Sacre Bleu! Wealthy French Push for Higher Taxes, Warren Buffett Smiles

[scandal 951]

Sacre Bleu! Wealthy French Push for Higher Taxes, Warren Buffett Smiles

By Aaron Task

The top income tax rate in France is 40% and French citizens pay a 19.6% VAT sales tax, yet some of the country's wealthiest individuals say they want to pay more.

"At a time when the government is asking everyone to show solidarity, we feel we must contribute," 16 of the nation's wealthiest individuals declared in an open letter published on the website of weekly magazine Le Nouvel Observateur.

The signatories included L'Oreal heiress Liliane Bettencourt, Total's Chief Executive Christophe de Margerie, Societe Generale's CEO Frédéric Oudéa and Maurice Lévy, chairman Publicis, The WSJ reports.

Unlike Warren Buffett, who's called for an overhaul of the U.S. tax code to make it more progressive, the les riches of France are only volunteering for a one-time special tax -- and a "reasonable" one at that.

Still, the letter from France's elites echoes Buffett's plea for the U.S. to stop "coddling" the super-wealth in this country.

In the accompanying video, Henry and I discuss the developments in France with Gillian Tett, U.S. managing editor of The Financial Times.

"It's a sign of just how fast the political-economic climate is changing and also how much underlying social tensions there are, not just in the U.S.," Tett says. "If there's going to be a question of finite resources and allocating pain, there could be quite a nasty backlash against the rich."

In other words, it's probably no coincidence the open letter was published ahead of the new $16 billion austerity package announced Wednesday by French President Nicolas Sarkozy.

The pleas for higher taxes by wealthy citizens here and abroad "indicates the degree to which people recognize the severity of the problems" on sovereign balance sheets, she says. "It also indicates a degree to which people recognize the potential for a nasty backlash as these problems bite."

[Mr. Big Dog 10,747]

Not just the French.

For those that don't know - probably most here - Jakob Augstein is the son of Rudolf Augstein - one of the legendary German journalists and founder, part owner and publisher of DER SPIEGEL.

Debt and Democracy

Why Germany's Rich Must Pay Higher Taxes

A Commentary by Jakob Augstein

A stockbroker drinks champagne at the Frankfurt exchange. Germany's rich need to pay higher taxes.

Germany is a land of inequality. The gap between rich and poor has widened, and cutting public services to balance the budget will only make things worse. If we're serious about saving German democracy, we have to raise taxes on the rich.

Info

A crisis is a turning point. In medicine, when a disease is at its worst, the patient's future hangs in the balance. The doctor does what he or she can, then waits to see if the crisis results in a recovery -- or death.

We know how the death of our society will look from the recent riots in London. We are threatened by social instability, which could lead to societal collapse and anarchy -- our own private Somalia. To avoid that will require a serious effort by the powerful. Our system needs a complete change of course. A politics of inequality got us into this crisis. If we keep going down that road, it will cause our downfall.

It's time to use the crisis as an opportunity for change. It's high time, in other words, to raise taxes.

Germany is a land of inequality. That's not some left-wing dogma, but a simple fact. Our system leads to a "redistribution of wealth from poor to rich." That was the recent conclusion of Paul Kirchhof, a conservative law professor and tax expert who Angela Merkel once wanted to appoint as finance minister. If our political system is to survive in the long term, something needs to change.

Let me describe the current situation with a few figures. The 5,000 best-earning German households have increased their share of the total national revenue by about 50 percent since the mid-1990s. At the same time, the real income of all Germans has remained about the same over this period. The net share of wages -- that is, the share of national income accounted for by wages -- was about 44 percent in West Germany up until the 1980s. Ten years later, it was just over 38 percent. Now it's about 35 percent. In the same period, the portion of income accounted for by profits has continually risen.

Huge redistributions are happening. That's a fact that has been known for some time. But most of us have just sat around and watched. Why? Because the ideology of privatization, small government and neo-liberalism has permanently fogged the minds of a generation.

