According to figures from the finance ministry this week, the so-called differential contribution, a special rate of income tax for the highest earners, generated an additional €400m last year. That compares to a forecast of €1.9bn.
It is not exactly a minor shortfall. The tax only raised a quarter of what was expected. This year is not likely to prove much better. Revenue is forecast at €650m, €1bn less than was planned. It has proved a spectacular flop.
Of course, it is not hard to work out what went wrong. The better-off simply adjusted their income to bring themselves under the threshold, or else they moved elsewhere.
True, the French extra tax hasn’t worked out. But it’s not, as far as I know, actually a Laffer response. It’s more fun than that:
That is, the initial numbers used to show how much the tax would raise were wrong. Wrong simply because the Treasury didn’t know how many people there were with how much of which type of income would be affected by the new tax. That is, this is failure by Hayek, not failure by Laffer.
Recall the Nobel lecture, The Pretence of Knowledge. The core lesson of which is that the centre, government, never does know enough about something as complex as the economy to be able to plan in detail. It’s not just wishes and all get to be an autocrat for a day, it’s not intentions, it’s simply the lack of that detailed knowledge that makes it all so difficult. There is also no cure for this – the Hayekian contention is that the centre will never, cannot, have the knowledge in the necessary detail.
Failure by Hayek is indeed different from failure by Laffer. Even if the end result is much the same, the plans of ants and autocrats gang aft agley….
Failure, yes, but failure for a slightly different reason.
Thing is, the last thing they’ll ever admit to is Hayek failure. It’ll simply be spun as class war: the bastard capitalists have wriggled out of it so we must double down and be even harsher.
This is the risk of arguing in good faith against dishonest people. They don’t care if it raises money if it penalizes “the rich”.
So, if they don’t know enough to plan, perhaps they don’t know enough to tell if it’s Hayek or Laffer?
I keep hearing about how much tax immigrants pay, and how good they are for the economy, so what can explain this:
Taxes go up, revenues go down, so the political establishment puts them up again to make up the shortfall. No one in Paris seems able to work out what is going wrong.
Racism?
How does the French equivalent of HMRC fail to know the taxable income of the populace?
“Recall the Nobel lecture, The Pretence of Knowledge. The core lesson of which is that the centre, government, never does know enough about something as complex as the economy to be able to plan in detail. It’s not just wishes and all get to be an autocrat for a day, it’s not intentions, it’s simply the lack of that detailed knowledge that makes it all so difficult. There is also no cure for this – the Hayekian contention is that the centre will never, cannot, have the knowledge in the necessary detail.”. It’s the same utter bell-end quoting this that wants complete central government control of everything?