Channelling Buffet, French Rich Demand Higher Taxes

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Warren Buffett, chairman and chief executive officer of Berkshire Hathaway Inc., listens during an interview with Bloomberg, July 8, 2011. (Photo: Scott Eells / Bloomberg / Getty Images)

It’s a small, real-time world, and it’s now evident no niche is too elite or removed from it to withstand a fad that has gone viral. Take France’s rich folk, who have turned billionaire businessman Warren Buffet into the hottest trend-setter among the globe’s super-wealthy by echoing his attention-grabbing New York Times appeal for his government to start taxing him and his fellow mega-affluent citizens at the steeper rates they deserve and can afford. But in contrast to Buffet’s open-ended, stick-it-to-us-as-we-should-have-been-all-along plea, his under-taxed French peers are requesting their government exact only “an exceptional contribution” from them at a time when growing “state debt threatens the future of France and Europe”. Once that very newsy menace to the collective good subsides (or is replaced in headlines by something else), presumably France’s stiff-pinky crowd goes back to enjoying what Buffet’s piece describes as being “coddled”. As an act of modesty and self-sacrifice, it isn’t  exactly Gandhi-grade.

Okay, so let’s be fair: whacking the petition signed by 16 of France’s wealthiest citizens and CEOs for its limits in asking the government to dig into their pockets in response to the debt crisis France and its euro zone partners now face isn’t altogether fair. Like millionaire sports or pop heroes who get attacked for writing checks of “only” a few hundred dollars to charities or disaster relief efforts when they could afford more, French fat cats weren’t obliged to make any effort at all. They could have easily reacted to Buffet’s editorial with blinking eyes, worried looks, and sideways mumbled questions of “who’s the deranged old guy babbling on over there?”

Meanwhile, many of those who signed the appeal previously established progressive bone fides in the way they’ve run their businesses and intervened in public policy debate, and they can’t be second-guessed just because their proposed tax generosity contained too many reservations and Use Before dates. Signing CEOs like Publicis’ Maurice Lévy, Dannone’s Franck Riboud, and Air-France-KLM honcho Jean-Cyril Spinetta have repeatedly won plaudits (including, at times, from France’s feisty unions) for management that put human concerns and employment priorities on par with– or above—strictly bottom line interests. For those reasons, few observers doubt the sincerity of those figures and others who issued their call noting they’re “conscious of having fully benefited from a French (social) model and European environment to which we are attached and want contribute to preserve”.

Because of that past and present effort to protect and advance those socially minded, human-conscious French and European socio-economic systems, this blog now fully applauds the signatories for volunteering to pay more towards them.

Now that’s done, here’s why it’s still not enough.

Unlike Buffet–who urged that taxation of the rich in the U.S. be raised to a level equal to or higher than the proportion of total income extracted from less affluent citizens—his French peers suggest increases they shoulder be limited in both scope and duration. Buffet urges the necessity on augmenting taxes on the wealthy not just as economically reasonable within the context of America’s debt dilemma, but also more rational within the framework of its progressive tax system—and as the decent thing to do generally. By contrast, the French petition calls for the levying of an “exceptional contribution” that must be “calculated on reasonable proportions”—“reasonable” being as debatable a term as “decent” when it comes to huge sums of money. The French signatories also note their proposed contribution “can not be a solution unto itself” in solving France’s debt problem, and insist it must be matched with a “more global reform of (state) spending as well as revenues”.

The problem with that is, it sounds a lot like what the conservative government of President Nicolas Sarkozy announced Wednesday under an austerity program to slash nearly $16 million in spending over the next 18 months. Though no one denies the urgency for France to reduce its debt for its own sake—and to avert contagion of market fears over untenable debt pressure spreading to France—pundit reaction to Wednesday’s plan not only painted it too little, too late, but also an effort by Sarkozy’s conservative government to avoid admitting its many errors that helped create the situation, including its continued “coddling” of the French wealthy.

It’s not as though at least lip service wasn’t paid to spreading the austerity pain around—albeit in exactly the kind of circumscribed subtext the petition carries . The plan included a new 3% tax on incomes of people earning more than $700,000 per year–a condition easily qualifying under the  “reasonable proportions” stipulated in the appeal. Meanwhile, even as he sought to portray the measure as boldly pinching the posh, Prime Minister François Fillon hastened to note it would be exactly the kind of “exceptional contribution” the petition outlined: collected only as long as France has not attained the goal of lowering its budget deficit to 3% of GNP (currently set to be met in 2013). Ironically, despite the loud ideological messages that have accompanied reforms and policies Sarkozy has pushed through since his election—virtually all of which have since been rolled back since as counter-productive, inefficient, or too expensive—Fillon sought to sound a faux-populist note in announcing the wider-hitting package of measures as getting particularly tough with the rich. Fillon went so far as to say the wealthy and big companies would finance over 80% of the costs his package involves—a claim most pundits responded to with an incredulous snort.

Why the skepticism? Because the Sarkozy government has long been decried for having continually pandered to the corporate and big money interests that constitute the main backers of his conservative party. They also represent its most faithful contributors (one of whom, scandal-rocked L’Oréal heiress Liliane Bettencourt, signed the petition.) According to many economists, an array of tax breaks Sarkozy has pushed through since his 2007 election have played a major role in worsening the French debt that has skyrocketed on his watch. Meanwhile, though many of those measures have had to be re-worked (though not always fully repealed) among broader hikes as the worsening economic situation started to bite, continuing Sarkozy-sponsored tax breaks the rich enjoy worth $2.2 billion to $2.8 billion annually will in no way be compensated by the estimated $280 million in receipts that Fillon’s 3% charge will bring in—for as long as it lasts.

Many experts say that what’s really need in France (as well as the U.S.) is a full revision and rationalization of how all income—whether salary, dividends, or capital gains—is taxed. Only that, they say, will ensure all private revenue is being efficiently drawn from at fair rates across all economic categories. That, too, is Buffet’s basic message in calling on the U.S. government to treat his fellow mega-wealthy the way it does everyone else: let’s be reasonable, efficient, and decent about how much we all pay into the collective pot according to our different means. The petition by the French affluent is a step in that direction, yet it also appears too inspired by what signatories seem to see as Buffet’s do-gooding gesture, rather than his argument that the rich should start to give till it hurts—and embrace that pain has habit from now on. Fillon seems to have understood that French reserve, and adapted his austerity measures to it. It all seems to suggesting that while the world’s super-rich and powerful may not be immune to viral trends, they aren’t about to do anything crazy even as they get faddish.