Photo: Flickr / vl8189
French Prime Minister Jean-Marc Ayrault announced today that the government will tax incomes of more than €1 million ($1.25 million) at a rate of 75 per cent, according to Bloomberg.That’s in addition to a new 45 per cent tax rate for the country’s highest earners, and a capital income tax equal to that of wages.
We think this means that if you make €2 million euros, you would pay 45 per cent on the first €1 million and 75 per cent of the second €1 million to the government, or a total of €1.2 million.
This tax rate compares to 35 per cent for the highest bracket of earners in the United States in 2012.
French President Francois Hollande had proposed a 75 per cent tax rate for earnings above €1 million in late February during his campaign. “The tax rate should be 75% because it’s not possible to have that level of income,” Hollande he argued at that time. He had also proposed a marginal tax rate of 45 per cent for earnings over €150,000.
Such rates are far higher than those proposed by the controversial Buffett Rule in the US, which would force anyone making over $1 million to pay at least 30 per cent of their income in taxes.
France will also increase taxes on banks and oil firms, but cancel a recent increase to value-added taxes. Ayrault also said that France will grow just 0.3 per cent this year, in comparison to earlier estimates of 0.7 per cent.
Last but not least, the government announced that it would split banks’ activities between speculative and retail. We’ll have more details on what this means as they develop.