In America, they are called “The One Percent”. In France, they are called “Les Riches”. These are the small minority of citizens who have grabbed the vast majority of a nation’s treasury and wealth. The new French President is Socialist François Hollande, and he has vowed to tax “Les Riches” at a whopping rate of 75%. His goal is to get the super rich to “pay extra tax to get the country back on its feet again.”
The tax is not that simple. The first million euros ($1.2 million) of income are subject to normal taxes, but any income over that amount would be taxed at 75%. This would affect between 7,000 and 30,000 people out of a total population of 65 million people.
The Hollande government needs 33 million euros to balance the budget. The tax proposal would provide a small fraction of that amount, but the symbolic value would be far greater. This is because austerity measures will probably make up a greater part of the budget balancing act. France does have a lush welfare system and a very large government, so cuts in those areas will have to bring vastly more revenue than the than taxing the rich would bring in. But austerity measures can only go so far until social instability erupts.
Some of the wealthy have made plans to move or have already moved out of France. Companies are developing contingency plans to get their high paid executives out of the tax collector’s sight. According to the Daily Mail and other journals, “former Victoria’s Secret model Laetetia Casta, the restaurateur Alain Ducasse and the singer Johnny Hallyday have already left the country.”
The most popular destinations are Britain, Belgium, Switzerland and the United States, where the rich would reap much larger after tax incomes.
The problem is that the rich are not exactly adding to the economy by creating jobs or investing in productive business, so it is difficult for the average person to understand just what they are worth.
According to the New York Times, the average person has a much higher tax rate than the rich.
“There is currently no plan to change the tax rates for most people, which is 14 percent for the poorest and 30 percent for the next rung. For higher earners — people with incomes above 70,830 euros a year — the tax rate will soon rise to 44 percent, up from 41, in a change that was already set before Mr. Hollande’s election.”
France also has the second highest corporate tax rate in the European Union. Malta has the highest at 35 percent and Ireland has the lowest at 12 percent. Ireland is suffering from economic distress and heavy debt and Malta’s economy is not in good shape either.
While a handful of celebrities have already left, It remains to be seen whether the threat of more leaving, or even of a $75 percent tax rate, are empty threats.