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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.

Continue reading below the fold.

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.

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Comment Preferences

  •  It's a technical decision (12+ / 0-)

    The court said the tax was applied unequally, not that it was too high or punitive:

    The court said Hollande’s plan would have added extra levies of 18 percent on individuals’ incomes of more than 1 million euros ($1.32 million), while regular income taxes and a 4 percent exceptional contribution for high earners would have been based on household income, an e-mailed statement shows.

    As a result, two households with the same total revenue could end up paying different rates depending on how earnings are divided among members of those households. That runs counter to a rule of equal tax treatment, the Paris-based court said.

    Chuck Hagel for Defense Secretary

    by Paleo on Sat Dec 29, 2012 at 01:00:51 PM PST

  •  Top tax rates are meaningless in terms (7+ / 0-)

    of what people actually pay in federal income taxes.  You have to also consider (1) what income level those rates begin at; and, more importantly (2) what income is subject to those rates -- what is deductible, and what is exempted.  That changed so dramatically in 1986 with the Tax Reform Act of 1986 that comparisons of rates before and after are MEANINGLESS.

    Putting up charts of top rates as if that reflected what the rich paid in taxes is extremely misleading.  Compare your top marginal rate for individual income taxes of 70% in 1979 with a top marginal rate of 39.6% in the year 2000.  Looks like the rich paid more in individual income taxes 1979?  Well, that's NOT TRUE.  The top 1% paid MORE as a percent of income in individual income taxes in 2000 than they did in 1979.  Look at the SECOND chart -- which is EFFECTIVE rates for federal individual income taxes -- here.

    If you want to argue that the top 1% don't pay enough in federal individual income taxes fine, I have no problem with that.  However, to have any credibility at all, you have to use meaningful numbers.  Anybody will any knowledge of tax policy can dismiss a diary like this that is based largely on top marginal rates and doesn't address EFFECTIVE rates.  

    And if you want to argue to return to the Clinton rates, that's fine, too.  I have no problem with that; what amount of income households over $250,000, or $400,000, or $1 million should pay in federal individual income taxes is a serious topic.  But you have to use meaningful numbers to make the argument.  The top 1% paid MORE in individual income taxes then than they did when top marginal rates were 70%.  You can't pretend that going back to the Clinton rates means that the rich will still pay less than they did before Reagan revamped the tax code, because the data doesn't back that up.  

    (That chart in the link is based on CBO data, and the CBO doesn't have data for years earlier than 1979.)  

    Tax policy is not just top marginal rates.  It is a combination of a variety of things -- marginal rates, tax brackets, exemptions, deductions, available shelters -- that all must be taken into account.  Effective tax rates are not perfect, but are far more meaningful than top marginal rates.    

    •  Agree on Effective Tax Rates, But... (1+ / 0-)
      Recommended by:

      I completely agree that it is hard to do an apples-to-apples comparison of the tax burden without looking at effective (vs. marginal) tax rates.  As you rightly note, without knowing the details on deductions, tax brackets, etc., comparing WWII to the Eisenhower 50's or the Reagan cuts of 1981 or reform of 1986, making definitive statements about any income group's changing tax rates is virtually impossible.

      That said, the key points here:

      1. Conservatives are suggesting that President Obama and Democrats in general would somehow be supportive of a 75 percent top marginal tax rate.  That's nonsense.

      2. What Democrats are propopsing for the top two percent of taxpayers is very similar to what they paid during the Clinton era, with a couple of exceptions.  While Obama wants the 15 percent capital gains tax rate to return to its pre-Bush level of 20 percent, for most of the 1990's it was actually at 28%. The economy did quite well then (and as I've noted elsewhere, investment did not jump as a result of the lower rate).  The Affordable Care Act does add a 3.8% capital gains surcharge for those families making over $250,000 a year.  Still, capital gains rates for the wealthy would be lower than pre-1998.

      At the end of the day, the total federal tax burden as a percentage of GDP is lower now than at any point since the 1950's.  Over the last two decades, effectives tax rate for all Americans (not just the wealthy) have also declined.  So, right-wing histrionics about high taxes for the wealthy are just that.

