France Imposed A 75% Tax On The Highest Incomes: It Didn’t Work And Here’s Why

In a recent interview, Alexandria Ocasio-Cortez stated that the highest income brackets in the US should be taxed at a 70% tax rate. The argument is that this extra income could then get channeled to fund a variety of policies from the so-called Green New Deal to different types of aid for the poor. The problem is that these types of high tax rates have been tried: in France. The policy failed.

In 2012, with great fanfare then French president Francois Hollande announced that all earnings above 1 million EUR were going to be taxed at a 75% tax rate. The policy was supposed to bring a windfall to the French coffers, and make the wealthiest citizens pay up. Just two years later in 2014, the tax was dropped after it had failed to deliver.

The money that was gotten through the tax was quite small, and the projected revenues for 2013 and 2014 were actually down! The government had forecast that in 2013 through all these measures it would be able to collect around 30 billion EUR of extra tax income. What it in fact got was 16 billion, which is 14 billion below the estimated forecast!

This failure forced a change on the post of the Prime Minister, with the new PM Manuel Valls being quoted as saying: “Too much tax kills tax.” The French government did not foresee the consequences that this type of a policy could have. This is a warning sign for any other government that will try to implement a similar policy.

Rich guys like Donald Trump don’t pay taxes and never will

The problem with these high tax rates on the highest income earners is that they punish some of the hardest workers, and not guys like Donald Trump. The ultra rich will never pay their fair share of taxes, because they can hire the smartest lawyers and accountants to get around them. They will stash their money in foreign accounts, or find all kinds of loopholes to get out of paying their taxes.

These high tax rates instead end up being slapped on people who are just above the threshold and don’t have the know-how to be able to get around paying them. What happens instead is that they decide that it is not in their best interest to work as hard as before and they substitute the higher income for more leisure…