It seems like New York and Alexandria Ocasio-Cortez could learn a thing or two from Europe.
The “millionaire tax” that both the state and its most controversial representative are proposing was first attempted in France back in 2012. Then, President Francois Hollande instilled a 75 percent “supertax” on all income exceeding $1.12 million. Two years later, the plan was ultimately canceled because it failed to bring in any serious revenue.
Millionaires Don’t Part with Money So Easily
Alexandria Ocasio-Cortez has repeatedly made headlines for suggesting a tax hike on millionaires of up to 70 percent, while New York’s Robert Mujica – the budget director of state governor Andrew Cuomo – has pushed for a “pied-a-terre” plan that would impose taxes on non-residents of New York who own luxury homes or apartments.
France is already one of the highest-taxed countries in the world. In 2017, government tax revenue accounted for nearly one-third of the country’s gross domestic product (GDP). This, combined with anger from France’s wealthiest citizens and allegations that the millionaire tax was anti-business, brought the plan’s unpopularity to new heights.
But it was the tax’s inability to garner any serious revenue that led to its cancellation. The country’s Finance Ministry shows that for the first year, proceeds from the tax were just shy of $300 million, while the second year brought in even less at $180 million.
Why a Wealth Tax Doesn't Work
At that time, France was already implementing a solidarity tax on wealthy citizens who possessed more than $1.7 million in total assets. The millionaire tax was removed in 2014 – two years after it was first implemented – while the solidarity tax ended in 2017.
The problem with the "wealth tax" and other similar plans is that they are designed to target the incomes of wealthy individuals, who often accept not salaries for their work, but investments, stocks or dividends. Warren Buffet, for example, boasts an estimated net worth of approximately $60 billion, though as CEO of Berkshire Hathaway, he only earns an annual salary of roughly $100,000.
The rest of his wealth can be attributed to the number of shares he owns in the company. Buffett holds a solid position in running Berkshire Hathaway, but since these shares are not sold or transferred into reportable income, they cannot be taxed the way his salary can.
The same goes for figures like Jeff Bezos of Amazon fame. Bezos is worth nearly $160 billion, yet his annual salary with Amazon was just over $81,000 for 2018. Even if a millionaire tax was implemented, it would not affect Bezos or individuals within similar financial brackets.
You Want to Tax Me? So Long!
France’s wealth tax led to a period of monetary unrest. Actor Gerard Depardieu took up Russian residency, while professional soccer groups threatened to go on strike. Many other wealthy individuals relocated to countries like Belgium, Luxembourg, or the U.K. and lowered their salaries during the two-year period in which the tax was imposed.
Jorg Stegemann – head of the German executive search firm Kennedy Executive – commented that the tax damaged both France’s competitiveness and reputation, and deterred international business managers from working within the country’s border.
AOC's Wealth Tax Presents Dismal Future for America
And yet, Alexandria Ocasio-Cortez has continued to push for a 70 percent tax hike on Americans earning more than $10 million to garner funds for her highly-criticized Green New Deal, which seeks to make the United States “carbon neutral” within the next ten years.
The Green New Deal is so radical that it is being described as unrealistic by members of Ocasio-Cortez’s own party, including long-time California Senator Dianne Feinstein. It is estimated that a tax hike of 60 to 70 percent in the U.S. would deter entrepreneurs from starting new businesses and further hinder America’s recovering economy.
Disclaimer: The views expressed in the article are solely those of the author and do not represent those of, nor should they be attributed to, CCN.