France’s high court has issued a resounding “non!” to President Francois Hollande’s attempt to tax millionaires. Hollande’s controversial tax, slated to go into effect for 2013 revenues, would have imposed a 75% tax on individuals with revenues of more than 1 million euros (about $1.3 million U.S.).
The tax was meant to raise money and help cut the deficit by depending on those at the top, something we know a little bit about in the U.S. It was meant to be temporary, only in place for two years, and was slated to take effect tomorrow (January 1).
The Court, however, found that the tax wasn’t equitable. No, not because it imposed tax on some wage earners more than others but because France’s tax system applies to household revenue and the tax was focused on individuals. That means that two households with the same amount of revenue could pay different tax rates, an inequity that isn’t allowed under the French tax system.
Hollande and his party consider this a stumbling block but not a barrier to raising taxes. The government plans to try again, keeping the basic tenets of the tax in place. Alternatives include the obvious, re-vamping the tax to apply to households instead of individuals, and perhaps nudging the total revenue up higher, to 2 million euros (about $2.6 million U.S.).
Other parts of the budget will also have to be tweaked. The court found that the tax treatment on stock options, private retirement benefits, and bearer bonds were all violations of the law under the French tax system. So it’s back to the drawing board in January.
How did the measure actually ended up in court in the first place? Politics. The Union for a Popular Movement, the party of former President Nicolas Sarkozy (famous in the U.S. for marrying Guess model Carla Bruni), asked the court to consider the bill. Maybe they should have thought about it sooner… the tax increase was a significant part of Hollande’s election platform and was thought to be one of the reasons why Hollande defeated Sarkozy. France’s economy has been a source of concern for many as its deficit grows and unemployment rolls expand.
With the tax increase on hold, at least until the work out the details, some wonder whether those who have fled France – like actor Gerard Depardieu – for lower taxes could be wooed back to the country. Don’t count on it. They’d be wise to heed this proverb: À tort se lamente de la mer qui ne s’ennuie d’y retourner. Roughly translated, it means, “He who complains wrongfully about the sea should never be bored of returning.” Or put better, Don’t do the same thing again and expect different results.
