A Capitalist Revolt In Socialist France

Business Insider ^ | 10/04/2012 | Wolf Richter, Testosterone Pit

[SeekAndFind]

The French government is trying to reign in its deficit by jacking up taxes, including the capital gains tax, which it wants to bring to the same level as the tax on income earned by the sweat of your brow—an old philosophical pillar of the French left.

But an explosive essay published last Friday hit a nerve with entrepreneurs, venture capital investors, artisans, and mom-and-pop business owners.

And their anger, which spread across the social media, the papers, and finally TV news, turned into an open revolt.

The trigger was an editorial in La Tribune by John-David Chamboredon, Executive President of ISAI, an internet startup fund. After the Finance Law 2013 was proposed during the presidential elections, he wrote, “la France du business stopped breathing.” Investments and hiring were put on hold.

The cause: the capital-gains tax provisions. An entrepreneur, for example, who risked his savings, spent 10 years growing his business, created perhaps hundreds of jobs, survived all the challenges, and then wanted to cash out, would have to pay two layers of taxes on the capital gains, totaling, according to his calculations, 60.5%. And so would investors.

It would kill entrepreneurship. Funding for startups would dry up. And growth in the private sector would wither. “If the fiscal maelstrom is confirmed, the sequence of events is quite clear,” he wrote. “Instead of hiring people and developing the business, owners threatened by this confiscation would spend the rest of 2012 imagining ways to escape it.”

[DonaldC]

I’ve never understood very well why capital gains should be treated differently myself, not that I’m in favor on income taxes generally.

[stephenjohnbanker]

The rest of Euope is wooing all of these disgruntled businesses. France will dry up overnight.

[GeronL]

I think businesses in France should simply go on strike. Shut their doors for a few days.

[kabar]

LOL. Read the article. You might learn something.

[econjack]

If you follow what's been going on in France in terms of its fiscal policies and compare it to what Obozo wants to do in this country, the parallels are obvious. Yet, for reasons I cannot fathom, voters in this country behave like lock-step lemming bound and determined to fall over the Socialist cliff. Raising taxes on the group who drive the economic engine is simply stupid. Obozo has the same plan...tax the rich, give to the poor. I don't know about you, but I've yet to have one job provided by a poor person. Can't Obozo see that a rising tide lifts all boats? Guess not...

[Disambiguator]

I’ve never understood very well why capital gains should be treated differently myself, not that I’m in favor on income taxes generally.

Inflation. If an asset "appreciates" due mostly to inflation of the currency, capital gains taxes are taxing you on the devaluation of your currency, which is also a tax. Hello, double taxation.

[SeekAndFind]

The French economy has started to implode. Service sector business activity is dropping at fastest rate since October 2011.

More importantly, the Markit Composite PMI sports the steepest rate of contraction since March 2009 with job losses accelerating at the fastest pace in 33 months and output plunging at the fastest rate in 42 months.



Here's an excerpt from their recent report....

---

Service sector activity declined in response to a further fall in new business during September. The rate of contraction in new work accelerated to the fastest in five months, with anecdotal evidence pointing to lacklustre demand conditions and clients delaying decisions on projects. Combined with a steeper decline in new orders in the manufacturing sector, overall new business across the French private sector fell at the steepest rate for 41 months.

Reduced workloads prompted French service providers to make further cutbacks to employment during September. The rate of job shedding accelerated to the sharpest for 33 months, with panellists indicating that staffing levels were lowered in response to declining activity and as part of cost-cutting efforts. Composite data signalled the sharpest reduction in employment since December 2009.

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If that does not accurately describe implosion, what does? Looking for who or what to blame? Look no further than inane work rules and regulations made worse by the socialist government of president François Hollande.

[chrisser]

There’s also the element of risk.

Income, generally speaking, is pretty risk free - you agree to do x amount of work for an employer, he agrees to pay you y amount of $$ in return. Absent extenuating circumstances, that arrangment will last indefinitely.

Capital gains are the results of investment. While it is possible to gain much, it is also possible to lose the entire investment. Even an investment that doesn’t appreciate or depreciate is essentially a loss when you consider the opportunity costs (could just put it in a savings account, for example).

