New French President Pledges To Tax Rich 75 Percent
MELISSA BLOCK, HOST:
The president-elect of France, Francois Hollande, once famously said: I don't like the rich. And now, he plans to put their money where his mouth is. Hollande wants the richest people in France to pay a marginal tax rate of 75 percent on incomes above 1 million euros, that's about $1.3 million. That will be a huge jump from the top rate now, which is 41 percent.
Sophie Pedder has been writing about this for The Economist. She's Paris bureau chief. Welcome to the program.
SOPHIE PEDDER: Thank you very much.
BLOCK: And, Sophie, what does President-elect Hollande say about his motivation for wanting this big tax increase on top earners? Is it to raise revenue? Is it an economic, populist sort of morality argument?
PEDDER: Well, it's quite interesting because he's been very clear that he doesn't expect to raise almost any revenue at all from the tax rate. He says what he wants to do is impose a sort of morality on high earners and on what he calls indecent wages. So he's really trying to kind of curve, I suppose, excess, and make sure that big bosses, big bankers, and those who are going to be in this sort of an earning bracket will reward themselves with the sort of salaries that people don't find outrageous. And that's what he's after. It's not about revenue.
BLOCK: Well, how many French households would fall into this top bracket that we're talking about, over a million euros a year?
PEDDER: Well, relatively few actually. Probably no more than about 3,000 French households will be affected by this. But that's an absolutely tiny fraction of the whole. So, once you start looking at numbers like that, you realize how this is very much a symbolic gesture.
BLOCK: And if this does go into effect in France, how would that top rate, 75 percent, how would it compare with other countries in Europe?
PEDDER: Well, if you look across Europe, very, very few countries now impose a tax rate over 50 percent. If you look at the U.K., for example, it's got an interesting case because very recently they voted to reduce the top rate from 50 percent to 45.
So, there is a sense everywhere else the top tax rates are going down. The highest rate at the moment is that in Sweden, which is about 57 percent. Belgium also has a very high rate, that's at about 55 percent. The U.K., as I said, has gone down from 50 to 45. The German rate is lower than that. So, you know, France sticks out really like a sore thumb on this one.
BLOCK: And by way of comparison, we should mention the top marginal rate here in the U.S. is currently 35 percent. That's for a taxable income above $388,000.
Sophie, is this a popular idea among the French? I mean Francoise Hollande did win over President Sarkozy, who's known as President Bling-Bling. How is this going over among the French people?
PEDDER: I think it's been incredibly popular. And if I look back over this campaign, I think that it really marked the moment when he sort of touched French hearts about what he was really trying to do. There were polls that were taken immediately after his announcement, which suggested that the majority of the French thought it was a good idea. So he's not going against the sort of popular mood at all, far from it.
BLOCK: But what about grumbling among the wealthy? I did see somebody say that this will be the death knell for French soccer teams. The mayor of London has said French finance workers, if they don't want you there, come on over to London - we welcome you. Is there a fear that top earners will be sent scurrying out of France?
PEDDER: Well, there is. There is obviously a view in London that they're quite happy with this, if it means that there are bankers who prefer to work in the city of London. Well, then so be it.
But I think that the sort of serious point here is that there is concern about the message it sends overseas. That one hears already sort of anecdotal evidence that international companies that are looking to recruit, or potentially recruit foreign senior executives into Paris, are beginning to hear, you know, a bit of apprehension. Do people really want to come? What will the top tax rate actually be? And that is damaging for France and potentially damaging for France's image. It's already been - had trouble in the past by introducing a 35-hour working week, which labeled the country as the country that's not interested in work. And this looks like, you know, potentially having the same sort of a damaging effect on its image.
BLOCK: Sophie Pedder, thanks so much for talking to us.
PEDDER: My pleasure.
BLOCK: Sophie Pedder is Paris Bureau chief for The Economist. We were talking about French President-elect Francois Hollande's plan to tax the wealthiest at a marginal rate of 75 percent. He's expected to put that before parliament in July.
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