      •  Your last paragraph is the kind of thing I (3+ / 0-)
        Recommended by:
        Sparhawk, nextstep, VClib

        think you should focus on.  

        If you want credibility on tax policy, you should not be promoting charts talking about how the rich "benefited" from lower top marginal rates that purports to show a much, much higher line in 1979 than in 2000 when in fact the top 1% actually paid more in 2000 than they did in 1979.  Using that kind of argument destroys any credibility on tax policy.

        What we should be focused on is, as you said in the last paragraph, receipts as a % of GDP  (which needs to come up) and effective tax rates on the various income groups.  That's why the tax code needs to be reformed -- we should not have working professional couples, or small business owners (i.e., people who work for their income and pay taxes on earned income) paying an effective tax rate of 26% or so (if they are subject to the AMT) while some zillionaires who live off their investments pay an effective tax rate of 15% because they get mostly capital gains income.  The primary reason I have problems with this focus on top marginal rates -- even in the discussions in Congress -- is because it exacerbates an already broken federal income tax system, rather than fixes it in a way that makes it fairer and increases receipts to the federal government.    

        Eventually, we also need to focus on spending as a percent of GDP as well, (which needs to come down).  When we focus on the long-term debt situation, we need to bring receipts up to about 18 - 19% of GDP and spending down to about 21 - 22% of GDP.    

    •  um, no, tax rates are not meaningless (1+ / 0-)
      Recommended by:

      Just because they're not the complete story, isn't the same as "meaningless."

      If everything else stays the same, raising tax rates raises revenue for the government.

      Your comment is basically incoherent.

      Since no one is suggesting reviving the tax shelters that existed before the tax reform of 1986, your complaint isn't meaningful or interesting.

      •  No, in and of themselves they are meaningless (1+ / 0-)
        Recommended by:

        they are only meaningful when they are viewed in conjunction with all those other things.  

        A 70% top marginal rate tells you nothing about what people pay in income taxes in and of itself.  In terms of what people pay in taxes, saying there's a 70% top marginal rate is meaningless.  It is only when you couple it with all those other factors that it has meaning.  

        My objection its to misleading charts, like the one in this diary, which is titled to indicate that the top 1% "benefited" from the lowering of top marginal rates, and then shows a situation where, in 1979, the line is high, and in 2000, the line is much much lower, leading a reader to believe that the rich were "benefited" in 2000 because of those lower top marginal rates, when the exact opposite is true - the rich benefited more in 1979 when those lines showing top marginal rates were higher.  

      •  Agreed. It's sleight of hand. (0+ / 0-)

        Higher tax rates on the rich will yield higher effective taxation, by definition, if the other factors remain the same.

        If you have a top rate of 39.6% with the same loopholes, deductions and exemptions as you have when the top rate is 91%, the person paying the latter will pay more.

        No way around that.

    •  It's misleading to choose 1979 to make your case (0+ / 0-)

      Choose the 40s, 50s or the 60s. You'll see the effective rate of taxation at the top above the 50% range, when the top marginal rate was 91%.

      They had fewer loopholes then. With the advent of neoliberalism (early 70s), loopholes started to go up, deregulation went viral, especially with the financial sector, and the privatization of public goods and services took off.

      Regardless, there is no good argument to make for lower taxes on the wealthy, especially given our record levels of inequality. Try as they may, right-wing groups who have always shilled for the rich simply don't have facts or evidence to back them up.

      It's time to drastically increase effective taxation at the top.

  •  Wow Conservatives just miss the boat don't they? (3+ / 0-)
    Recommended by:
    jck, a2nite, charliehall2

    The judge didn't strike it down because it was too high.  The rate at which it is isn't within the judge's purview regardless.  They don't strike down bad or stupid laws, they just strike down illegal ones.

    "Holding on to anger is like drinking poison and expecting the other person to die," - Buddha.

    by sujigu on Sat Dec 29, 2012 at 01:17:40 PM PST

  •  france is no model of perfection. (2+ / 0-)
    Recommended by:
    Gooserock, LaurenMonica

    We could stand to move in their direction. But the left in France has gone too far IMO.

