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France looks at ways to curb 'fat cat' salaries across the EU - Europe, News - The Independent

Pressure is building in the European Union for common rules to discourage, or punish, excessive payments to top business executives.

France, which takes over the presidency of the EU on 1 July, will ask finance ministers to consider a European directive to curb disproportionate bonuses or golden handshakes to company bosses. The Dutch government has already introduced a draft national law to punish what it describes as "unjustifiable" payments to business leaders. The French finance minister, Christine Lagarde, said companies must put their own house in order or face a rash of national, or EU, legislation to clamp down on "excesses".

French officials said Paris felt that, without such an EU-wide curb, large companies or highly paid executives would evade national curbs by exercising their right to move from one EU country to another.

Jean-Claude Juncker, Luxembourg's Prime Minister, and president of the "Eurogroup" - the countries using the Euro - recently described steep increases in executive pay as a "social scourge". He said EU governments should consider ways of punishing disproportionate bonuses and high severance payments with windfall taxes.

by Fran on Sat May 31st, 2008 at 05:14:17 AM EST
[ Parent ]
Quite surprising (and welcome) to see the Dutch and French acting, you know, almost in concert on this.

Wouter Bos, Dutch finance minister (and leader of the social-democratic PvdA party), has also been making some noise about more economic governance in the eurozone, which used to be something only the French advocated.

Also see my Feb. 2007 diary Eurozone Economic Governance. Bos is a big improvement over Zalm, at least internationally.

by nanne (zwaerdenmaecker@gmail.com) on Sat May 31st, 2008 at 05:55:54 AM EST
[ Parent ]
The easy way to do this is to add a new tax bracket with a higher marginal rate at, say, 4xGDP per head.

In the UK the highest marginal rate of 40% kicks in slightly below 2xGDP/head. A 60% rate tax above 4xGDP/head (that's over £90k) couldn't hurt. And an 80% rate above 8x wouldn't be bad either.

When the capital development of a country becomes a by-product of the activities of a casino, the job is likely to be ill-done. — John M. Keynes

by Migeru (migeru at eurotrib dot com) on Sat May 31st, 2008 at 06:03:28 AM EST
[ Parent ]
Let's not hesitate to have the really high marginal rates for, well, very high incomes. 8xGDP per head is, what, 200 000€ in many places ? that's certainly very wealthy, but suprisingly, not that extremely rare. You're still hitting doctors, successful small businessmen, even some shop owners, at that level. It's not extraordinary enough. Even worse for a 60% rate at above 4xGDP/head. (In the UK, is it families or single persons who pay income taxes ?). You risk getting into fights about taxing the upper middle class. Not that I'd care, mind you, but it is politically harder. Whereas aiming to a 80% rate for, say, 100xGDP per hear will still hit quite efficiently those wage that create really problematic inequality, and much more clearly hits only the very fat cats. It's going to be very hard for the populist right wing papers to find "normal" families being hit with such a tax hike : even selling a bubbled up house won't give enough income to reach that rate. Whereas obviously, the CEOs, and the owners, routinely reach those incomes.

Un roi sans divertissement est un homme plein de misères
by linca (antonin POINT lucas AROBASE gmail.com) on Sat May 31st, 2008 at 07:17:02 AM EST
[ Parent ]
I'm assuming taxes are paid by individual earners. Using tax policy to encourage (or discourage) marriage is (IMHO) stupid.

Let's see... GDP per capita is already higher than median income.

Assume
0% below 1/2 GDP
10% between .5x and 1 x GDP
20% between 1x and 2x GDP
40% between 2x and 4x GDP
60% between 4x and 8x GDP
80% between 8x and 16x GDP
90% above 32x GDP

Your upper-middle class professional making 200k would pay 86.25k which is only 43% - but the point is that someone making 100k and getting a 100k bonus would only pocket 40k of the bonus, and that 100k + 100k is already indecent, if you ask me. At the upper end of the 80% tax bracket (400k) they'd pay 52%.

