Ned6 Wrote:
Oct 03, 2012 11:59 AM
Increasing the French capital gains rate from 19% to 75% will crash the French stock market and halt all new investment in entrepreneurial ventures: At the current 19%, owners of stock have an after tax call on 81% of the proceeds. At 75% capital gains, they will have a call on only 25% of the proceeds. One can expect a 69% drop in the stock market (25%/81%) to 30.9% of its current value; resulting in no capital gains tax revenue from the increase. For entrepreneurial ventures, a 10% after tax return requires a 12.3% pre-tax hurdle rate for investment adjusting for risk, at the 21% rate. However, at the 75% rate, a 40% hurdle rate obtains. Obviously all entrepreneurial investment will cease.