Wednesday, July 4, 2012

How Will French Plan to Reduce Budget Deficit By Soaking The Rich Work Out?

Wealthy individuals in democracies across the world had better keep a close eye on what is happening in France. While governments in the U.S,, U.K., and Japan continue to run up unsustainable public debts. the government in France is taking measures to reduce their deficit. The newly elected socialist government is doing so by implementing the only solution that is politically feasible in the age of entitlements -- soak the rich and big business.

There is little appetite in the U.S. for the type of deep cuts that would be required to balance the budget. Thoughtful plans to for deep budget cuts, such as those proposed by Paul Ryan or the Simpson-Bowles Commission are brushed aside by knee jerk attacks by the left. The Tea Party talks a good game about balancing the budget, but has too much that is off limits to make doing so feasible, including their inflexibility on taxes. Proposals to reduce medical spending are met with demagoguery on the Right about "death panels", and defense spending cuts are off the table among the favored candidates of conservative voters.

In the age of entitlements, voters want ever more benefits, but are deeply reluctant to pay more in taxes. The only type of taxes that voters will approve are those that are imposed upon the rich and big businesses. Thus, the wealthy had better hope that the French plan to soak the rich fails miserably, otherwise they are next on the docket for big tax increases in democracies running big deficits.
The following is a summary from the The Guardian of the French plan to soak the rich 

 Over half the measures target households, mainly the country's richest, and just under half target big business. They include lowering France's wealth-tax threshold, which had been raised by Nicolas Sarkozy. France's wealth tax is unique in the EU and Hollande will now add a one-off higher levy on those with net wealth of more than €1.3m. Inheritance tax, which had been loosened by Sarkozy, will be tightened.
• Banks will face higher taxes, as will petrol giants through a new tax on energy firms holding oil stocks. A 3% "dividend tax" must be paid by companies on dividends distributed to shareholders. This aims to encourage firms to use cash flow for investment as France seeks to close the competitiveness gap with its industrial powerhouse neighbour, Germany.
• The tax on financial transactions will be doubled to 0.2%.

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