The PJ Tatler

French 75% Tax Rate Ruled Unconstitutional

Irony abounds in this decision by the French Supreme Court. The reason the 75% French tax rate on incomes above a million euros is unconstitutional is because it fails to guarantee “taxpayer equality.”

In short, it’s a fairness issue.

President Obama should love this decision, then, right?


President Francois Hollande’s 75 percent millionaire-tax is unconstitutional because it fails to guarantee taxpayer equality, France’s top court ruled today.

The tax, one of Hollande’s campaign promises, had become a focal point of discontent among entrepreneurs and other wealth creators, some of whom have quit French shores as a result. The ruling comes as the president seeks to cut France’s public deficit to 3 percent of gross domestic product next year from a projected 4.5 percent this year.

“Politically, this has an impact because it was a symbol for French public opinion, and was considered abroad as the emblem of French tax excess, of French tax hell,” said Dominique Barbet, senior economist at BNP Paribas SA in Paris. “In deficit terms, it’s truly negligible.”

The court said Hollande’s plan would have added extra levies of 18 percent on individuals’ incomes of more than 1 million euros ($1.32 million), while regular income taxes and a 4 percent exceptional contribution for high earners would have been based on household income, an e-mailed statement shows.

As a result, two households with the same total revenue could end up paying different rates depending on how earnings are divided among members of those households. That runs counter to a rule of equal tax treatment, the Paris-based court said.


The constitutional court lowered a series of other tax increases, calling them excessive or saying they also violated equality of treatment for taxpayers. The tax rate on stock options and free shares was lowered to a maximum of 64.5 percent from a rate of as much as 77 percent. The marginal tax rate on a type of private retirement benefit, known as “retraites chapeau,” was cut to a maximum of 68.34 percent from a planned rate in 2013 of 75.34 percent.

Looking at France’s wealth tax, the court said that unrealized gains couldn’t be included in assessing the tax because it ignores the requirement to take into account a payer’s ability to meet his obligations.

Hollande called on the “patriotism” of the country’s rich to do their part during Europe’s more than three-year-old financial crisis.

A new tax proposal will be presented next year and will apply to earnings for 2013 and 2014, Finance Minister Pierre Moscovici said on BFM television.

The government “will present a new proposal in line with the principles laid down by the Constitutional Court…” so chances are that some kind of tax on the rich will be implemented. But along with President Hollande’s other soak the rich schemes, it will probably realize far less in actual revenue than has been planned by the government. Those who earn just over or under a million euros will try their best not to reach that number in order to avoid the tax. And there will almost certainly be continued flight from France by wealthy and successful Frenchmen who don’t feel like handing over such a large segment of their income to a profligate, socialist government.

Will they ever learn?