When the capital development of a country becomes a by-product of the activities of a casino, the job is likely to be ill-done. — John M. Keynes

by Migeru (migeru at eurotrib dot com) on Sat May 31st, 2008 at 07:47:50 AM EST
[ Parent ]
But really, if we need to have a smaller progression in order to get the people who make more that 600k to agree to it...

When the capital development of a country becomes a by-product of the activities of a casino, the job is likely to be ill-done. — John M. Keynes
by Migeru (migeru at eurotrib dot com) on Sat May 31st, 2008 at 07:57:13 AM EST
[ Parent ]
What could be entertaining is including an option for tax breaks if the money is spent on specific investments such as social investment, transport, and sustainables.

They wouldn't get to keep the cash either way, but it could do some interesting things if pushed in certain directions.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Sat May 31st, 2008 at 08:18:27 AM EST
[ Parent ]
That's already the case in France, and it's lousy and strongly abused.

Such investments essentially allow high brackets tax payers to get interests on their taxes...

Plus, it means that unlike lower income tax payers, higher income tax payers get to decide which government programs their taxes are spent on. Very undemocratic.

An example : to help service employment, house employee's wages are tax deductible, in France. Which concretely means that if you pay enough taxes, your babysitters eventually cost you half their wages ; that's very regressive...

Un roi sans divertissement est un homme plein de misères

by linca (antonin POINT lucas AROBASE gmail.com) on Sat May 31st, 2008 at 08:43:42 AM EST
[ Parent ]
This is a much higher tax rate for the upper middle class than in the 50's, I think.

Just to point out that François Hollande, when he said, "I hate the rich" during the presidential campaign, got burned for defining "rich" as someone who made more than 4000€ a month. I'd say even those making 8000€ a months are not perceived as obscenely rich in Europe.

What do we define as unhealthy inequality ? I fully agree with you that 200 k€ is already obscene, but that's not the public perception of it. Someone who did well on the property bubble, buying a 200 k€ house at the low point and selling it when prices have doubled, will be in that bracket ; and that's the case the opponents will put forward.

Even many parts of the upper middle class making that kind of money yearly are not perceived as "one of them" by most of the population. That's the arguments that have been used to push down the rates : it's normal people that are benefiting from lower taxes.

Unhealthy inequality is currently that of the upper percentile of the population, the kind of income that allows one to own large companies, etc. That's income above 500 k€, not 100 k€. It's possible to make those earning more than 500 k€ into them ; not as much for those earning more than 100 k€. And high marginal rates will be much more viable if they only hit the wealthiest ; as pointed by the Hollande polemic : if you aim too low incomes, the tax rates will quickly come back down.

Un roi sans divertissement est un homme plein de misères

by linca (antonin POINT lucas AROBASE gmail.com) on Sat May 31st, 2008 at 08:38:58 AM EST
[ Parent ]
Okay, so let's make things more progressive...

Assume
0% below 1x GDP
10% between 1x and 2x GDP
20% between 2x and 4x GDP
40% between 4x and 8x GDP
60% between 8x and 16x GDP
80% between 16x and 32x GDP
90% above 64x GDP
100% above 128x GDP

I.e., you shouldn't make more than 256k/mo...

When the capital development of a country becomes a by-product of the activities of a casino, the job is likely to be ill-done. — John M. Keynes

by Migeru (migeru at eurotrib dot com) on Sat May 31st, 2008 at 08:51:46 AM EST
[ Parent ]
My meaning exactly. Now we must also define a wealth tax.

Un roi sans divertissement est un homme plein de misères
by linca (antonin POINT lucas AROBASE gmail.com) on Sat May 31st, 2008 at 09:34:09 AM EST
[ Parent ]
Multiply the tax rates by 20% and the tax brackets by 20:

Assume
0% below 20x GDP wealth
2% between 20x and 40x GDP
4% between 40x and 80x GDP
8% between 80x and 160x GDP
12% between 160x and 320x GDP
16% between 320x and 640x GDP
18% between 1280x GDP and 2560x GDP
20% above 2560x GDP

Assuming GDP/head = 25k, we're talking no wealth tax below 500k, and 20% above 64M.

