French Lawmakers Back Top Earner Tax

Within the framework of the government’s 2012 budget bill, the French National Assembly has adopted the provision introducing an exceptional tax on top earners in France. Coming on top of the existing wealth tax that the current government failed to repel and denounced by opposition parties as merely a “cosmetic” tax, the measure, which was recently agreed by way of a compromise between the government and the parliamentary majority, provides for a 3% tax on income of between €250,000 and €500,000, and for a 4% tax on income in excess of €500,000.

Defending the beacon measure of the 2012 budget ahead of the vote, French Budget Minister Valérie Pécresse underscored the “justice” of the levy, which targets very high income in all its components, income from work and capital. In its initial draft, the government originally put forward the idea of imposing a 3% tax on income from work and from capital in excess of €500,000 from 2011 to 2013. The tax was expected to yield in the region of €200m for the state in 2012.

Under the revised plans, the tax is expected to affect around 25,000 households in France, compared to approximately 10,000 in the initial version, and to generate in the region of €410m for the state budget, twice as much as in the version announced by Prime Minister François Fillon on August 24. The government has pledged to abolish the tax once the public deficit in France returns to 3% of gross domestic product (GDP) in 2013. You can bet this will never happen...