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Posts Tagged ‘Jurisdictional Competition’

I’m not a big fan of international bureaucracies.

Regular readers know that the Organization for Economic Cooperation and Development is the worst institution from my perspective, followed by the International Monetary Fund.

Some folks ask why the United Nations isn’t higher on the list?

My answer is simple. The UN has a very statist orientation and it routinely advocates bad policy, but it is too incompetent to do much damage.

The OECD and IMF, by contrast, have some capacity to undermine global growth by encouraging more statism.

That being said, the UN occasionally does something that is so obnoxious that I can’t resist commenting. Especially since my tax dollars pay a big share of that bureaucracy’s bloated budget.

What has me irked is that the United Nations Conference on Trade and Development just released its annual Trade and Development Report.

You would think an institution that focuses on trade and development would be advocating free markets and small government.

But UNCTAD takes the opposite approach.

Here’s how the bureaucrats frame the issue in the report. Keep in mind that “market liberalism” is their term for free markets (in other words, classical liberalism).

Back in 1964, the international community recognized that “If privilege, extremes of wealth and poverty, and social injustice persist, then the goal of development is lost”. Yet, almost everywhere in recent years, the spread of market liberalism has coincided with highly unequal patterns of income and wealth distribution. A world where its 85 wealthiest citizens own more than its bottom three and a half billion was not the one envisaged 50 years ago. …the past three decades have demonstrated that delivery is unlikely with a one-size-fits-all approach to economic policy that cedes more and more space to the profitable ambitions of global firms and market forces. …the moment is right to propose another international “New Deal” that can realize the promise of “prosperity for all”.

But not only does UNCTAD utilize class-warfare rhetoric, they also try to support their ideological agenda with historical illiteracy.

I’ve pointed out that the western world became rich when government was very small and markets were liberated.

But the statists at the UN want us to think that big government deserves the credit.

None of today’s developed countries depended on market forces for their structural transformation and its attendant higher levels of employment, productivity and per capita incomes. Rather, they adopted country-specific measures to manage those forces, harnessing their creative side to build productive capacities and provide opportunities for dynamic firms and entrepreneurs, while guiding them in a more socially desired direction. They also used different forms of government action to mitigate the destructive tendencies of those same market forces. This approach of managing the market, not idolizing it, was repeated by the most rapidly growing emerging market economies − from the small social democratic economies of Northern Europe to the giant economies of East Asia − in the decades following the end of the Second World War.

Wow. They even want us to think big government deserves the credit for prosperity in Hong Kong and Singapore.

So you know the bureaucrats are either very stupid or very dishonest. I suspect the latter, but it doesn’t matter. All we need to know is that they are willing to make very preposterous claims to advance their agenda.

And what is their agenda? Well, a major theme is that politicians in developing nations need “policy space” to enable bigger government.

For instance, UNCTAD doesn’t like free trade but does like industrial policy (aka, crony capitalism).

Policy space is…reduced by free trade agreements… Along with the proliferation of trade agreements and their expansion into trade-related areas, there has been a global revival of interest in industrial policy.

But a big focus of the report is that tax competition is a threat to the “policy space” of politicians.

Fiscal space goes hand in hand with policy space. …strengthening government revenues is key. …This…allows for higher growth-enhancing public spending… The need for reclaiming and expanding fiscal space faces particular challenges in an increasingly globalizing economy. …A major problem is that globalization has affected the ability of governments to mobilize domestic revenues. …the increased mobility of capital and its greater use of fiscal havens have considerably altered the conditions for taxing income − both personal and corporate − and wealth. The dominant agenda of market liberalism has led to a globalized economy that encourages tax competition among countries, at times pushing them to a “race to the bottom”.

Gasp, how horrible! Politicians don’t have as much “policy space” to impose punitive taxes.

That’s the best advertisement for tax competition I’ve ever read, even if it is unintentional.

So what do the UN bureaucrats want to solve this supposed problem? Simple, just destroy financial privacy and fiscal sovereignty so that politicians have carte blanche to expand taxes.

