(NEW YORK) — The French government’s budget presented Friday, which is imposing a 75 percent tax rate for income exceeding 1 million euros ($1.39 million), is expected to inspire a number of wealthy French to move their residency to other countries. The 75 percent rate seems shockingly high, but if it were instituted in the U.S. it would still not be enough to even balance the budget.
How much money would a 75 percent tax rate for people with incomes over $1 million earn in the U.S.?
It’s tough to say, says William McBride, chief economist of the conservative think-tank, The Tax Foundation. In the “rosiest” scenario of a higher tax-rate, millionaires would continue working, not renounce their citizenship nor find tax shelters, he said.
In France, one’s tax status is mostly based on residency, as opposed to the U.S., which requires all U.S. citizens regardless of residency to file with the Internal Revenue Service.
If the U.S. were to tax 75 percent of millionaires’ entire incomes, not just their income over $1 million, that would yield around $532 billion in tax revenue, he said.
McBride points out that such a tax rate here would make only a 48 percent dent in the nation’s deficit, which is expected to reach $1.1 trillion this year, the Congressional Budget Office said in August. And that still would not pay down by one dime the $16 trillion plus national debt.
Again, that is in the “rosiest” situation. In France, the 75 percent tax rate is levied on millionaires’ incomes only over €1 million and will last only for two years.
“It’s not as if it comes at no cost. The cost is a huge waste of resources in the form of tax planning, investors leaving the country, or investors who stay will stop investing,” McBride said. “There would be a loss in investment over time due to lower productivity, lower wages for everyone. It would cause massive harm to the economy with little or no gain in revenue.”
The top marginal tax rate in the U.S. has ranged from a high of 94 percent during World War II to 91 percent from 1950 to 1963 then gradually falling to the current rate of 35 percent.
Copyright 2012 ABC News Radio
Kathryn Vasel and Jill Disis, CNN
Heather Hourigan, CNN
Kathryn Vasel, CNN
Shannon Gupta, CNN