  •  oh wow maybe Gerard Depardieu will now see fit (0+ / 0-)

    to return to his native land

    "I'm sculpting now. Landscapes mostly." ~ Yogi Bear

    by eXtina on Sat Dec 29, 2012 at 01:26:55 PM PST

  •  asdf (4+ / 0-)
    Recommended by:
    ferg, IreGyre, charliehall2, wu ming

    It was declared unconstitutional on a technicality. There was a loophole which permitted multiple residents of the same household to vastly exceed $1 million Euros in income, as long as each individual member was BELOW that threshhold - and they were exempted from the requirement - which appears to be the technical point they overlooked.

    It will be rewritten to conform to the French constitution and reinstated fairly quickly, I imagine.

    Sadly, everything Communism said about itself was a lie. Even more sadly,, everything Communism said about Capitalism was the truth.

    by GayIthacan on Sat Dec 29, 2012 at 01:49:42 PM PST

    •  The government says it will be back (1+ / 0-)
      Recommended by:

      in the 2013 version of the revenue law.

      An interesting footnote is that the current constitutional council contains only people who were nominated from the right. This year, two new members will be nominated by members of the PS. It's unclear whether that actually will change anything regarding this particular law, though.

  •  There isn't a single country on Earth (0+ / 0-)

    with tax rates the GOP would like that isn't in chaos, poverty, or both, so what they really cheer is not countries that have already done what they say - they hate such places, because they stand as proof against their ideology - but countries that are in the process of degenerating from progressivism toward conservatism.  The only time conservatives can feel good about themselves is in the brief period between when they start breaking things and when the consequences roll in.  Useless shitbags.

    In Roviet Union, money spends YOU.

    by Troubadour on Sat Dec 29, 2012 at 03:05:06 PM PST

  •  The tax is more symbolic for Hollande then (1+ / 0-)
    Recommended by:

    anything else.  Doesn't even begin to address the 85B deficit.  Likely to get reworked and passed.  It will feed the masses appetite for eating the rich for a little while.

    Guns don't kill people...people with GUNS kill people.

    by thestructureguy on Sat Dec 29, 2012 at 03:22:57 PM PST

    •  Yeah (0+ / 0-)

      But France, just like the US, can't solve all of its problems by raising taxes on the rich.

      (-5.50,-6.67): Left Libertarian
      Leadership doesn't mean taking a straw poll and then just throwing up your hands. -Jyrinx

      by Sparhawk on Sat Dec 29, 2012 at 03:44:58 PM PST

      [ Parent ]

  •  75% is ridiculously high tho. (0+ / 0-)

    "Rick Perry talks a lot and he's not very bright. And that's a combination I like in Republicans." --- James Carville

    by LaurenMonica on Sat Dec 29, 2012 at 03:39:09 PM PST

    •  It's not high enough . . . (1+ / 0-)
      Recommended by:

      In America, I think we should add several new brackets:

      1 million
      10 million
      50 million
      100 million
      1 billion

      It's absurd to have it so low at 250K. Larry Ellison or Oracle made a billion last year.

      Raise the rate progressively. At the top, it should be 94%, like it was for part of FDR's presidency.

  •  US Max Tax on Income now 47.45% not 35% (0+ / 0-)

    The highest marginal tax rate on income in the US is now 47.445% for those with income over $1 million and living in California.  This is the combined rate for Federal, State and Medicare taxes on income.

    Comparing the 75% rate in France to only the US Federal income tax rate is an incorrect comparison, as a person is obligated to pay the Medicare tax and state income tax as well on income.

    If the top Federal Income tax rate increases to 39.6% the new net max marginal rate becomes 51.43% in the US - so more is taken in taxes than what one gets to keep.

    This means a reduction in after tax marginal income of 7.6% for those in this situation.

    The most important way to protect the environment is not to have more than one child.

    by nextstep on Sat Dec 29, 2012 at 04:15:52 PM PST

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