…a number of developments aimed at improving transparency and exchange of information for tax purposes have taken place. They include a declaration by G20 leaders to promote information sharing… an OECD Action Plan on base erosion and Profit Shifting (BEPS), increased monitoring by several national tax authorities…and numerous bilateral tax treaties (BTTs) and tax information exchange agreements (TIEAs). …these initiatives are steps in the right direction.

With BEPS, indiscriminate information sharing, and more power for national tax police, UNCTAD has put together a trifecta of bad policies.

And to add insult to injury, all the bureaucrats at the UN get tax-free salaries while they concoct schemes to enable higher taxes on the rest of us.

Geesh, no wonder I sometimes have perverse fantasies about them.

And I’m very grateful that Senator Rand Paul is leading the fight against their evil ideas.

P.S. On a more pleasant topic, the “Beltway Bandits” just played in the softball world series in Las Vegas. We competed in the 55+ grouping and finished with three wins and two losses.

Not bad, but not good enough to win any trophies. But we got to play in replica Major League stadiums, which was a fun experience.

I can now say I’ve hit home runs in Dodger Stadium and Wrigley Field, and also doubled off the Green Monster at Fenway. Sounds impressive so long as nobody asks any follow-up questions!

IMAG0135

P.P.S. Here’s something else that I found amusing.

Bill Clinton not only understands the inversion issue, but he’s also willing to publicly explain why Obama is wrong.

During an interview with CNBC on Tuesday, former President Bill Clinton called to cut corporate taxes and give companies a break on money stashed overseas, dinging President Barack Obama’s latest effort to combat corporate tax-dodging. When asked what should be done about corporate inversion transactions, Clinton responded with a host of GOP talking points about the tax burden on big business. “America has to face the fact that we have not reformed our corporate tax laws,” Clinton told CNBC, according to a transcript. “We have the highest overall corporate tax rates in the world. And we are now the only OECD country that also taxes overseas earnings on the difference between what the companies pay overseas and what they pay in America.”

But I guess we shouldn’t be surprised. This isn’t the first time he’s had sensible things to say on the issue of corporate taxation.

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I’ve complained over and over again that America’s tax code is a nightmare that undermines competitiveness and retards growth.

Our aggregate fiscal burden may not be as high as it is for many of our foreign competitors, but high tax rates and poor design mean the system is very punitive on a per-dollar-raised basis.

For more information, the Tax Foundation has put together an excellent report measuring international tax competitiveness.

Here’s the methodology.

The Tax Foundation’s International Tax Competitiveness Index (ITCI) measures the degree to which the 34 OECD countries’ tax systems promote competitiveness through low tax burdens on business investment and neutrality through a well-structured tax code. …No longer can a country tax business investment and activity at a high rate without adversely affecting its economic performance. In recent years, many countries have recognized this fact and have moved to reform their tax codes to be more competitive. However, others have failed to do so and are falling behind the global movement. …The competitiveness of a tax code is determined by several factors. The structure and rate of corporate taxes, property taxes, income taxes, cost recovery of business investment, and whether a country has a territorial system are some of the factors that determine whether a country’s tax code is competitive.

And here’s how the United States ranks.

The United States provides a good example of an uncompetitive tax code. …the United States now has the highest corporate income tax rate in the industrialized world. …The United States places 32nd out of the 34 OECD countries on the ITCI. There are three main drivers behind the U.S.’s low score. First, it has the highest corporate income tax rate in the OECD at 39.1 percent. Second, it is one of the only countries in the OECD that does not have a territorial tax system, which would exempt foreign profits earned by domestic corporations from domestic taxation. Finally, the United States loses points for having a relatively high, progressive individual income tax (combined top rate of 46.3 percent) that taxes both dividends and capital gains, albeit at a reduced rate.

Here are the rankings, including scores for the various components.

You have to scroll to the bottom to find the United States. It’s embarrassing that we’re below even Spain and Italy, though I guess it’s good that we managed to edge out Portugal and France.

Looking at the component data, all I can say is that we should be very thankful that politicians haven’t yet figured out how to impose a value-added tax.

