French President François Hollande’s wildly unpopular tax policies have a new critic: François Hollande. After a year in which everyone from the rich to entrepreneurs to the general public have savaged his tax plans, Hollande has admitted that French taxes are simply too high. As the FT reports, Hollande is cutting back on a few planned tax hikes that would have led to the collection of nearly half the country’s GDP in taxes:
In a television interview this week, he noted that both his and the previous centre-right government had raised taxes in total by €60bn since 2011, equivalent to about 3 per cent of national income. “That’s a lot – that’s to say, too much,” he said.Mr Hollande has promised a “tax pause”, backing up his finance minister, Pierre Moscovici, who last month triggered a political tremor when he said he was “very conscious that the French are fed up with taxes”.
How quickly things change. When he was elected in mid-2012, Hollande won on a platform promising high taxes—including a 75 percent tax hike on the rich—allowing France to lower deficits without cutting social programs. The 75 percent tax was scrapped after the constitutional court complained and it became apparent that it would further damage a struggling economy, but a bevy of other tax hikes have gone forward, including a similar 75 percent marginal tax on companies paying high salaries. Now it appears that those have failed as well. This reversal is a step in the right direction for the country, but it’s also an admission that Hollande’s campaign platform has failed spectacularly.This will create a whole host of other problems for France, which was banking on this tax revenue to close a stubborn budget deficit. With further tax hikes seemingly off the table, Hollande may have to cut social spending instead, reneging on his second campaign promise. This is not likely to do anything for his dismal approval ratings. Lowering taxes is the popular part; cutting services makes people mad. Unfortunately, he has few options left.[François Hollande photo courtesy of Wikimedia Commons]