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French Court Authorizes “Millionaire Tax”
A new, extremely controversial tax was just ruled constitutional in France. The law has been nicknamed a “millionaire tax” and requires that companies pay a 75% tax on salaries exceeding 1 million euros. Others have called it a “supertax.” The tax is not on the individuals who receive the salaries, but on the companies that pay such exorbitant sums. Although the government originally did try to place the tax on individuals, it was heavily protested and ruled unconstitutional to put such a heavy burden on an individual.
This tax is part of President Francois Hollande’s promise to make sure that the rich citizens of France do more to help out the poor. During the most recent 2012 presidential election, Hollande beat incumbent President Nicolas Sarkozy on promises to go after the rich, fix the deficit, and ameliorate income inequality.
The tax will only be in place for 2 years, 2013 and 2014, and is said to be more of a symbolic statement than an actual attempt at raising revenue. According to Hollande, the tax will only affect 470 companies in total.
The tax has drawn a lot of protest from entrepreneurs and companies with CEOs or other top ranking officials who make more than 1 million Euros per year. However it has also drawn protest from football teams. Top footballers can make up to 12 million euros per year, so there are many that make 1 million or more. As a result, many football teams are protesting the millionaire tax. Some have even threatened to strike if the tax went through.
The tax itself is not just a flat 75% rate, but rather closer to 50%. There are other taxes and social contributions included, however, so all said and done it will total about 75%. That being said, it was also written into the law that the tax paid by a given company cannot exceed 5% of that company’s turnover. Given that the tax is intended to be symbolic of a need for the rich to contribute to the nation, the 5% limit makes sense.
The tax’s constitutionality was challenged, so the law was brought before the Constitutional Council. The Constitutional Council is one of the checks and balances present in the French system of government. Its closest America counterpart, for context, would probably be the Supreme Court. The Constitutional Council’s responsibility is to ensure that new laws accord with the provisions of the constitution. It is composed of any former French Presidents who wish to sit on it, as well as a number of appointees from the Executive and Legislative Branches.
The Constitutional Council ruled earlier this week that the law was in fact constitutional, and the government was authorized to move forward on enforcing it.
The ruling on the supertax, or millionaire’s tax, was seemingly the last step in what has been a contentious battle in France. When Hollande’s plans to create the supertax was first introduced in 2012, famed actor Gerard Depardieu actually fled the country.
Hollande has had a rough year, and the French economy is still pretty stagnant. Hollande’s effort to make the rich contribute will probably pay off among the people, but may come back to bite him in the next election when he looks for rich contributors.
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Anneliese Mahoney (@AMahoney8672) is Lead Editor at Law Street and a Connecticut transplant to Washington D.C. She has a Bachelor’s degree in International Affairs from the George Washington University, and a passion for law, politics, and social issues. Contact Anneliese at amahoney@LawStreetMedia.com.
Featured image courtesy of [Images Money/TaxRebate.org.uk via Flickr]
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