I’m also wondering whether it’s better to be ranked 32 out of 34 nations or ranked 94 out of 100 nations?

But rather than focus too much on America’s bad score, let’s look at what some nations are doing right.

Estonia – I’m not surprised that this Baltic nations scores well. Any country that rejects Paul Krugman must be doing something right.

New Zealand – The Kiwis can maintain a decent tax system because they control government spending and limit government coercion.

Switzerland – Fiscal decentralization and sensible citizens are key factors in restraining bad tax policy in Switzerland.

Sweden – The individual income tax is onerous, but Sweden’s penchant for pro-market reform has helped generate good scores in other categories.

Australia – I’m worried the Aussies are drifting in the wrong direction, but any nations that abolishes its death tax deserves a high score.

To close, here’s some of what the editors at the Wall Street Journal opined this morning.

…the inaugural ranking puts the U.S. at 32nd out of 34 industrialized countries in the Organization for Economic Co-operation and Development (OECD). With the developed world’s highest corporate tax rate at over 39% including state levies, plus a rare demand that money earned overseas should be taxed as if it were earned domestically, the U.S. is almost in a class by itself. It ranks just behind Spain and Italy, of all economic humiliations. America did beat Portugal and France, which is currently run by an avowed socialist. …the U.S. would do even worse if it were measured against the world’s roughly 190 countries. The accounting firm KPMG maintains a corporate tax table that includes more than 130 countries and only one has a higher overall corporate tax rate than the U.S. The United Arab Emirates’ 55% rate is an exception, however, because it usually applies only to foreign oil companies.

The WSJ adds a very important point about the liberalizing impact of tax competition.

Liberals argue that U.S. tax rates don’t need to come down because they are already well below the level when Ronald Reagan came into office. But unlike the U.S., the world hasn’t stood still. Reagan’s tax-cutting example ignited a worldwide revolution that has seen waves of corporate tax-rate reductions. The U.S. last reduced the top marginal corporate income tax rate in 1986. But the Tax Foundation reports that other countries have reduced “the OECD average corporate tax rate from 47.5 percent in the early 1980s to around 25 percent today.”

This final excerpt should help explain why I spend a lot of time defending and promoting tax competition.

As bad as the tax system is now, just imagine how bad it would be if politicians didn’t have to worry about jobs and investment escaping.

P.S. If there was a way of measuring tax policies for foreign investors, I suspect the United States would jump a few spots in the rankings.

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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.

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Ukraine is in the news and that’s not a good thing.

I’m not a foreign policy expert, to be sure, but it can’t be a positive sign when nations with nuclear weapons start squabbling with each other. And that’s what’s happening now that Russia is supposedly occupying Crimea and perhaps other parts of Ukraine and Western powers are complaining.

I’m going to add my two cents to this issue, but I’m going to approach it from an unusual angle.

Look at this linguistic map of Ukraine. The red parts of the country show where Russian is the primary language and most people presumably are ethnically Russian.

Russian in Ukraine

Now look at these maps (from here, here, here, and here) showing various election results in the country.

Ukraine Election Results

Like I said, I’m not overly literate on foreign policy, but isn’t it obvious that the Ukrainians and the Russians have fundamentally different preferences?

No wonder there’s conflict.

But is there a solution? And one that doesn’t involve Putin annexing – either de facto or de jure – the southern and eastern portions of the nation?

It seems there are two options.

1. Secession - The first possibility is to let the two parts of Ukraine have an amicable (or at least non-violent) divorce. That’s what happened to the former Soviet Union. It’s what happened with Czechoslovakia became Slovakia and the Czech Republic. And it’s what happened (albeit with lots of violence) when Yugoslavia broke up.

For what it’s worth, I’ve already suggested that Belgium should split into two nations because of linguistic and cultural differences. So why not the same in Ukraine?

Heck, Walter Williams has argued that the same thing should happen in America, with the pro-liberty parts of the nation seceding from the statist regions.

