French ‘Yellow Vests’ Are Rioting Because Taxes Have Consequences

Over the past decade, we have been informed by members of the political Left that there are simply no costs to building a “green economy.” In March 2009, for example, President Obama stated:

Throughout our history, there’s been a tension between those who’ve sought to conserve our natural resources for the benefit of future generations, and those who have sought to profit from these resources. But I’m here to tell you this is a false choice. With smart, sustainable policies, we can grow our economy today and preserve the environment for ourselves, our children, and our grandchildren.

Obama promoted the idea of environmental regulation and “green” investments as the future of a prosperous economy and a simultaneously cleaner world. But as France is currently proving, politics provides few situations in which trade-offs aren’t required. And environmentalist policies generally aren’t those situations.

Thus, this week, the French government announced that in the wake of widespread, damaging rioting throughout Paris, it would back off of its latest planned tax increases. French Prime Minister Edouard Philippe explained that the tax increases put “the nation’s unity in danger…This anger, you’d have to be deaf or blind not to see it or hear it.” Why, exactly, are people rioting? Because France taxes unleaded fuel at 64% and diesel fuel 59%. This tax is regressive, and harms those at the lower end of the economic spectrum most. And France isn’t alone. Sweden taxes petrol at 64%; Netherlands at 68%; the UK at 63%; Finland at 64%. Not a single country in the EU taxes at below a 50% rate.

This is the dirty little secret that America’s democratic socialists don’t like to talk about: the income and consumption tax rates are insanely high across Europe. The top marginal income tax rate in Denmark is 60.4%; it’s 56.9% in Sweden; it’s only 39.0% in Norway thanks to the country’s massive sovereign wealth fund, powered by oil revenue. More importantly, those top tax rates apply at extraordinarily low incomes – the top tax rates hit people who earn 1.2 times the average income in Denmark (about $60,000 in the United States, if the rules were applied here). Similarly flat income tax rates apply in other social democracies. All of these countries also have value-added taxes, effectively a national sales tax. Denmark, Norway, and Sweden have VAT rates of 25%.

When people say the United States should look more like Europe, they should explain whether they believe such tax rates should apply here, too. They should also be asked whether they truly believe that economic growth and environmental overreach are compatible. Clearly, France’s riots show there are costs to such overreach. Economic policies have consequences.