PARIS — French presidential candidate Francois Hollande, leading in polls but lacking in ideas that stick in voters’ minds, finally dropped a bombshell: As president, he would levy a 75 percent tax on anyone who makes more than
€1 million ($1.33 million) a year.
The flashy idea from the normally bland Socialist proved wildly popular, fanning hostility toward executive salaries and forcing President Nicolas Sarkozy to defend his ostentatious friendships with the rich. It also unleashed debate in the French press about whether the wealthy would decamp for gentler tax pastures.
As much as France likes the plan, it does not seem to have assured Hollande’s victory, which, just three weeks before the first round of voting, is growing more uncertain as Sarkozy reaps the benefits of projecting presidential mettle following France’s shooting attacks.
Polls put the two men neck-and-neck in the first round April 22, and show Sarkozy gaining on Hollande for the decisive runoff May 6.
Centrist candidate Francois Bayrou has dismissed the plan as absurd — contending that when all was added up, the top bracket would be taxed at nearly 100 percent. Many economists are also scratching their heads over the tax — seeing it as dangerous at worst and ineffective at best — and even Hollande admits it’s not meant to balance the budget.
The “Fouquet’s tax” — so named by some in the press after the tony restaurant where Sarkozy celebrated his 2007 presidential win — is riding and in part fueling a resurgence of the French left. The tax-the-rich proposal has garnered as much as 65 percent approval in some polls.All that has helped Hollande, often perceived as amiable but uninspiring, to distinguish himself from his main opponent, said Jean-Daniel Levy, a pollster and political analyst.
“Nicolas Sarkozy has a double difficulty: On the one hand, he is perceived as a president who is close to the rich, which is not a good sign in France. And he is also seen as a president who oversaw inegalitarian policies,” he said. The tax, he added, “allows Francois Hollande to take control again and to paint a negative portrait of Nicolas Sarkozy.”
But there is a danger that Hollande hit the nerve too well.
Many voters have swept right past Hollande and into the camp of far-left candidate Jean-Luc Melenchon, who has electrified voters with calls for a new French revolution and who some polls say will come in third or fourth in the first round of elections. That could bleed support away from Hollande in the first round, depriving him of crucial momentum going into the second one.Antipathy for the rich is widespread in France, where wealth is meant to be discreet and climbing the social ladder to build yourself a mansion isn’t a common narrative.
Hollande himself once famously declared “I do not like the rich” — a statement that only boosted his political standing among those who think wealth should be redistributed instead of accumulated.
Following his 75-percent tax announcement, front pages treated the rich like some strange, migrating species, declaring that they would decamp to Belgium if the tax was put in place. One presidential candidate, Dominique de Villepin, himself quite wealthy, warned France not to “kill the goose that lays the golden eggs.”
While there is some anecdotal evidence to suggest the wealthy are eyeing the border, tax lawyer Sandra Hazan said there’s nothing new in rich people fleeing France. But they don’t pull up the stakes simply because taxes are high.
“The problem is not the level of taxation you suffer,” said Hazan, who heads the tax department at law firm Salans. “The problem is when you cannot anticipate how much you will be paying.”
The French tax code has long been unpredictable, she said, but it has become even more so in recent months. As Sarkozy’s administration has tried to keep a series of budget targets that are central to his credibility and reassure markets that France can manage its debt, the number of changes to tax law have come fast and furious.
When he put taxes at the center of his campaign, Hollande unleashed a new flood of tax proposals, creating more uncertainty. Sarkozy, too, has vowed to hunt down French people who have fled the country purely to escape high taxes and make them pay the difference between what they’re paying in their haven and what they would have to pay in France.
In all the discussion about how much the rich make and how much they should pay, Sarkozy has also been put on the spot — again — about a lavish party to celebrate his presidential victory at Fouquet’s and a vacation on a friend’s yacht he took shortly after. These moves quickly earned him the moniker “President Bling Bling,” and he has struggled ever since to shed the image of a man too comfortable with money.
Five years after the victory party and the yacht trip, Sarkozy is still fielding questions about them. He most recently defended the vacation in an interview not long after Hollande’s proposal when he called it a last-ditch attempt to save his marriage to Cecilia, whom he divorced not long after taking office.
But Hollande has struggled to harness this momentum.
Hollande bungled the announcement of his new tax, initially saying it would apply to those bringing in more than €1 million — about $1.33 million — a month, before clarifying he meant a year.
He has also failed to provide a coherent narrative for why the tax is needed. He started out by saying that, in tough times, the rich had to pay their fair share, before later conceding it would only bring in about €100 million to €300 million each year. France’s public debt is €1.7 trillion ($2.3 trillion).
Then he said it would put pressure on companies to lower ballooning salaries, noting that that executive pay for France’s 40 largest public companies — the ones that make up its CAC-40 stock index — rose 34 percent in 2010, while most of Europe was fighting for its very existence.
In the end, Hollande has settled on casting the tax as simply the right thing to do.
“It’s not a question of return,” he told RTL radio station. “It’s a question of morality.”