French Court Says 75% Tax Rate on Rich Is Unconstitutional By Helene Fouquet & Alan Katz - Dec 29, 2012 10:21 AM ET
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. Government Response
Prime Minister Jean-Marc Ayrault said in an e-mailed statement that the government “takes note” of the court decision on the 75 percent tax band and “will present a new proposal in line with the principles laid down by the Constitutional Court.” The ruling doesn’t call into question deficit targets or the path set out to get there, Ayrault said.
The court’s decision will lower tax revenue by less than 500 million euros in 2013, according to a spokeswoman for the prime minister’s office who declined to provide her name.
French billionaire Bernard Arnault, chief executive officer of LVMH Moet Hennessy Louis Vuitton SA (MC), filed an application for Belgian nationality in September. While he promised to continue paying taxes in France, the action prompted fierce criticism from Hollande and his supporters.
Movie star Gerard Depardieu, 64, said he was leaving France “because you consider success, creativity, talent, anything different are grounds for sanction.”
The decision could be positive for France’s bond market because it shows there is a limit to the government’s ability to raise taxes on the wealthy and may decrease the flight risk of more rich French citizens, Barbet said. Wealth Tax
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. Budget Constraints
Former President Nicolas Sarkozy’s opposition Union for a Popular Movement political party had asked the court earlier this month to overturn the measure.
The tax, which Hollande said would be in place for two years, is part of the 2013 budget law and would have gone into effect starting on Jan. 1.
Hollande’s 2013 budget relies on 20 billion euros in additional taxes: 10 billion euros from companies and 10 billion euros from individuals. In addition to the millionaire tax, Hollande has added new charges on capital gains, an increased tax on wealth, a boost to inheritance charges and an exit tax for entrepreneurs selling their companies. His government has also created a new 45 percent tax bracket for incomes exceeding 150,000 euros per year.
To contact the reporters on this story: Helene Fouquet in Paris at hfouquet1@bloomberg.net; Alan Katz in Paris at akatz5@bloomberg.net
French Court Says 75% Tax Rate on Rich Is Unconstitutional By Helene Fouquet & Alan Katz - Dec 29, 2012 10:21 AM ET
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. Government Response
Prime Minister Jean-Marc Ayrault said in an e-mailed statement that the government “takes note” of the court decision on the 75 percent tax band and “will present a new proposal in line with the principles laid down by the Constitutional Court.” The ruling doesn’t call into question deficit targets or the path set out to get there, Ayrault said.
The court’s decision will lower tax revenue by less than 500 million euros in 2013, according to a spokeswoman for the prime minister’s office who declined to provide her name.
French billionaire Bernard Arnault, chief executive officer of LVMH Moet Hennessy Louis Vuitton SA (MC), filed an application for Belgian nationality in September. While he promised to continue paying taxes in France, the action prompted fierce criticism from Hollande and his supporters.
Movie star Gerard Depardieu, 64, said he was leaving France “because you consider success, creativity, talent, anything different are grounds for sanction.”
The decision could be positive for France’s bond market because it shows there is a limit to the government’s ability to raise taxes on the wealthy and may decrease the flight risk of more rich French citizens, Barbet said. Wealth Tax
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. Budget Constraints
Former President Nicolas Sarkozy’s opposition Union for a Popular Movement political party had asked the court earlier this month to overturn the measure.
The tax, which Hollande said would be in place for two years, is part of the 2013 budget law and would have gone into effect starting on Jan. 1.
Hollande’s 2013 budget relies on 20 billion euros in additional taxes: 10 billion euros from companies and 10 billion euros from individuals. In addition to the millionaire tax, Hollande has added new charges on capital gains, an increased tax on wealth, a boost to inheritance charges and an exit tax for entrepreneurs selling their companies. His government has also created a new 45 percent tax bracket for incomes exceeding 150,000 euros per year.
To contact the reporters on this story: Helene Fouquet in Paris at hfouquet1@bloomberg.net; Alan Katz in Paris at akatz5@bloomberg.net
Shadow is now proposing SOCIALIST FRENCH legislation!
The modern conservative is engaged in one of man's oldest exercises in moral philosophy; that is, the search for a superior moral justification for selfishness. John Kenneth Galbraith
No I'm implying that taxing only the rich may be unconstitutional in the USA as well.
US LAW? OR FRENCH LAW?
The rich have historically paid a higher RATE for most of our tax system. If it's unconstitutional, it was always unconstitutional.
