A proposed bill to institute a heavy tax on luxury cars, boats, and planes, something that has been tried twice before here in the US and had just the opposite effect intended by those who crafted the tax legislation. As Eric The Viking recalls, the last time such a tax was instituted here in 1991, the government didn't see nearly the revenue it expected and the 'unexpected' jump in unemployment by makers of those luxury goods cost the US government more than they took in from the luxury tax. It was a net loss for US tax revenues. Explains Eric:
In 1990 there were no luxury excise taxes, all of them having been repealed in 1965. But perhaps every quarter-century or so government--it cannot help itself--must go on a "fairness" bender, the memory of the hangover from similar misadventures having faded.As Eric also reminded us, France just finished learning a hard lesson from trying to tax the rich at a confiscatory level – the rich started leaving and taking their money with them. Now they're going to try the same thing the US tried (and failed at) and I expect the same thing will happen in France as happened here – sales in those items will plummet and the wealthy will mere start buying their luxury items elsewhere. As Eric states it, this legislation should be called “The American Boating Employment Act of 2017” as I have no doubt a lot of French buyers will be more than happy to buy their yachts here.
In 1990 the Joint Committee on Taxation projected that the 1991 revenue yield from luxury taxes would be $31 million. It was $16.6 million. Why? Because (surprise!) the taxation changed behavior: Fewer people bought the taxed products. Demand went down when prices went up. Washington was amazed. People bought yachts overseas. Who would have thought it?
Of course we can expect Emmanuel Macron to say something along the lines of “We'll do it better then the crass Americans.” But of course they won't. No one ever does. But that's something the French will have to learn (again) if Macron's proposed tax goes through.
C'est la vie!