than it is in France.

Here are some passages from a story in the Washington Free Beacon.

New Jersey’s high taxes may be costing the state billions of dollars a year in lost revenue as high-earning residents flee, according to a recent study. The study, Exodus on the Parkway, was completed by Regent Atlantic last year… The study shows the state has been steadily losing high-net-worth residents since 2004, when Democratic Gov. Jim McGreevey signed the millionaire’s tax into law. The law raised the state income tax 41 percent on those earning $500,000 or more a year. “The inception of this tax, coupled with New Jersey’s already high property and estate taxes, leaves no mystery about why the term ‘tax migration’ has become a buzzword among state residents and financial, legal, and political professionals,” the study, conducted by Regent states. …tax hikes are driving residents to states with lower tax rates: In 2010 alone, New Jersey lost taxable income of $5.5 billion because residents changed their state of domicile.

No wonder people are moving. New Jersey is one of the most over-taxed jurisdictions in America – and it has a dismal long-run outlook.

And when they move, they take lots of money with them.

“The sad reality is our residents are suffering because politicians talk a good game, but no one is willing to step up to the plate,” Americans for Prosperity New Jersey state director Daryn Iwicki said. The “oppressive tax climate is driving people out.” …One certified public accountant quoted in the study said he lost 95 percent of his high net worth clients. Other tax attorneys report similar results. …Michael Grohman, a tax attorney with Duane Morris, LLP, claimed his wealthy clients are “leaving [New Jersey] as fast as they can.” …If the current trend is not reversed, the consequences could be dire. “Essentially, we’ll find ourselves much like the city of Detroit, broke and without jobs,” Iwicki said.

By the way, make sure you don’t die in New Jersey.

The one bit of good news, for what it’s worth, is that Governor Christie is trying to keep matters from moving further in the wrong direction.

Here’s another interesting bit of evidence. The Wall Street Journal asked the folks at Allied Van Lines where wealthy people are moving. Here’s some of the report on that research.

Spread Sheet asked Allied to determine where wealthy households were moving, based on heavy-weight, high-value moves. According to the data, Texas saw the largest influx of well-heeled households moving into the state last year, consistent with move trends overall. South Carolina and Florida also posted net gains. On the flip side, Illinois and Pennsylvania saw more high-value households move out of state than in, according to the data. California saw the biggest net loss of heavy-weight moves. Last year, California had a net loss of 49,259 people to other states, according to the U.S. Census. …Texas had the highest net gain in terms of domestic migration—113,528 more people moved into the state than out last year, census data show. Job opportunities are home-buyers’ top reason for relocating to Texas, according to a Redfin survey last month of 1,909 customers and website users.

The upshot is that Texas has thumped California, which echoes what I’ve been saying for years.

One can only imagine what will happen over the next few years given the punitive impact of the higher tax rate imposed on the “rich” by spiteful California voters.

If I haven’t totally exhausted your interest in this topic, let’s close by reviewing some of the research included in John Hood’s recent article in Reason.

Over the past three decades, America’s state and local governments have experienced a large and underappreciated divergence. …Some political scientists call it the Big Sort. …Think of it as a vast natural experiment in economic policy. Because states have a lot otherwise in common-cultural values, economic integration, the institutions and actions of the federal government-testing the effects of different economic policies within America can be easier than testing them across countries. …And scholars have been studying the results. …t present our database contains 528 articles published between 1992 and 2013. On balance, their findings offer strong empirical support for the idea that limited government is good for economic progress.

And what do these studies say?

Of the 112 academic studies we found on overall state or local tax burdens, for example, 72 of them-64 percent-showed a negative association with economic performance. Only two studies linked higher overall tax burdens with stronger growth, while the rest yielded mixed or statistically insignificant findings. …There was a negative association between economic growth and higher personal income taxes in 67 percent of the studies. The proportion rose to 74 percent for higher marginal tax rates or tax code progressivity, and 69 percent for higher business or corporate taxes.

Here are some of the specific findings in the academic research.

James Hines of the University of Michigan found that “state taxes significantly influence the pattern of foreign direct investment in the U.S.” A 1 percent change in the tax rate was associated with an 8 percent change in the share of manufacturing investment from taxed investors. Another study, published in Public Finance Review in 2004, zeroed in on counties that lie along state borders. …Studying 30 years of data, the authors concluded that states that raised their income tax rates more than their neighbors had significantly slower growth rates in per-capita income. …economists Brian Goff, Alex Lebedinsky, and Stephen Lile of Western Kentucky University grouped pairs of states together based on common characteristics of geography and culture. …Writing in the April 2011 issue of Contemporary Economic Policy, the authors found “strong support for the idea that lower tax burdens tend to lead to higher levels of economic growth.”

By the way, even though this post is about tax policy, I can’t resist sharing some of Hood’s analysis of the impact of government spending.

Of the 43 studies testing the relationship between total state or local spending and economic growth, only five concluded that it was positive. Sixteen studies found that higher state spending was associated with weaker economic growth; the other 22 were inconclusive. …a few Keynesian bitter-enders insist that transfer programs such as Medicaid boost the economy via multiplier effects… Nearly three-quarters of the relevant studies found that welfare, health care subsidies, and other transfer spending are bad for economic growth.

