Francois Hollande really can’t catch a break. One of the most memorable election promises he made was to raise marginal tax rates on the very rich—those making €1 million or more—to an eye-popping 75%. His government has, alas, finally decided to scrap that particular pledge. The Wall Street Journal has details:
The notion of slapping a 75% marginal tax rate on those earning over €1 million ($1.3 million) a year has been on shaky ground ever since the country’s top constitutional authority shot it down in late December on the grounds that applying it to individuals and not households was illegal. The ruling came as a political blow to Mr. Hollande, who had vowed to make the tax a key plank of his platform that called for greater fiscal justice.Dropping the tax plan is the latest challenge for the Socialist president, who is struggling to revive France’s stalled economy, with unemployment above 10% and rising.
Francois Hollande got elected promising to keep deficits under control without cutting social programs. (He didn’t quite manage to do that to the EU’s liking, but never mind that detail for the moment.) That feat could only be achieved by steeply raising taxes. With the 75% tax rate now off the table, keeping his promise on social spending becomes more difficult, especially with the French economy so stubbornly stagnant. “These constraints greatly reduce our margin for maneuver,” Pierre Moscovici, the French finance minister, admitted to the Journal. He promised to look at unspecified ‘other options’ for 2014.Budgets can be confusing, complex things, especially at the national level, where politicians can play all sorts of games with them. But math is ultimately unforgiving. Your next move, Monsieur Hollande?