Will France’s Ultra-Wealthy Go Galt??

That’s the headline Atrios would have put on this Times piece:

A chill is wafting over France’s business class as Mr. Hollande, the country’s first Socialist president since François Mitterrand in the 1980s, presses a manifesto of patriotism to “pay extra tax to get the country back on its feet again.” The 75 percent tax proposal, which Parliament plans to take up in September, is ostensibly aimed at bolstering French finances as Europe’s long-running debt crisis intensifies.

But because there are relatively few people in France whose income would incur such a tax — an estimated 7,000 to 30,000 in a country of 65 million — the gains might contribute but a small fraction of the 33 billion euros in new revenue the government wants to raise next year to help balance the budget…

Many companies are studying contingency plans to move high-paid executives outside of France, according to consultants, lawyers, accountants and real estate agents — who are highly protective of their clients and decline to identify them by name. They say some executives and wealthy people have already packed up for destinations like Britain, Belgium, Switzerland and the United States, taking their taxable income with them.

Though a 75 percent top marginal rate is devilishly appealing, this seems like about the same thing that dragged down Spain and Italy. Irrational German demands to be “responsible” and cut the deficit leads to budget cuts and tax increases, which causes a recession, making the deficit worse. Rinse and repeat. One might hope that starting that cycle in France might finally break the Germans of their inflation-paranoiac, the-economy-is-like-a-household thinking, but they’ve been stone dense about it so far. Here’s hoping.

I would be interested to see how this plays out if the tax increase goes through as planned. Will the über-rich take their riches and their colossal, bruised egos elsewhere? Or will they take their lumps? Keep your eyes peeled for well-dressed refugees on 5th Avenue.

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Ryan Cooper

Ryan Cooper, a contributing editor of the Washington Monthly, is currently the Washington correspondent for The Week.