Hollande’s 75% Income Tax Plan Receives Final Blow

Photo: Eleni Zaras for LJP

Photo: Eleni Zaras for LJP

The French State Council (Counseil d’Etat ) objected to President François Hollande’s controversial 75% top-margin income tax reform plan last Thursday, declaring that the tax could not exceed 66.66% without being “confiscatory.” Finance Minister Pierre Moscovici released on Friday the government’s acknowledgement and acceptance of their advice.

The 75% tax would have only been imposed on around 1,500 people who individually make at least €1 million. However, the State Council’s statement enumerated the conditions with which the tax would need to comply, including most notably that the tax apply to households or couples, rather than individuals.

The Constitutional Council in December already ruled this article unconstitutional because it “violates the principle of equality,” after which the government planned to revise the terms of the bill while maintaining the 75% tax goal. This time, though, the State Council’s advice has reverberated with a greater sense of finality.

The 2014 budget plan, due for proposal in September 2013, will now require further amendments within the bounds of the State Council’s and Constitutional Council’s advice. Moscovici admits the decision will “greatly reduce our margin for maneuver” in drafting the new budget bill. But the original 75% tax rate was projected to have brought in around 300 million euros, which constitutes a minute percentage of France’s approximately 300 billion euro budget.

Yet after all the heated debates and high profile emigration of high-earning French figures such as Gerard Depardieu, there is more at stake than whether or not these changes in the tax will have a grave impact on Hollande’s budget scheme. Rather, after having attracted so much international attention, the rejection comes more as a symbolic defeat of yet another one of Hollande’s promises.

It is no doubt that the dismissal of one of Hollande’s most defining aspirations comes as a blow to his party, as it was one of the major planks in his campaign platform. And with the rising levels of unemployment, his failure to lower France’s deficit to the 3% goal, and his already sinking approval ratings, it may not be surprising if this new failure to reform the tax structure only attracts more criticism.

A BVA poll reported recently that while 61% of people polled agreed with the idea of a different tax for incomes over 1 million, only 21% supported the 75% rate. The bill’s failure, therefore, may not be as great of a disappointment to the French people because of forgone economic benefits, but instead because of the blow to Hollande’s credibility.

But as Parti socialiste member Jean-Marie Le Guen remarked, we must now just “turn the page of the 75% tax.”

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  1. […] several months of dialogue, I decided to concentrate the legislative action on the 75% tax on incomes exceeding 1 million euros, which will be discharged by the employer. It will be […]

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