Spoiling the Rich and Placating the Poor

But the ideology has started to show cracks. Writing in the Sunday edition of the heavyweight conservative newspaper Frankfurter Allgemeine Zeitung recently, the prominent German journalist Frank Schirrmacher argued that a decade of economic policies based on loosely regulated financial markets is proving to be the "most successful" way to make the left-wing critique of free-market capitalism, which had fallen out of favor, popular again.

It's not the power of left-wing arguments that has brought capitalism to its knees. Capitalism has grown for so long that it has reached the point of being incompatible with democracy. We live in a system where the few profit but the many do not. But in a democracy the majority are still needed at the ballot box every few years. They're expected to give their votes -- and then keep quiet. In return for this service, the state hands out (ever-smaller) benefits from the public treasury. But where should the money come from, if the rich and the corporations pay fewer and fewer taxes and keep their money for themselves, while the poor pay no taxes because they have no money?

Answer: debt. Public debt is the price paid by countries to allow the rich to grow richer while the poor grow poorer. This system has now come to the end of the road.

A strategy of spoiling the rich and placating the poor can't work any longer. The only choice now is to raise taxes or cut spending.

But if the government cuts spending, inequality will rise. Whether it's schools, public swimming pools, libraries or hospitals, the wealthy don't care if these public institutions are in a good condition. But everyone else does. Popular rage will grow. We can imagine where it might lead in Germany -- toward the far right. If the government cuts spending, it will not reform the system in the direction of more democracy. Instead, it will push it toward totalitarianism.

If we want to save our society, there is only one answer: to raise taxes. The top tax bracket in Germany is lower than ever. In the past, 53 or 56 percent were normal levels -- now the maximum rate of income tax is 42 percent. The rich person who takes advantage of all possible tax breaks pays just over 30 percent. That's crazy. The state can no longer afford to make do without money from its wealthiest citizens.

The Berlin economics professor Giacomo Corneo has called for a tax bracket of 66 percent for the nation's top earners. He's right.

[one...two...tree 2,762]

HA-HA-HA....There aren't any rich people in Socialist countries except corrupt government officials. Everyone knows this....except sheep.

[mawilson 2,133]

It's not about Warren Buffett or people who are already rich.

It's about the next aspiring Warren Buffett who will find it harder to accumulate wealth.

[웃 910]

It's not about Warren Buffett or people who are already rich.

It's about the next aspiring Warren Buffett who will find it harder to accumulate wealth.

Poor babies only have a couple hundred million...Finding it so hard to get into the billions these days

[mawilson 2,133]

Poor babies only have a couple hundred million...Finding it so hard to get into the billions these days

It *is* hard.

[Mr. Big Dog 10,747]

It *is* hard.

As it should be. A tiny spike on the top marginal rate is only making it a little but harder. If you can make billions at 35% top rate, a 39% top rate won't keep you from making billions either. If, on the other hand, you make your billions because you're actual top rate on most of your accumulation is 15%, then I'd suggest it would be far more fair if you faced the same tax rates that people on earned income face.

[scandal 951]

It *is* hard.

Not really. Not for all of them, at least. It's rare, I'll grant you that, but not necessarily hard. Mark Zuckerberg is a billionaire in his 20s and became a billionaire after only a few short years of work. I don't begrudge him one bit - I think that's wonderful. But please don't tell me it was hard, or that any rate of taxation, higher or lower, would have changed Zuckerberg's motivations to do precisely what he did.

Edited August 27, 2011 by scandal

[Golden Gate 530]

HA-HA-HA....There aren't any rich people in Socialist countries except corrupt government officials. Everyone knows this....except sheep.

