The Economic Consequences of the French Wealth Tax

by Eric Pichet, La Revue de Droit Fiscal, Vol. 14, p. 5, April 2007

Abstract:

Despite attempts to ‘unwind’ the Impôt de Solidarité sur la Fortune (‘Solidarity Wealth Tax,’ the French wealth tax) during the last legislature (2002-2007), ISF yields had soared by 2006, jumping from €2.5 billion in 2002 to €3.6 billion. Analysis of the economic consequences of this ISF wealth tax has raised the following conclusions: Tax collection costs remain low (around 1.6% of proceeds); Not raising the threshold in line with inflation between 1998 and 2004 created windfall revenues for the French State of €400 million in FY 2004 alone; ISF fraud mainly involving an under-assessment of property assets has stabilised over time at around 28% of total revenues, equivalent; (had the legal framework remained unchanged) to a shortfall for the State of €700 million in 2004; Capital flight since the ISF wealth tax’s creation in 1988 amounts to ca. €200 billion; The ISF causes an annual fiscal shortfall of €7 billion, or about twice what it yields; The ISF wealth tax has probably reduced GDP growth by 0.2% per annum, or around 3.5 billion (roughly the same as it yields); In an open world, the ISF wealth tax impoverishes France, shifting the tax burden from wealthy taxpayers leaving the country onto other taxpayers.

HT2 Tyler Cowen.

Happy Yeltsin Supermarket Day!

by Scott Lincicome, Cato at Liberty, September 16, 2024.

Excerpt:

Yeltsin, who’d two years later become the first freely elected leader of Russia, roamed the aisles of the relatively small Randall’s market that day and was astonished at the variety and affordability of the products on display. According to various reports, this visit — not the one to NASA — catalyzed Yeltsin’s exit from the Communist Party and his abandonment of the Soviet economic model. His 2007 New York Times obituary tells the tale:

During a visit to the United States in 1989 he became more convinced than ever that Russia had been ruinously damaged by its centralized, state-run economic system, where people stood in long lines to buy the most basic needs of life and more often than not found the shelves bare. He was overwhelmed by what he saw at a Houston supermarket, by the kaleidoscopic variety of meats and vegetables available to ordinary Americans.

Lincicome also quotes this from the New York Times obituary for Yeltsin:

Leon Aron, quoting a Yeltsin associate, wrote in his biography, “Yeltsin, A Revolutionary Life”…: “For a long time, on the plane to Miami, he sat motionless, his head in his hands. ‘What have they done to our poor people?’ he said after a long silence.” He added, “On his return to Moscow, Yeltsin would confess the pain he had felt after the Houston excursion: the ‘pain for all of us, for our country so rich, so talented and so exhausted by incessant experiments.’”

He wrote that Mr. Yeltsin added, “I think we have committed a crime against our people by making their standard of living so incomparably lower than that of the Americans.” An aide, Lev Sukhanov was reported to have said that it was at that moment that “the last vestige of Bolshevism collapsed” inside his boss.

DRH note: This last quote reminds me of something Nikita Khrushchev said, something that was quoted in Red Plenty. Here’s what I wrote in “Plenty of Nothing,” my review of Red Plenty:

The book ends with a sympathetic portrayal of Nikita Khrushchev in 1968. Khrushchev, who was forced into retirement in 1964, looks back, sadly and angrily, at the huge amount of blood spilled for communism. He had thought the losses were worthwhile because he and his comrades were creating paradise. But here are his actual words, which Spufford tells us in a footnote were on tapes that Khrushchev recorded but that were held back from the memoir his son smuggled to the West:

“Paradise is a place where people want to end up, not a place they run from. What kind of socialism is that? What kind of s**t is that, when you have to keep people in chains? What kind of social order? What kind of paradise?”

Decoding the Sex Trafficking Case Against Sean ‘Diddy’ Combs

by Elizabeth Nolan Brown, Reason, September 18, 2024.

Excerpt:

I can’t speak to whether the allegations against Combs are true. But reading the indictment, a few things jump out that I can comment on. The first is how—once again—the Mann Act rears its ugly head, making criminal what really should not be a crime. The second is how federal prosecutors are (once again) stretching the application of sex trafficking laws to conduct that goes beyond the sort of actions they were originally pushed to target. And the third is how the racketeering conspiracy charge opens up the government to seizing way more assets than they would otherwise be allowed to seize.

Tim Scott Wants to Deregulate Manufactured Housing

by Christian Britschgi, Reason, September 17, 2024.

On Thursday, a group of Republican senators led by Sen. Tim Scott (R–S.C.) introduced the Renewing Opportunity in the American Dream (ROAD) to Housing Act, which proposes a grab bag of reforms to federal housing programs.

Unlike the slew of federal YIMBY (Yes in my backyard) bills that have been introduced in recent years, Scott’s bill doesn’t try to poke, prod, or bribe local and state governments into liberalizing their zoning codes. “Housing policy is inherently local, and federal legislators should encourage local solutions to local problems,” reads the press release on the bill.

Nevertheless, the bill does include at least one idea to increase housing supply.

That includes a repeal of the federal regulation requiring that manufactured housing sit on a permanent steel chassis.

80 Years Later, Are We Still on ‘The Road to Serfdom’?

by Rainer Zitelmann, Wall Street Journal, September 17, 2024.

Excerpt:

In 1942 Hitler defended the Soviet planned economy to his inner circle: “One has to have unqualified respect for Stalin. In his way, the guy is quite a genius . . . and his economic planning is so all-encompassing that it is only exceeded by our own Four-Year Plan. I have no doubts whatsoever that there have been no unemployed in the U.S.S.R., as opposed to capitalist countries such as the U.S.A.”

In July 1941, Hitler said: “A sensible employment of the powers of a nation can only be achieved with a planned economy from above.” And: “As far as the planning of the economy is concerned, we are still very much at the beginning and I imagine it will be something wonderfully nice to build up an encompassing German and European economic order.” Statements like these confirm Hayek’s basic thesis.

And:

Hayek’s book presents a second important thesis: The loss of economic freedom precedes the loss of intellectual and political freedom. Critics who dispute his concerns point to the U.K., which after World War II introduced extremely high taxes and nationalizations. Although the economic consequences were disastrous—and reversed only decades later by Margaret Thatcher, who greatly admired Hayek—there was no loss of political freedom.

The critics are onto something. The loss of economic freedom doesn’t necessarily or immediately lead to the loss of political and intellectual freedom. But Hayek was more right than wrong. Look to the recent example of Venezuela, which lost economic freedom first. Political freedom disappeared next.