When the capital development of a country becomes a by-product of the activities of a casino, the job is likely to be ill-done. — John M. Keynes

by Migeru (migeru at eurotrib dot com) on Sat May 31st, 2008 at 09:41:26 AM EST
[ Parent ]
For similar reasons, I'd cut the first bracket away : a 700k home happened upon much of the Parisian-and-suburbs middle class as a result of the housing bubble. The "standard family home" has been used as an excuse to cut the Estate tax ; let's not allow the same excuse for the wealth tax.

Un roi sans divertissement est un homme plein de misères
by linca (antonin POINT lucas AROBASE gmail.com) on Sat May 31st, 2008 at 09:51:29 AM EST
[ Parent ]
Okay, multiply the brackets by 30 (longer lifespans and lower long-term ROC rates). Also start with a 1% rate and round off the multipliers

Assume
0% below 30x GDP wealth
1% between 30x and 60x GDP
2% between 60x and 120x GDP
4% between 120x and 250x GDP
8% between 250x and 500x GDP
12% between 500x and 1000x GDP
16% between 2000x GDP and 4000x GDP
18% between 4000x GDP and 8000x GDP
19% between 8000x GDP and 16000x GDP
20% above 16000x GDP

The top bracket kicks in at 400M.

When the capital development of a country becomes a by-product of the activities of a casino, the job is likely to be ill-done. — John M. Keynes

by Migeru (migeru at eurotrib dot com) on Sat May 31st, 2008 at 09:59:36 AM EST
[ Parent ]
Wealth... marked to market or marked to model?

When the capital development of a country becomes a by-product of the activities of a casino, the job is likely to be ill-done. — John M. Keynes
by Migeru (migeru at eurotrib dot com) on Sat May 31st, 2008 at 09:45:12 AM EST
[ Parent ]

4xGDP per head.

I am more accustomed to seeing this referred to as multiples of the "average wage" or "the median wage" (quite different things, for sure).  Does GDP refer to gross domestic product?

"It is not necessary to have hope in order to persevere."

by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Sat May 31st, 2008 at 12:53:00 PM EST
[ Parent ]
Yes, I figure that makes matter simple and that by the time the tax forms are mailed out the GDP/head for the previous year has been computed.

When the capital development of a country becomes a by-product of the activities of a casino, the job is likely to be ill-done. — John M. Keynes
by Migeru (migeru at eurotrib dot com) on Sat May 31st, 2008 at 12:56:05 PM EST
[ Parent ]

by the time the tax forms are mailed out the GDP/head for the previous year has been computed.

I can see the advantages of that.  But what portion of GDP does total national wages form? Can I presume that the individuals income would be all income, including dividends, investment income, etc?

In the US we need to put high taxes on large estates as well.  As Willie Sutton observed: "Cause that is where the money is."

"It is not necessary to have hope in order to persevere."

by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Sat May 31st, 2008 at 01:06:42 PM EST
[ Parent ]
It's an income tax, not a wage tax, so indeed all income must be taxed similarly...

And about taxing estates, that's why I talked about wealth tax upthread...

Un roi sans divertissement est un homme plein de misères

by linca (antonin POINT lucas AROBASE gmail.com) on Sat May 31st, 2008 at 01:08:55 PM EST
[ Parent ]
I missed that, skimming through the thread.  But I am letting the day get away from me and must get some yard work done.  Later.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Sat May 31st, 2008 at 01:41:54 PM EST
[ Parent ]
At least you should do GNI per head...
by nanne (zwaerdenmaecker@gmail.com) on Sun Jun 1st, 2008 at 03:31:53 AM EST
[ Parent ]

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