The modern conservative is engaged in one of man's oldest exercises in moral philosophy; that is, the search for a superior moral justification for selfishness. John Kenneth Galbraith
Our laws are supposed to treat everyone equal under the law. We have a graduated income tax so the more you make the more money you pay in tax. I question punishing one group with a higher tax while not making the lower brackets pay any of the new tax, it seems unfair. Change the tax codes and eliminate all loop holes and the rich will have to pay more and that would be a fair tax. There should be no group of people who pay no taxes because they use the same government provided programs that the rest of the country does.
Our laws are supposed to treat everyone equal under the law. We have a graduated income tax so the more you make the more money you pay in tax. I question punishing one group with a higher tax while not making the lower brackets pay any of the new tax, it seems unfair.
There is NO NEW TAX. The Bush Tax Cuts for the Rich, that the Republicans overwhelmingly approved, created a provision that those tax cuts would EXPIRE. They will expire on Jan 1.
A NEW TAX is not happening... just the expiration of a TEMPORARY TAX CUT.
The modern conservative is engaged in one of man's oldest exercises in moral philosophy; that is, the search for a superior moral justification for selfishness. John Kenneth Galbraith
Per the MSM 47% of the country pays no taxes at all that's the unfair part, the rich are going to be taxed at a higher rate as soon as the Obamacare taxes kick in in 2013 on dividends, interest, capital gains and estate taxes and not one Rep voted for those. When the Bush tax cuts expire everyone will feel the pain. This compromise bill that will kick in when the Bush tax cuts expire was created by both parties in Congress and signed by Obama. Plenty of blame all around.
Per the MSM 47% of the country pays no taxes at all that's the unfair part, the rich are going to be taxed at a higher rate as soon as the Obamacare taxes kick in in 2013 on dividends, interest, capital gains and estate taxes and not one Rep voted for those. When the Bush tax cuts expire everyone will feel the pain. This compromise bill that will kick in when the Bush tax cuts expire was created by both parties in Congress and signed by Obama. Plenty of blame all around.
Of course we all know the conservative BS "the 47% pay no taxes." The truth is that most Americans pay some taxes. Most pay payroll tax, excise tax, etc. if ya heard it on FoxSnooze, it must be true!
The modern conservative is engaged in one of man's oldest exercises in moral philosophy; that is, the search for a superior moral justification for selfishness. John Kenneth Galbraith
True the 47% does pay some taxes but pay no Federal Income Tax yet still use the programs provided by the Federal Government.
YUP. Some of those 47% are teenagers who made very little money... they pay no tax, just like you or I would if we made that amount.
Some of those 47% are grandma and grandpa on social security... they make no money so pay no tax.. just like you and I would if retired with no job.
Some of those 47% are out of work...laid off from the Bush Economic Meltdown. They make no money and pay no tax because they don't have a job... just like you or I in that circumstance.
The figures for 2009 are particularly anomalous; in that year, temporary tax cuts that the 2009 Recovery Act created — including the “Making Work Pay” tax credit and an exclusion from tax of the first $2,400 in unemployment benefits — were in effect and removed millions of Americans from the federal income tax rolls. Both of these temporary tax measures have since expired.
These 47% figures cover only the federal income tax and ignore the substantial amounts of other federal taxes — especially the payroll tax — that many of these households pay. As a result, these figures greatly overstate the share of households that do not pay federal taxes. Tax Policy Center data show that only about 17 percent of households did not pay any federal income tax or payroll tax in 2009, despite the high unemployment and temporary tax cuts that marked that year.[5] In 2007, a more typical year, the figure was 14 percent. This percentage would be even lower if it reflected other federal taxes that households pay, including excise taxes on gasoline and other items.
Most of the people who pay neither federal income tax nor payroll taxes are low-income people who are elderly, unable to work due to a serious disability, or students, most of whom subsequently become taxpayers
When all federal, state, and local taxes are taken into account, the bottom fifth of households pays about 16 percent of their incomes in taxes, on average. The second-poorest fifth pays about 21 percent
I know, I know... the 47% is too good for a Rabid Right Winger to resist... it's fits the agenda... even if it doesn't fit the FACTS!
The modern conservative is engaged in one of man's oldest exercises in moral philosophy; that is, the search for a superior moral justification for selfishness. John Kenneth Galbraith
There is NO NEW TAX. The Bush Tax Cuts for the Rich, that the Republicans overwhelmingly approved, created a provision that those tax cuts would EXPIRE. They will expire on Jan 1.
A NEW TAX is not happening... just the expiration of a TEMPORARY TAX CUT.
Obamacare IS a new tax that EVERYONE is going to pay for.
"Approval ratings go up and down for various reasons... An example is the high post 911 support for GWB even though he could be said to be responsible for the event." --- Box A Rox '9/11 Truther'
Melania is a bimbo... she is there to look at, not to listen to. --- Box A Rox and his 'War on Women'
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