2. Decentralization - The second possibility is for Ukraine to copy the Swiss model of radical decentralization. In Switzerland, even though there are French cantons, German cantons, and an Italian canton, the various regions of the country don’t squabble with each other because the central government is relatively powerless.

This approach obviously is more attractive than secession for folks who think that existing national borders should be sacrosanct.

And since this post is motivated by the turmoil in Ukraine, it’s worth pointing out that this also seems to be a logical way of defusing tensions across regions.

I confess I have a policy reason for supporting weaker national governments. Simply stated, there’s very strong evidence that decentralization means more tax competition, and when governments are forced to compete for jobs and investment, the economy is less likely to be burdened with high tax rates and excessive redistribution.

Indeed, we also have very strong evidence that the western world became prosperous precisely because the proliferation of small nations and principalities restrained the natural tendencies of governments to oppress and restrain economic activity.

And since Ukraine (notwithstanding it’s flat tax) has a very statist economic system – ranking only 126th in the Economic Freedom of the World index, maybe a bit of internal competition would trigger some much-needed liberalization.

P.S. If you’re intrigued by the secession idea promoted by Walter Williams, you’ll definitely enjoy this bit of humor about a national divorce in the United States.

P.P.S. If you think decentralization and federalism is a better option than secession, the good news is that more and more Americans have unfavorable views of Washington.

P.P.P.S. The tiny nation of Liechtenstein is comprised of seven villages and they have an explicit right to secede if they become unhappy with the central government in Vaduz. And even the statist political crowd in the United Kingdom is considering a bit of federalism.

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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?!?

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Over the years, I’ve shared some ridiculous arguments from our leftist friends.

Paul Krugman, for instance, actually wrote that “scare stories” about government-run healthcare in the United Kingdom “are false.” Which means I get to recycle that absurd quote every time I share a new horror story about the failings of the British system.

Today we have some assertions from a statist that are even more absurd

Saint-Amans

“Taxes for thee, but not for me!”

Pascal Saint-Amans is a bureaucrat at the Paris-based Organization for Economic Cooperation and Development. He has spent his entire life sucking at the public teat. After spending many years with the French tax authority, he shifted to the OECD in 2007 and now is in charge of the bureaucracy’s Centre for Tax Policy Administration.

I don’t know why he made the shift, but perhaps he likes the fact that OECD bureaucrats get tax-free salaries, which nicely insulates him from having to deal with the negative consequences of the policies he advocates for folks in the private sector.

Anyhow, Saint-Amans, acting on behalf of the uncompetitive nations that control the OECD, is trying to create one-size-fits-all rules for international taxation and he just wrote a column for the left-wing Huffington Post website. Let’s look at a few excerpts, starting with his stated goal.

To regain the confidence and trust of our citizens, there is a pressing need for action. To this end, the OECD’s work…will pave the way for rehabilitating the global tax system.

You probably won’t be too surprised to learn that the OECD’s definition of “rehabilitating” in order to regain “confidence and trust” does not include tax cuts or fundamental reform. Instead, Monsieur Saint-Amans is referring to the bureaucracy’s work on “tax base erosion and profit shifting (BEPS) and automatic exchange of information.”

I’ve already explained that “exchange of information” is wrong, both because it forces low-tax jurisdictions to weaken their privacy laws so that high-tax governments can more easily double tax income that is saved and invested, and also because such a system necessitates the collection of personal financial data that could wind up in the hands of hackers, identity thieves, and – perhaps most worrisome – under the control of governments that are corrupt and/or venal.

The OECD’s palatial headquarters – funded by U.S. tax dollars

So let’s focus on the OECD’s “BEPS” plan, which is designed to deal with the supposed crisis of “massive revenue losses” caused by corporate tax planning.

I explained back in March why the BEPS proposal was deeply flawed and warned that it will lead to “formula apportionment” for multinational firms. That’s a bit of jargon, but all you need to understand is that the OECD wants to rig the rules of international taxation so that high-tax nations such as France can tax income earned by companies in countries with better business tax systems, such as Ireland.

In his column, Monsieur Saint-Amans tries to soothe the business community. He assures readers that he doesn’t want companies to pay more tax as a punishment. Instead, he wants us to believe his BEPS scheme is designed for the benefit of the business community.