If taxing capital gains occured at the same rate as income, there would be no incentive to invest because of the risk of losing the investment with no upside when the investment pays off.

[MasterGunner01]

“Can't Obozo see that a rising tide lifts all boats?”

No, neither Hollande or Obama can see this because socialists/Marxists are all about equality of outcome. Their world is a zero sum game where if one prospers, it is at the expense of another. Their idea of fairness is to spread misery equally among the masses while the elites like them live high at everyone’s expense. They are the Pig in Orwell's “Animal Farm”.

[Covenantor]

France’s earlier work rules were already an insane burden on employers. Expect exorbitant exit taxes on one way flight departures any day now.

The plunge in service sector jobs is kind of ambiguous. Does this mean surly waiters will be let go or retained to maintain glorious tradition?

[TexasRepublic]

“Can’t Obozo see that a rising tide lifts all boats?”

It isn’t ignorance, it is malevolence. Obama does not want to raise the poor up, he wants to tear the rich down. Some people have a hatred of success, perhaps because they know they are incapable of attaining it themselves. It is envy and resentment due to their own ineptitude.

[Mister Da]

Capital gains are earned by risking your capital. Capital can be lost, too. There is no guarantee of a profit.

Payroll income has no risk of loss.

Hollande is crazy. Any French business not tied to the French economy will leave. Those that remain will whither away.

[bravo whiskey]

income taxes are immoral.

[alexander_busek]

The French government is trying to reign rein in its deficit by jacking up taxes [...]

reign:

1. Exercise of sovereign power, as by a monarch.

2. The period during which a monarch rules.

3. Dominance or widespread influence: the reign of reason.

intr.v.

reigned, reign·ing, reigns

1. To exercise sovereign power.

2. To hold the title of monarch, but with limited authority.

3. To be predominant or prevalent: "Panic reigned as the fire spread."

rein:

1. A long narrow leather strap attached to each end of the bit of a bridle and used by a rider or driver to control a horse or other animal. Often used in the plural.

2. A means of restraint, check, or guidance.

3. A means or an instrument by which power is exercised. Often used in the plural: the reins of government.

v. reined, rein·ing, reins

v.tr.

1. To check or hold back by or as if by the use of reins. Often with in, back, or up.

2. To restrain or control.

v.intr.

To control a horse, for example, with reins.

Regards,

[The Working Man]

I’ve never understood very well why capital gains should be treated differently myself, not that I’m in favor on income taxes generally.

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I feel the same way about Property Taxes. If the Government MUST have taxes to run on then it should be consumption taxes alone.

[SunkenCiv]

Thanks SeekAndFind.

[Cincinna]

H/T SeekandFind for the Post; Sunken Civ for the Ping

This will pose an even more serious problem for French society in the future, as well as the economy.
These “pigeons” as they are called, the fledgeling intrepreneurs, artists, inventors and creators have been the creative “juice” in French culture an economy for quite awhile

While we often like to joke about the French, they have been incredibly creative in technology, fashion, tourism, museums, aviation, and cultural life. These pigeons want to work, create, innovate, and start up businesses. If the socialist government creates an inhospitable atmosphere, they will go elsewhere.

They are young, talented, and not stupid enough to allow 65% of their efforts to be confiscated.

*** FRENCH POLITICS AND CULTURE PING LIST ***

*** FREEPMAIL ME IF YOU WANT TO JOIN  ***

[Lexinom]

So people can sit on their assets and collect income while doing not a lick of work. It’s little different from welfare, IMO, and is part of the reason for the anger of the OWS folks.

[Lexinom]

The French government is trying to reign in its deficit by jacking up taxes, including the capital gains tax, which it wants to bring to the same level as the tax on income earned by the sweat of your brow—an old philosophical pillar of the French left.

I actually agree with this. Money earned from real work should be taxed at a lower rate than income not tied to the sweat of the brow. Let's encourage innovation, not golfing.

[Cincinna]

These are hardworking, risk taking entrepreneurs and creative start ups, not coupon clippers.

