France Dodges a Wealth Tax, but Will America?

The rejection by France’s parliament of a wealth tax offers a glimmer, if only that, of optimism for the revival of pro-growth economic policies at Paris. The idea was to levy a tax of 2 percent on the assets, including unrealized gains, of the wealthiest citoyens. It stirs echoes of President Francois Mitterand’s socialist takeover of French banks more than 40 years ago, when the Rothschild name was deleted from the facade of their offices in the Rue Lafitte. “Nationalizing us meant throwing the Rothschilds out of France,” Baron Guy de Rothschild lamented at the time. Mitterand’s program of nationalization, too, brought key French companies in the steel, electronics, aircraft, and chemical industries under government sway. “The entire program is being undertaken regardless of the economic consequences,” warned in 1981 Société Générale’s chief economist, Yves Laulan.Mitterand’s socialist takeover meant that France was “the only non-Communist country in the world to have credit almost totally under government control,” Time reported. Yet nationalization’s folly soon became clear, and the policy was abandoned within a few years. That track record likely helps animate the opposition to the wealth tax, which was just scuttled by a coalition “between centrist, conservative and far-right lawmakers,” as France 24 reports.Could such a bloc emerge as a vehicle for France to undertake the kind of supply-side tax reductions, spending cuts, and deregulation needed to get the economy back on track? The question is all the more urgent in light of red ink surging to unsustainable levels in France. The national debt now exceeds the yearly output of the economy, and the annual budget deficit is running at more than 5 percent of gross domestic product.The wealth tax mooted at Paris, backed by economist Gabriel Zucman, resembles proposals by American leftists like, say, Senator Elizabeth Warren. Such a tax — a bite of the fortunes of the wealthiest — might appear harmless. Yet when, in 1913, America’s income tax was first imposed, that levy, too, was minimal. “Less than 1 percent of the population paid income taxes at the rate of only 1 percent of net income,” the National Archives reports.Yet once the door was opened to taxing incomes, via the 16th Amendment to the Constitution, Uncle Sam’s seizure of Americans’ earnings only soared. On average, some 14 percent of taxpayers’ income goes to the IRS, though the top 1 percent pay 26 percent, per the Tax Foundation. Count on a so-called wealth tax to follow a similar trajectory and expand its reach to wallop the middle class, too.The logic of a wealth tax is undermined, too, by the fact that the wealthy can always pull up stakes when one country makes the mistake of trying to overtax high earners. “Imposing higher capital taxes on a relatively small number of very wealthy individuals,” the Financial Times has reported, “ often prompts changes in their behavior, that limit or even reduce the amounts raised.” As these columns put it: “Arthur Laffer, call your office.”The left’s persistent enthusiasm for confiscatory tax policies, despite their adverse outcomes, proves the need for vigilance by the voters. Feature, say, the tax-the-rich agenda backed by New York’s Marxist mayoral aspirant, Zohran Mamdani. As Baron Rothschild, alas no longer with us, said of France’s bank seizures: “We have been caught up in it as if in a hunting accident, caused by the men whom the French people had the weakness to give the guns to for a time.”

France Dodges a Wealth Tax, but Will America?

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