French President Francois Hollande obtained approval two weeks ago from a constitutional court to impose a stiff new tax on salaries above 1 million euros, or $1.36 million. Combined with other taxes and social charges, the effective rate will be 75 percent.
His intention is to close France’s budget deficit and provide government with more resources to address the country’s 11 percent unemployment rate and feeble economic growth.
Mr. Hollande, in effect, won the electorate’s approval of the tax by making it one of his principal issues in the 2012 elections, in which he defeated President Nicolas Sarkozy. The tax has some unusual wrinkles to it, as taxes sometimes do. It will be paid by employers — the corporations, banks and other organizations which provide the high salaries — and will be capped at 5 percent of an employer’s revenues. Soccer clubs will be affected as well, given the astronomical salaries they pay players and coaches.
Critics see the new measure as risking an outflow from France of business people, bankers and other highly paid alleged job-creators. Mr. Hollande argues that the government can make better use of the money by boosting the French economy.
It is interesting for Americans to view France’s new 75 percent tax in light of growing discussion in the United States of the problems of poverty and income inequality. Unfortunately, tax reform of any sort has not made it onto the agenda of either President Barack Obama or Congress for 2014.