I never realized there was so much leftist class warfare sentiment here on FR.

[Lexinom]

These are hardworking, risk taking entrepreneurs and creative start ups, not coupon clippers.

I know, because I'm one of them. It does not seem right, though, that innovation should be punished and litigation/investment/paper pushing rewarded. Just my opinion.

[stephenjohnbanker]

The French government is trying to reign in its deficit by jacking up taxes, including the capital gains tax, which it wants to bring to the same level as the tax on income earned by the sweat of your brow—an old philosophical pillar of the French left.

“I actually agree with this. Money earned from real work should be taxed at a lower rate than income not tied to the sweat of the brow. Let’s encourage innovation, not golfing.”

Money I invest that was earned “by the seat of my brow” has ALREADY been taxed . If there is no incentive to invest, people won’t do it. Call any London real estate broker, and ask them how much time and money they are spending to woo wealthy French to move there.

[okie01]

I actually agree with this. Money earned from real work should be taxed at a lower rate than income not tied to the sweat of the brow. Let's encourage innovation, not golfing.

You actually think that "real work" is not involved in income generated by investments? That no research is done, that no studying is required, that no alternatives are examined, that no investigations are performed, that no careful monitoring is involved, that no management effort is required?

How do you think innovation occurs, if not thru investment?

Not to mention that funds employed in investment have already been taxed...at least once...as ordinary income earned.

Understand the "the idle rich" is generally a misnomer -- except in the case of so-called trust fund babies, most of whom are Democrats, anyway. Moreover, the "idle rich" constitute a microscopic proportion of what you would evidently call "rich". The rest of them are working hard for every penny -- perhaps even harder than you.

[Cincinna]

No one who contributes to society and/or creates wealth should be punished (ie discouraged )
I hope you are not in France.

Regulation of financial markets is another topic, IMO.

[Cincinna]

Very true. I know many people who are independently wealthy and who work 50 + hours a week. Either continuing in their profession or doing volunteer work.
The “idle rich” is a Democrat myth, and applies to mostly Democrats.

[Lexinom]

We haven't taken a dime in investment, and we have a working end-to-end prototype. I've lost everything I own in the process - my marriage, my car, my home, and most recently, thousands of hours of music I'd written. I have nothing else, and have not asked a free ride from anyone.

The concept of taking money I did not earn is completely alien to the way I was raised. Sorry.

Crowdsourcing models like Kickstarter and IndieGogo present an interesting and, I think, positive alternative to conventional venture capital.

[Lexinom]

I’ll go halfway with you. Leave unearned income tax rates alone, but cut earned income such that it is lower. Give the people who most need the help, the help. At the same time, neutralized the threadbare old trope that the Republicans are the party for the rich and against the working man.

[okie01]

We haven't taken a dime in investment, and we have a working end-to-end prototype. I've lost everything I own in the process - my marriage, my car, my home, and most recently, thousands of hours of music I'd written. I have nothing else, and have not asked a free ride from anyone.

Truly, you have suffered. But is that a good reason to want those more fortunate than you, but just as hard-working, to be punished?

Please, sir, reconsider...

[Lexinom]

I would just like some affirmation of our work, that's all. This is my job, even if I end up dying of starvation.

I've been a software engineer for 18 years, making over the course of that time millions of dollars for other people. Most recently I got to see what all the hubbub about "business-friendly" Texas really means. It means you - the business owner - can pay people a pittance of a wage and treat intelligent professionals like hourly warehouse workers. The concept of "overtime" has no place among professionals.

I see people with straws, like the proboscis of a mosquito, sucking off the labor of people like me, with three children whom I can no longer support and who are now thousands of miles away - and whom I may well never see again since, if I get seriously sick, I will have no choice but to succumb to the illness. They are the ones with the Steinways, the nice homes. I actually PLAY the piano - difficult and technically demanding material like Chopin - and could benefit from a Steinway, but I'm not one of them. Nope, I work and produce for a living, and those who work and produce are the plebes at the bottom.

Damn you, Obama.

[Cincinna]

I’m with you. Game on!