It's true that you don't have such extremes in a country like France. But they have a wonderful health care system which is run by the government, which is very efficient, and I don't think any person there would give it up for private insurance. Generally, people there live within their means, get a nice chunk of vacation, travel around the world, take a couple of hours for lunch to relax with their families, and generally enjoy a nice life. I have friends from there and friends who are musicians from here who live there. Even the relatives of my fiance have made a nice life there and have accomplished a lot, coming up from poverty to a nice middle class existence.

[Sofiyya 1,687]

I have to agree with this, considering that one of my husband's brothers has demonstrated just the kind of economic and social progress GG claims. He has risen from poverty to a well-paid government job in France, great vacations, and much better health in an amazingly short amount of time. Far shorter than possible for poor immigrants here.

It's true that you don't have such extremes in a country like France. But they have a wonderful health care system which is run by the government, which is very efficient, and I don't think any person there would give it up for private insurance. Generally, people there live within their means, get a nice chunk of vacation, travel around the world, take a couple of hours for lunch to relax with their families, and generally enjoy a nice life. I have friends from there and friends who are musicians from here who live there. Even the relatives of my fiance have made a nice life there and have accomplished a lot, coming up from poverty to a nice middle class existence.

Edited August 27, 2011 by Sofiyya

[mawilson 2,133]

If, on the other hand, you make your billions because you're actual top rate on most of your accumulation is 15%, then I'd suggest it would be far more fair if you faced the same tax rates that people on earned income face.

I don't. HFT profits are taxed as ordinary income, not capital gains.

Mark Zuckerberg is a billionaire in his 20s and became a billionaire after only a few short years of work.

It's just dumb luck. There were probably hundreds of similar social networking sites and his was the one that didn't fail.

[one...two...tree 2,762]

I have to agree with this, considering that one of my husband's brothers has demonstrated just the kind of economic and social progress GG claims. He has risen from poverty to a well-paid government job in France, great vacations, and much better health in an amazingly short amount of time. Far shorter than possible for poor immigrants here.

You must be on the Socialist Network payroll.

[Sofiyya 1,687]

You must be on the Socialist Network payroll.

I'm on the Checking In With Reality payroll, and I'm not saying that France can sustain such perks.

[Mr. Big Dog 10,747]

I don't. HFT profits are taxed as ordinary income, not capital gains.

Good. Income should be income. Non-earned income should not receive preferable treatment.

[웃 910]

Apple CEO Tim Cook gets $384M payday

Well, so much for Apple cofounder Steve Jobs' infamous $1 pay.

Just two days after taking the chief executive's chair from Jobs, Tim Cook received a stunning 1 million shares from Apple. It's restricted stock -- meaning shares won't vest for years --- but it's big money, about $383.58 million at today's closing price of $383.58. Thank you Apple for making the math easy for the end of another shockingly busy tech news week. Whatever happened to August vacations and no big biz activity until after Labor Huge stock awards aren't unusual, particularly for incoming CEOs. Boards of directors use restricted shares as incentives for CEOs to do well and to stay with the company. Not that it often matters. Exiting CEOs, particularly from a company of Apple's size and stature, often walk away with severances in the tens of millions anyway. Cook will make out. By how much depends on how long he stays with Apple.

According to an Apple 8K filing, Cook must wait until 2016 for half the shares and 2021 for the remainder. Of course, with this week's hurriquake on the East Coast, other natural disasters, solar flares and anomalies, none of us may make it past Dec. 21, 2012. Oh, those Mayan predictions!

Cook's salary as chief operating officer was just over $800,000 in fiscal 2010, with a $5 million bonus and more than $59 million in restricted stock. By comparison, Apple paid Jobs $1, with no bonus, but reimbursed him $248,000 for air travel. However, Jobs' stock holdings are substantial, making him a billionaire.

The amount of executive pay reveals something about the personality of the two men -- the one inspired by passion, good taste and innovation and the other by the logistics of running a business. What? You think Cook will work for a buck a year?

http://betanews.com/2011/08/26/apple-ceo-tim-cook-gets-384m-payday/