French Bosses Open Their WalletsBy
Warren E. Buffett’s call for higher taxes on the super-rich has produced an echo in France. In an open letter published on Aug. 23 by the magazine Nouvel Observateur, 16 members of France’s corporate elite volunteered to pay more taxes to ease the nation’s budget deficit and debt burden. “At a time when the government is asking for solidarity, it seems necessary for us to contribute,” said the letter signed by the bosses of Total, Publicis Groupe, Danone, L’Oréal, and Société Générale, among others.
The statement, issued a day before the government released a $17 billion deficit reduction plan, seemed aimed to reassure voters that everyone would share the pain, says Laurent Dubois, an analyst at the Paris-based Institute of Political Studies. The CEOs “know the French people will have to tighten their belts, and they want to show they are listening,” he says. President Nicolas Sarkozy’s plan includes a temporary 3 percent levy on incomes over $720,000, estimated to raise $288 million annually.
Yet a key element of Buffett’s crusade is lost in translation. Buffett wants an overhaul of the U.S. tax code, which he says is riddled with special breaks that allow the “mega-rich” to pay far lower rates than the middle class. Wealthy Americans make most of their income from investments, generally taxed at the 15 percent capital-gains rate. Those who live by their wages pay combined income and payroll tax rates of roughly 30 to 40 percent. France isn’t that different. In a recent book, For a Fiscal Revolution, three French economists showed that income and payroll taxes consumed 41 to 48 percent of the earnings of low- to middle-income households—compared with less than 35 percent for the wealthiest.