France has been a bogeyman of the American right for years. Mitt Romney, after all, made enmity towards Paris' "big government, big taxation, welfare state" a talking point of his campaign. For his part, John McCain joked that the French "remind me of an aging movie actress in the 1940s who is still trying to dine out on her looks but doesn't have the face for it."
But now the French Constitutional Court has struck down Socialist French President Francois Hollande's 75 percent tax on incomes over one million euros, American conservatives are cheering "Vive La France!" But right-wing glee in their Parisian proxy war against President Obama's tax policies is more than a little bit silly. After all, the 75 percent rate isn't just about double the top income tax rate Obama now seeks. As it turns out, Hollande's millionaire levy is less than how much FDR taxed rich Americans to help the nation liberate France during World War II.
Nevertheless, conservatives on this side of the Atlantic saw the French Court's decision that the millionaire tax "fails to guarantee taxpayer equality" as major blow to the Obama agenda. (Apparently, the levy designed to raise only about 300 million euros a year treated different households with identical incomes differently.) While John Fund crowed in the National Review, "Mon Dieu! Perhaps French actor Gerard Depardieu can come home from his exile in Belgium," PJ Tattler joked "it's a fairness issue, [so] President Obama should love this decision, then, right?" Meanwhile, Sister Toldjah proclaimed "sanity in France" before asking:
Three cheers for the French court, but I can't help but wonder: How soon before the United Socialists of America aka the Democratic Party proposes something similar here in the US?Ms. Toldjah shouldn't hold her breath waiting to find out. President Obama, after all, has merely proposed letting the top two incomes rates return to their Clinton era levels. And the last time the top bracket paid 39.6 (and not 35) percent to Uncle Sam, the U.S. created 23 million new jobs and produced budget surpluses while enjoying the longest economic expansion since World War II. And during that war, when the U.S. was fighting a global war after emerging from an economic calamity, the top rate reached 94 percent.
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Despite the GOP's "job creators" myth, the U.S. economy grew faster and generated more jobs when tax rates were higher--even much higher--than today. But as the chart above reveals, what low top-tier income tax rates did help produce was record income inequality. And as it turns out, lower capital gains tax rates make that dynamic much, much worse.
In September 2011, an analysis by the Washington Post concluded that "capital gains tax rates benefiting wealthy feed [the] growing gap between rich and poor." As the Post explained, for the very richest Americans the successive capital gains tax cuts from Presidents Clinton (from 28 to 20 percent) and Bush (from 20 to 15 percent) have been "better than any Christmas gift":
While it's true that many middle-class Americans own stocks or bonds, they tend to stash them in tax-sheltered retirement accounts, where the capital gains rate does not apply. By contrast, the richest Americans reap huge benefits. Over the past 20 years, more than 80 percent of the capital gains income realized in the United States has gone to 5 percent of the people; about half of all the capital gains have gone to the wealthiest 0.1 percent.This convenient chart tells the tale:
To put the tax debate another way, President Obama and the Democratic Party don't want the United States to look more like 21st century France, but instead more like the America of the 1990's. And as the record shows, that was pretty good time for almost all Americans.
Even, it turns out, for France-bashing conservatives.