And as I’ve repeatedly noted, it’s important to have good policy in all regards. And Hood shares some important data showing that laissez-faire states out-perform their neighbors.

…economists Lauren Heller and Frank Stephenson of Berry College used the Fraser Institute’s Economic Freedom of North America index to explore state economic growth from 1981 to 2009. They found that if a state adopted fiscal and regulatory policies sufficient to improve its economic freedom score by one point, it could expect unemployment to drop by 1.3 percentage points and labor-force participation to rise by 1.9 percentage points by the end of the period studied.

If you’ve made it this far, you deserve a reward. We have some amusing cartoons on class-warfare tax policy here, here, here, here, here, here, and here.

And here’s a funny bit from Penn and Teller on class warfare.

P.S. Higher tax rates also encourage corruption.

Read Full Post »

Very few political cartoons make me laugh out loud.

Even when I look back at the all-time favorites that I included in my political cartoonist contest, most of them are on that list because they make a very effective and clever point about public policy.

Though I do recall being very amused by Glenn McCoy’s cartoon on media bias, Chip Bok’s war-on-women cartoon, and Robert Ariail’s cartoon about Greece and the euro.

But I don’t think any of them made me laugh as much as this gem by Scott Stantis.

Socialist Obama Cartoon

I don’t even know why it struck me as being so funny.

Yes, I have a peculiar interest in international economic policy, so I’m fully aware that President Hollande of France is a disaster, but I’m not sure that’s enough to make a cartoon amusing.

And I’ve commented several times on the debate over whether Obama is a socialist, but that’s hardly a topic that lends itself to humor.

Hollande v ObamaOr perhaps I’m just a narcissist and I appreciated a cartoon that was somewhat similar to one of my homemade jokes about Hollande and Obama.

Beats me.

But kudos to Scott Stantis (who also is the author of the best-ever cartoon on the failure of Keynesian stimulus).

Since we’re looking at funny cartoons, it’s time to give some credit to the other side.

I don’t often find much humor on the left, but this cartoon on income inequality is worth sharing.

It’s from the New Yorker, though I don’t know the author. And I confess that I’m merely assuming a left-wing perspective.

It’s your call whether this cartoon is as good as the other leftist cartoons I’ve shared, but it is a good caricature of the GOP country club types.

P.S. Yesterday I shared some libertarian valentines.

So in the interest of fairness, here’s are some left-wing valentines.

They’re designed to trick people into signing up for Obamacare.

Our first option is from a group called the National Women’s law Center.

And here’s one from a group named the Young Invincibles.

obamacare valentine

I have to say that I’m not overly impressed with either one of these valentines.

Though anything has to be better pro-Obamacare marketing than Pajama Boy or casual sex (because big government can take the fun out of anything).

JeffersonP.P.S. Speaking of Valentine’s Day, the PotL graced me with her presence, making me an inexplicable winner.

Even if some of my erstwhile friends who watch Modern Family have started to refer to us as Jay and Gloria.

P.P.P.S. Let’s close with a comment on a very odd story from Norway.

The nut-job who killed 77 people has made an announcement.

Anders Breivik…wants the world to know that he’s being treated “worse than an animal” in prison and is considering going on a hunger strike until the “torture”-like living conditions improve. Just how bad are things for the admitted and unrepentant killer? Well, for one, he says he’s being forced to play his video games on an out-of-date Playstation 2 instead of a newer model. …Breivik was deemed sane by a Norwegian court in the summer of 2012 and sentenced to 21 years in prison, the most-severe sentence allowed under the Scandinavian country’s laws… Details of Breivik’s current conditions are a bit unclear, although Norwegian news reports from the time of his sentencing suggested that he was going to be kept in a three-room cell complete with an exercise area and a television.

I guess it’s a good thing I’m not the warden at his prison.

Why? Because I not only would turn down his request, but I also would dump him in a 6X8 call. Moreover, I would station a couple of guards outside his cell and have them play the newest and fanciest version of Playstation 24 hours a day.

Read Full Post »

Some things in life are very dependable. Every year, for instance, the swallows return to Capistrano.

And you can also count on Dan Mitchell to wax poetic about the looming collapse of French statism.

Back in 2011, I said France was engaged in economic self-destruction.

In September 2012, I wrote that it was time to start the countdown for France’s fiscal crisis.

In October of that year, I pontificated about France’s looming fiscal suicide.

Last April, I warned that the fuse was burning on France’s fiscal time bomb.

In June of 2013, I stated that the looters and moochers in France were running out of victims to plunder.

And in October of last year, I expounded on France’s economic death spiral.

Geesh, looking at that list, I guess I’m guilty of – in the words of Paul Krugman – being part of the “plot against France” by trying to discredit that nation’s economy.

Or maybe I’m just ahead of my time because we’re now seeing articles that almost sound like they could have been written by me appearing in establishment outlets such as Newsweek. Check out some amazing excerpts from an article by Janine di Giovanni, who lives in France and serves as the magazine’s Middle East Editor.

