The Socialist's Tax-Everything Plan Blows Sky High With Riots

Mike Shedlock
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Posted: Nov 01, 2013 12:01 AM
The Socialist's Tax-Everything Plan Blows Sky High With Riots

President Francois Hollande wants to balance the French deficit by taxing the rich, taxing the poor, taxing trucks, raising the VAT, and increasing the tax on corporations.

That policy blew sky high this week in a storm of riots by Brittany farmers.

Please consider French Gov't Backs down on Truck Tax After Riots

French Prime Minister Jean-Marc Ayrault on Tuesday indefinitely suspended the introduction of a green tax on trucks following riots at the weekend in the Brittany region.

The move comes three days after a protest by hundreds of food producers, artisans and distributors in the western Brittany region ended in the worst riots in the area in years.

One person was seriously injured in clashes between police and a group of around 1,000 demonstrators, who blocked a national road with convoys of vehicles and tonnes of produce on Saturday in protest over the tax.

Bretons say the levy will squeeze the already wafer-thin margins of the region’s struggling chicken, pork and other food producers.

The protests were seen as the expression of growing frustration nation-wide with the escalating tax burden on businesses and households.

Taxes have risen 70 billion euros (96 billion dollars) in the past three years, as France battles to shrink its budget deficit.

The truck tax, which is to apply to all vehicles of over 3.5 tonnes that use French roads, aims to raise 1 billion euros a year towards the development of rail and river transportation.

French Way of Getting Your Message Across

Mr. Ayrault denied that the government had caved in to the protesters.

To be courageous is not to be obstinate; it’s to listen and understand,” he said after a meeting with Breton lawmakers and several Cabinet Ministers.

In France, riots, strikes, and mass protests work.

This is the second time this week, and third time in a month that France rolled back a tax.

Hollande Backs Down on Ecotax, on a Tax on Savings, On Corporate Earnings

Bloomerg reports Tax Revolts Hit Hollande as Farmers, Soccer Clubs Protest.

French President Francois Hollande’s taxes, among the world’s highest, have made strange bedfellows out of the country’s soccer clubs and farmers in Brittany.

Revolts against a series of levies have erupted with protests by farmers in Brittany against a trucking tax on Oct. 27 leaving several people injured, and soccer clubs refusing to play a round of league matches in November to oppose a tax on salaries of more than 1 million euros ($1.38 million). Hollande has said he won’t budge on the millionaire tax, while Prime Minister Jean-Marc Ayrault said today he’s suspending the levy on truckers transporting agricultural products for now.

The Socialist president, who turned to increased taxes to narrow the country’s budget gap, has backed down on other levies in the face of objections. On Oct. 27, he gave up on a plan to lift taxation on savings, just weeks after backing off a new levy on corporate earnings.

“The cumulative effect of these retreats is that they confirm in many voters’ eyes that the government is struggling to govern,” said Bruno Jeanbart, a director of Paris-based pollster OpinionWay. “Even Hollande’s own supporters question if he’s up to the job. The problem for the president is that every time there’s good news, it’s marred by political errors.”

Hollande’s ratings in polls have sunk, making him the country’s most unpopular president. A BVA poll published last night showed Hollande’s approval rating dropping six points in the past month to 26 percent, the lowest level for any president under France’s current constitution.

The revolts reflect discontent with taxes that have risen by 70 billion euros in three years. France’s tax burden was 46.3 percent of gross domestic product last year, up two percentage points from 2011 when it was already the third-highest in the world behind Belgium and Denmark, according to the Organization for Economic Cooperation and Development.

“There’s no more room to raise taxes,” said Laurent Dubois, a professor at the Institute of Political Studies in Paris. “The French feel taxes are going up and purchasing power is going down. They voted for Hollande thinking they’d afford austerity; that the rich would pay. They realize now that that’s not possible. There aren’t enough rich people.”

Not Enough Rich People to Tax

Socialists are all in favor of raising taxes (on somebody else). When Hollande ran out of rich people to tax, he simply taxed everybody.

Those generally supportive of tax hikes then revolted in a riot of "not me" protests.

Support for Tax on Soccer Players is 83%

Apparently there are not enough soccer payers to matter. By a massive margin, the "Not Me" protesters support Hollande's 75% tax rate on millionaire soccer players.

On soccer clubs, Hollande has said he intends to hold his ground on a pledge to tax salaried earnings of more than 1 million euros at a rate of 75 percent for two years. French soccer clubs said last week they won’t play a round of league matches during the last weekend in November to protest the tax.

For some unprofitable clubs, the extra burden is a threat to survival, according to the Ligue de Football Professionnel.

“The consequences of this measure will be dramatic,” said Frederic Thiriez, head of the LFP, said in a statement. “France must be the only country that taxes money-losing companies.”

The clubs, which are canceling matches between Nov. 29 and Dec. 2, are asking the government to abandon the tax.

The million-euro salary levy is one that is popular. About 83 percent of French say the soccer strike is unjustified, according to a poll by Opinion Way for LCI television.

For now, Hollande says he is not backing down on taxing soccer players. I guess there are not enough of soccer players to matter (at least until games are cancelled, tax revenue plunges, and people who want to see the games riot).

French Want Something For Nothing

Hollande has promised to cap the deficit mostly by shrinking spending next year. That won’t make the French happy either, said Emmanuel Riviere, a pollster at TNS Sofres in Paris.

“The French want the deficit addressed and spending reduced but they don’t want to give up their services and social protection,” he said. “Faced with this contradiction, Hollande has been ambiguous. The result is that the French are now suspicious that the government isn’t telling them the truth.”

Making a Choice

“If we don’t have the tax we can no longer restart public works projects, renovate roads including the high-speed train links that all lawmakers are asking us for,” he said. “We will have to make a choice. We will have to find an agreement.” said Industry Minister Arnaud Montebourg.

Well, perhaps Montebourg should ask if people want tax hikes to support those things. Then again, the answer would likely be "Yes, But ... Not On Me!"

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com