French President Francois Hollande's Socialist government unveiled its 2013 budget proposal to tackle the growing deficit. One of the key measures includes a 75 percent temporary super-tax on those making one million euros ($1.28 million).
The 2013 preliminary budget includes 20 billion euros ($26 billion) in tax increases and the elimination of the wealth tax, a flat rate of between 0.25 percent and 0.55 percent for the affluent whose wealth is 800,000 euros ($1.03 million).
In order to cut the budget deficit by three percent and find 30 billion euros in savings to meet the limit, Hollande has proposed cutting spending by 10 billion euros. Other measures include a new income tax of 45 percent for those earning 150,000 euros ($193,465) or more, an increase in the capital gains tax and a cap on deductions for large companies.
Hollande projects that the budget will bring growth to France of 0.8 percent next year.
Economists are urging caution because the second largest euro nation needs to slash government spending and reform labor laws in order to spur growth. France has not seen growth in three quarters and the unemployment rate continues to rise at 10.2 percent.
The 75 percent super-tax is slated to last two years, but Hollande noted in a television interview that it would be scrapped only if the economy recovers. Many are already warning that it will bring in very little revenue and many of the rich in the country will leave. Economic Collapse News reported earlier this month that Bernard Arnault, France’s richest man and CEO of LVMH Moet Hennessy Louis Vuitton SA (MC), the world’s biggest luxury-goods company, announced he was seeking citizenship in Belgium.
“It’s true we’re asking for an effort of the richest, the top 10 percent and the top 1 percent in particular,” said French Prime Minister Jean-Marc Ayrault on Friday, reports Bloomberg News. “Big companies of the CAC 40 pay less than the small companies and sometimes don’t pay at all. So we’re asking them for an effort too. It's a budget that aims to inspire confidence and to break the debt spiral that keeps growing and growing.”
Data published Friday suggested that there was zero growth, while consumer spending and trade growth was down, according to Reuters. There was one positive in the figures: savings. Even though wages have remained stagnant, French workers increased their savings from 16 percent to 16.4 percent.
France’s public debt is 85.8 percent of its GDP, the deficit accounted for 7.1 percent of the GDP in 2010 and public spending totaled for 56 percent in 2011.