France Moves to Tax the Rich

On Wednesday, the new French government announced plans to hike taxes on its wealthy citizens and big businesses in order to offset a financing gap amounting to as much as $12.5 billion.According to the New York Times, the French socialist government needs to make up that gap to bring the budget deficit down to 4.5 percent of gross domestic product.During a news conference, finance minister Pierre Moscovici said, "We face an extremely difficult financial and economic situation. The wealthiest households, the big companies, will be asked to contribute. In 2012 and 2013, the effort will be particularly big.”These are the first major economic changes made since Francois Hollande was elected President in May amid promises of avoiding Greek-style austerity measures. The tax hike is a big sign that he intends to keep those promises, opting to target big companies and the rich.The tax increase comes after Hollande met with German chancellor Angela Merkel on June 27, as the two leaders attempted to settle their differences. The Guardian quoted José Manuel Barroso, head of the European Commission, as saying that, "We must articulate the vision of where Europe must go, and a concrete path for how to get there.""These decisions on deeper economic, financial and fiscal integration imply major changes to the way our citizens are governed and to the way their taxes are spent," said Barroso. "This crisis is the biggest threat to all that we have achieved through European construction over the last 60 years… A big leap forward is now needed."Hollande is taking steps to address those concerns, though only time will tell if he has made the correct steps. Roughly 200,000 wealthy British citizens have second homes in France. It will be interesting to see if those people hold onto those properties as their taxes increase.According to the Telegraph, tax on rental income for foreign-owned second homes would rise from 20 percent to 35.5 percent.In addition, capital gains tax on property sales would rise 19 percent to 34.5 percent.It would seem that Hollande is coming down heavy on everyone but the government, which currently accounts for 56.6 percent of the GDP. That is only expected to fall to 56.2 percent this year. To be fair, the President is only doing what he said he would do, and the average working French person can celebrate the fact that, for now, austerity is being avoided.Follow me @BCallwood.