Naturally, the business community feels like it’s in the cross-hairs. …But the point of crafting new international tax rules is not to punish the business community. It is to even the playing field and ensure predictability and fairness.

And maybe he’s right…at least in the sense that high tax rates will be “even” and “predictable” at very high rates all around the world if government succeed in destroying tax competition.

You’re probably thinking that Saint-Amans has a lot of chutzpah for making such a claim, but that’s just one example of his surreal rhetoric.

He also wants readers to believe that higher business tax burdens will “foster economic growth.”

The OECD’s role is to help countries foster economic growth by creating such a predictable environment in which businesses can operate.

I guess we’re supposed to believe that nations such as France grow the fastest and low-tax economies such as Hong Kong and Singapore are stagnant.

Yeah, right. No wonder he doesn’t even try to offer any evidence to support his absurd claims.

But I’ve saved the most absurd claim for last. He actually writes that a failure to confiscate more money from the business community could lead to less government spending – and he wants us to believe that this could further undermine prosperity!

Additionally, in some countries the resulting lack of tax revenue leads to reduced public investment that could promote growth.

Wow. I almost don’t know how to respond to this passage. Does he think government should be even bigger in France, where it already consumes 57 percent of the country’s economic output?

Presumably he’s making an argument that the burden of government spending should be higher in all nations.

If so, he’s ignoring research on the negative impact of excessive government spending from international bureaucracies such as the International Monetary FundWorld Bank, and European Central Bank. And since most of those organizations lean to the left, these results should be particularly persuasive.

He’s also apparently unaware of the work of scholars from all over the world, including the United StatesFinland, AustraliaSwedenItaly, Portugal, and the United Kingdom.

Perhaps he should peruse the compelling data in this video, which includes a comparison of the United States and Europe.

Not that I think it would matter. Saint-Amans is simply flunky for high-tax governments, and I imagine he’s willing to say and write ridiculous things to keep his sinecure.

Let’s close by reviewing some analysis of the OECD’s BEPS scheme. The Wall Street Journal is correctly skeptical of the OECD’s anti-tax competition campaign. Here’s what the WSJ wrote this past July.

…the world’s richest countries have hit upon a new idea that looks a lot like the old: International coordination to raise taxes on business. The Organization for Economic Cooperation and Development on Friday presented its action plan to combat what it calls “base erosion and profit shifting,” or BEPS. This is bureaucratese for not paying as much tax as government wishes you did. The plan bemoans the danger of “double non-taxation,” whatever that is, and even raises the specter of “global tax chaos” if this bogeyman called BEPS isn’t tamed. Don’t be fooled, because this is an attempt to limit corporate global tax competition and take more cash out of the private economy.

P.S. High-tax nations have succeeded in eroding tax competition in the past five years. The politicians generally claimed that they simply wanted to better enforce existing law. Some of them even said they would like to lower tax rates if they collected more revenue. So what did they do once taxpayers had fewer escape options? As you can probably guess, they raised personal income tax rates and increased value-added tax burdens.

P.P.S. If you want more evidence of the OECD’s ideological mission.

It has allied itself with the nutjobs from the so-called Occupy movement to push for bigger government and higher taxes.

The OECD is pushing a “Multilateral Convention” that is designed to become something akin to a World Tax Organization, with the power to persecute nations with free-market tax policy.

It supports Obama’s class-warfare agenda, publishing documents endorsing “higher marginal tax rates” so that the so-called rich “contribute their fair share.”

The OECD advocates the value-added tax based on the absurd notion that increasing the burden of government is good for growth and employment.

It even concocts dishonest poverty numbers to advocate more redistribution in the United States.

P.P.P.S. I should take this opportunity to admit that Monsieur Saint-Amans probably could get a job in the private sector. His predecessor, for instance, got a lucrative job with a big accounting firm, presumably because “he had ‘value’ to the private sector only because of his insider connections with tax authorities in member nations.” See, it’s very lucrative to be a member of the parasite class.

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