Where have all the millionaires gone?

The new rate kicks in in 2013, and already there is evidence that wealthy Frenchmen are fleeing. Switzerland and the U.K., tax havens by comparison, are among the destinations cited by the Wall Street Journal in a recent article noting that French chateaux are being sold at bargain prices to foreigners (who would be unaffected by the new tax).

Similarly, sales of high-end property to French tax exiles are keeping London estate agents in the swank neighborhoods of Chelsea and South Kensington (dubbed the “21^st arrondissement” quite busy these days, the Telegraph reported even before Hollande assumed office a week after his election.

The European tax flights will likely get close attention in the U.S., where fiscal cliff negotiations will decide whether a Bush-era tax reduction will be extended. Currently, the top tax rate is scheduled to rise from 35% to 39.6% come January–far lower than British or French rates, though the Obama administration proposes to apply that rate to families earning $250,000 (or individuals earning $200,000).

In addition, taxes on investment income are scheduled to rise sharply in the new year, and two new wealth surtaxes that are part of the health care overhaul take effect in the new year as well.

While many conservatives warn that the increased taxation will suppress wealth creation and bring in less revenue than expected, at least one analyst cautions that the European exodus from high tax jurisdictions may not be a relevant comparison to the U.S. Forbes contributor Tim Worstall says the U.S. tax system makes fleeing taxes very difficult, since Americans, unlike citizens of the European Union, must file taxes regardless of their residence. Americans’ only recourse is to renounce their citizenship, and even then they must settle with the IRS before taking leave of the U.S. In contrast, a French citizen need only take the Chunnel train to London to be rid of France’s new higher taxes.

As for the British, it remains unclear where their highest earners are fleeing to, though it is possible they are simply working less while remaining in place.

This article first appeared in AdvisorOne, a sister Summit Business Media publication. Read the original post here.