Taxman

When candidate for the French presidency Francois Hollande first proposed a 75% tax rate on those who earned €1 million, his own advisors were taken aback. But even they endorsed Hollande's proposed 45% rate on those earning over €150,000, which is an increase over France's current top rate of 41%.

At least Mr. Hollande has been honest about his motivation. He once remarked "I do not like the rich," and has boldly proclaimed that "the world of finance is my greatest enemy." Hollande's specific reason for the 75% rate on high income earners? (Hint: It has nothing to do with economics.) "It is sending out a signal, a message of social cohesion."

And now Mr. Hollande is going to have the opportunity to implement his policies.

Of course, President Obama also cherishes the idea of higher taxes on the wealthy and productive. He wants to raise taxes on corporations (lower the rate, but eliminate enough deductions such that overall corporate revenue goes up) and especially raise taxes on high income earners.

And he has a small handful of wealthy folks fronting for him, most notably investor Warren Buffet.

But the wealthy, including Mr. Buffett, do not happily comply with extortive tax rates, as almost any government entity should have learned by now. Such taxes never deliver the hoped-for revenue, because those with the tax bulls-eye on their chests find ways to avoid higher taxes, not only relocating assets and capital, but even relocating themselves.

News reports suggest that the wealthy in France are already inquiring into a move across the channel to England, which is more than a bit ironic, as not too long ago it was England's 90+% tax rate on the wealthy that led many English rock stars to leave England for America, Switzerland, the Bahamas, and even France.

The same thing happens at the state level. In 2008, the state of Maryland passed a "millionaire's tax," and one year later, one-third of Maryland millionaires had disappeared from the state's tax rolls. The tax ended up losing, rather than increasing, revenue from high income earners.

Meanwhile, Maryland remains at or near the bottom of the list of job-creating states, while states like Texas, with no income tax whatsoever, are at the top.

Clearly, higher taxes on the wealthy and the productive don't deliver, and in fact lead to capital and talent flight, as France is about to find out.

Raising tax rates to punitive levels on the wealthy and the productive seems like an area in which the U.S. is truly better off "leading from behind."