On Dec. 29, the Conseil Constitutionnel, France's highest court, decided that a new proposal by French President Francois Hollande to tax annual salaries above €1 million ($1,380,600) at a rate of 75 percent is constitutional. For comparison, the highest tax rate in the United States is 44.6 percent.
Hollande first announced the idea while campaigning for office in February 2012. The same court found a similar proposal to be unconstitutional last year, ruling that the measure did not tax affected households equally. That ruling also said that tax rates above 66 percent would be rejected as confiscatory. Much like the United States Supreme Court, the Conseil Constitutionnel has the power of judicial review and can nullify laws that it deems unconstitutional.
“The companies that pay out remuneration above 1 million euros will, as expected, be called upon for an effort of solidarity on remuneration paid in 2013 and 2014,” the Economy Ministry said in an e-mailed statement. The new tax is to be paid by employers rather than individuals, and is limited to 5 percent of a company's income.
The tax hike is expected to affect about 470 companies and 12 soccer clubs, and is forecast to collect €210 million each year.
Some wealthy French people, such as actor Gerard Depardieu, have already left the country in protest of the new tax policy. Other wealthy individuals, entrepreneurs, and foreign investors have condemned the higher tax rates and accused Hollande of being anti-business. Recent polls suggest that Hollande's approval ratings are at historic lows.
France is not the first country in the Eurozone to attempt to relieve budget deficits through confiscation of private wealth. In March, the government of Cyprus stole money directly from private bank accounts at the Bank of Cyprus and other banks in the country.