Is Gavin Newsom Repeating the Billionaire Mistake That's Tearing France Apart?

France's unrest exposes the consequences of failing to tax the wealthy. California's billionaire-tax fight raises the same fundamental question about who should pay to make a nation succeed...

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Three weeks from today, California voters will have their ballots tallied on Proposition 40 (and 41 and 42, which would negate 40) that will impose a one-time 5% tax on the assets — the wealth — of the state’s 200+ billionaires.

The money will be used to make up for the massive almost-trillion-dollar cuts to Medicaid, called Medi-Cal in that state, that hits in January because the Republican’s Big Beautiful Billionaire’s Bill used it to pay for their trillions in tax cuts for billionaires.

The California Democratic Party has formally endorsed Prop 40 along with the California Nurses Association and the state AFL-CIO, and if the state’s Democratic politicians had backed the tax across the board, odds are very high that it would pass and 42 (which is now polling over 50%) would fail.

But Governor Gavin Newsom has come out against it, making an argument that dates back to the Reagan years:

“If you ask the morbidly rich to pay more in taxes they’ll simply leave the state.”

That threat is the beating heart of a bizarre economic and governing philosophy called neoliberalism. I remember the late Milton Friedman hustling this crap back in the 1970s and was horrified when Reagan dusted off its variation in the old Horse and Sparrow economics that Warren Harding had tried in the 1920s, calling it “trickle down.”

Harding told people that if you feed horses [rich people] extra oats, that will pass through into their patties on the road where the sparrows [working class people] can pick them out. He cut the top tax rate on the morbidly rich from 73 to 25 percent, which kicked off the Roaring 20’s and led directly to Black Tuesday and the Republican Great Depression.

It took FDR almost a decade to completely repudiate Harding’s policies and put the nation back together and, with his 90 percent top tax rate on the morbidly rich, create the first middle class to encompass more than half a nation in the history of the world.

Reagan cut the top rate from 70 percent down to 28 percent and raised taxes on working-class people 11 times, according to his own economic advisor Bruce Bartlett, to partially cover the hole that blew in the nation’s budget (Reagan tripled our national debt in a mere 8 years, a non-wartime record at the time.)

Thus began the destruction of FDR’s vaunted middle class and the explosion of today’s predatory billionaire class.

The “tax burden” (a favorite Republican phrase) moved down the income ladder from the rich to working class people and has kept moving in that direction through every Republican administration since.

But neoliberalism wasn’t limited to America; it swept the democratic world in the 1980s and 1990s, most famously embraced by the French and the British but popping up measurably in virtually all the European nations. The result is today most visible in the student riots that are tearing France apart.

I was listening to The New York Times “Daily” podcast on the topic yesterday and they started out by blaming France’s debt and school crisis on decades of over-spending on social policy without mentioning the revenue (taxes) side of the equation. Interestingly, the top comment (as I’m writing this) on the podcast says:

“Is it any surprise that the neoliberal Times ignored the effect of cutting taxes on the rich & went immediately for France’s social welfare programs? Instead of cutting taxes, France should have raised them. Ask Kansas how trickle-down economics actually works.”

Macron — a neoliberal “conservative” and former investment banker — is still doubling down on tax-cutting neoliberalilsm. This week their legislature, the National Assembly, opens debate on an austerity budget that cuts pensions and freezes wages for public workers.

Young people are in the streets, around 400 high schools have shut down, and the government’s borrowing costs have hit their highest level in at least two decades. And France is probably just the beginning; Bloomberg is warning that the turmoil could and probably will spread across the Eurozone.

France does spend a lot on its people: everybody has healthcare, childcare, college, and a dignified retirement and the trains generally run on time. And those costs are what the neoliberal politicians and press in America are focusing on.

Almost nobody, though, is asking why the morbidly rich in France are paying less and working class people are paying more in the years since the ’80s, just like it’s been here in America since our very own neoliberal Reagan Revolution.

From 1914 through 1986, France’s top income tax rate on the morbidly rich was generally above 60 percent and it’s middle class was steadily growing. Until 1985 its corporations paid a 50 percent tax on profits. Then the neoliberals arrived, and today the top personal rate is 45 percent, the top corporate rate is 25 percent, and, while French billionaires have never had it so good, the French middle class is in crisis.

While total taxes actually climbed from 33.7 percent of the economy in 1965 to 43.5 percent today, the money that used to come from the top tiers of society and business was replaced with flat levies on paychecks and on purchases that everybody buys. As a result, the progressive income tax went from 12 percent of public revenue in 1981 to 6 percent by 2014.

