Understanding France’s 75% Supertax

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            In September 2012, France’s Socialist President Francois Hollande unveiled a temporary 75% marginal tax rate on individuals earning more than one million euros a year, an outrageous amount compared to the American top marginal tax rate of 39.6% [1]. Arriving in the midst of a stagnating French economy, with a 10.6% unemployment rate and a downgraded credit rating, the new “supertax” was passed as part of a broader plan to reduce the government deficit without affecting government spending. [1][4] However, the tax itself will not make a huge dent in the deficit – it will affect only an estimated 15,000 to 25,000 people, and was approved more as a symbolic measure than a revenue generator. Although the law was ruled unconstitutional by France’s “Conseil Constutionnel” in December 2012 for violating the principle of “fiscal equality between households” (the tax was based on individual income, not household income), Hollande has recently stated that the tax rate would be “restructured … without changing its objective” for the 2014 budget. [2][5]

            As an American, it is almost impossible to fathom the rationale behind such a symbolic policy – wouldn’t such a high tax rate destroy the economy? Critics argue that the tax policy discourages risk-taking, investment, and wealth-creation, while weakening industry and lowering employment. Importantly, they claim that the policy will discourage the not-yet-rich, job-creating innovative entrepreneurs that would help revive the French economy from setting base in France. [5][6] Additionally, critics state that the wealthy in France will simply change citizenship to another EU nation and pay a much lower tax rate. In fact, France’s richest person, Bernard Arnault, has applied for Belgian citizenship, and illustrious film star Gerard Depardieu has moved to Belgium and received Russian citizenship. In a harsh criticism addressed to French Prime Minister Jean-Marc Ayrault, Depardieu wrote he was leaving “because you believe success, creation, talent, anything different, to be grounds for sanction.” [1]

            Yet, with all this foreign and internal criticism, why is it that 60 percent of French citizens still approve of the supertax and sincerely believe it will benefit the country? [1] The answer to this question lies not in some sort of lack of education, but rather in an understanding of the symbolism of the supertax and, in extension, French culture. Although it is difficult to look at the world from the French perspective, it is necessary in order to understand the supertax. In fact, in doing so, I gained quite a few insights about the current American, and global, economic system.

            First, I noted that the French seem to value leisure and economic equality much more than economic growth and development. They seem to be content with a slower growth rate than countries like China, as long as they can still supply the basic necessities of life and a certain degree of leisure. This is evidenced by France’s maximum 35-hour workweek and guaranteed five weeks of vacation time.  As author Corinne Maier states, “Americans, I think, believe more in future than French people. We, French people, right now we don’t believe that the future will be better than now.” [7] It seems that the French have an attitude that the country has reached a certain point in development that achieving basic levels of sustenance and contentment for all should be valued more than growth and investment in a better future. As Hollande stated after the court decision, “we will still ask more of those who have the most,” an idea that constitutes a major part of the symbolism of the supertax. Economically, along these same lines, the supertax will maintain purchasing power for the low-income (in other words, a basic level of sustenance and leisure), while still helping reduce the government deficit [5].

            The second important observation I made about French attitudes is their intensely strong national pride. The French believe that France and its institutions is to put it simply, what made rich people rich. Sylvain Bourmeau, editor of the leftist newspaper Libération, wrote in an editorial that people like Depardieu and Arnault “seem to forget the country that made them kings.” [1] France seems to hold much more of a “we are all in this together” attitude, in distinct contrast to the American emphasis on cutthroat competition and “survival of the fittest,” although a less economically beneficial one. Part of the supertax’s symbolism lies in the idea of French solidarity through harsh economic times. French parliament member Yann Galut stated this idea very well in a response to Depardieu’s departure: “It’s obscene to refuse to help your country when it’s going through a terrible situation, and is asking for help for two years, that’s all.” In France, taxes are supposed to be viewed more as a civic honor or contribution to the national good than as a duty or responsibility, as they are seen in America. [1] Personally, I think this divide in attitudes is mostly due to the fact that France is smaller and more unified culturally than America, which fosters more national solidarity.

           I do not believe the supertax will help remedy France’s economic struggles in the short-run, and neither, apparently, does Francois Hollande, as he is willing to concede that it is more symbolic than material. Nor do I believe France’s high taxes will help in the “longer-run” simply because it will always languish behind the more capitalist countries who focus on economic growth, productivity, and development at all costs, and exploit the newly globalized world rather than foster national pride. However, the French outlook on taxes raises the critical political questions of whether a more equal distribution of resources and increased leisure in the present should come at the cost of slower global progress and development, and whether intense national pride is even a positive ideal in this newly globalized world. While France won’t succeed in the near future, understanding, contemplating, and evaluating the French ideology could lead to a better global future in the long term.

Sources

[1]   http://www.newyorker.com/reporting/2013/02/25/130225fa_fact_collins?currentPage=all

[2]   http://world.time.com/2012/12/30/frances-75-income-tax-on-the-rich-overturned-as-unconstitutional/

[3]   http://www.english.rfi.fr/economy/20130106-new-french-super-rich-tax-be-introduced-autumn

[4]  http://www.huffingtonpost.com/2012/09/28/france-tax-rich-rate_n_1922089.html

[5]   http://www.economist.com/news/europe/21569068-françois-hollande-remains-intent-introducing-punishing-top-income-tax-à-bas-les-riches

[6]   http://www.ocregister.com/articles/hollande-382413-tax-french.html

[7]   http://www.cbsnews.com/2100-500164_162-704571.html

[Image Credit: http://www.quadratinmexico.com/wp-content/uploads/2012/09/hollande.jpg]

About author

Alak Mehta

Originally from Montville, New Jersey, Alak is a junior in the College of Arts & Science, working toward a double major in economics and philosophy. He is interested in a variety of political themes and institutions, but is particularly intrigued by the Supreme Court. At Vanderbilt, Alak is also a site leader for Alternative Spring Break, a community service organization that runs volunteer trips over spring break, and a member of WilSkills, an outdoors student organization. When he‘s not busy doing schoolwork or writing VPR articles, Alak loves to hike and watch soccer. He hopes to attend law school after graduation.

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