Posts Tagged ‘tax avoidance’

One great man’s take on freedom

December 23, 2012

“Despite my excesses, my appetite and my love for life, I am a free man.” Gerard Depardieu, December 2012

In 2012, the French government extracted 44 per cent of gross domestic product in tax revenues.  This is ten percentage points above the OECD average. Yet,  the newly-formed  Socialist government of Francois Hollande has hiked tax rates yet further, imposing a new top rate of income-tax of 75 per cent and taxing investment incomes so heavily that some investors are receiving negative returns (i.e. the effective tax rate exceeds 100 per cent).

In a series of Asterix cartoons, super-human strength enabled Obelix to carry seriously heavy burdens.  Gerard Depardieu, the famous once-French actor, played that over-sized Gaul in the movies characterizing those cartoons.  However, Depardieu, like Atlas, has now shrugged.  He has crossed the border from France to Belgium, locating himself one mile on the right side of tax freedom, and lowering his effective marginal income tax rate by some 25 per cent and eliminating additional punitive taxes on his accumulated wealth.

That is Gerard Depardieu’s definition of freedom. Exit indeed is more powerful than voice in a country that is corrupted by envy and a lack of work ethic among the majority of its slothful population.  Ayn Rand identified and ridiculed  that disease more than 50 years ago.

The French government, far from rethinking the revenue-raising efficiency of its tax hikes, has pursued Gerard in a moralistic manhunt.  The Prime Minister, Jean-Marc Ayrault called his departure ‘pathetic’ and deplored the great actor’s ‘lack of patriotism’. The Culture Minister, Aurelie Filiippetti, claimed to be ‘totally scandalized’. Bernard Cazeneuve, the Europe Minister, complained ‘when a country has given you a lot, there are moments when you must give a bit back’.

‘A bit’ is not exactly how Gerard Depardieu sees it.  Having commenced work as a printer at the age of 14, he has amassed a fortune by hard, successful work. He has paid E145 million in taxes over 45 years.  Angered by the abuse spilling out from Paris,  he has now surrendered his French passport, and rejected all his social security remittances from France.

This great Belgian now resembles the world’s greatest detective (in his own judgment) Hercule Poirot, in his love for a small less envious country, that treats him well and that provides refuge for him against a rapacious government.

BRAVO Gerard Depardieu. May many other wealthy Frenchmen follow suit in defense of their imprescriptible rights to their own property. Remember that the British Prime Minister, David Cameron, also stands by with a red carpet  to welcome to the shores of  Albion  rich Frenchmen yearning for a similar freedom. And Britain’s top rate of income tax is a full  5  percentage points lower than that of Belgium!

Hat Tip: ‘Adieu Obelix’, The Economist, December 22, 2012

Reforming federal income taxes

September 27, 2011

President Obama is currently engaged in a 2012 election campaign that bottom-feeds into his left-wing base by charging wealthy Americans with free-riding on their country by paying unfairly low federal income taxes. Ironically, in the  midst of  this knee-jerk, anti-rich campaign, the president halted his journey to reward the biggest tax  free-loader of them all – Warren Buffet – with the Presidential Medal of Honor for out-free-loading all his billionaire peers, and thus, by Obamanic criteria, for dis-honoring the nation that he professes to love.

Warren Buffet, despite a request from The Wall Street Journal  (See WSJ, September 27, 2011) refuses to make public the federal income tax forms on which he rests his case. So, most likely, the Berkshire man has crept his way into presidential favor by understating  the level of his federal income taxes.  Or alternatively, he has engaged not just in efficient tax avoidance, but in effective tax evasion, that might come to light should some sharp Wall Street Journal eyes light upon discrepancies in his 1040 submissions to the I.R.S.

Nevertheless, as I have suggested in earlier columns, some overall increase in federal tax revenues is required, given the magnitude of the federal debt and the aging of a United States population that unfortunately has been weaned onto a system of retirement entitlement programs that can be scaled back, but only slowly. Efficient tax reform can achieve a modest increase in federal tax revenues, while returning the U.S. economy to a higher rate of economic growth than is currently achievable.

First, let it be emphasized that President Obama speaks in terminological inexactitudes  when he charges the wealthy with  tax freeloading.  The facts expose his lack of truthfulness. The richest 1 per cent of all Americans pay more than a quarter of all federal taxes and 40 cent of all federal income taxes, while making less than 20 per cent of pre-tax income. By any measure of proportionality, their contribution is more than ‘fair’. The President’s campaign trail rhetoric is simply out of line.

Efficient tax reform, neverthless, may result in the wealthy paying more taxes, just as other Americans will also pay more, in order to elevate the federal revenues from 15.5 to 20 per cent of gross domestic product.  The route to that goal should be the elimination of all tax exemptions – without exception –  for all individuals in society, and by imposing a flat rate percentage income tax across the board, irrespective of household income. Payroll taxes would disappear, as would corporate taxes, in order to eliminate double-taxation.  Capital gains and dividends would be taxed flat rate exactly the same as earned income.

Because the flat rate would be low, excess burdens would fall. Tax avoidance would no longer be meaningful and tax evasion incentives would fall significantly. Dynamism would be restored to the United States economy.

Now there is a campaign promise that you could take to the people, Mr. President. It would be an election winner. But you will not take that route, for sure, because, sadly, you are an ideologue and not a statesman – not even an efficient vote-maximising  politician.


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