…what is happening today in France is being compared to the revocation of 1685. …the king closed churches and persecuted the Huguenots. As a result, nearly 700,000 of them fled France, seeking asylum in England, Sweden, Switzerland, South Africa and other countries. The Huguenots, nearly a million strong before 1685, were thought of as the worker bees of France. They left without money, but took with them their many and various skills. They left France with a noticeable brain drain.

It’s happening again, except this time the cause is fiscal persecution rather than religious persecution. French politicians have changed the national sport from soccer to taxation!

Since the arrival of Socialist President François Hollande in 2012, income tax and social security contributions in France have skyrocketed. The top tax rate is 75 percent, and a great many pay in excess of 70 percent. As a result, there has been a frantic bolt for the border by the very people who create economic growth – business leaders, innovators, creative thinkers, and top executives. They are all leaving France to develop their talents elsewhere.

It’s an exaggeration to say “they are all leaving,” but France is turning Atlas Shrugged from fiction to reality.

“Au revoir, bloodsuckers”

Many of the nation’s most capable people are escaping – ranging from movie stars to top entrepreneurs.

What I find most amusing is that France’s parasitical political elite is whining and complaining that these people won’t remain immobile so they can be plundered.

And when the people who have the greatest ability leave, that has an impact on economic performance – and ordinary people are the ones who suffer the most.

…the past two years have seen a steady, noticeable decline in France. There is a grayness that the heavy hand of socialism casts. It is increasingly difficult to start a small business when you cannot fire useless employees and hire fresh new talent. Like the Huguenots, young graduates see no future and plan their escape to London. The official unemployment figure is more than 3 million; unofficially it’s more like 5 million.

The article also gives some details that will help you understand why the tax burden is so stifling. Simply stated, the government is far too big and pays for things that should not be even remotely connected to the public sector.

Part of this is the fault of the suffocating nanny state. …As a new mother, I was surprised at the many state benefits to be had if you filled out all the forms: Diapers were free; nannies were tax-deductible; free nurseries existed in every neighborhood. State social workers arrived at my door to help me “organize my nursery.” …The French state also paid for all new mothers, including me, to see a physical therapist twice a week to get our stomachs toned again.

Government-subsidized “toned” stomachs. Hey, maybe big government isn’t all bad. Sort of reminds me of the taxpayer-financed boob jobs in the United Kingdom (British taxpayers also pay for sex trips to Amsterdam).

More seriously, all the wasteful spending in France erodes the work ethic and creates a perverse form of dependency.

I had friends who belonged to trade unions, which allowed them to take entire summers off and collect 55 percent unemployment pay. From the time he was an able-bodied 30-year-old, a cameraman friend worked five months a year and spent the remaining seven months collecting state subsidies from the comfort of his house in the south of France. Another banker friend spent her three-month paid maternity leave sailing around Guadeloupe – as it is part of France, she continued to receive all the benefits. Yet another banker friend got fired, then took off nearly three years to find a new job, because the state was paying her so long as she had no job. “Why not? I deserve it,” she said when I questioned her. “I paid my benefits into the system.”

So what’s the bottom line? Well, the author sums up the issue quite nicely.

…all this handing out of money left the state bankrupt. …The most brilliant minds of France are escaping to London, Brussels, and New York rather than stultify at home. …“The best thinkers in France have left the country. What is now left is mediocrity.” From a chief legal counsel at a major French company: “France is dying a slow death. Socialism is killing it…”

As the old saying goes, this won’t end well. Maybe France will suffer a Greek-style meltdown, but perhaps it will “merely” suffer long-run stagnation and decline.

Which is a shame because France is a beautiful country and is ranked as one of the best places to live if you happen to already have a considerable amount of hard-to-tax wealth (and the French also were ranked among the top-10 most attractive people).

But bad government can screw up a country, even if it does have lots of natural advantages.

And that’s exactly what generations of French politicians have done to France. The tax system has become so bad that more than 8,000 French households had to pay more than 100 percent of their income to the government in 2012.

The French government has announced, by the way, that it intends to cap taxes so that no household ever pays more than 80 percent to the state. Gee, how merciful, particularly since the French President has echoed America’s Vice President and asserted that it’s patriotic to pay higher taxes.

That’s why I’ll stand by my prediction that President Obama will never be able to make America as bad as France. Heck, France has such a bad approach on taxes that Obama has felt compelled to oppose some of that country’s statist initiatives.

P.S. The prize for silliest example of government intervention in France goes to the law that makes it a crime to insult your spouse’s personal appearance.

P.P.S. The big puzzle is why the French put up with so much statism. Polling data from both 2010 and 2013 shows strong support for smaller government, and an astounding 52 percent of French citizens said they would consider moving to the United States if they got the opportunity. So why, then, do they elect statists such as Sarkozy and Hollande?!?

Read Full Post »

Older Posts »

Follow

Get every new post delivered to your Inbox.

Join 2,446 other followers

%d bloggers like this: