Tuesday, January 16, 2007

France is Losing Its Wealthy and It's All Switzerland's Fault

France's leftist politicians complain that their wealthy citizens are fleeing the country to "tax havens" like Switzerland. Instead of asking themselves why, they blame Switzerland for "illegal" activities, pursuant to Arnaud Montebourg, Presidential candidate Segolene Royal's press secretary, in his public statement: "Our Swiss friends should be reminded that international law does exist." (There's a second article here.)

Monsieur Montebourg is the author of a report on tax havens, those countries, called "paridis fiscaux" in French, that are just beyond the reach of the French taxing authorities. According to Monsieur Montebourg, there exist international agreements on unfair fiscal competition that the Swiss refuse to respect and that the French political right is using "to justify lowering taxes on people of wealth and on businesses."

Heaven forbid.

This is just another example of socialist ignorance. Look at the reality on the ground, as portrayed visually by the LAFFER CURVE. I tell you, it's a fact of life, not a moral choice.

You can have your Laffer Curve vertical, or horizontal, but they both tell the same story.

laffer
laffercurve
[Thanks to qando.net here for the vertical, and to raybromley.com here for the horizontal.]

The Laffer Curve demonstrates visually what happens statistically when you take too much money away from people. There seems to be a threshold beyond which taxation is intolerable -- and it makes sense. After all, we all can feel this pain; we all know about where that threshhold is. There's no reason anyone in his right mind would let someone else, even someone with good intentions, confiscate a good portion of his assets without putting up a fight, leaving town, or giving up the effort to create the assets in the first place.

And more importantly, when you penalize people for making money, you also penalize them for creating jobs.

So now we have this little war between the French socialists and the Swiss press [paraphrasing]:

Montebourg: The larger European nations should unite to combat these tax haven predators.

Swiss: The French leftists should take responsibility for their own errors, like the 35-hour week.

Montebourg: Even the Swiss citizens are beginning to realize that the less you tax corporations, the more you tax wage earners and management.

Swiss: Think so? That must be why one small Swiss county just voted to lower the tax on corporations to zero.

Yadda, yadda, yadda.

Here's the bottom line: As long as there is a market for tax havens, tax havens there will be.

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