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New French president wants to tax super rich by as much as 75 percent

By Catholic Online (NEWS CONSORTIUM)
September 28th, 2012
Catholic Online (www.catholic.org)

France's new President Francois Holland intends to unveil major budget reforms which include a 75 percent tax on the super wealthy. Coupled with sharp tax hikes, the proposed 2013 budget is aimed at proving France has what it takes to remain at the core of the euro zone.

LOS ANGELES, CA (Catholic Online) - The proposal will recoup $39 billion in U.S. dollars for the public purse with a goal of narrowing the deficit to 3.0 percent of national output next year from 4.5 percent this year. The budget represents France's toughest belt-tightening in 30 years.

Record unemployment along with data pointing to economic stagnation, there are fears in France that the deficit target will slip as the nation falls short of the modest 0.8 percent economic growth rate on which it is banking for 2013.

Pro-reform lobbyists were disappointed by the budget as they say it merely freeze's France's high public spending in lieu of attacking ministerial budgets, in the manner of Spain as it battles to avoid the conditions of an international bailout.

"This is a fighting budget to get the country back on the rails," Prime Minister Jean-Marc Ayrault said, adding that the 0.8 percent growth target was "realistic and ambitious.

"It is a budget which aims to bring back confidence and to break this spiral of debt that gets bigger and bigger."

Public debt in France is at a post-war record of a staggering 91 percent of the economy. The budget is vital to France's credibility, not only among euro zone partners but also in markets which for now are allowing it to borrow at record-low yields around two percent.

The government says the budget was the first in a series of steps to bring its deficit down to 0.3 percent of GDP by 2017.

Initial reactions were skeptical. "The ambitions that were flagged are very audacious," Philippe Waechter at Natixis Asset Management says. "I struggle to see how we'll find the growth needed in 2013 and afterwards."

Of the total 30 billion euros of savings, around 20 billion will come from tax increases on households and companies, with tax rises already approved this year to contribute some 4 billion euros to revenues in 2013. The freeze on spending will contribute around 10 billion.

For business leaders who expressed dismay at an exodus of top talent, the government confirmed a temporary 75 percent super-tax rate for earnings over one million euros and a new 45 percent band for revenues over 150,000 euros.

Business will be hit with measures including a cut in the amount of loan interest which is tax-deductible and the cutting of an existing tax break on capital gains from certain share sales - moves worth around four billion and two billion euros each.

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