Depardieu bids French statists ‘Adieu!’
Guest article by Stephen Michael MacLean
On the roll-call of notable French laisser-faire economists, a few names trip off the tongue: Condillac, Say, Turgot, Tracy, and Bastiat. But can actor Gérard Depardieu be permitted now an honorary mention?
In defiance of punitive taxation laws initiated by the new Socialist president, François Hollande, the actor made plans to emigrate, telling prime minister Jean-Marc Ayrault and his erstwhile countrymen:
“I am handing over to you my passport and social security, which I have never used … We no longer have the same homeland, I am a true European, a citizen of the world, as my father always taught me to believe.”
Of course, tax exiles are a common phenomenon (most often reviled), but contemporary Gauls are rediscovering economic realities well-known to their eighteenth and nineteenth century compatriots: prohibitive taxation will drive your wealth-creators, your successful innovators and entrepreneurs, from the land. Libertarians across the Atlantic, in the America sympathetic to Ayn Rand’s novel Atlas Shrugged, wrote ‘Depardieu goes John Galt’, shorthand for when capital goes on strike or, as the case may be, AWOL.
Many French classical liberals had learned their economics from their Scotch colleague across the Channel, Adam Smith, who had written in The Wealth of Nations that
“Every tax ought to be so contrived as both to take out and to keep out of the pockets of the people as little as possible, over and above what it brings into the publick treasury of the state”.
To do otherwise — for the state to be profligate in its tax collections — Smith argued, could be disastrous:
“…it may obstruct the industry of the people, and discourage them from applying to certain branches of business which might give maintenance and employment to great multitudes. While it obliges the people to pay, it may thus diminish, or perhaps destroy some of the funds, which might enable them more easily to do so” (V.ii.b.6).
Depardieu is not the first citizen to depart the Motherland in response to Hollande’s policies; France’s loss is the gain to whatever country encourages these ‘wealth tax’ protestors to its shores. David Cameron, for one, has said,
“When France sets a 75pc top income tax rate we will roll out the red carpet and we will welcome more French businesses which will pay their taxes in Britain”.
Though we should pause before indulging in a bit of schadenfreude at France’s expense — indeed, Smith believed that the centuries-old animosity between these two rivals was a great loss, since “the very same circumstances which would have rendered an open and free commerce between the two countries so advantageous to both, have occasioned the principal obstructions to that commerce” (see IV.iii.c.12-13).
And while France’s proposed top tax rate of 75 per cent on anyone making more than €1 million a year is a decisive influence for the emigration of wealth — “Fresh data from the Banque de France show a sudden rise in outflows in October and November”, reports Ambrose Evans-Pritchard, who quotes one investment manager: “Taken together, it is clear that there has been a major loss of confidence and funds have been pulling money out of the country” — Britain’s 45 per cent marginal tax hardly makes for an enticing tax haven. Recall the rancorous squabbling over a mere few percentage points — from about 35 per cent to 39½ per cent at the highest rate of income tax — that was at the centre of America’s ‘fiscal cliff’ controversy late last year.
On the question of the optimum rate, it would be well to remember a sometime secretary of the U.S. Treasury in the 1920s, another student of Smith. “It seems difficult for some to understand that high rates of taxation do not necessarily mean large revenue to the Government”, wrote Andrew Mellon in Taxation: The People’s Business (anticipating Laffer curve analysis), “and that more revenue may often be obtained by lower rates”. If the rate of income tax is
“…too low, the Government’s revenue is not large enough; if … too high, the taxpayer, through the many means available, avoids a taxable income and the Government gets less out of a high tax than it would out of a lower one. What the proper figure is between these extremes in not determinable with absolute accuracy. It is the opinion of some authorities on taxation that this figure is below 15%. None of them places it as high as 25%.”
No nation is immune from counter-productive taxation policy. And as Smith observed — and Depardieu and his departing compatriots have given witness — human capital ‘stock’ is very mobile and susceptible to favourable foreign tax incentives:
“The proprietor of stock is properly a citizen of the world, and is not necessarily attached to any particular country. He would be apt to abandon the country in which he was exposed to a vexation inquisition, in order to be assessed to a burdensome tax, and would remove his stock to some other country where he could, either carry on his business, or enjoy his fortune more at his ease. By removing his stock he would put an end to all the industry which it had maintained in the country which he left” (V.ii.f.6)
Moreover, whereas Depardieu is among that class of rich with the liberty of relocating to more auspicious tax climates as ‘citizens of the world’, not all rate-payers have that luxury: many industries may be region-centric and certain professions are tied to a local service clientele acquired and hard-won over time. Certainly the poor and middle-class are less able to pull up stakes with such ease, left behind to take up the revenue slack — and so a cruel paradox ensues that high marginal taxes end up hurting the intended beneficiaries most.
But the French president remains unconvinced, unrepentant, and undeterred: When France’s Constitutional Court ruled the tax measure to be ultra vires (notably remaining silent on the moral or economic consequences of the flawed bill), Hollande addressed the nation on New Year’s Eve, pledging to redraft the legislation on the justification that ‘the policy was based on a notion of “fiscal justice,” adding that, “those who have the most, will always be asked for more”. (Were the electorate to note (or care about) this unforced error of frankness, they might remember Margaret Thatcher’s observation that “the problem with socialism is that eventually you run out of other people’s money”, a truism that GOP House members would be well to press in upcoming debt ceiling negotiations with the Obama administration.) As Theodore Dalrymple writes, “Solidarité in France is no longer an expression of compassion, but a matter of fiscal policy mandated by the political class”.
So it’s ‘Bravo et Bon Voyage!’ to M Depardieu and, from him, ‘Adieu!’ to France’s socialist government as he enjoys Russian citizenship and settles into new lodgings in Belgium — two blows to French chauvinism! — while the rest of us remain vulnerable to the folly of economic interventionists. Wouldn’t it be far easier to show them their walking papers instead?
In memory of D. Peter Dockwrey MA, PhD (Cantab), a student of Adam Smith’s moral and economic writings and of his influence upon French laisser-faire economic thought, who passed away in December 2012. Peter’s politics would no doubt have led him to rally against the argument above, but he would have relished the intellectual debate and the contest of wits. R.I.P.
Stephen Michael MacLean runs the Disraeli-Macdonald Institute, a Canadian think-tank. His e-mail address is firstname.lastname@example.org