The result is that the effective tax rate on the richest 0.1 percent is 26 percent rather than the 45 percent that an affluent doctor or lawyer might pay, as France’s Institut des Politiques Publiques points out.

Economist Gabriel Zucman puts it more bluntly, noting that the average French person pays about 51 percent of their income in taxes of all kinds while billionaires pay about 25 percent. Which is why, over that same period, the fortunes of France’s 500 richest people swelled from 6 percent of the country’s GDP to 42 percent.

Demonstrating that old cliché about the definition of insanity, Macron stupidly poured gasoline on the fire his predecessors had started.

He scrapped the country’s wealth tax and cut the corporate rate from 33 percent to 25 percent; France’s own national auditor, the Cour des comptes, concluded that his tax cuts have cost the treasury more than €60 billion a year and produced no savings whatsoever to offset them. (That’s a bit more than a third of this year’s entire French government’s deficit.)

And make no mistake: the French people understand exactly what’s been done to them. When French-American economist Gabriel Zucman suggested France should levy a 2 percent minimum wealth tax (like Prop 40 in California, but smaller and permanent) on family fortunes over €100 million (about 1,800 French households) fully 86 percent of the public supported it, including 92 percent of Macron’s own party.

Nonetheless, Macron’s conservative allies joined up with Le Pen’s hard right to kill it in the Assembly last fall, warning that — wait for it — if it passed, “The rich would flee France.”

So now Macron is trying to extract that money from the nation’s retirees, just like Republicans here in America are right now talking about the need to cut Social Security and Medicare to sustain their tax cuts for Elon Musk and Mark Zuckerberg.

France is almost certainly just the first domino to fall from neoliberal stupidity, as I detailed in The Hidden History of Neoliberalism: How Reaganism Gutted America. When you look at income taxes across the developed world in 1981, the average hit to the morbidly rich was 66 percent. By 2013 it had fallen to 43 percent, as the worldwide average corporate tax rate fell from 47 to 25 percent.

When two British scholars looked at 50 years of tax cuts for the rich in 18 wealthy countries, they showed how these neoliberal tax cuts consistently made the rich richer but did nothing measurable for growth or jobs. The sparrows (and us trickle-ees) are still waiting for the oats and drips.

Which brings us back to California and Newsom’s political calculations. Economists Saez and Zucman calculate that California’s billionaires currently pay about 0.2 percent of their wealth in state taxes each year, so even if fully a quarter of them stormed off to Texas or Florida it’d take a century for that lost income tax to equal what this one-time wealth tax would bring in even with only three-quarters of them still there to pay it.

Study after study shows most of them don’t leave anyway, because their homes, their companies, and their friends are where they made their money.

In 2022, for example, Massachusetts voters approved a 4 percent surtax on incomes over a million dollars, and sure enough, billionaires like Patriots owner Robert Kraft and New Balance’s Jim Davis shrilly warned that the rich would flee the state.

Instead, the tax brought in $3.38 billion last year, the third year in a row it’s more than doubled the state’s original estimate. Federal tax data from Massachusetts proves higher-income households were less likely to leave the year after it passed than the year before. And that money is now paying for quality schools, free community college, and low-cost public transit.

Newsome, of course, knows all this. But he also knows that five corrupt Republicans on the Supreme Court legalized billionaires buying our elections, so having access to billionaires’ money could be a big factor in his all-but-announced run for president in 2028.

What the French students are showing the world right now is what happens when politicians with real power across the political spectrum cling to neoliberal low-tax doctrine. The debt piles up, the bond traders start circling like chum-drawn sharks, and pretty soon everybody is talking about “fixing” Social Security, schools, and the rest of the social safety net to “restore fiscal responsibility.”

Meanwhile the morbidly rich see their wealth explode and — in America with this corrupt Supreme Court — their political power rises right along with it, which just accelerates the process.

So, if you live in California, vote “Yes!” on Prop 40 and “No!!!” on 41 and 42. And keep an eye and ear out for potential Democratic contenders for 2028 who — like Congressman Ro Khanna — have the courage to tell the truth about these things.

Louise’s Daily Song: “We Gave It All To The Rich”

Comments on Monday’s Daily Take:
Benedict Arnold Sold Out America Once. Is Trump Doing It Again, This Time for Putin?

The question of whether Trump is a Russian asset was settled long ago. We have either refused to call it out in a clear, consistent way, or it has been drowned out by all the other noise Trump generates. So, to repeat, our sitting President is a Russian agent.
~ Andrew Campbell

I believe loyal Americans in and outside the intelligence community have “known” that DT has been both a Soviet and, then Russian asset, for three decades.

The issue that I feel is most critical is why those in position to eliminate this threat have not acted to do so, given years of evidence???
~ Donald Laghezza

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