Saturday, December 29, 2012

Constitutional Court Quashes 75% Income Tax

The Constitutional Court has ruled that the 75% top marginal income tax rate, sprung by Hollande as a surprise on his own campaign earlier this year, is unconstitutional because it affects different households unequally depending on how total household income is distributed between spouses.

So how does one assess the fate of Hollande's most distinctive campaign ploy? It may well have helped to elect him by portraying him as a candidate farther to the left and more intransigently opposed to malefactors of great wealth than he actually is: "Riches, je vous haïs," he came across as saying, in a paraphrase of André Gide, but in fact the measure never made much economic sense and could be defended largely on the grounds that it would affect so few people and raise so little revenue as to be pragmatically insignificant. But as Hollande's post-election approval rating sank, the top marginal tax rate became a symbol not of Hollande's left-wing bona fides but rather of the inchorenece of his economic strategy. The Conseil Constituionnel was no doubt eager to strike it down at the first opportunity.And the government will no doubt seize on the opportunity to throw down some new symbolic markers demonstrating its determination. But what is really needed is a comprehensive overhaul of the tax system, which it is now too late to attempt, Hollande having expended his meager political capital already. So he must muddle through with the tax policy he has and hope that things improve without significant government input, for which the wherewithal is lacking.

10 comments:

brent said...

My recollection is that early in the campaign season Thomas Piketty laid out just such a comprehensive tax restructuring proposal, simple in form and progressive in intent, with clear coefficients in place to determine whether net revenue was intended to rise, fall, or remain constant. A clear and brilliant plan, placed in the lap of candidate Holland--so what happened to it?

Art Goldhammer said...

Yes, Piketty made such a proposal, but comprehensive tax reform requires a fortuitous alignment of interests, not just the logical coherence of cogent economic analysis. Years of work in the political trenches are a prerequisite.

Mitch Guthman said...

Art,

If that's true, Holland is in big trouble. I don't think he's got years to spend in the political trenches. I don't think he's got much time remaining at all.

What he needs is to find the political equivalent of the tank and start making some breakthroughs right now. I don't think reforming the homework requirements for French schoolchildren is really going to be his ticket to reelection---if he can even accomplish that much (I note he seems to be struggling even with that).
A part of Hollande’s problem is that he is constrained by the institutions and regulations of the EU, yet unwilling to try to free himself from those constraints. Another part is that he personally seems unable to bring himself to cause harm to any sort of incumbent. When you can’t bring yourself to engage against any interest group, what you end up with is political entropy, followed by oblivion at the next election.

Cincinna said...

François Hollande, in a moment of populist pandering, stated during his campaign." je n'aime pas les riches" (I dont like the rIch), Or "F" the rich. And they are giving him the middlle finger salute right back.
He made this confiscatory tax a key campaign promise, which will drive creative, productive people, and job creators out of France, and railed against Depardieu, one of France's most beloved actors. He is now at 40% in the polls, and dropping.
I think Monsieur President Normal has bigger problems than reelection in 2017. He has a government to run, and he seems incapable of doing so.

DavidinParis said...

Depardieu spoke...and the Constitutional Court listened.

Another more cynical way to look at this is that the Constitutional Court has given Hollande a way out. And even more cynical, Hollande asked them to give him a way out.

But then again, it could simply be symptomatic of a dithering president.

Mitch Guthman said...

@Cincinna,

In the first place, a tax rate of 75% on income above 1 million euros is confiscatory? Really?

Another thing I find interesting is that many of these super riches that want to go to England (or bizarrely in Depardieu’s case to the earthly paradise of Chechnya) are people who are popular mainly in France and not so popular everywhere else. Looking at Jonny Hallyday, Françoise Hardy they’re hugely popular cultural icons in France but not well known elsewhere. I would bet that the vast bulk of the more than 1 million euros they make annually come entirely from France.

I’m frankly shocked that they aren’t willing to do more at a time of great economic crisis given that they owe everything to France. Even gangsters like Frank Costello were more patriotic. When he was asked at the Kefauver Hearings what he’d done for his country, he replied “paid my tax” indicating that he, unlike Depardieu, associated paying ones taxes with patriotism and civic virtue. If only Depardieu could muster the moral and civil qualities of Frank Costello.

As for Depardieu himself, if the photos of him taken in Rome are an indication, France will save a lot of money when he turns in his citizenship and health card

DavidinParis said...

@ Mitch,
I think you are missing the point here. 75% is punitive. Really. To take home 1/4 of what you earn is confiscation of wealth and reflects a very old brand of leftist politics. In the 6 years I have lived here in France, I have repeatedly witnessed a deep mistrust of those engaged in 'professions liberales' and in particular, a deep mistrust of those who try to distinguish themselves on their merit. Depardieu has paid ~150 million in taxes so your comparison to a gangster is not fair nor justified.

Robert said...

@DavidinParis,

No one will be paying 75% of all they earn. Obviously, Le Fisc will be taking a large chunk of your income, but the attached explains how the proposed tax is supposed to work.

http://tempsreel.nouvelobs.com/election-presidentielle-2012/20120228.OBS2489/impots-la-tranche-supplementaire-a-75-de-hollande-en-4-questions.html

DavidinParis said...

@ Robert
Thanks...this was an informative link. I stand corrected. Then what is leading to this apparently common misperception?

Robert said...

Qui sait?