Do Higher Taxes Really Chase Out The Rich, Or Just Gerard Depardieu?

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Gerard Depardieu
French actor Gerard Depardieu was removed from a Paris to Dublin flight after urinating in the aisle. Cabin crew would not allow Depardieu access to the toilet as the plane was on the runway ready to take-off. The actor apparently could not wait so began urinating into a small Evian water bottle, which then overflowed.

 

As was widely reported over the weekend, the French actor Gerard Depardieu got into a public scuffle when he bid adieu to his high-priced native country and decamped for the more tax-friendly Belgium.

In the wake of the Socialist government’s 75 percent marginal tax rate for incomes above 1 million euros, or $1.3 million, the 63-year-old actor last week announced that he is moving to the small Belgian town of Nechin, just over the French border.

The move didn’t sit well with French officials. In an interview with the France 2 TV network, Prime Minister Jean-Marc Ayrault blasted Depardieu’s decision as “pathetic” at a time when the country is facing severe unemployment and cutbacks. “I find this quite shabby,” he said in the interview, according to BBC. “All that just to avoid paying tax. Paying a tax is an act of solidarity, a patriotic act.”

France’s 75 percent tax rate, the highest in Europe, will take effect next year. In Belgium the highest rate is 50 percent. According to Depardieu, the lower tax rate was not the only reason for his move, but he nevertheless fired back at Ayrault with fierce vitriol. In an open letter to the prime minister, Depardieu wrote that he paid an 85 percent tax rate in 2012 and a total of $190 million in taxes throughout his life. “At no time have I failed in my duties,” he wrote. “The historic films in which I took part bear witness to my love of France and its history.”

Depardieu, who has attracted bad headlines for public drunkenness in recent years, added that he is leaving the country because the French government punishes “success, creation and talent.” “Who are you to judge me so, I ask you, Mr. Ayrault?” he continued. “Despite my excesses, my appetite and my love of life, I am a free being, sir, and I will remain polite.”

The actor concluded by saying that he is sending back his passport and social security card. “We no longer have the same country,” he wrote. “I’m a true European, a citizen of the world.”

French President Francois Hollande approved the 75 percent tax rate in October, provoking the ire of entrepreneurs and bankers who threatened to move their businesses to London. The decision was widely seen by economists -- both in Europe and the United States -- as particularly burdensome and excessively harsh. If nothing else, Depardieu’s high-profile move has given ammunition to conservatives in the United States who have long argued that higher taxes on the wealthy chase them out, thereby offsetting any additional revenue they might have been taken in.

However, there is a key difference between the U.S. and European tax models that render such comparisons tenuous at best: American income tax operates on a worldwide basis. That means American citizens who flee the country are still subject U.S. taxes -- unless they renounce their citizenship, which is not so easy a task. Secondly, Americans who do successfully obtain a foreign citizenship are then subject to a hefty exit tax.

Not so in Europe, where residents can freely hop to another country and pay income tax based solely on their residence. Such simplicity, which many have argued is fairer than the American system, has made it that much easier for Depardieu -- and countless European tax exiles -- to jump ship when they feel they’re being overtaxed. Indeed, some statistics have shown that as many as two-thirds of the top earners in Britain have fled the U.K. since 2010, when their tax rate was hiked from 40 to 50 percent.

In America, meanwhile, opinions differ as to whether or not higher taxes cause wealthy residents to flee at the state level. In August of last year, a study by the Center on Budget and Policy Priorities, reported that, while some rich residents do flee their home states to avoid higher taxes, “the effects of tax increases on migration are, at most, small -- so small that states that raise income taxes on the most affluent households can be assured of a substantial net gain in revenue.” However, in July, a report by the anti-tax group Change Maryland countered that claim, reporting that 31,000 wealthy Marylanders fled the state since 2007 in response to a so-called millionaire tax.     

Seeing how Depardieu -- France’s most notable actor worldwide -- has now exacerbated the argument, the debate is sure to continue on both sides of the Atlantic. Now, if Audrey Tautou moves out anytime soon, France could really have a problem. 

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