The French and taxes

Posted: Jul 01, 2003 12:00 AM

In the 15th century, a young woman named Joan rallied the people of France to revolt against their English oppressors. Today, another young woman, named Sabine Herold, is trying to do the same thing. Only she is not trying to save France from foreign invaders but from itself.

Herold is a 21-year-old college student who became the unlikely leader of a libertarian revolt in France when she spoke out against striking public sector unions. Protesting government plans to make them work 40 years to receive full pensions, as private sector workers do, rather than 37 as they do now, the unions have severely crippled transportation and caused great hardship for ordinary people throughout France.

In years past, people would have tended to sympathize with the strikers. But sparked by Herold, large numbers of French people seem to have decided that enough is enough. They are tired of having their lives disrupted and paying excessive taxes for the benefit of a few pampered government workers, for whom too much is never enough.

Herold had no plans to become another Joan of Arc, but that seems to be what happened. As striking workers marched through her hometown of Reims, northeast of Paris, she spontaneously denounced them from the steps of city hall on May 25. Suddenly, there were 2,000 citizens cheering her on and listening intently to her attacks on the strikers, the federal government, and a loss of French dynamism and entrepreneurial spirit.

A star was born.

The next thing Herold knew, she was the leader of a national movement. On June 15, she addressed a crowd of 18,000 in Paris with the same message. Beautiful, articulate and willing to say things that no national leader has been willing to say in France in decades, Herold became a heroine to the oppressed middle class. Squeezed on all sides by taxes, high unemployment, slow growth and an unresponsive political class, all they needed was a leader when she burst on the scene.

Exactly 50 years ago, a similar middle-class revolt arose in France led by a small-town bookseller named Pierre Poujade. In the summer of 1953, he organized the shopkeepers in the town of St. Cere to go on strike against the tax collectors. As with Herold, Poujade suddenly found himself the leader of a national crusade. In 1956, his movement elected 52 members to the 544-member National Assembly.

But the Poujadists quickly ran out of steam. Within two years, their movement virtually ceased to exist. The reason seems to be that they had no real vision of reform or a program that went much beyond protest. In the United States, they would be called populists. Once given a bit of power, they didn't know what to do with it and so faded away.

According to a report in Forbes Magazine, France has the heaviest tax burden among the 47 countries surveyed. It had a score of 179.4 on the Tax Misery Index, which is calculated by adding together corporate and individual income tax rates, and wealth, Social Security and sales taxes. With enactment of the recent tax cut, the United States has a ranking of just 85.3.

However, such a calculation overstates the French tax burden because evasion of the income tax is so pervasive. Consequently, France collects less revenue from personal income taxes than any other major country, according to the Organization for Economic Cooperation and Development. It gets just 18 percent of its total revenue from this source vs. 42.4 percent in the United States. However, sales and Social Security taxes, which are harder to evade, are much higher in France.

It appears that the French channel their anger against high taxes into individual income tax evasion, rather than political action for tax cuts. The government turns a blind eye because the taxes it really depends upon are still paid. This makes people feel they are getting away with something even as their total tax burden rises ever higher. It also diffuses pressure to reduce taxes.

Thus, it seems that France still successfully follows the maxim of Jean Baptiste Colbert, minister of finance to King Louis XIV in the 17th century. "The art of taxation," he said, "consists in so plucking the goose as to obtain the largest possible amount of feathers with the smallest possible amount of hissing."

Sabine Herold has her work cut out for her. But unlike Pierre Poujade, she understands the need for a broader political philosophy upon which to base her movement. She is said to be reading the Austrian political philosopher F.A. Hayek and is a great admirer of former British Prime Minister Margaret Thatcher. She will need the wisdom of the former and all the steely determination of the latter if she is to be successful.