Young Frogs Hop to New Ponds

A recent story concerning the French youth is fascinating.  It reports that a poll conducted by the leftist newspaper Le Monde shows that the French are not happy with their socialist government.  Seventy percent now believe that taxes are too high, and 80% hold that President Hollande's economic policies are on the wrong track.  And 54% believe that high tax rates increase, rather than decrease, inequality.

Under the socialists, of course, the government has swollen. By next year, France will surpass Denmark as the biggest government on Earth measured as a percentage of GDP (at 57%).

This is driving the French tax collectors into a frenzy of devising ways to pluck fiscal feathers from the national goose, no matter how much hissing it causes.  (The idea of cutting spending is, of course, dismissed out of hand.)  Tax agents now look for visible signs of wealth, such as fancy cars, to target individuals for audit.  This has resulted in not one Rolls-Royce being sold this year in the entire nation.

Not only is the tax burden getting heavy, but it is also crazily enacted.  New taxes get announced, then deferred, then modified, then deferred, creating colossal confusion.  Last year, the socialists passed a 75% income tax on the wealthy, which their "Constitutional Council" ruled unconstitutional, which the socialists then said would be applied to certain companies who paid their managers "obscenely" high compensation packages.

As on French banker put it, "[i]t's not only that people don't like to be treated as criminals just because they're successful...But this uncertainty in every aspect of the tax system means it is impossible to do business: you don't know what your future costs are, or your customers'. You can't buy, you can't sell, you can't hire, you can't fire."

Perhaps the most absurd example is Hollande's bizarre plan to stick the 75% super-tax to professional soccer players (or more exactly the soccer clubs).  This prompted the president of the Union of Professional Football clubs, Jean-Pierre Louvel, to say the tax would be "the death of French football," and his union has threatened to in effect go on strike in the national games late next month if the law gets enacted.

As I noted earlier, this has already made a lot of wealthy flee, often to nearby London.

Worse, not only are the older rich people moving out, but so are the talented young folk.  Jacques Regniez, economics professor at the prestigious Sorbonne, reports that about one fourth of all French university graduates, and upwards of 90% of those with "marketable degrees," hope to emigrate.  Regniez adds that in one of his finance seminars, all the students plan to emigrate.

One executive recruiter estimates that about a third of French youth generally have the three characteristic of a good émigré worker: they want to emigrate, they speak English, and they want to work.  Many want to work for the great French multinationals (such as Danone and L'Oréal), corporations which earn most of their profits outside the country, but the recruiter notes that many are willing to work in far-flung outposts such as Vietnam to get their start.

Those who don't want to emigrate are essentially the unambitious and those craving security rather than the chance of great success -- that is, those who dream of a job in the burgeoning bowels of the French bureaucracy.  And those bowels are burgeoning, indeed: the French government already employs more than one fourth of all French workers.

Now, I know what you are thinking, dear reader.  The French are so addicted to the welfare state and the ideology of egalitarianism that they are driving the best of their children to leave.  And any nation that drives her best, brightest and most ambitious to flee confiscatory taxation and stultifying economic policies deserves what it gets.

However, consider the recent Bloomberg report that American expats are now renouncing their citizenship at a record rate, a rate 600% greater than it was a year ago -- which already was a record -- and 800% since Obama took office.

The immediate cause is a cleverly named law, "FATCA" (like "fatcat" -- get it?), which Obama signed in 2010.

Under FATCA, foreign financial institutions -- read, Swiss banks -- must inform the IRS of any accounts held by Americans.  This has led foreign banks to shun American depositors, and complaints by many of those same banks have led the Treasury Department to delay further implementation of the law for six months.

Now, the rationale behind the law is to get all citizens to pay their fair share, so that we can help close the deficit.  But this rationale is laughable, for two reasons.

First, even the Congress that passed the law estimated that it would bring in only about $8.7 billion -- over a decade!  How will less than a billion a year in extra revenues close a trillion-dollar deficit?

Second, expats are already over-taxed.  We are the only country in the OECD that taxes citizens living abroad on the wages they earn there, which is a kind of double-taxation.

Considering that there are in fact 6 million Americans living abroad, the number of citizens renouncing citizenship will no doubt balloon.  As one U.S. tax attorney working in Zurich put it, "[w]ith the looming deadline for FATCA, more and more U.S. citizens are becoming aware that they have U.S. tax reporting obligations. Once aware, they decide to renounce their U.S. citizenship."

We begin to look more and more like France every day.

Gary Jason is a philosophy lecturer and a senior editor of Liberty.  He is also the author of Dangerous Thoughts: Provocative Writings on Contemporary Issues.