The newspapers Les Échos and Le Figaro recently revealed that the French government was about to reduce the scope of what is probably Hollande’s most symbolic measure: his 75% tax on income above €1 million. Many commentators are already talking about a tax that has been emptied of its force.
The government has not yet confirmed anything. Michel Sapin, Labor Minister, said that “decisions were not made yet” and that newspapers should be careful printing “conditional” statements as breaking news, hinting at what Les Échos and Le Figaro presented about the tax. The government did not expressly deny the information, though the Finance Ministry spoke about “simple adjustments”. According to officials, “there are several scenarios on the table” to deal with the “practical details”. The decisions might be made as soon as next week.
The tax will not disappear altogether because it is so representative of Hollande’s campaign promises. Having presented former president Nicolas Sarkozy, as the “president of the rich”, Hollande needed a gesture of good will toward the extreme left and the left side of his own party to prove that he would not be too soft on the richest French citizens.
Its aim was to tax extra income at 75% only once that income exceeded €1 million. It would be added to the lower rate of taxation on the rest of the income.
The sources that informed Les Échos and Le Figaro were rather accurate, stating that the tax would only be applied to income coming from salaries, to the labor but not to the capital. People making high but irregular incomes such as artists, soccer players or other special cases would be exempt from the tax because the government does not want to infringe on creation and innovation.
While a single person making more than €1 million a year would be taxed at 75% after, a couple, as long as the two members belong to the same tax household, would not be taxed until their combined income reached €2 million. With these new adjustments, the tax would only target 1,000 people.
On the morning of September 7th, before the French State Audit Office, Hollande stated that the “law of finances” that his government will propose to the Assembly for the year would favor growth above all. The French President did not mention the 75% tax, but said that he did not want the new tax to be an expropriation. He promised that his government would refuse a general tax increase on households.
Hollande stated that efforts were necessary to reduce debt, however, and that those who make more money should contribute more than others. He asserted that he wanted taxes to be fairly balanced “between the small business and the large groups, not to harm competitiveness.”