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French Front-Runner Pledges 75% Tax Bracket

Published: February 29, 2012 | 10:00 am
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PARIS—French presidential front-runner François Hollande said taxpayers earning over €1 million ($1.35 million) a year would be subjected to a special 75% tax bracket should he be elected, underscoring heightened interest across Europe in raising taxes on the wealthiest individuals.

Speaking on French television late Monday, the Socialist candidate lamented the “considerable increase” in French corporate executives’ pay, which he put at €2 million a year on average. “How can we accept that?” asked Mr. Hollande.

His proposal caused an uproar in the ruling UMP party, and surprised even Mr. Hollande’s own advisers. Jérôme Cahuzac, head of the National Assembly’s budget commission and a close ally of Mr. Hollande, appeared to learn of the candidate’s proposal during a live TV interview. “You’re questioning me about a proposal I haven’t heard of,” he told his interviewer.

President Nicolas Sarkozy pointed to the “appalling amateurism” of his opponent’s proposals.

But Mr. Hollande stuck to his proposal on Tuesday. “It’s a message of social cohesion….It’s a matter of patriotism,” he told journalists on his way in to Paris’s annual agriculture fair.

Across Europe, the idea of raising taxes on high-income earners began to burgeon three years ago, when the Continent started to descend into recession. In 2009, the U.K. government increased its top marginal income-tax rate to 50% from 40%. In the U.S., the top 1% of earners have been the target of widespread protests under the umbrella of the Occupy Wall Street movement.

Mr. Sarkozy’s government has already slapped a 3% temporary levy on high revenue to be applied to those with a taxable income exceeding €500,000 a year.

But Mr. Hollande’s proposal is more extreme and underscores his bid to draw in leftist voters ahead of the April 22 first round of the presidential poll.

Messrs. Hollande and Sarkozy are widely predicted to make it past the first round to compete in a run-off on May 6, where the Socialist has a convincing lead, according to opinion polls. But Mr. Sarkozy has regained some ground since officially declaring his candidacy on Feb. 15 and hitting the campaign trail.

Mr. Hollande has already vowed to introduce a new, higher rate of income tax for those earning over €150,000 a year, who would face a marginal rate of 45%, rather than 41% now; pledged to cut taxes on profit for small and midsize companies, and scrap €29 billion of tax breaks introduced by Mr. Sarkozy. Mr. Hollande’s proposal to set the marginal tax rate at 75% would apply only to income above €1 million.

Analysts said the measure would have limited impact.

According to a 2009 French Senate study, the 0.01% richest French taxpayers, or 3,523 households, had an average yearly revenue of €1.22 million.

“It’s a populist measure, because it concerns very few people and it’s not going to bring a significant amount of money into the public coffers,” said Emiliano Grossman, a political-science professor at Sciences Po in Paris.

The wealthiest taxpayers usually manage to cut their overall tax rate substantially. In France, the wealthiest 0.1% of taxpayers have an overall tax rate of 17.5%, according to the 2009 study.

Revenue disparity, which has been on the rise in most industrialized economies since the 1980s, has remained relatively contained in France, according to an Organization for Economic Cooperation and Development study published in December. The top 1% taxpayers in France earn less than half the average earned by the top 1% in the U.S.

Some wealthy taxpayers scoffed at the idea. “This proposal is ridiculous,” said Ernest-Antoine Seillière, the former head of Medef, the country’s business lobby, who is chairman of the supervisory board of Wendel, a holding company.

Mr. Hollande is feeding into widespread resentment in the euro zone against the super-rich and particularly against tax evaders at a time when many Europeans are keenly feeling the impact of the protracted sovereign-debt crisis.

Mr. Sarkozy has been trying to rub out his rich-friendly image. He recently unveiled a raft of proposals ranging from the overhaul of remuneration systems for top executives to reforms in welfare for poor workers.

The president also has conceded mistakes during his five-year mandate. He said, for example, that he wouldn’t go back to Fouquet’s, the restaurant on the Champs-Élysées where he celebrated his victory in the 2007 presidential elections with many top executives and industrialists.


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