France’s Highest Court Calls 75% Tax On Top Earners Unconstitutional

The highest court in France on Saturday declared the proposed 75 percent tax on its nation’s top earners unconstitutional.

According to the Associated Press, the constitutional council opposed the way the law discriminated between households depending on how incomes were distributed among its members.

“A household with two earners each making under €1 million would be exempt from the tax, while one with one earner making €1.2 million would have to pay,” wrote the AP.

Bloomberg elaborated noting that according to the court, the plan adds “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 are based on tax households.”

“As a result,” Bloomberg observed, “two households with the same total revenue could end up paying different rates depending on how earnings are divided among members of those households, which runs counter to a rule of equal tax treatment, the Paris-based court said.”

The 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,” Bloomberg wrote. “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.”

As it pertains to the wealth tax, “[T]he 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,” added Bloomberg.

Socialist Prime Minister Jean-Marc Ayrault responded via email after the ruling Saturday saying his government would resubmit the measure addressing the court’s concerns.

The court's decision might help the ailing French bond market as investors view the ruling as a limit to the government’s ability to raise taxes..

In recent months, some of France’s richest citizens have taken steps to avoid the new tax including actor Gerald Depardieu and billionaire Bernard Arnault with the former saying he would be moving to Belgium and the latter officially applying for Belgian citizenship.

Saturday’s actions by the court might stem other wealthy Frenchmen from leaving.

Noel Sheppard
Noel Sheppard
Noel Sheppard, Associate Editor of NewsBusters, passed away in March of 2014.